Fructifera: BF Entrepreneurial

The entrepreneurial environment of Burkina Faso

In this section I want to give my opinion of what the entrepreneurial environment of Burkina Faso is. I am very aware that I risk to be caricatural, but I only hope this is not preventing my reader to getting a bigger insight.

The economy (See also section ….)

Growing cities

The growing and fast changing cities (see graph) are giving an enourmous boost to the demand for a number of services for their new inhabitants.

The higher class is building houses, they are therefore needing garderners, cooks and builders for their houses and furniture. This class has the money to hire these people, and in this way, is creating a new group of people with an income.

A part of this higher class are the well paid (in the eyes of the Burkinabé) Western aid workers and consultants who are looking to copy some of their lifestyle from home. This brings new products to the market, which will certainly also be used by the local people who can afford them.

Technology

The very fast growing new technology, which is put on the market at a relatively low price is very quickly allowing several entrepreneurs the opportunity to set up new businesses.

The mobile telephone setup and market penetration has proven to be easier then the fixed lines.

I can imagine with the combination of internet technology, and cheap workforce that internetshops could have a bright future here….

Investment environment

The entrepreneurial culture is driven by relatively short-term results and by the habit of investing in second hand material.

Due to the problem of skilled people and replacement parts, for a long time only older machines, cars and technology were imported to Africa . PC's which are not used in an environment more or less dust free, were broken very rapidly and had to be replaced at a high pace.

This means that entrepreneurs start thinking in short-terms, in most cases no longer than 1 year, which also reduces the risk in a, compared with Europe, less stable institutional environment.

This extremely short write-off period can be found in a lot of businesses in Burkina Faso . A lot of businesses are created, but a lot of them close down after only a short period.

Although, I must admit I had the feeling that the investment period entrepreneurs are counting with, are getting longer and longer.

Entrepreneurship: solution wise handling.

This entrepreneurship is also fed by the lack of a social security system and general poverty. When there is no job available, setting up a small business is often the only way to create an income for feeding the family.

A lack of capital is the main reason for starting with old machinery, cars, trucks and so on. Once these are bought, they have to bring in the money as soon as possible, which means they are often overloaded etc.

The scaricity of a lot of materials, replacement parts, money etc brings the best in entrepreneurs to the surface. Creativity, finding solutions is put highly in their minds, and is almost the official cry-out of Burkina Faso .

Also interesting to see is that the traders are not always doing business from a pure economical standpoint, but from time to time just from a high need for capital. The best deals can be done on Friday or Saturday evening, when most youngsters try to earn enough money to be able to go out.

Banking

We have found differrent banks that are giving micro-credits, but haven't been able to talk to one. BRS (Banque Regional de la Solidarité) is one of the most named bank, but we have seen publicity for several of them. The most important issue is to prove there is a market for your products. As we haven't been talking to any of them, it is hard to say what the security conditions are for getting a (micro-) loan.

Institutional Environment

With 3.2 on The 2006 Transparency International Corruption Perceptions Index , Burkina Faso stands on the 79 th place in the worldwide transparancy index.

The African regional report shows that 5 is considered as a treshold against serious corruption, but only 2 states in Africa have achieved to get this figure until now.

But, relative to this neigbourhood of countries and wealth (File: 2Mb!), we can see that Burkina Faso is doing relatively well, but a lot still has to be done.

What does this mean?

For a foreign investor there is an absolute lack of transparancy. E.g. from the economical adviser in the Burkina Faso embassy in Brussels , we received information about the 3 levels of import taxes: 0%, 10% and 20%. In reality there are tax regimes of up to 60%, with a very unclear definition which product is in which category.

Even more, with the right connections, who have to be “supported and taken care of” on time, different outcomes are possible.

What is for sure: white people are paying more, as it is just considered that they can afford to do that.

Talking to several entrepreneurs, local and foreign, it is very clear that taxes are negotiated and that it is very important to know the right people. The outcome is a mixture of social behaviour (do you have a lot of people working for you, and what if you decide to stop your business), corruption and relationship management.

The advise given to us is that it is better to keep your head down till you are sure that you have organised everything as it should be done, meaning getting every paper of authority in hand, before getting too big or visible.

Fair Competition

As this country gets a lot of money from international aid, this is to be considered in certain fields as competitor number one.

If you are trying to start up commercial products like TerraCottem for agricultural use, your first competitor is international aid, from which the Burkinabées are used to getting everything for free.

In our exemple, we saw an enourmous difference when we talked about “our project”, where everybody asked where the money was coming from and how, and “our commercial introduction of a new technology” where everybody understood they had to pay for it if they want it.

Governement organisations tend to be only interested in the first kind of projects, comparable with the European politicians when they are talking about regional development money.