Investing in the agricultural sector/ Burkina Faso. Foreign Direct Investment in emerging markets. Impact, opportunities, and challenges.

1. Investment Strategy & Plan
Unlocking Investment and Finance in Emerging Markets and Developing Economies (EMDEs)
World Bank/ MOOC 2019

2.  Burkina Faso is the fourth largest country in the Economic
Community of West African States (ECOWAS).
 Population (2016 est.): 18.6 million
 Currency: West African CFA franc (XOF)
 GDP (2017 est.): $13.1 billion
 Gross fixed investment (2012 est.): 20.5% of GDP
 Economic growth held steady at 6% in 2018

3.  Contribute to measurable positive social or environmental impact.
 Improve, modernize, and transform the agricultural sector.
 Demands in the agricultural sector is heavily engaging towards in
the country.
 Improve emerging market opportunities.
 Agricultural sector has a prominent part in the overall development
strategy.
 Impact on the local and domestic production.
 Economic growth stimulation.
 Financial returns.
 Greenfield Investment
◦ To achieve the highest degree of control over foreign activities.
◦ Avoid intermediary costs.
◦ Creating jobs for the economy where the greenfield investment is taking place.

4.  The Agriculture Industry
◦ Agriculture is the central pillar of Burkina Faso’s economy.
◦ Its contribution to GDP in 2013 stands at 35%, and more than 80% of the population
is employed in the sector.
◦ Sector-based development policies have identified 12 promising sectors, four of
which are in agricultural production: cotton, grains, fruits and vegetables and
oilseeds.
 Government Incentive
◦ Strategies aim at increasing agricultural production by improving productivity
(including the widespread use of improved seeds).
◦ Modernization of agriculture (provision of equipment to producers).
◦ Providing training in the latest growing techniques, and improvement of basic
infrastructure.
◦ Expansion of initiatives to intensify and diversify agricultural production in order to
provide the missing link of the added value chain.
◦ Expansion of the market.

5.  Increasing productivity
◦ Establishment of modern processing material.
◦ Equipment control and time quality gained.
◦ Supply of high yielding variety and quality of seeds.
◦ High quality machinery and farm equipment.
◦ Modern technical approach.
 Sustainable agriculture
◦ Efficient productivity.

6.  Barriers to investment
◦ Government regulatory environment.
◦ Unskilled/ uneducated workforce.
◦ Poor transportation infrastructure.
◦ Periodic shortages of water and electricity.
◦ High energy costs and a weak judicial system.
◦ High risk of currency devaluation.
◦ High risk and uncertainties.
 political instability.
 potential inability to repatriate dividends.
 possibility of expropriation.
 possible physical threats to their assets through political acts of war and civil disturbance
or a government's willingness or ability to fulfill their obligations under a contract with
the investor.
 As a greenfield
◦ An extremely high-risk investment (the riskiest form of foreign direct investments).
◦ Potentially high market entry cost (barriers to entry).
◦ Government regulations that may prevent foreign direct investments.
◦ High fixed costs involved in establishing a greenfield location.

7.  Adopting the Impact Investing/ environmental, social, and
governance (ESG)
◦ Making a difference to the world.
◦ Managing the investments to make a good contribution.
◦ Measuring and monitoring the impact that occurring.
 Further Integration
◦ Integrating the impact goals into the selection of investments strategy.
◦ Setting up impact targets before the investment.
◦ Monitoring those targets during the investment.
◦ Reporting of those targets afterwards using commonly accepted metrics.
◦ Integrating good environmental, social, and governance (ESG) risk
management practices.
◦ Monitoring the investment system to align with the principles.

8.  Multilateral Investment Guarantee Agency (MIGA)
◦ Objective
 Promoting foreign direct investment into developing countries and in doing so
contribute to Boosting economic growth and reducing poverty.
 Promote cross-border investment into Emerging Markets and Developing
Countries.
 Insuring investors against political risks.
 Growing the flow of capital into much needed infrastructure, manufacturing,
agriculture, services and other sectors.
◦ Mitigating risk using the World Bank Group (WBG)’s MIGA political
risk insurance
 Help finance the development to achieve the sustainable development goals.
 Help investors and lenders manage specific risks associated with their
investment in emerging markets and developing economies.
 Offering political risk insurance commonly known as guarantees and credit
enhancement instruments.

9.  Assessing Trends
◦ External trends
 social, technological, economic
 environmental, political/regulatory
 Assessing long-term sustainability issues
◦ Understanding how global megatrends will shape the future investment environment.
 Considering the environmental, social and governance (ESG) issues
◦ To maximize long-term investment performance.
◦ To better manage risk.

10.  In Burkina Faso, agriculture, as well as livestock, forestry and fishing have
remained the most important sub-sectors (35% of GDP), followed by trade,
transport and communications (18%), and mining (13%).
 The economy is heavily reliant on agriculture, with close to 80% of the active
population employed in the sector.
 Cotton is the country’s most important cash crop, while gold exports have
gained importance in recent years.
 In 2018 MIGA issued a record $5.3 billion in political risk insurance and
credit enhancement guarantees helping finance nearly $17.9 billion dollars’
worth of projects in developing countries.

11.  http://www.state.gov/r/pa/ei/bgn/2834.htm
 www.unglobalcompact.org
 www.unepfi.org
 www.unpri.org
 https://www.worldbank.org/en/country/burkinafaso/overview
 https://corporatefinanceinstitute.com/resources/knowledge/strategy/greenfield-investment/
 The World Bank’s 2019 MOOC resources