Macroeconomic performance²

Real GDP growth continued at an estimated 7.0% in 2018, compared with 6.7% in 2017. Key contributors were food agriculture (up 14.2% in 2018), extractive industry (20.5%), and cotton ginning (8.0%). Final consumption was the main component of domestic demand. The tax burden rose to approximately 18.0% of GDP in 2018 from 16.5% in 2017, while total outstanding public debt declined from 36.6% of GDP to 33.4%. Inflation increased to an estimated 1.4% in 2018, reflecting higher food prices. The current account deficit improved to an estimated 7.2% of GDP in 2018 from 7.6% in 2017.

²Source: African Economic Outlook, 2019, African Development Bank. Accessible here: https://www.afdb.org/en/knowledge/publications/african-economic-outlook/

Business environment and private sector development³

Burkina Faso is at a critical juncture: to sustain the high growth rates needed to create jobs, improve livelihoods, and build resilience increasing private sector investment will be crucial going forward. The sustainability of growth is at stake with the economy needing to add 300,000 jobs annually, while current fiscal woes, characterized by a weak contribution to micro, small and medium enterprises, are challenging the financing of social and development needs. In addition, though growth has remained resilient, the compounded effects of rising security, climatic, and fiscal risks could dampen investor confidence and hinder medium-term growth prospects. Thus, given that government expenditure is projected to decline, it will be critical to reinvigorate the engines of growth by harnessing Burkina Faso’s assets through increased private sector development, which depends on more private funds for infrastructure. Approaches to private sector development for Burkina Faso need to be considered at the regional level, since the country’s landlocked situation presents both a challenge and an opportunity. While Burkina Faso is dependent on costal countries, it could at the same
time serve as a regional hub, given that the country shares more than 3,000 km of border with its six direct neighbors, five of which are part of the WAEMU. For Burkina Faso, enhanced regional integration offers economies of scale and streamlined production processes among the countries of the region, making companies more competitive in international markets. This would help to create a larger market alongside a more favorable business climate that is able to attract and stimulate increased private investment into the region. Several initiatives have been started in this direction, such as the Lomé-Ouagadougou-Niamey Corridor and the joint special economic zone (SEZ) between Burkina Faso (Bobo-Dioulasso), Côte d’Ivoire (Korhogo) and Mali (Sikasso), which aim to encourage the creation and growth of public and private industrial activities, including through joint infrastructure.

³Creating markets in Burkina Faso growing Burkina Faso’s private sector and harnessing it to bolster economic resilience - Country Private Sector Diagnostic - July 2019 – World Bank Group

Key takeaways on the electricity sector

Electricity Access

The electricity sub-sector is relatively undeveloped, with a national electricity access rate of 25.5%. In rural areas, official access to electricity is only around 3.2%, compared with 68.6% in urban areas.

Installed capacity

The installed capacity was increased from 368.4 MW in 2017 to 384.6 MW in 2018, as well as the share of renewable energies in total production which was increased to 13.8% against 12.5% in 2017. The commissioning of the electricity interconnection between Burkina and Ghana, the increased production of Zagtouli's 33 MW peak solar photovoltaic power plant and the capacity building of the thermal park underpin these performances.

Production⁴

By 2020, Burkina Faso seeks to increase its electricity access rate from 20% to 80% as part of its National Plan for Economic and Social Development, doubling the number of customers to 1 million, and increasing installed capacity to 1,000 megawatts (MW). By 2025, Burkina Faso seeks to lower its cost of energy, increase the access rate to 95%, increase installed capacity to 2,000 MW, and begin exporting oil and gas to nearby countries. A new law adopted in April 2017 removes market segmentation and the single-buyer model, liberalizes production and distribution, and adopt provisions relating to renewable energy and energy efficiency. In 2017, Burkina Faso inaugurated the Zagtouli solar power plant with support from the European Union and the French Development Agency (AFD).

Table 1 - Production per technology and power plants⁵

Production costs

The average cost per kWh at fuel and oil stations in 2018 has increased by 0.8 FCFA compared to 2017. The quantities of HFO and DDO consumed are respectively 172,243,729 and of 26,946,409 liters in 2018 against 188,876,250 and 26,859,690 liters respectively in 2017. The HFO / DDO ratio is 86.5% above the 80% target by the contract plan.

Maintenance

[To be completed]

Downtime and efficiency

[To be completed]

Tariffs⁶

Burkina Faso currently has some of the most expensive electricity in the region, with cost of production at $0.22-0.25 USD/kWh. The country has had limited experience with private sector development in the energy sector, but the Government of Burkina Faso has set forth a bold national plan and has taken steps to introduce legislation to encourage private-sector investment and to liberalize electricity generation and distribution.

By 2020, Burkina Faso seeks to increase its electricity access rate from 20% to 80% as part of its National Plan for Economic and Social Development, doubling the number of customers to 1 million, and increasing installed capacity to 1,000 megawatts (MW). By 2025, Burkina Faso seeks to lower its cost of energy, increase the access rate to 95%, increase installed capacity to 2,000 MW, and begin exporting oil and gas to nearby countries

⁴https://www.usaid.gov/powerafrica/burkina-faso
⁵SONABEL rapport d’activités 2018
⁶https://www.usaid.gov/powerafrica/burkina-faso

Country strategy on the environment and climate change¹⁰

Policy and regulation

Policy and regulation The vision of the Burkina Faso NAP (National Adaptation Plan) reads as follows: "Burkina Faso intends to manage its economic and social development more efficiently by implementing planning mechanisms and measures taking account of resilience and adaptation to climate change between now and 2050". The long-term adaptation objectives based on that vision are to: protect accelerated growth pillars; ensure sustainable food and nutrition security; preserve water resources and improve access to sanitation; protect persons and goods from extreme climate events and natural disasters; protect and improve the functioning of natural ecosystems; and protect and improve public health. I is planned to implement the National Adaptation Plan based on a strategy comprising five (5) axes:

• Strategic axis 1: Build long-term capacities of institutions involved in climate change adaptation
• Strategic axis 2: Improve information systems
• Strategic axis 3: Implement efficient and sustainable financing mechanisms
• Strategic axis 4: Reduce the country's overall vulnerability to climate change
• Strategic axis 5: Systematically integrate climate change adaptation into development policies and strategies

Despite the naturally unfavorable conditions which exist in Burkina Faso, solutions exist that will enable it to move towards sustainable development. Political decisionmakers will need to ensure that climate change adaptation is at the heart of development policies and strategies. Moreover, all development stakeholders (State, technical and financial partners, private sector, civil society organisations, international community) need to join forces to combat climate change. In that context, the NAP is a suitable reference framework which will enable all stakeholders to pool their efforts with a view to helping Burkina Faso reduce its structural vulnerability, increase its resilience and manage its development better.

¹⁰https://www4.unfccc.int/sites/NAPC/Documents/Parties/PNA_Version_version%20finale%5BTransmission%5D.pdf

Regional Integration with the West African Power Pool (WAPP)¹¹

2018 Highlights

In 2018, the supply of electrical energy for export was marked by the following elements:

- Commissioning of the Ghana-Burkina interconnection in June 2018 via the 225 kV Bolgatanga (Ghana) - Zagtouli (Burkina) line;

- Improvement of the voltage withstand at the 225 kV Ferké substation following the commissioning of the 225 kV Laboa-Boundiali-Ferké line in December 2018. This line will also be used to decongest the 225 kV Taabo-Kossou-Bouaké artery which handles transport to Burkina Faso and Mali

- Since September 2018, energy exported to Burkina has fallen considerably compared to the targeted supply programme. This is due to the fact that the power system of Burkina Faso encounters difficulties to maintain the average transit beyond 60 MW, when 90 MW were targeted.

Figure 3 - Burkina Fao imports from Côte, in GWh

Integration challenges

According to Sédiko Douka, energy commissioner of the Economic Community of West African States (ECOWAS), West African nations face an energy crisis and individual state energy sectors are disadvantaged by local circumstances such as limited access to energy, poorly performing electricity companies, expensive tariffs, while challenges include the need to overcome a reliance on hydrocarbons and the development of renewable sources of energy. More will need to be done if regional progress towards electricity integration (via projects such as the recent commissioning of the Bolgatanga-Ouagadougou interconnection linking ECOWAS members Burkina Faso and Ghana) is to continue in the medium and long term. With access to electricity hovering between 40% and 52% of the population, and brownouts and blackouts averaging about 80 hours a month, the 15 ECOWAS member states need to confront a chronic lack of access to electricity across the region and persistently high prices. A lack of historical infrastructure planning and poor implementation contribute to enduring poverty and have led to an engrained reliance on emergency rental plants, which inflates power costs even more. Complicating the challenge of extending power supply infrastructure is the fact that several of the group's landlocked states, including Niger, Chad, Mali and Burkina Faso, are located in the Sahel region—an arid zone that will experience significant desertification as global temperatures rise over the course of the 21st century, according to forecasts by climate scientists. ECOWAS estimates that more than 75% of the population of memberIntegration challenges According to Sédiko Douka, energy commissioner of the Economic Community of West African States (ECOWAS), West African nations face an energy crisis and individual state energy sectors are disadvantaged by local circumstances such as limited access to energy, poorly performing electricity companies, expensive tariffs, while challenges include the need to overcome a reliance on hydrocarbons and the development of renewable sources of energy. More will need to be done if regional progress towards electricity integration (via projects such as the recent commissioning of the Bolgatanga-Ouagadougou interconnection linking ECOWAS members Burkina Faso and Ghana) is to continue in the medium and long term. With access to electricity hovering between 40% and 52% of the population, and brownouts and blackouts averaging about 80 hours a month, the 15 ECOWAS member states need to confront a chronic lack of access to electricity across the region and persistently high prices. A lack of historical infrastructure planning and poor implementation contribute to enduring poverty and have led to an engrained reliance on emergency rental plants, which inflates power costs even more. Complicating the challenge of extending power supply infrastructure is the fact that several of the group's landlocked states, including Niger, Chad, Mali and Burkina Faso, are located in the Sahel region—an arid zone that will experience significant desertification as global temperatures rise over the course of the 21st century, according to forecasts by climate scientists. ECOWAS estimates that more than 75% of the population of member states are already affected at least once every two years by natural phenomena whose effects are becoming increasingly damaging because of climate change.

Clashing imperatives

Besides supporting the mandate for immediate power demand, the role of the West African Power Pool (WAPP) extends to driving long-term climate-proofing strategies recommended under the framework of the Paris Agreement on climate change, which is due to be implemented by 2020. This regional body is mandated to translate overarching public policy guidelines into sectoral investment schemes that favor relatively new green technologies. The schemes include encouraging the installation of diversified sources of renewable energy, creating off-grid generation and storage technologies and nurturing regional power networks and new trading mechanisms. Although these initiatives are complex, require close co-operation between member states and are expensive to implement, they will secure long-term electricity supply security for West Africa if they succeed.
Domestic power utilities are at the forefront of electrification efforts, and their mandates to increase nationwide electricity production frequently lead to conflicts with the WAPP over the type of power generation used. The WAPP is concerned that regional pressure on states to increase electrification could lead to an oversupply of inefficient, fossil fuel-intensive or environmentally damaging generation that relies on coal or hydropower, which would be counterproductive to the WAPP's climate-proofing aims. Indeed, new research by the US National Academy of Sciences suggests that similar large-scale electrification projects in Western countries in the past have had a disastrous long-term effect on the environment . At present, domestic demand in West African countries is often too low to attract investment in such large-scale projects, but this is changing. Several countries are set to increase their reliance on hydrocarbons as a result of developments in the West African basin, especially in Senegal, Ghana, Côte d'Ivoire and Nigeria (the last being an established oil producer). But the countries involved argue that the resulting power generation from these developments will mostly be gas-fired, which would provide significant low-emission generation gains to the power market.

Figure 4 - West Africa’s energy situation

Network integration

If the installation of new power generation capacity remains largely a domestic state-based prerogative, the integration of existing networks is firmly in the WAPP's remit. The continued involvement of third-party donors and financial institutions such as the African Development Bank and the World Bank is likely to ensure that the focus on regional integration remains at the forefront of electricity stakeholders' concerns. In 2016, with the African Development Bank’s help, the WAPP accelerated the construction of a 330 kV double circuit high voltage transmission line from Erukan (Nigeria) to Sakete (Benin) and help meet the needs of the ECOWAS region in suppling reliable electricity supply at affordable cost. The Project, a WAPP key priority, will ensure stable integration of the national electricity networks in the ECOWAS Region and facilitate the accessibility to economic energy resources to all member states of the region. The realisation of this 330 kV WAPP Nigeria–Benin Project will facilitate optimal power exchanges and trading between the Member States. It seeks to establish a robust transmission link from Côte d’Ivoire to Nigeria passing through Prestea, Aboadze, Volta in Ghana, Lomé in Togo, and Sakete in Benin. In 2017, with the World Bank's help, the WAPP launched a regional off-grid electrification project which aims to increase access to electricity in rural areas through innovative solar power solutions, and a regional electricity trading market, which was launched in July 2018. A number of transmission interconnections have already been completed or are under way, such as the 225-kV exchange line between Burkina Faso and Ghana, a 225-kV transmission project linking Côte d'Ivoire, Liberia, Sierra Leone and Guinea and the OMVG interconnector, which will link Senegal, Gambia, Guinea-Bissau and Guinea. It is estimated that the entire region will be connected by the start of the next decade.

Regional electricity market

Assuming that regional states can overcome the obstacles identified earlier, the integration of West Africa's growing power-generating capabilities could create the region's first true power market. Currently, only about 7% of the electricity produced in West Africa is traded. However, in July 2018 the WAPP launched a trading market (with its headquarters in Cotonou, Benin) that will allow ECOWAS member states to trade their surplus electricity. The World Bank estimates that an integrated power-trading system in the region could bring operational and power-generation cost savings of USD 5bn-8bn a year by allowing countries to import cheaper and more cleanly generated electricity.
However, the potential new market throws up several complex political and technical challenges, which will require close cooperation and determination among policymakers, regulators and utilities if they are to work. Throughout much of the region, local power utilities are expected to hinder the conclusion of trading agreements, and low capitalization, ongoing supply problems, poor domestic collection capacity and corruption are likely to result in poor collection of payments, making it difficult to enforce international contracts. Such problems have already been reported in pre-existing projects operating on a smaller scale, such as the West African gas pipeline system linking Nigeria, Benin, Togo and Ghana. After force majeure was declared on the supply of gas by Nigeria at the start of the project in 2011, the pipeline underperformed and the Ghanaian authorities consequently underpaid for supply. The WAPP will need to instigate measures to improve the power sector's creditworthiness, provide guarantees and involve regional institutions, if it is to take the lead in ensuring that the region's electricity infrastructure stands a chance of succeeding, once it is built.

¹¹Source : African Development Bank Analysis; The Economist Intelligence Unit, December 2018
¹²Source: Electricity from renewable resources – Status, Prospects and Impediments, The National Academies of Sciences, Engineering and Medicine, 2010.
Accessible here: https://www.nap.edu/catalog/12619/electricity-from-renewable-resources-status-prospects-and-impediments

Electricity Regulatory Index¹⁷

Burkina Faso was included in the 2019 edition of the Electricity Regulatory with a score of 0,472 over 1,000, ranking 28 out of thirty-four countries that were surveyed. The results are displayed in the table below:

Table 5 - ERI Summary for Burkina Faso

*Data in course of elaboration, preliminary results to be validated

The following dimensions represent important challenges for the country:

1. Implementation of the institutional strategy: the new electricity law of 2017 establishes a modern institutional framework, oriented towards the private sector, liberalizing the sector and promoting competition for the supply of electricity through independent electricity producers. However, the effective implementation of this institutional framework would benefit from being accelerated;
2. Tariffs and regulations: The Energy Regulatory Authority (ARSE) has recently been extended to the entire sector without additional resources and expertise, which prevents it from fulfilling its mandate. The ARSE is under the authority of the Prime Minister's Office, and although the new Electricity Law has strengthened and expanded its mandate to encompass both grid-connected and mini-grid segments, the ARSE remains at the margin of decisions taken on the main aspects of sectoral regulation, such as the tariff revisions processed directly between the Ministry of Energy and the SONABEL electricity utility.
3. Taxation: There is no tax exception on solar kits and imports of wind power equipment, with the government only considering a provision eliminating taxes on solar power kits and wind generation equipment to allow more households to access electricity.

¹⁷Desert to Power Implementation Strategy for Burkina Faso – August 2019

National utility

General profile

SONABEL is the state-owned, vertically integrated utility which has a monopoly on transport, but following recent reforms, not on generation, import/export or distribution. SONABEL is a relatively well-performing utility by regional standards on both technical and commercial operations. It serves more than 669,448 clients with 2,353 employees. The financial situation of SONABEL has significantly improved since 2016 with a net profit of Euro 13.9 million (eq. XOF 9.1 billion) in 2018 representing a growth of 150.34%. The utility is characterized by relatively low loss rates at 13.65%i n 2018 and good performance in collection of billed amounts (91,22%) ranking among the well performing utilities in Sub-Saharan. However, this performance has to be nuanced by government subsidies on fuel purchase, as SONABEL towards the National Company of Hydrocarbons (SONABHY). That amount an estimated Euro 47.5 million over 2018 used to represent 1.2% of the budgetary expenditure to recover costs, as the tariffs do not recover costs by Euro 0.1 cents (eq. XOF 7.6). Fuel supply, which weighs more than 40% of the actual cost of electricity service, remains a weak link in the sector. Electricity demand has increasingly grown at 9% over in 2017 and almost 14% in 2018. The quality of service provided by SONABEL has been irregular with an improvement in 2017 and a deterioration in 2018. The deterioration in 2018 was driven by an increase of the Non-Distributed Energy (59.70%) and cut-off time (53.3%), despite growing imports from Côte d’Ivoire, Ghana and Togo. The inadequacy of logistics and distribution equipment, the delays in the work programs (Interconnection Bolgatanga – Ouagadougou) and the low level of hydroelectric dams’ reservoirs. The improvement of the energy mix will hopefully enable a much cheaper electricity cost. opportunities to develop renewable energies (hydro, solar, and wind turbines) are underutilized. The country could become a major producer of solar energy because it enjoys 7 to 10 hours of sunshine a day year-round with an average irradiation of 5.5 kWh / m² / d for 3,000 to 3,500 hours per year against a global estimated average of 3-3.5 kwh/m2/d. More Renewable Energy should reduce the cost of service in the medium to long term, however it requires improved sector planning in a fast-growing demand context.

Policy and strategy

The Government is currently reviewing national policies concerning renewable energy (RE). The development of the sector is a priority, as the 2020 objectives aim to reduce fossil fuel dependency while increasing access to electricity to a growing population. As such, the Government is planning to create a National Agency for Renewable Energy and Energy Efficiency. According to the General Regulation of the Electricity Subsector of Burkina Faso (Law No. 053-2012/AN), a concession is required for the development of any power plant over 25 kW (whether it uses renewable resources or not). The country’s RE policy has been primarily focused on solar. In January 2013, a law of finance relating to customs duties was passed which exempted solar related equipment and material from customs charges and VAT.

Table 6- Production per power station - SONABEL¹⁸

Transport and distribution networks – Lines and cables length, in km:

¹⁷Desert to Power Implementation Strategy for Burkina Faso – August 2019
¹⁸SONABEL rapport d’activités 2018

Mapping of ongoing programmes and projects

Donors interventions:¹⁹

African Development Bank:

• Rural Electrification and Electrification Infrastructure Project (PRIELER), approved by the Bank in 2010 and completed in 2016. The PRIELER, which was deemed satisfactory by the Bank and the Government of Burkina. The on- grid project enabled the electrification of 159 localities throughout the national territory and connected 20,000 households; 272 schools, 290 health and social promotion centers.
• Energy Sector Budget Support Program (PASE), approved in 2015 and completed in 2017, has contributed on improving the financial balance of the sector, rebuilding the fuel security stock (reserve) SONABEL (20 days) and ensuring a regular supply of its thermal power stations in fuel.
• Electrification project for the peri-urban areas of Ouagadougou and Bobo-Dioulasso (PEPU), approved in September 2016 and in ongoing;
• Multinational Nigeria-Niger-Benin-Burkina Faso electricity interconnection project approved in December 2017 and in progress;
• Energy Sector Reform Support Program (PARSE) approved in July 2018 and being implemented.
• Yeleen Rural Electrification Project approved in October 2018 and ongoing
• Yeleen solar power plants and grid extension project under study

IDA¹⁰

• Electrification of 220 rural localities (Component 2, under PASEL project) $50m FDE Ongoing (2014-21)
• Electrification of 179 localities along North-core interconnector, UE $69.5m SONABEL Ongoing (2018-2021)

IsDB

Electrification in Ouaga., Bobo Dioulasso and Koudougou IsDB $34m SONABEL Ongoing

European Eunion

Decentralized rural electrification of Ziro and Gourma regions (ERD ZIGO) UE EUR12m FDE Ongoing (2014-19)

AFD

Subsidized connections in border areas (North and Sahel regions) AFD EUR3m SONABEL Ongoing (2018-19)

Table 7 - pipeline projects²¹

¹⁹Desert to Power Implementation Strategy for Burkina Faso – African Development Bank
²⁰http://documents.worldbank.org/curated/en/889901551115559831/pdf/Concept-Project-Information-Document-PID-BURKINA-FASO-ELECTRICITY-ACCESS-PROJECT-P166785.pdf
²¹Desert to Power Implementation Strategy for Burkina Faso – African Development Bank

Investment opportunities for the private sector²²

The energy sector in one of the sectors where private sector intervention would be needed. These includes opportunities in the generation space grid connected and captive power also. While only three mines are currently connected to the national grid, they nonetheless consume over one-third of Burkina Faso’s total energy. In addition, because the electricity network does not cover the entire territory and dispatch is unreliable, all the mines currently operating in Burkina Faso have their own generation capacities. The total captive power generation capacity of the active mines is equivalent to 250 MW, marginally less than the total installed capacity of SONABEL. Because goldmining operations last, on average, 10 to 15 years, developing the mining energy infrastructure through shared infrastructure agreements between SONABEL, the mining companies, and IPPs offers a tremendous opportunity to expand electrification and generation capacities at the same time. It would lower capital costs for power infrastructure, while also providing a solvent offtake to SONABEL, thus helping to improve its credit-worthiness, and its capacity to invest in new transmission and generation capacities. Furthermore, this would help to improve the energy mix, develop solar energy, and reduce mines operating expenditures. Most mines rely on HFO, while improved technology and storage solutions now allow for the scaling-up of Solar PV for mining operations provided that there is sufficient baseload

Additional investments required to meet renewable energy targets

It is estimated that even if all these projects are built, there will still be a 13% shortfall in installed renewable energy capacity to meet the 2030 goals. To achieve its targets, Côte d’Ivoire will need to consider increasing the number of high-likelihood renewable energy projects in the pipeline. According to IFC analysis, the pipeline plan should be aligned with the targets to ensure consistency and communicate the government’s objectives to investors.

Sample sources of concessional funding

• African Development Bank financing solutions: https://www.afdb.org/en/projects-and-operations/financial-products/
• A list of available sources are available here: https://www.get-invest.eu/funding-database/?_search=1
• Africa Renewable Energy Fund (AREF): https://www.gogla.org/africa-renewable-energy-fund-aref
• Africa Power Platform: http://www.africanpowerplatform.org/financing/grants.html
• Seed Capital Assistance Facility (SCAF): https://www.scaf-energy.org/
• Energy access Africa: https://energyaccess-africa.com/2016/10/10/funds-available-for-energy-access-companies-and-projects-in-africa/
• Energy Africa Infrastructure Fund: https://energyaccess-africa.com/2016/10/10/funds-available-for-energy-access-companies-and-projects-in-africa/
• IRENA/ ADFD: https://www.irena.org/ADFD/Project-Facility/Funding-Offer

²²https://www.ifc.org/wps/wcm/connect/f45fd7a3-f8be-430b-bd9f-eb958ebe2d89/201907-CPSD-Burkina-Faso-EN.pdf?MOD=AJPERES&CVID=mNf5Bxk

Contact information of local donor representations

About opportunities in the country

²³African Development bank – report on Desert to Power -Burkina Faso
²⁴African Development bank – report on Desert to Power -Burkina Faso
²⁵https://www.usaid.gov/powerafrica/burkina-faso
²⁶https://www.usaid.gov/powerafrica/burkina-faso
²⁷https://bpp.worldbank.org/content/dam/documents/bpp/burkina-faso.pdf

About private sector participation

²⁶https://unctad.org/en/Docs/diaepcb20094ch4_en.pdf
²⁷https://bpp.worldbank.org/content/dam/documents/bpp/burkina-faso.pdf