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Cotton, which forms the backbone of the agricultural sector, is processed and marketed by three
corporations: SOFITEX, the oldest and largest, SOCOMA and FASO-COTON. Over the years,
SOFITEX has suffered operational losses amounting to CFAF 86.2 billion for 10 FY2008 alone and
farmers’ groups have accumulated crop year credit arrears of payment of CFAF 4.355 billion in the local
banks (African Development Fund, 2010).
There is no official definition for SMEs in Burkina Faso. The tax authorities consider any officially-
registered firm with an annual turnover of 15-50 million CFA francs ($30 000 -$100 000) as a small or
medium sized enterprise. The commerce ministry defines SMEs in terms of the number of employees (5-
10 employees). There is no real data available on the population of SMEs either in the formal or informal
sectors. It is assumed that they provide very many jobs, especially in the informal sector, including the
countless cotton and vegetable farms that sell their crops. SMEs have limited access to traditional bank
loans and applications by existing firms and especially those starting up are often rejected. When loans
are offered the interest rates are very high (10-18%) and in most cases the provision is made for short-
term working capital funding and rarely long-term (only 1% of all loans to the private sector). Mortgages
are the most popular form of security with banks but these are not easy to set up since property rights
were effectively abolished during the 1983-87 revolutionary government in favour of “urban residence
permits”. Although property law is being gradually normalised, this is likely to take a long time and prove
to be very costly for the government.
Burkina Faso has, since the inception of the Doing Business Better Programme, introduced reforms to
engage private sector development, with the support of TFPs, including the Bank. The outcome appears to
be promising based on various reports that highlight national efforts to improve the business environment.
Questions of rural land tenure security remain a constraint to private investment in the agricultural sector.
Other barriers faced by businesses include the high cost of factors of production, difficult access to
financing, low labour qualification and the absence of legal and institutional mechanisms that encourage
private sector business opportunities in infrastructure financing and management based on the public-
private partnership (PPP) approach. A lack of economic diversification leaves the country exposed to
exogenous shocks. There is a clear need for the business community to promote and diversify the
economy, and especially to rely less on the primary sector, which employs the majority of the labour
force and contributed 30.3% to total value-added in 2010 and 2.2% to GDP growth. Since the opening of
a one-stop business centre to speed up creation of new firms some pronounced progress has taken place.
Procedures have been simplified and new business applications can be approved in three days instead of a
month (African Development Bank and OECD, 2005).
3.2.4. Barriers to Economic Growth, SME Development and Exports
Sub-Saharan Africa is regarded as the region in the world where it is most difficult to do business (World
Bank 2010). There are, however, moderating factors to consider. The region includes countries with a
relatively healthy business environment. For instance, Mauritius is ranked as number 17, well above the
OECD-average and South Africa is ranked as number 34, better than countries such as Portugal, Spain
and Luxembourg. On average however, Sub-Saharan African countries are scoring poorly.
Both sluggish and uneven growth and decline in the share of exports, suggest that different barriers and
constraints are at work against the interest of export-oriented businesses. These barriers may occur as a
result of various factors including international and/or domestic policies and from geographic or regional
features through to internal barriers at the micro level within the firm, stemming from the absence of
appropriate know-how, skills and training and access to resources.