Foreign direct investment (FDI) in Burkina Faso

FDI in Figures

According to the World Investment Report 2022 published by UNCTAD, FDI inflows into Burkina Faso recovered to USD 137 million in 2021, after negative net FDI inflows of USD -102 million in 2020. The total stock of FDI stood at USD 2.67 billion in 2021. According to UNCTAD’s Investment Trends Monitor, global FDI momentum weakened in 2022 in the context of the war in Ukraine, rising food and energy prices, financial turmoil and debt pressures. The mining sector attracts most of the investments and the exploration of new deposits has been increasing. The country's soils contain gold as well as zinc and manganese. The main investing countries are Canada, France, Ivory Coast, Mali and Morocco (IMF). The creation of three new growth centres, after the success of the Bagré Reservoir, is expected to spur new activities and attract investment. The government is interested in exploring areas that are potentially suitable for oil extraction. After the Houndé and Netiana mines, the country is looking to exploit the Tambao deposit (worth USD 1 billion, currently the largest in the world reserve of manganese, with an estimated 55 million ton), which should bring in significant foreign investment.

Burkina Faso encourages FDI and offers tax and legal incentives, such as the possibility for a foreign company to own 100% of shares in a local company. However, investments in sectors such as mining, telecommunications, financial services and electricity are subject to restrictions. The country's economy is favourable to trade, and the condition of its infrastructure is considered satisfactory. However, its lack of access to the sea and agricultural resources, and its industrial sector is weak. The business climate is still poor compared to international standards. Political instability, as well as insecurity and violence linked to the jihadi insurgency are negatively affecting business climate.

What to consider if you invest in Burkina Faso

Strong Points

The strong points of the Burkinabé economy include:

• Burkina Faso is a member of the West African Economic and Monetary Union which ensures the stability of the CFA franc (freely exchangeable to EUR at a fixed rate)
• the country’s legal, regulatory, and accounting systems are transparent and consistent with international norms
• Africa’s leading cotton producer
• gold exporting country (Africa’s 5th largest producer)
• low unemployment rate (4.94% in 2020 according to the World Bank), abundant labour force and young population
• the country is supported by the international financial community (as shown by the fact that Burkina Faso was one of the first countries to have benefited from the HIPC initiative)
• the country benefits from political and institutional stability
• the country’s investment code guarantees foreign investors the right to the overseas transfer of any funds associated with an investment, including dividends, receipts from liquidation, assets, and salaries.

Weak Points

The main challenges for foreign investors include:

• the strong influence of state-owned firms in certain sectors
• weak intellectual property protections
• dangerous safety conditions, with terrorist attacks (especially in the North)
• the country’s economy is highly exposed to weather events
• the informal sector still has a strong influence on the economy
• Burkina Faso is vulnerable to movements in cotton and gold prices
• the country is heavily dependent on foreign aid
• weak infrastructures
• Burkina Faso is landlocked
• deficits of the current and fiscal accounts
• demographic pressures, high poverty rate, very weak human development index

Government Measures to Motivate or Restrict FDI

The government of Burkina Faso is actively seeking to promote foreign investments. Some of the measures taken include tax breaks and incentives to lure in foreign investors. There are also exemptions from value-added tax on certain equipment; special tax and customs regime for investment agreements signed by the state with big investors; the creation of a deposit institution that provides financing for small and medium-sized enterprises, public-private partnerships, and real estate investments thanks to the adoption of the government’s “general investment guidelines”, the creation of enterprise registration centres called Centres de Formalités des Entreprises (CEFOREs), whose purpose is to make registration of companies simpler.