Reducing the costs of being landlocked
Burkina Faso’s economy grew slowly with high volatility during 1971–2000—then growth nudged up and volatility abated. Services dominate in contributions to GDP followed by agriculture and manufacturing, which has stagnated for most of the past four decades. The share of manufacturing in GDP in 2010 (average of 2009–11) is now around 7%, and in exports of goods and services about 3%. Resourcebased exports have expanded since 2005 when the gold mining boom started. Revenues from gold exports, if properly managed, could help diversify the economy, which remains highly dependent on unprocessed agricultural and resource-based products.
The economy grew 10.0% in 2012, up from 4.2% in 2011 and an average of 5.1% in the 2000s. But growth has not translated into more jobs, especially for youth, and lower poverty rates. In 2007 youth unemployment was estimated at 29.4% for 15–24 year olds and at 21.4% for 25–29 year olds. Roughly 85% of employment is in agriculture. Poverty fell from 71% in 1994 to 45% in 2009 (share of population living on less than $1.25 a day), and the Gini index of inequality from 51 to 40.
Democratic elections returned in 1991, and the ruling party has won all presidential and parliamentary elections since then. But there has been some social and political unrest, especially in 2008–11. Technical capacity in the public service is good, with 21% of the public sector employees holding a bachelor’s degree or higher and 56% holding a high school diploma or higher. And most employees are recruited through examinations.
The review of implementation of the national growth and development strategy shows good results for public finance—87% of measures met in 2012 compared with 37% in 2011—but only 57% of measures were met for sustained and inclusive growth in 2012 compared with 64% in 2011. The fight against corruption has also shown mixed results in recent years, and the recurrent social unrest (food riots, trade unions, demonstrations) and cabinet reshuffles challenge the state’s capacity to implement and manage transformation.
The business climate improved, with the country’s ranking on the Doing Business Index going from 171st of 175 countries in 2005 to 163rd in 2006 and from 154th of 183 countries in 2010 to 151st in 2011. Burkina Faso was among the top five most improved economies for the five-year (2006–11) cumulative change on the Doing Business Index, with the areas improved being hiring workers, paying taxes, registering property, and dealing with construction permits.
In global competitiveness Burkina Faso ranked among the bottom 10 countries in 2010–11, at 134th of 139 countries. The most challenging areas include infrastructure, health, primary education, higher education and training, and business sophistication. Burkina Faso has shown a commitment to making the private sector the driving force of economic development. For more than 15 years the public authorities have set up a dialogue mechanism between the private and public sectors, which includes annual meetings between the government and the private sector. But challenges remain including the poorly skilled labor force, the lack of business sophistication, and credit constraints.
The most promising products for Burkina Faso’s exports include:
- Cotton. Burkina Faso’s world market share for cotton has increased from 0.9% in 1980 to 3.2% in 2009, its revealed comparative advantage in cotton was 466.42 in 2009, and the country is the top Sub-Saharan cotton producer. If productivity improves, there are opportunities to capture more value by moving up the value chain (animal feed, cooking oil, biogas, medical and hygiene products, and textiles).
- Food products from animals. Given the large livestock herds and poultry flocks, industrial production of meat, milk, and butter could be promoted. Indeed, livestock has consistently been among the top 10 exports in the past decade.
- Agricultural food products. Large-scale production and packaging of agricultural products can be envisaged for tomatoes, French beans, Shea nut butter, and mangoes.
To transform the economy, policymakers need to work on reducing the costs imposed by being landlocked, one of the major constraints on the country’s competitiveness. Indeed, investment in infrastructure needs to be stepped up and sustained to bring transport costs down and increase trade with countries in the region and beyond. A strategic investment policy involving airports, roads, railways, and storage facilities is needed. Reliable and affordable energy is also critical.
Other measures to promote economic transformation include attracting more private investment, both foreign and domestic, promoting financial sector development, investing in skills development through state-private sector partnerships, and improving the quality of exported products to meet the requirements of foreign markets. Reinforcing the capacity of the technical secretariat of the national growth and development plan to coordinate the implementation of the needed reforms will be crucial for starting and sustaining transformation.
Burkina Faso’s growth with depth
- Transformation—21st of 21. Burkina Faso ranked last among the 21 countries on the overall transformation index in 2010 (2009–11), having dropped from 17th in 2000 (1999–2001) and losing ground to Ethiopia, Nigeria, Burundi, and Rwanda.
- Growth. Burkina’s GDP grew at 4.4% a year from 1971 to 2010, yielding a GDP per capita growth of 1.8% a year. But growth has been extremely volatile. Since 2001 growth has picked up—5.1% for GDP and 2.5% for GDP per capita. Volatility in growth has abated but is still evident.
- Diversification—18th. The share of manufacturing in GDP dropped from 12% in 2000 to 7% in 2010, and the share of manufacturing and services in total exports fell from 27% to 18%. The top five exports made up 79% of total exports of goods and services during 2009–11 (but export concentration is rising with the expansion of gold exports). The composition of the top 10 export products did not vary much over the decade except for the occasional product that enters the list one year and drops out the next.
- Export competitiveness—20th. Burkina Faso ranked 18th in 2000 but dropped to 20th in 2010, losing ground to Rwanda and Nigeria.
- Productivity—9th. Burkina Faso ranked 9th on productivity in both 2000 and 2010, though levels of manufacturing value added per worker and cereal yields went down.
- Technology—21st. Burkina Faso’s rank on technology dropped from 17th in 2000 to 21st in 2010, indicating that production in the economy remains at low levels of technology.
- Human well-being—18th. GDP per capita (PPP 2005 US$) was $1,124 in 2010, up from $867 in 2000. Burkina Faso’s human well-being score improved slightly from 20th to 18th over the two periods.