Burkina Faso Mulls Eurobond to Boost Growth After Upheaval

  • West African nation needs $9.5 billion for investment plan
  • ‘We can do better,’ Prime Minister Thieba says in interview

Burkina Faso may sell a Eurobond to help accelerate growth in an economy that’s become increasingly reliant on income from gold mining.

The West African nation needs $9.5 billion to carry out a five-year investment program following a year of political upheaval that rattled investor confidence, Prime Minister Paul Kaba Thieba said in an interview in the capital, Ouagadougou. That’s why the government plans to meet with donors and is considering raising cash on regional markets or selling a Eurobond, he said.

Paul Kaba Thieba
Paul Kaba Thieba
Photographer: Ahmed Ouoba/AFP via Getty Images

The government is trying to restart projects that stalled during a series of political crises that began in 2014 with the sudden ousting of former President Blaise Compaore, who fled the country after a mass revolt against a bid to extend his 27-year rule. Agriculture and mining are the two key sources of revenue in Africa’s top cotton producer, which has seen a surge in gold mining as companies including Roxgold Inc and Endeavour Mining Corp. developed projects. Production of the metal, non-existent a decade ago, now accounts for almost 80 percent of export income.

“We can go to regional markets to raise funds for our program,” Thieba said. “We can think of new forms of financing, issuing Islamic bonds. If we have to we can also go to international markets, like Senegal and Ivory Coast have done before us.” He didn’t say how much Burkina Faso would raise. The 56-year-old economist previously worked for more than a decade at the Central Bank of West African States.

High Growth

In 2014, Senegal sold Eurobonds for $500 million while Ivory Coast issued notes for $750 million in the same year and $1 billion in 2015. This year, Ghana and the Democratic Republic of Congo have called off or postponed bond sales after they deemed investors’ asking prices too expensive.

Burkina Faso is one of few countries in sub-Saharan Africa that achieved sustained high growth over a long period of time despite a lack of resources, the International Monetary Fund said in a report this year. Gross domestic product per capita was $613 last year, compared with $6,360 in Botswana, one of the richest nations in the region.

Thieba said talks are ongoing with a subsidiary of Timis Mining Corp. about the development of what could be one of the world’s largest manganese mines at the northeastern Tambao deposit. Another project that the government is trying to push forward is a 400 million-euro ($452 million) railway upgrade that will link the city of Kaya to a seaport in neighboring Ivory Coast, a contract awarded to Bollore SA in 2014, he said.

Growth will probably accelerate to 5.2 percent this year, from 4 percent in 2015, according to the government. 

Doing Better

“We can do better than the economic growth figure we’re currently seeing,” Thieba said. “There’s a new dynamic in Burkina Faso and this is the moment to invest in our country.”

Almost a year after Compaore’s departure, a transitional government was briefly held hostage by a military junta, which lost its hold on power within a week because other army units didn’t support it. Voters last year elected Roch Marc Christian Kabore as president, a high-profile politician who was seen as Compaore’s chosen successor until the two men fell out in 2012.

The interim leadership told Timis’s Pan African Minerals to halt work on its $1 billion manganese mine while it reviewed permits.

“We hope to find a solution in the short term,” Thieba said, referring to talks with the company. “I think we will get to a balanced agreement soon.”

A revised mining code approved by the interim parliament still needs to be signed into law by the president, Thieba said. “We’re talking with the industry to make sure that the interests of both parties are taken into account,” he said. “We want gold to contribute more to our national economy but we also need to preserve our industry’s competitiveness.”

Gold mining developed quickly, accounting for three-quarters of exports within five years of starting up, according to the IMF. As two new operations are set to come into production this year, output is forecast to rise to 48.8 metric tons, from 35 tons last year.

Biggest Producer

Cotton remains a priority for Africa’s biggest producer of the fiber, as about 80 percent of the population earns an income from farming, according to Thieba.

“It would be good if world market prices stabilize,” Thieba said after the U.S. benchmark price for cotton dropped 13 percent in less than three weeks after reaching this year’s high on Aug. 5. “We’re hearing that there’s a surge in consumption in countries like Pakistan and Uzbekistan, and the fact that China is reviewing its cotton-marketing policies is good news for our cotton farmers.”

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