Upper Volta - The economy

RESTRICTED FIE Copy Report No. AF-22a This report was prepared for use within the Bank and its offiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION THE ECONOMY OF UPPER VOLTA September 22, 1964 Department of Operations Africa CURRENCY EQUIVALENTS Unit: Franc de la Communaute Financiere Africaine (CFA Franc) 1 CFA Franc = U. S. $0. 004 247 CFA Francs = U. S. $1 1 million CFA Francs = U. S. $4, 051 50 CFA Francs = 1 French Franc CONTENTS Page Basic Data Maps I and II SUMMARY AND CONCLUSIONS I. INTRODUCTION ................................... 1 Country and People ............................ 1 The Government ................................ 2 Political Situation ............................ 3 II. ECONOMIC STRUCTURE ............................. 4 Labor, Wages and Salaries ...................... 4 Agriculture ................ ................... . Cotton ......................................... 5 Groundnuts ..................................... 6 Sheabutter ..................................... 6 Tobacco ........................................ 6 Livestock ............................ ......... 7 Forestry ..............................*. ..... 8 Fishing ..... ....... .. ..... ....... . .. .. .... 8 Industry .............. ...................... 8 Communications . .. . ........... 0 ... . ........ 9 Railroad ........... .. . . ...... ............ 9 Roads .............................. ........... 9 Power and Water ........... ................ 10 Education ...................................... 10 Health ......................................... 11 III. FINANCIAL STRUCTURE ............................ 12 (1) Monetary Sector:...................... 12 (2) Public Finance ............................ 13 (3) External Trade and Payments ............... 16 Balance of Payments . ............... 17 Economic Development ........................... 18 IV. CONCLUSIONS AND RECOMMqENDATIONS ................ 20 STATISTICAL APPENDIX APPENDIX - The extension services of Upper Volta BASIC DATA Area: 105,900 square miles; 274.200 square km. Population: Total 4,00,000 (as of January 1961) Rate of Growth 2% (1960-1961) Total Non-African Populaticn 3,000 Density of Total Population 16 per sq. km. Political Status: Independent since August 5, 1960 Membership: Bank May 2, 1963 IDA May 13, 1963 IFC - Total GDP as of 1959 43.0 billion: (in local currency) 170 million: (in 4 equivalent at current exchange rate) % of GDP from mining and manufacturing 2% % of GDP from agriculture 58% % of GDP from subsistence 66% Rate of growth of GDP, 1954-1960 at constant prices 3.76 % of GDP (as of 1959) Gross Investment 8% Savings 5 Exports 8% Total Government Current Revenues 9% Total Mv,oney Supply (including sight deposits)l1% Per Capita GD? (as of 1959): $40 at present exchange rate Currency: CFA Franc Value in dollars U.S. 40.04 Total currency and coin in circulation (October 30, 1962) 2.990 million Total money supply (including sight deposits) (October 30, 1962) 4.594 million Relationship to any larger monetary area Part of CFA Franc zone - Banque Centrale des Etats de 1'Afrique de l'Ouest Public Finances: In million CFA francs Latest Budget as of 1963: Current Receipts 6,691.9 Current xpenditures 7,992.5 Current Surplus or Deficit -1,300.6 Foreign Subsidy to Current Budget 1,762.0 Total Budget Investment Expenditure 461.4 Total External Debt (as of December 31, 1962): 25.9 million US $ equiv. Total Annual Debt Service: 1962 0.7 million US 4 equiv. Debt Service Ratio as % of Total Exports l0 Balance of Payments (as of 1962) in million U.S. $ Total Exports (in U.S. $ equiv.) 7.9 Total Imports (in U.S. $ equiv.) 34.9 External Assistance (in U.S. $ equiv.) Since 1960, as of December 31, 1962: in million U.S. $ Source Total Made Available 1/ France 33.3- CEE 26.0 U.S. 1.8 Germany 3.0 Ghana 11.0 Technical Assistance Personnel: October 1963 Source France No.: In administration and general government 73 In teaching 123 In production and infrastructure 77 Total, including other 337 Foreign Exchange Reserves (as of Nov. 1963): $13 million/ IMF Quota and Position (as of Dec. 31, 1963): $ 7.5 million Undrawn 1/ Including all forms of aid: FAC, budget subsidies, technical assistance. 2/ Held on behalf of Upper Volta by Central Bank of West African States. 右 FFRRIJ△RY lqF4-BRD15O3 0 50 100 150 KILOMETERS C A T T L E 5 H E E P Ari n Djibo 0 600 600------- 700 NIAMEY 100 Kong 5510 C 0 T T 0 N 800 0 < Tougon Kayo 000,1- 50 R GH U tV Nouna T 7- iv ou DUAGADOUGOU K DOUGOU 1000- SORG u Af 50 HUM Foda Ngou,mo C A 7' T L E \ 900 Boronno 5 H E E P ý130130-Dl ULASSO 5 0 R GHUM 0l-éo p6 00 Orodara Diebougou RICE 1400 Bo fora c 0 R iv REPUBLIC OF UPPER VOLTA ECONOMIC RESOURCES G oua C) AND RAINFALL 1200 -0 /JOO ID FEBRUARY 1964 IBRD-1304 SUMMARY AND CONCLUSIONS 1. Upper Volta is a poor country. Its development is severely lim- ited by natural factors. The country is badly located, landlocked, and an average distance of 500 miles from the sea. Soils are poor, climatic con- ditions hard. Thele is a shortage of water and a lack of known mineral re- sources. The most encouraging factor is probably the population itself, which is hard working and relatively well organized. 2. The main economic activity is agriculture. Most of it is of a subsistence nature. Agricultural output is low, and the principal activity of the bulk of Upper Volta's population is devoted to the cultivation of food crops - millet and sorghum - for the subsistence of the cultivators. Production for the market, mainly cotton, is still at an early stage, but increasing slowly. Livestock is the principal soarce of wealth and probably one of the most promising economic activities. Exports of cattle represent more than fifty per cent of total official exports; in addition Upper Volta is the cross-roads for relatively important trade in cattle between Mali and Niger, on the one side, and Ghana and the Ivory Coast, on the other. 3. So far, the budget has been balanced only with financial aid from outside. Since independence, Upper Volta has had to assume the burden of financing such new services as foreign representation, defence, and other services previously financed by the former French West African Federation. Government receipts have not increased in proportion to these mounting ex- penditures. The difficulty in balancing the budget has compelled the gov- ernment to reduce certain essential services to a level which is probably insufficient for normal maintenance. The balance of payments in recent years has been favorable to Upper Volta, but only because of important for- eign public capital transfers, primarily French economic aid. 4. Investment has been largely financed with foreign aid; before in- dependence with irench aid exclusively, and since independence primarily with French and Common Market (FED) aid. There has also been, since indepen- dence, a small anount of U.S. and West German aid. Upper Volta has received a relatively large amount of economic assistance. Most of the aid has been on soft loan terms or outright grants. 5. The external debt is relatively small, but the moderate prospects of the economy, the low level of internal government revenues and the country's budget deficit, generally would make it difficult for Upper Volta to bear the burden of servicing any debt on conventional terms. It seems clear that inter- nal capital formation will not in any sense be adequate for the development of the country. External aid will certainly be required on non-conventional or grant terms. THE ECONOMY OF UPPER VOLTA 1. iNTRODUCTION Country and People 1. Upper Volta covers an area of some 105,900 square miles on the African plateau, and is situated in the tropical zone of West Africa. The country is completely landlocked, far from the sea. The nearest ports, Abidjan and Takoradi, are eacn 500 miles away. The country is traversed by the three Volta Rivers and by tributaries of the Niger River. 2. The tropical climate is marked by two main seasons, a dry season, of 8 months from November to June, and a rainy season from July to October. Rainfall ranges from an annual average of 40 inches in the South to less than an annual average of 10 inches in the North and North-East. The ext- reme North and North-East have an arid desert climate. Soils are poor and eroded by the concentrated heavy rainfalls during the wet season. Except in the West, the length of the dry season often means exhaustion of water supplies by the end of the season, and limits the possibilities of profit- able agriculture. 3. Population is estimated to be around 4.4 million including some 3,000 Europeans. The average density of population is 4O per square mile, but most of the inhabitants are concentrated in the center of the country and the South, where the density can attain a rate of 60 per square mile. The Eastern and Northern fringes of the republic are sparsely populated. Ethnically, the population can be divided into three main groups: the Vol- taic group, (comprising the Mossi, Gourounsi, the Bobo and Lobi), the Mande group, and in the North the Peuls, who are nomads. The strongest and most influential sub-group is the Mossi, established in the center of the country, around Ouagadougou, and along the White and Red Volta Rivers. The popul- ation is young with 4O% being under 15 years of age. The annual rate of population growth is estimated to be almost 20. The main urban areas are Ouagadougou (63,000 inhabitants), the capital, and Bobo-Lioulasso (h5,o0o inhabitants) which has long been the economic center of the Republic as a result of its proximity to both the Ivory Coast and Iali. 4. Probably since the eleventh century the Mossi people have domin- ated the largest part of the area which now constitutes Upper Volta. The Mossi, as a vell-organized and hard-working group, succeeded in maintaining through some nine centuries a relatively strong and cohesive empire. But, when the French arrived on the scene, the FMossi empire was on the verge of falling apart. A French Protectorats was established in 1896. After various administrative changes, in 1947, Upper Volta was reconstituted as an overseas territory in the French Union. Since then, the political development of the country has been rapid. The loi cadre of 1956 gave the Upper Volta direct universal suffrage. In 1959,7Upper Volta became an autonomous republic with- in the French Community, and on August 5, 1960 achieved independence. 5. The unity of the country is built around the presence of the strong Mossi group. The location of Upper Volta, and its meager resources make it dependent on its relationships with the surrounding countries, mainly those -2- to the South. The economic growth of Upper Volta is largely tied to the strengthening of its links with its neighboring countries. Thus, the Gov- ernment has attempted to build close links with its neighbors, while at the same time preserving its own independent personality. Along these lines Upper Volta first agreed with Senegal, Sudan (now Mali) and Dahomey to form the Federation of Mali, out then, along -jith Dahomey, withdrew shortly thereafter. Upper Volta then joined with the Ivory Coast, Dahomey, and Niger to form a loose association: the Conseil de lhntente. The association provides for periodic consultations between the chiefs of state of the four countries. A "Solidarity Fund" nas been set up to provide economic assist- ance to the less wealthy member states. The Fund is supplied by contribu- tions of each country, but in fact is largely financed by the Ivory Coast. In 1961 Upper Volta entered into negotiations with the Government of Ghana, which led to an agreement providing for the free movement of both people and products, and the abolition of customs barriers. However, there have been recurring difficulties in implementing the agreement and customs controls have been re-established along the Ghanaian-Voltaic border, and a variety of taxes on goods, entering or in transit through the two countries, have come into or remain in effect, although not characterized as customs duties. Differences of political ideology make the relations between iali and Upper Volta somewhat distant. Nevertheless, production of eastern Mali is exported toward the Ivory Coast through Upper Volta; in addition, as a consequence of the dissolution of the Federation of Mali and the break in relations between Mali and Senegal, the bulk of the traffic between Mali and overseas countries has gone through Ivory Coast and Upper Volta instead of over theic railroad from Mali to Dakar. However, with the recent resumption of Mali-Senegalese relations this has partly changed. With Niger, rulations are good, the two countries being members of the Conseil de l'Entente. Relations with France remain close; Upper Volta has consistently maintained a policy of close economic co-operation with France, which is now governed by an Agreement signed in April 1961. The Government 6. Upper Volta has a republican form of government with a presiden- tial system. Legislative power is exercised by the National Assembly, com- posed of 75 members, elected for a term of 5 years by direct and universal suffrage. In addition there is an Economic and Social Council composed of 24 members, which only has consultative functions. The Executive Branch is headed by the President of the Republic, who is elected by nation-wide vote for a term of five years. The President is not responsible to the Assembly. He appoints the ministers to head each ministry. Ministers are solely responsible to him. Mr. Maurice Yameogo was elected President in 1959. The country is divided into 39 subdivisicne. According to a new law these subdivisions will be grouped into 4 departments headed by a pre- fect appointed by the President. In each department there will be a "Conseil Departmental" which only has consultative power. Each subdivision -3- is divided into "collectivites rurales" headed by a council which is elected by direct and universal suffrage. 7. Upper Volta has been having difficulties maintaining, staffing and financing the structure, which appears to be disproportionate to its need and financial resources. Some 11,000 civil servants, equal to 0.20 of the total population, receive salaries totaling 5,753 million CFA francs, i.e. 13/0 of GDP. Moreover, the lack of skills malze the management and operation of the administration difficult. Political Situation 8. Upper Volta has the familiar African one-party system, witn the "Union Democratique Voltaique, RDA", headed by President Yameogo, the only party in the country. Before independence, there were multiple parties, the most important of which were: the local section of the "Rassemblement Democratique Africain (RDA)", the party led by ii. houphouet-Boigny, present- ly President of the Ivory Coast, the "Parti du Rassemblement Africain (FRA)" the local section of the former French W-est African federalist party, led by M. Leopold Senghor, presently President of Senegal, and the "Mouvement Democratique Voltaique (M?iDV)1, headed by President Yameogo. 9. In the elections of March 1957, the HDA and the MDV won almost all seats, and agreed to form a coalition government under Juezzin Coulibaly, one of President Houphouet-Boigny's closest associates. Some months later, some of the MDV deputies led by President Yameogo joined the RDA, and when Ouezzin Coulibaly died in 1958, Mr. Yameogo was elected Prime hiinister. In the elections of 1959 the RDA under the new title of "Union Derriocratique Voltaique-RDA" emerged with practically all of the seats, and President Yameogo formed a "homogenous" one-party government. In 1960, the UDV-RDA became the only party after the dissolution of the major opposition Party: the "Parti Republicain de la Liberte", the leader of which, Nazi Boni, went into exile, first in Bamako and then in Dakar. Through the one recognized party, which he leads as General Secretary, and througn the Government, which he heads, President Yameogo plays the leading role in the country's political life. -4-. II. ECONOMIC STRUCTURE 10. The economy is based almost entirely on traditional agriculture and the raising of livestock. Most agricultural and animal husbandry activities are of subsistence type, production for the market is of little importance. All other traditional activities are related to agricultural and pastoral life. Industry is unimportant. 11. Some attempts have been made to set up the national accounts, but the lack of reliable statistical data only allows for limited estimates. Although not too much weight should be placed on these estimates, it may be useful to cite them. They give a broad view of Upper Volta's economy. In 1959, Gross Domestic Product was estimated at 42.6 billion CFA francs, i.e., about U.S. $170 million; on this basis, the GDP per capita is about 1q 000 CFA francs or U.S. ''0 equivalent - probably the lowest in French speaking Africa. GDP increased moderately, by about 20% from 1954 to 1959. Taking into account an increase of about 10% of the population during the same period, the increase of per capita GDP has been about 10%. About 60% of total GDP is subsistence production. Local trade is relatively weak, and there is a great difference between consumption in rural areas, estimated at 8;300 CFA francs per annum or U.S. 03, and consumption in towns, estim- ated at 32,000 CFA francs per annum or U.S. 4)132. The rate of investment is low: about 8% of GDP, a large part of which is being financed by foreign re- sources; there was no real increase in the rate of investment over the last six years. Labor, Wages and Salaries 12. More than 90% of the population derives its livelihood from agri- culture. However, because of the length of the dry season and the shortage of land- there is a widespread underemployment problem in the country. Moreover, the normal agricultural production cycle imposes almost complete inactivity for the greatest part of the year. These factors to a large ex- tent are responsible for the important annual emigration of the Voltaic pop- ulation. Each year about 400,000 men work outside the country, mainly on the plantations in Ghana and the Ivory Coast. Consequently, almost half of the adult male population is away from the country much of the year, and a third or more is away all year. These migrant workers have been well receiv- ed in both Ghana and the Ivory Coast. About 100,000 of the 400,000 stay away for three to six months, and return for the cultivation periods to Upper Volta. About 200,000 stay away for one to five years, and the rest apparently do not return at all. These workers constitute important settlements in certain areas, mainly near Kumasi in Ghana. The remittances of these migrants rep- resent a not negligible part of Upper Volta foreign resources. The incomes of the migrants have been roughly estimate4 to be some 10 billion CFA francs of which about 2 billion CFA francs are estimated to be sent to Upper Volta. 13. Permanent wage earners number about 25,000, half of them in public administration. In 1961 wages and salaries were estimated at about 7 billion CFA francs. The average daily wage is low, between 25 and 35 CFA francs for an unskilled worker. Salaries and wages in the private sector have remained stable during the last fifteen years, but have increased markedly in the pub- lic sector. According to official data, prices have generally increased over the last six years, especially during 1963. The index of prices (100:1958) was 140.8 in December 1962, 143 in April 1963, and 148.8 in may 1963. The increase in prices is due in part to an increase in transportation costs of imported goods, and in part to an increase in indirect taxes. Agriculture 14. As already noted, agriculture and cattle raising are the most important sectors of Upper Volta's economy. Agricultural production is estimated to account for about 58% of Gross Domestic Product. MIany factors combine to limit the development of agriculture in Upper Volta. Soil is poor, except in the south of the country and along the rivers, but in these areas tsetse fly and other insects do not readily allow settlement. Rain- fall is concentrated in three or four months of the year, and as a result, the periods during which cultivation is possible are very short. M0oreover, short dry periods may occur after the first rains in May, in which case it is then necessary to plant twice. Due to the poor quality of the soils and the lack of manure and fertilizers. extensive fallowing is required to avoid the exhaustion of the soil. Consequently, the acreage available at any one time that can be devoted to cultivation is severely limited, and in certain overpopulated areas, there is a shortage of cultivable land. Less than 2,000,000 ha,. are generally under cultivation. At any one time 6,700,000 ha. are fallow, 2,300,000 ha. are forested and 14,000,000 ha. customarily devoted to cattle raising. In practice, each farmer cultivates about 0.80 ha. (about 2 acres) yielding about 400 to 500 kgs. of millet or sorghum. At the begin- ning of the rainy season farmers plant millet or sorghum, also some other crops such as maize, rice, niebe beans, to meet their family's consumption needs, and, then if atmospheric conditions allow enough time, they plant commercial or cash crops such as cotton or groundnuts. Hence, production of these products for the market depends largely on climatic conditions, and remains small. 15. Agricultural production was estimated in 1962 to have been: 6orghum 508,000 tons, millet 261,473 tons, maize 78,000 tons, rice 45,000 tons, niebe beans 95,000 tons. This production is entirely used for local consumption, none is marketed. According to official figures it has not been increased, while, with the growth of population, consumption has been increasing, so that sometimes it has become difficult to meet local needs with the local production. Shortages of food often occur in certain poor areas at the end of the dry season. 16. The methods of cultivation remain largely traditional and crude. Land tenure customs as well as other tribal customs make the modernization of agricultural methods difficult, and little has been done in this direction. Nevertheless, the government is more and more aware of the problem of modern- ization of the methods of cultivation, and various efforts are now under way to develop the range of activity of extension services. The results already reached seem promising enough to encourage the efforts of the government along this line. (See Appendix.) Cotton 17. Cotton production is characterized by the parallel existence of two main sectors, the traditional and the modern. The traditional sector, in which Africans cultivate old types of cotton, has a more or less constant out- put estimated at 2,000 tons per year. Cotton from this sector is sold om the local market to local weavers. A high-yielding variety of cotton which Africans cultivate in the modern sector with the guidance and assistance of -6- the "Compagnie Frangaise des Fibres Textiles" (CFDT), is intended for the export market. The company advises the peasants, provides them with sel- ected seeds and fertilizers, and buys their production on the basis of pri- ces which are in relation to world market prices. Until recently despite the efforts of the company, results have not been striking. Production has not increased rapidly. As a practical matter, local weavers offered better prices than the CFDT and have bought much of the production. In addition, before independence, peasants were reluctant to cultivate cotton under the CFDT scheme for political reasons. Only when the government started to sup- port the CFDT effort, some years ago, and the local demand was saturated, did production of exportable cotton begin to increase. In 19 1/92 local cotton production sold by CFDT was 123 tons; in 1962/63 it increased to 6,000 tons, and in 1963/64 it is forecast as 8,500 tons. The outlook for overall cotton production is for an increase over the next few years. The Government has had some success in inducing the expansion of acreage under cotton and with its program of technical assistance to increase the yield per ha.;taking into account the relatively small quantities of exported cot- ton at the present time, there are no serious problems of marketing. Groundnuts 18. Groundnuts are cultivated mainly for consumption; the part of the production sold commercially by Upper Volta is very small. The yearly ex- port average has been about 4-5 thousand tons. Marketing of such small quan- tities does not raise any problems. France agreed to buy 3,000 tons in 1964 at a price of FF1050per ton. Despite these low export figures, estimated production has grown greatly over the last few years, increasing according to recent estimates, from 50,000 tons in 1957, to 113,000 tons in 1962. Re- cent experiments carried out by the French "Institut de Recherches des Oleagineux Tropicaux" (I.R.H.0.) suggest that it is possible to increase lo- cal production by relatively simple changes in methods, provided that the peasant cultivators are properly trained and aided by an appropriate extension service. The Government apparently intends to have these services provided, and if it does, it can be expected that production will increase by 50-80 over the next five years. Such an increase in production would make it pos- sible for peasant cultivators to meet their own food needs more readily and devote more effort to the cultivation of groundnuts for export and of cotton, and possibly other crops. Sheabutter 19. In fact production is the result of gathering nuts from wild shea- trees. There is no plantation cultivation. Only small quantities of shea- nuts or sheabutter are marketed, and these vary greatly with the cycle of production, which extends over a three-year period. iiarketed production amounted to 12,000 tons of nuts in 1961, compared with 1L,000 tons in 1960, Production is likely to fluctu:.te, but with no definite departure from present levels of production. Tobacco 20. Tobacco is cultivated on about 4,000 ha. located in many different areas. Production is estimated to be about 1,000 tons. All of the production -7- is sold on the traditional market. A small factory is now planned for con- struction in Ouagadougou to make cigarettes, by blending local and foreign tobaccos. Local production of tobacco may increase but not markedly. Livestock 21. Livestock is the most important economic activity in Upper Volta, and possibly one of the most promising. Livestock represents 50$o of known exports, and probably exceeds this level, if unregistered traffic across the borders could be computed and taken into account. In addition, Upper Volta is the center of important transit traffic of livestock from Niger and Mali on one side to Ghana and Ivory Coast on the other. According to recent estimates the Voltaic animal population is: 2,000,000 .......... cattle 2,750,000 .......... sheep and goats 300,000 .......... donkeys and horses In 1948 comparable figures were: 1,000,000 .......... cattle 1,426,000 ..........sheep and goats This represents an increase of 80%, in cattle population and 901 in sheep and goat population. The principal reason for the growth is the improvement in herd sanitation due to the consistent effort of the country's sanitary services. Generally speaking, epidemic diseases have largely diminished, vaccination is widely in use, and as a result no large losses have occured in recent years. Nevertheless, from the marketing point of view, the herd is still in generally poor condition. Cattle raising has not yet reached a commercial basis, and the full potential of this activity as a source of in- come for the country has not yet been fully realized. Moreover, the neces- sity for long drives over insufficiently serviced areas and routes does not allow producing animals of good quality. Despite efforts already made roads, waterholes and wells, feeding points, and slaughter houses are still insuf- ficient. 22. The main problem at present is not to multiply the number of head of cattle, but to increase the rate of production of the herd and to improve its condition and quality. Indeed, owing to the lack of land, an absolute increase in the number of head of cattle would probably result in over- grazing. Besides the growth of livestock exports, to a large extent, depends on the improvement of the marketed products. Upper Volta has to take into consideration the fact that other countries such as Mali and Niger are planning to develop their exports. In addition the main importing countries, Ghana and the Ivory Coast, have plans for increasinL their own production of cat- tle. Despite these facts, taking into account the development of the con- sumption in Ghana and the Ivory Coast, it is possible to expect an increase in Upper Volta exports to these countries over the next years, on the con- dition that Upper Volta succeeds in modernizing its methods of breeding and marketing. The government is well aware of these problems and plans to in- stitute programs to meet them. Efforts have already been made by increasing -8- the number of wells, by the extension of stock raising to regions hitherto considered unfavorable, and by improving methods of husbandry. However, such programs will require a long and sustained effort of education and will not be easy. Methods of breeding and marketing will have to be modernized, and in the process modify and change the customary habits and interests of the stock owners. U.S. AID is providing assistance to improve cattle production in the North East, with the objective of increasing the value of cattle pro- duction by 25% during the next few years. Forestry 23. Upper Volta has no real forest. The country's primary forest was destroyed by fires, and in its place there is now a poor type of wooded savanna. - The forest acreage which remains is estimated to be about 2-300,000 ha. The Government is trying to restore the forest over an area large enough to supply some timber for internal needs and to improve the country's climate. At present timber production is practically non-existent. Fishin 24. Fishing in pools and rivers is very limited and inefficient. It provides about 3,500 tons of fish per year, which is sold entirely for local consumption. Efforts are being made to develop the production by training fishermen in more modern methods of fishing and by developing fish farming in natural and artificial pools. The Government hopes to increase fish produc- tion from 3,500 tons to 5,100 tons per year over the next five years. Such an increase would help diminish the shortage of protein in local diets. Industry 25. Upper Volta has few manufacturing industries. Enterprises which operate along modern commercial lines are about 40 in number, of which only 3 have more than 100 workers. Most industries are foreign owned and account for about 12% of domestic output. The most important industries are con- cerned with the processing of agricultural products, mainly cotton, fats and oils. Known mineral resources are limited. The only mineral deposits of any importance are too far from existing lines of transportation to be com- mercially exploitable. Generally speaking, the location of Upper Volta far from the sea, limits the prospects for developing a mining industry. Never- theless, the Government has undertaken a geological survey in the hope of finding commercially-exploitable denosits of gold or diamonds. Between Ouagadougou and Bobo-Dioulasso, at Boromo, the "Societe des Mines de Poura"l operates a small gold mine, the capacity of which is around 300 kg. of goldpa. giving a value of 70 million CFA francs. Production began in 1961, but the reserves are small, and the production is expected to last only three or four years. 26. The "Compagnie Frangaise des Fibres Textiles" has built two cotton ginning plants: one in Bobo-Dioulasso, the other in Ouagadougou. The capacity of these two plants is 15,000 tons of cotton per year. The company has had considerable difficulty in getting enough cotton to use the full capacity of the two plants. In Bobo-Dioulasso there is a fats and oils processing plant with 6 000 tons capacity, and a beer bottling-plant owned by a firm domiciled in the Ivory Coast. The remaining industry is largely handicraft manufacturing, of construction material, traditional textiles, and light metal goods. Cotton weaving is the most important of these industri.es. 27. The present situation is not favorable to the development of in- dustry. The absence of raw materials, the very small local market, high costs of imported materials and equipment, all limit the prospects for the expansion of industry. The development of agriculture may increase the pur- chasing power of the internal market and pernaps encourage the establishment of some small manufacturing enterprises. The Government would, however, like to develop local industry. A French firm is now studying the industrial pos- sibilities of Upper Volta. In the offing is the construction of a textile plant with German economic aid. The German Government has agreed to furnish the machinery and personnel, during a 5-year period, to train local people. But Upper Volta has to finance the buildings and has run into financial dif- ficulties in attempting to do so. The Government also plans to build, with German economic aid a groundnut oil press near Fada N'Gourma. The project is still under discussion. The Government also contemplated the extension of the two cotton ginning plants of CFDT, anticipating an increase in raw cotton production. The local bottling company, began the extension of its instal- lations in Bobo-Dioulasso. Other projects in the offing or in process are mainly very small manufacturing or processing projects. Communications 28. Communications are an important factor in the econom,y of Upper Volta because of theremoteness of the country and its role as a transit area between Mali and Niger, and the Ivory Coast, Ghana and Dahomey. Railroad 29. The railroad connects Ouagadougou with Bobo-Dioulasso and Abidjan, a distance of 1,146 kms. The railroad is Upper Volta's main link with the sea. The part between Bobo-Dioulasso and Juagadougou, called the"i.ossi rail- road' , was built after World War II and was the major French investment in Upper Volta after the War. The railroad is jointly owned by the governments of the Ivory Coast and Upper Volta. Traffic has increased markedly in the last few years, in part, due to the diversion of Hali shipments from Dakar to Abidjan as a consequence of the dissolution of the Federation of Mali. In 1961, freight traffic for the whole line was 753,410 tons and 338,360,000 tons/k. The traffic originating in or destined for Upper Volta was estimated at 276,000 tons and 71,590,437 tons/k., i.e. about 1/3 in volume of the total traffic. It appears that even without transit transportation to Mali, traffic to and from Upper Volta has also increased since last year. Roads 30. The road network is important. For reasons already mentioned re- ntenesfrom the sea and the role of Upper Volta in transit traffic, efforts -10- have been made to build a road network which facilitates the links of Upper Volta with neighboring countries. The road system consists of about 16,000 kms. of roads, as follows: 2,400 km. of interstate roads, 3,100 km. of state roads, 2,700 km. of local roads, and 7,00 kIm. of rural paths. Compared with the size of the population, and the acreage of the country, that nean 1.3 km. of roads per 1,000 inhabitants, and 20 km. of roads per 1,000 kmi. . This fairly extensive network by and large provides sufficient geographic coverage for the present needs of the country, except in certain regions where feeder roads are needed for transporting cotton. But its present state requires im- provements. The roads are in poor condition. There are no paved roads. Inter- state roads are generally classified as "all-weather roads", but after heavy rains, even on these, traffic can be interrupted for weeks at a time. The other roads are not classified as "all-weather". The poor condition of the roads makes transportation expensive. Roads Tjere apparently often built to standards which were too low, and has resulted in increasing deterioration. This has meant increasing maintenance costs to keep the roads operational. Power and Water 31. Water and electric power are distributed in Ouagadougou and Bobo- Dioulasso by the "Soci'te Africaine d'Electricite". The capital of the Soci6te has been provided by the governments of Niger and Upper Volta, and by the French Governmental Caisse Centrale de Coop4ration Econoique and private share- holders. Since the company began its activity in 1955, production has increased by about four-fold in Ouagadougou and twice in Bobo-Lioulasso. The production in 1961 was 5,332,000 Kwh. in Ouagadougou and 4,236,000 Kh. in Bobo-Dioulasso. Demand is expected to continue to grow. The cost of electricity is about 26 CFA francs per Kwh. in Bobo-Dioulasso and 27 CFA francs per Kwh. in Ouagadougou. This is largely due to the high prices of imported gas-oil. The Society has begun the electrification of ouahigouya. Host of the invest- ments of the Society have been financed by the Caisse Centrale de Cooperation Economique. Projects are now under study for electrification of Koudougou, Dedougou, Gaoua, Kaya, Dori. The low level of estimated consumption is ex- pected to make the unit cost high in these sectors. There are two water sup- ply systems, in Ouagadougou and Bobo-Dioulasso, and both are operated by the "Societg Africaine d'lectricit6". Water consumption has increased three-fold in Ouagadougou and doubled in Bobc-Dioulasso since 1955. Education 32. Educational development is still at a low level. In primary schools the rate of attendance is 7% of the eligible primary-age school population. In 1961, there were 63,977 pupils of about the 900,000 children eligible to attend primary schools. In secondary schools, the situation is more serious. In 1961, there were 1,900 pupils in secondary schools.. There are no insti- tutions of higher education. About forty students attend universities in Senegal or in Europe, mainly in France. In the technical field, there are very few institutions. Technical schools were attended by 450 pupils in 1961-62. In addition, there are some specialized centers, attended by about 150 pupils, and a school for civil servants. The latter school preparea civil servants for the various echelons of administration, but, in fact, up to now, civil -11- servants for the higher echelons have been recruited I'rorm among university graduates. Education is provided by the Government and by private bodies, mainly Catholic 3-issions. The Govermaent allocated 1.2 billion CFA francs for education in 1963, or about 13/ of the total budget. 33. Despite the efforts made to date, much remains to be done. The general level of education is low and tends to limit the development of the country. There is a shortage of skilled people to fill the low and inter- mediate echelon positions in all sectors of the national activity, mainly in agriculture and public administration. The government is aware of the need and has formulated plans to meet it, but shortage of financing limits the efforts along this line. ror that reason the goverrmient is trying an experi- ment in expanded rural education. The object of this experiment is to provide children who are not able to attend regular primary schools some basic elements of primary education, and some fundamental knowledge in agriculture. The program is now under way; 180 schools, sometimes built bY the local population are now open. FEDOM has financed another group of these rural school buildings. Health 34. A serious effort has been made to better the health situation in the country. The main problem remains the control of endemic diseases: sleeping sickness, river blindness, etc. These diseases make certain areas unfit for human habitation, animal-raising, and cultivation; and these areas unfoi'tunately are mainly along rivers where good soils are to be found. New efforts are now being made with the help arid under the management of the "Organisation de Coordination et de Cooperation pour la Lutte Contre les Grande Endemnies" (O.C.C.G.E.), an inter-governmental organisation, to suppress these diseases in areas along the Volta Rivers. III. FINANCIAL STRUCTURE 1. Monetary Sector 35. The monetary sector is small. The banking system is closely linked to France. Upper Volta is member of the Franc zone and, together with Dahomey, Ivory Coast, Mauritania, Niger and Senegal, a member of the "Union Monetaire Ouest Africaine". This Union was created by the agreement of May 12, 1962 between France and these African countries. According to this agreewent, member countries have a common currency with a common central Bank, the "Banque Centrale des Etats de 1'Afrique de lOuast". The common currency, CFA francs, is fully convertible into French francs at a fixed rate, at present 1 French Franc for 50 CFA francs. This rate can be charged only by the agreement of all member countries. In order to assure full convertibility between the two currencies, the Central Bank has a credit account in French Francs with the French Treasury called the "Compte d'operation". Thus, the Bank always has at its disposal French Francs which can be drawn to meet all transfers from its monetary zone to countries outside the zone, In cases of deficit in this account, France can request the Bank to increase its rediscount rate and lcwer its redis- count ceiling. The new agreement gives the six members a fair degree of autonomy in the formulation of credit policy. Committees established in each of the member countries set ceilings for rediscounting by local banks at the Central Bank within global quotas for the whole Union area. In add- ition the Government may itself borrow at short term from the Central Bank within certain limits. 36. The banking system is composed of: 1) The Central Bank; 2) The "Banque Nationale de Developpement Economique et Social"; 3) Two commercial banks which are both branches of French banks: "Banque de l'Afrique Occidentale" (B.A.0.) and "Banque Nationale pour le Commerce et l'Industrie" (BNCI); 4) The French Government's "Caisse Centrale de Co- operation Economique". The "Banque Nationale de Developpement Economique et Social" is a public agency in which the Government and the French "Caisse Centrale de Cooper- ation Econormique" are shareholders. It specializes in housing, small industrial equipment loans, and agricultural loans. Since its establish- ment in 1957 up to December 1962 the "Banque Nationale de beveloppement" has extended: - 13 - Agriculture 138 loans 164 million CFA francs Trade 22 loans 146 million CFA francs Housing 459 loans 293 million CFA francs Small equipment 3,479 loans 101 million CFA francs Total 4,098 loans 707 million CFA francs of which: long term loans 181 million CFA francs medium term loans 212 million CFA francs short term loans 314 million CPA francs Dofaults of repayments are few. As of December 1962 the amount of sums due and still unpaid was about 40% of the total amount of instalments. The Govern- ment plans to use this Bank to promote industrial development. So far, the role of the Bank in the industrial development field has been limited mainly because of the lack of projects. The Caisse Centrale de Cooperation Econcnique has made certain loans relating to the development of economy, primarily in the power sector. 37. At the end of 1962, total deposits in the country were 2,700 mil- lion CFA francs, compared with 2,505 million at the end of 1961. At the end of 1962 the amount of credit was extended to 1,852 million CkA francs, com- pared with 1,738 million at the end of 1961. Almost all of these credits are short term for financing exports and imports and their amount follows the trade cycle of agricultural production, usually reaching a peak in December-January. At the end of 1962 the distribution of the credits was as follows: short term credits 1,588 million CFA francs, long term 20i million CFA francs, mainly for one enterprise. 2. Public Finance 38. Comparing the budgets of the last five years is a somewhat haz- ardous undertaking as independence brought many important changes in the financial structure of the country. The development of public expenditure and revenue is shown in the table below: in million CFA francs actual budget estimate 1959 1960 1961 1962 1963 Current expenditure 4,714.8 5,238.9 6,025.3 8,054.5 7,992.5 Current revenue 4,059.0 5,232.0 5,757.0 7,223.7 6,691.9 Current budget deficit -655.8 -6.9 -268.3 -830.8 -1,300.6 Capital expenditure in budget 467.8 942.2 1,492.3 347.2 461.4 Total deficit -1,123.6 -949.1 -1,760.6 -1,178.0 -1,762.0 Foreign aid in budget 1,135.9 811.4 3,O50.0 1,178.0 1,762.0 of which - Subsidies 1,135.9 811.4 270.0 500.0 1,000.0 - Fonds de Solidarite -Consei' de l'Entente) - 180.0 678.0 762.0 oan from Ghana - - 2, 600M0 - - -14- 39. Government Expenditure increased from 511 billion CFA francs in 1959 to 8.ET 11ion CFA francs in 1963. Budgeted canital expenditure con- sists of government investment, primarily in the admiistrative and social sectors: school buildings, administrative buildings, etc. In fact, oudgeted capital expenditure represents only a small part of total government invest- ment. In addition to budgeted capital expenditure, the government finances most investment outside the budget with financial aid from public foreign sources: "Fonds Europeen de Developpement Economique", French "Fonds d'Aide et de Cooperationt, U.S. AID, etc. These investments are financed directly by foreign aid, without local financing, and hence are not inciuded in the budget. 4o. To a great extent, the increase in current expenditure can be attributed to the fact that, with its independence, Upper Volta had to assume the cost of governmental functions.which were theretofore financed by France and the Federation of French dest Africa, or which did not previously exist, e.g. cost of diplomatic representation allowances. Thus, the present level of current expenditure more nearly reflects the operations of government services than the previous level in budgets before independence. France, however, continues to contribute to the cost of recurrent expenses by paying the salaries of Frencn technical assistance personnel (about 300 people, many of whom occupy operating or quasi-operating positions), and by paying a part of the expenditure relating to certain services such as air nalvigation facil- ities, meteorology, and radio communications. The amount of these e.pendi- tures, which are not included in the budget, is currently estimated. to be about 1,000 million CFA francs, or 1/ of present Voltaic budget expenditures. In 1963 13.4% of the total budgeted expenditures was for education (ccmpared with 12.5 in 1960), 9.5% for health (11.9% in 1960), 1.8% for foreiRn affairs (1.1; in 1960), 8.5 for army (0 in 1960 and 13% in 1962). 4l. The total external public debt outstanding at present is 6.:3 bil- lion CFA francs or U.3. .;25 million. In addition, to this amount, Grmany has agreed to extend a credit totaling- U.S. ,P3,000,000 for various indust- rial projects, but owing to the lack of prepared projects, this line of credit has not yet been drawn down, and probably will not be drawn down sig- nificantl1 for some time. Sixty per cent of tne outstanding debt is with France, in the form of long term loans. Due to the fact that Upper Volta has received foreign aid mainly in the form of grants, the government has succeeded in limiting the debt burden of the country. Debt service payments budgeted for 1963 were 263 million CFA francs, representing 310 of government expenditure or h6 of current government revenue, excluding foreign public loans and grants. in 1962, the Voltaic external public debt service payments were equal to 9.6% of total export earnings. This percentage is expected to increase over the next few years. Indeed Upper Volta is due to begin reim- bursement of the loan of 2,000,000 Ghanaian b extended by Ghana in 1961. This loan was used mainly for financing the government current expenditures and some capital expenditures. It is repayable in 15 years since 1961 with a grace period of 5 years. The rate of interest is 2-1/2%. At the same time, Ghana also granted a loan of L2,000,000 without interest as an advance for the sums due as refund of import duties levied in Ghana on products ship- ped to Upper Volta. -15- 42. Governmentreceipts increased from 4.1 billion CFA francs in 1958 to 8.4 billion in 1963. The major increase took place in 1961 with the set- ting up, for the first time, of Voltaic customs along its borders with the Ivory Coast and the other former French v4est African territories. 4ith Ghana, according to the agreement with this country, custom duties and taxes on im- portations and exportations were suppressed in 1961 except a small "taxe de statistique". But, as already mentioned, there have been difficulties in im- plementing the agreement and in 1962 Upper Volta re-established tne different taxes but not the customs duties. This imoosition of customs resulted in a change in the structure of government revenue, with indirect taxes becoming the major so-,rce of revenue. The following table gives a creak down of gov- ernment revenue since 1959: Government Revenues (in million CFA francs) actual budgetary estirates 1959 1960 1961 1962 1963 Direct taxes 1,125 1,253 1,455 1,339 1,317 Indirect taxes 810 1,752 3,276 3,907 7, 23 Other taxes 97 147 200 115 128 Miscellaneous 2,026 2,080 826 2,362 723 Total from domestic sources 4,058 5,232 5,757 7,723 6,691 Foreign aid 1,135 811 3,050 678 1,762 GRAND TOTAL 5,193 6,03 8,807 8,401 8,453 hore and more, government revenue has relied on indirect taxes, including custom duties. The percentage of indirect taxes in the total of domestic revenue, excluding foreign aid had increased from 190 in 1959, to 67/ in 1963. During the same period direct taxes increased slowly up to 1961, and since then have decreased. The increase of indirect taxes has been mainl> due to the setting up of a customs system. Up to 1961, custom control on products imported from outside the French monetary zone took place mainly in Abidjan. Taxes on products declared as imports for Upper Volta were levied in Abidjan and subsequently reimbursed to Upper Volta. But, in practice, many, if not most of the imports destined for Upper Volta were imported througn Abidjan without any clear indication of their final destination. Consequently, the import duties received by Upper Volta were smaller than what would have been the case if all the products shipped to Upper Volta had been declared as im- ports for Upper Volta. In addition to obtaining a large share of import duties under the newly imposed customs, there has also been an increase in the rate of custom duties. Thus, as in many other African countries, in Upper Volta taxes on imports are the main source of governmental revenue, the low level of income not allowin7 for a large return from direct taxes on income. -16- 43. Foreign aid has consisted mainly of subsidies granted to help the country balance its ordinary budget. Before independence these subsidies were granted by the French est African Federation. They were on the decre- ase until 1960. Since then i,ith independence Upper Volta has received in- creasing suosidies directly from France and the Fonds de Solidarite de 1'1n- tente. In 1962, the French subsidy amounted to 500 million CFA francs, and in 1963, it reached 1,000 million CEA francs. In addition, as already nen- tioned, certain public expenditures are paid for directly by France, the amount of which has been estimated at about 1,000 million CFA francs. The amount of sums paid by the "Fonds de Solidarite de l'Entente" was estimated to be 678 million CFA francs in 1962 and 762 million CFA francs in 1963. 3. External Trdde and Payments 44. Because of the importance of subsistance consumption in the country the economic activity of Upper Volta is riot stiongly tied to foreign trade. Exoorts are equal only to a small part of local consumption, and the pro- portion of imported goods in local consumption remains srall. Inforrr.ation on foreign trade is not easily available or reliable, As mentioned above, until recently (1961) there were no customs between the different territories of the French West African Federation, and therefore there is no data avail- able with respect to inter-state trade. In addition, custom duties on pro- ducts imported from outside the Federation were paid in Abidjan and subse- quently a share was paid over to Upper Volta; hence, corresponding import data for this period is essentially an estimate derived from the share of customs paid to Upper Volta. Since the establishment of a custom syrs'tem, import-export data is more reliable, although still incomplete. 'fe stat- istics still do not record all transactions with neighboring countries, as a significant part of the export of cattle into Ghana and the Ivory Coast, goes across the borders without being controlled. Tnere is also an unrec- orded movement both ways of other commodities across these borders,. L. According to official statistics, the foreign trade of Upper VclLa has been as follows: Officially Recorded Foreign Trade (millions CFA francs) Year Tports Fports: Balance 1957 1,612 897 -715 1958 1,799 1,6C0 +1 1959 2,071 1,121 -950 1960 2,027 1,064 -963 1961 7,00 881 -6123 1962 8,5b9 1,944 -6,625 1963 (6 months) 4,404 1,184 n43,220 46. ImDorts increased from 1Y612 million CFA francs in 1957, to 8,569 million CFA francs in 1962. This sudden increase in imports was largely statistical and accounted for by the custom control imposed along the Voltaic borders. The real increase was undoubtedly considerably smaller. Half of -17- the imports come from France. The other main supplier countries are the Ivory Coast (10%), Senegal (51) and Ghana (51). Upper Volta relies on for- eign sunplies for all industrial goods arid for most construction material. Food products account for 23o of the total imports, but consist mainly of items consumed by the European population in the country. Consumption goods represent h0% of imports, of which a large part is textiles. 47. According to official statistics, exports increased from 897 mil- lion CFA francs in 1957, to 1,944 in 1962. Most of the exports go to Ghana and the Ivory Coast. Exports to theI.e countries represent more than 60," of total exnorts. Livestock is the country's principal export. It represents about half of total exports, according to official statistics, and probably equals even more if unofficial exoorts were to be taken into consideration. These exports consist entirely of cattle and sheep sold on the hoof. Ghana buys about two-thirds of this livestock export, and Ivory Coast, Togo and Dahcmey the rest. During the last five years these exporbs have increased from a level of55 million CFA francs to the 1962 level of 819.8 million CFA francs. The increase has been continuous, and the outlook, as already noted, probably is for the trend to continue. The other exports, groundnuts, shea- nuts, cotton and gold are all relatively small. Balance of Dayments 48. The balance of payments statistics established by the government covers only transactions with countries outside the Franc zone. The lack of data concerning monetary relations inside of the 1ranc zone does not permit filling in this gap. Moreover, even with respect to foreign countries out- side the Franc zone, certain transactions are not taken into consideration. In theory, all export and import transactions must oe authorized by the "Office des changes", and customs must require tnis authorization before allowing a product to enter or leave the country. But, in practice, certain exports and imports, such as cattle, even though controlled by the custom - services, are exported and imported without this authorization. So, even if these transactions are taken into account in the customs statistics; they frequently have not been included in the statistics concerning the balance of payments. With respect to relations with countries outside the 1ranc zone, official data for 1962 reveals a deficit in the balance of payments, before taking account of foreign public assistance, arising primarily from a deficib in foreign trade (0.3 billion CFA francs in 1962) and from the new government expenditures in foreign countries (0.1 billion CFA francs in 1962). The deficit 7ias, however, more than compensated for by aid from foreign countries and international organizations (0.9 billion CFA francs in 1962). Thus, the balance of payments with countries outside the Franc zone showed an excess in favor of Upper Volta in 1962 of about 0.5 billion CPA francs. W*Jithin the Franc zone, because of the structure of the CFA zone, it is not nossible to obtain figures with respect to capital flows inside the zone. Nevertheless, it appears from various unofficial estimates that tnere is probably an im- portant flow of capital transfers from Upper Volta by private companies and individuals to France, which is more than compensated for, however, by publi2 transfers from the French Government of various types of special expenditures (financial aid, and payment for services), and therefore helps to finance Upper Volta's import surplus. Basically, Upper Volta remains dependent on -18- foreign aid, and is likely to ccntinue to do so for some time to come because of the slow growth of its economy and because of the limited outlook for in- creases in foreign trade. Economic Development 49. Since the last war, France through the "Fonds d'investissements pour le developpement economique et social" (FIDES) has made important in- vestments in infrastructure and agriculture in Upper Volta: roads. railroads, schools, health services, and irrigation. FIDES nas financed virtually all public development expenditure in the country. Upper Volta s contribution to the FIDES financial program was largely financed by soft loans from the French "Caisse Centrale de Coooeration Economique". At the termination of FIDES aid in 1959, the total of this aid was estimated at 3500 million CFA francs, of which investments in agriculture represented 32/, infrastructure 68% (principally the iossi Railroad), education 12', and health 80. In add- ition, since 1950 Upper Volta has received soft loans from Caisse Centrale de Cooperation Economique estimated at 0.9 billion CFA francs. 50. After independence, the government of Upper Volta carried out in- vestment rrojects with foreign financial aid, but these projects were not in any sense part of a more general 'lan or program, and were generally .barried out on an ad hoc basis, without reference to the overall needs of the economy. Several years ago the government prepared, with the aid of French advisors, a five-year plan which was to have been applied over the period, 1963 to 1967. This plan, however, was never put into effect. Instead a temporary plan was pre.ared and instituted for the two years 1963 and 1964. This plan is mainly a list of projects gathered from the five-year plan after taking into consider- ation the possibilities of financing and managing them. The total amount of investments is estimated to be about 13 billion CFA francs of which LlA is for agricultural projects and 175% is for industrial projects. The government expects during these two years to prepare a new plan which will be more real- istic in the view of the government than the earlier plan which was discarded partly on the ground of its being unrealistic. Due to the lack of trained personnel, the government is likely to have difficulties in drawing up a new plan, and in any event, subsequently in carrying it out. The government lacks trained and skilled staff to carry out a devel"pment plan, and specifically to develop projects to translate the plan into real-ity, and for subission to possible financing institutions. This is one of the principal bottlenecks to economic growth in the country. 51. Up to now, financing of government investment has been no problem since France and, more recently, the European Economic Community, have made available substantial amounts. 52. French aid to Upper Volta takes various forms: financing certain services, subsidizing the budget, providing technical assistance and finan- cing certain investment projects. The technical assistance and the finan- cing of investment projects are channelled through the "Fonds d'Aide et de Cooperation " (FAC). The total amount of grant funds committed by the FAG since 1959, the date at which it began its operations, througn December 31, 1962, was 3,945 million CFA francs or about U.S. 416 million. Out of this 19- amount 760 million CFA francs is for general stui'es, 1,598 million CFA francs for agriculture, 834 million 0A francs for infrastructure (rail- road 390, telecommunications 230), 843 imillion CFA francs for social equip- ment (health 491, education 385). All of this aid has not yet been drawn The European Economic Community has agreed to finance eleven projects. The amount of its aid since 19 5 until December 1962 is about U.S. $26 million in the form of grants, out of this amount U.S. 410.3 million is for invest- ments in hydraulic facilities for agriculture, U.S. 05.5 million for soil conservation, U.S. $3.7 million for health, U.S. ?2.1 million fo2 school buildings, and U.S. J3.h million for water supply. U.S. has financed various projects totaling U.S. 41,887000 all in the form of grants. Germany has agreed to extend a 12.000.000 D.M., or U.S. $3 million, loan for financing various industrial projects. This loan would be repayable in 12 years at interest rate of 3%. At the present time certain projects are under study but none of them have as yet been initiated. The whole loan is still undisbursed. The total of foreign aid for investment since independence, not including the Ghanaian loans, has been about U.S. *$95 million. -20- IV. CONCLUSIONS AND RECOMMENDATIONS 53. With a GDP of U.S. 40 equivalent per capita, Upper Volta is pro- bably the poorest country of West Africa. The lack of resources, the harsh natural environment, and the isolation of the country are formidable factors which make changing the basically subsistence character of its economy ex- tremely difficult, and hinder a rapid growth of its economy. 5h. There are, however, some limited possibilities for development of the economy, even though this may be a slow process. Certain products have some promise, primarily cotton and livestock. The population is, on the whole, hard worktg and should be able to increase its output, with appropri- ate training and technical assistance. Taking into consideration the gener- ally low yields of present agricultural production, the application of sim- ple, known techniques should result in higher yields. This should be possible to achieve with the help of an improved extension service. The government is aware of these possibilities, and is trying to develop the role and quality of the already existing extension services. Hence, there.is some reason to assume that the present trend of increasing exports will continue over the next few years. It is only through the development of agriculture that the national income can be significantly increased in the near future; and thus lay the basis for expansion in other sectors. The first priority is, and the government appreciates this, in stimulating agricultural production through strengthening all agricultural services, and particularly the exten- sion services. The government is also laying stress on the improvement of the road system in connection with the development ofagricultural production and certain agricultural areas. 55. The financial situation of the government is a cause for concern. Prior to independence the budget of Upper Volta was unbalanced and needed external budget support. Upper Volta has made some efforts to increase its local revenues, has cut some governmental salaries (including those of iin- isters), but because of the limitations of the 0ituation in the country, the government has not been able to mobilize enough resources to meet all its current needs. Internal funds available for investment are limited. Hence, Upper Volta has relied heavily on foreign aid for financing its development projects. So far it has received a large amount of foreign aid. If Upper Volta is to have much chance of development, however, it is likely that it will continue to need foreign aid for many years to come. Even though foreign aid has been mainly in the form of grants or soft loans, the burden of the external debt is not unimportant, and payments to service it take up 470 of current budgetary revenues and 8% of export earnings. It is clear that with its difficulty in meeting current expenditure as it is, Upper Volta will not be able to increase the burden of its external debt very much. To the extent it requires external financing it should, as much as possible, be in the form of grants or on unconventional terms. STATISTICAL APTENDIX Table No. Agricultural Production.....o..>......ne.....0o0e . 0 o. 1 Government Revenues2................. 0.. 000...3.0..0 2 Government Expenditures...o3o. ............ 0 3 Foreign Trade - Imports by Coixmodit'es - Irnports by Monetary Zones................................4.... Exports by Commodities - Exports by 11onebary Zones... 5 Balance of Payments ith Countries Dutoide the Franc Zone ...0 0 0 0 0.. 0 . .0 0. . 0 . . 0 .0.0 . . 0.0 . 0.0 0.0 6 Public Debt Outstanding as of December 31, 1962......... 7 Gross Domestic Product, 1959........,.......,,.... 8 Table 1 Agricultural Production 1959 1960 1961 1962 1963 Products Production Production Production Production Production in tons in tons in tons in tons in tons Sorghum 425,oco 555,996 410,725 508,343 520,000 Millet 161,000 293,171 194,900 261,473 265,000 Maize 70,000 92,008 74,985 78,306 45,000 Rice 28,600 30,834 20,971 45,220 27,000 Niebe 65,000 95,739 41,230 95,788 105,000 Yams 42,000 58,318 22,530 39,820 - Groundnuts 5C,OCO 95,720 110,350 112,910 125,000 Cotton (marketed by CFDT) 2,900 3,900 ,800 6,000 8,500 Source: Ministre de IrAgriculture. Table 2 Government Revenues in million CFA Francs 1961 1962(a) 1963(a) Poll tax 965.9 898.0 770.0 General income tax 352.2 34o8 431.5 Other direct taxes 137.3 99.9 116,1 Total direct taxes 1,455.4 1 338.7 L317.6 Import duties 1,033.4 1,160.0 1,630,0 Excise tax on con- sumption 2,179.3 2,656.5 2,799.2 Export duties 48.0 10.0 8 0 Other indirect taxes 14.6 80.7 8K,8 Total indirect taxes 3,275.3 2,907.2 123.0 Other taxes 200.3 -15.5 127,,7 Income from properties and services 26.6 4oo.8 618 8 Miscellaneous 449.4 1 16,.h 10.8 A. Total from dorestic -ou~rce 767.0 2 6,691.9 B. FocrciRn rocupiragg -000 1,178.0 1, 762.0 of which: - Subsidies (270,0) (5000) (1,000.0) - Fonds de Solidarit6 de 1'Entente (180.0) (678.0) (762.0) - Loans from Ghana (2,6o0.o) Total 8 07.O 8 .7 8-653.9 (7a Budgetary estimates. Source: Iinist rc des Fincnces. Table 3 Government Expenditures in million CFA Francs 1961 1962(a) 1963(a) External Public Debt 133.4 188,6 263.2 Current Expenditures 5,131.1 6,445.6 6,161.0 of which: Legislature 118.5 218.1 186,4 General Government 287.3 230.2 240.6 Interior 894.0 859.9 821.9 Defense 12.0 1,138.3 720,2 Finances 347.0 325.2 370.0 Public Works 118.0 113.2 117.2 Education 947.0 1,203.4 1,133.7 Health 922.1 880.5 803.4 Foreign Affairs 90.4 181.2 151. National Economy 375.6 409.6 333.7 Posts and Telegraph 217.0 259.8 221.1 Others 305.4 235.2 360.4 Common expenditure 496.8 391.0 501.0 Subsidies to local entities and local government 760.8 1,420.3 1,568.3 A. Total Current Exnenditure 6,9025,3 8054 7 992.5 B. Equipment 1,492-3 347.2 461.4 Total 7,517.6 8z401.7 8,453.9 (a) Budgetary estimates. Source: Minist6re des Finances. Table _ Foreign Trade in million CFA francs 1959 1960 1961 1962 Imports 2,071 2,027 7,004 8,569 Exports 1,121 166 881 19bJa Balance -950 -963 -6,123 -6,625 I. Imports by Commodities 1959 % 1960 % 3961 % 1962 % (11 Foodstuffs, bev- months) erages, tobacco 221,0 (11) 237.0 (12) 1,281.7 (18) 1,843.1. (23) Energy 29.5 ( 1) 149.5 (7) 312.2 (5) 265.2 ( 3) Raw material and intermediate goods 246.0 (12) 295.5 (14) 1,oh9.o (15) ) )2,582.7 (33) Manufactured 491.5 (24) 382.5 (19) 1;067.2 (15) ) Consumption goods 1,080.0 (52) 963.0 (48) 3293_9 (47) _I92 .8 (4l) Total 2,071.0 2,027.5 7,004.0 7,883.8 Iports_by ionetary Zones 1959 % 1960 % 1961 % 1962 % (11 months) Zone Franc 1,648 (80) 1,496 (74) 4,872 (69) 5,570 (70) of which: France (1,557) (1,444) (4,20) (4,010) Sterling Area 251 (12) 281 (14) 1,510 (22) 853.5 (11) of which: Ghana n.a. n.a. (1,315) (412) Others 172 ( 8) 250 (12) 622 ( 9) 1,459.1 (19) Total 2,071 2.027 7,oo 7,883,0 Source: .inistire de 1'Econorie Nationalo, Table 5 I!. E2jrs-yCruldte in million CFA francs 1959 % 1960 1961 / 1962 % (11 monThs) Livestock 555,0 (50) 752.0 (71) 527.0 (60) 819.8 (48) Fish 240.0 (21) 117.0 (11) 4.0 ( -) 13.8 ( 1) Sheanut 21.0 ( 2) 114.0 (11) 61.0 ( 6) 118.9 ( 7) Groundnut 58.0 ( 5) 19.0 ( 2) 7,0 ( 1) 27.8 ( 2) Cotton - - - 38.2 ( 2) Gold - 7000 ( 8) 249.0 (114) Others 247,0 (22) 62.0 ( 5) 2120 (25) 1,,5 (26) Total 11121.0 1,064,0 881.0 1,706..0 Eors14onetary Zones 1959 % 1960 % 1961 f 1962 $ Franc Zone 181.0 (16) 20.0 ( 2) 129,6 (15) 806.4 (47) of which: Ivory Coast n.a. n.a. (18.5) k387,9) Sterling Zone 828.0 (74) 891.0 (84) 681.2 (77) 707.4 (42) of which: Ghana - (680,6) (696.6) Others 112.0 (10) 153,0 (14) 70.2 ( 8) 192.2 (11) Total 1,121.0 1,064.0 881.0 1,706.0 Source: iUnistAre de i'Economie Nationale. Table 6 Balance_of Paypents with Countries Outside the Franc Zone in million CFA Francs 1961 1962 Recegts Payments Recepto Payments Merchandise 137.0 751.9 235.3 523.9 Freight, Insurance 03 20.2 0.1 13.8 Travel 213 5.2 2.8 1,5 Income from Capital - 3.8 - 1.7 Income from Labor 1.0 1.6 0.9 4.1 Other Services 1.4 1.7 6.2 286. Central Government - 538,9 1.7 98.9 Foreign Governmient 1,6.8 - 61.0 31.3 Public Transfers 276.7 - 76.,1 0.5 Private Transfers 82.4 0.3 111.6 0.1 Long-term Capital 0.7 - - - Short-term Capital 10.1 - 18.2 h.6 1,977.7 1,323.6 1,201.9 70C.8 I I +65.1 eo93.1 Source: Ministire de l'Economie Nationale. Table 7 Public Debt Outstandng as of Decerber 31, 1962 in million in million d.llar 1. To FRANCE CFA francs ecuivalent a. Caisse Centrale de Cooperation Economique, on behalf ofTFIDES 2, 808o5 11.4 of which part of the debt cf "Federation de l'AOF"with FIDES 2,785.7 Repayment in 4O years - rate of interest 15 b. Caisoe Centrale de Cooperation Economique 2710 1.1 3,079.5 12.5 2. To GHANA a. Loan of L2,000,000 1,852.2 7.5 Repayment in 1F years - rate of interest 2-1/2% b. Advance of L2,000,000 1,321.7 5.4 Advance without interest repayable by means of taxes levied by Ghana on products imported by Upper Volta through Ghana 3,1'73.9 12.9 1/ 3. To GERMANY / 48.2 0.2 4. To OTHER LENDERS 43.8 0.2 TOTAL EXTERNAL DEBT 6,3h5, 25.9 5. OTHER DEBT (inside the country) 428.8 1.6 GRAND TOTAL 6,783.0 27.5 Upper Volta has also guaranteed loans in the amount of 627 million CFA francs - or U.S. $12.5 million - made by Caisse Centrale de Cooperation Economique to indenendent or quasi-independent public agencies and local com- munities. It therefore has a contingent liability in the aforementioned amount in case of default by the borrowing agencies or connunities. 1/ Not included a new loan of 12.000.000 D.M. undrawn for the moment. Table 8 Gross Domestic Product, 19591/ In billion % of total Use of In billion / of total Resources CFA resources resources CiA resources Private consump- Agriculture 20.8 46 tion 39.5 88 Industry, handicraft, electric power 2.9 7 Public consump- Construction 5.2 12 tion 1.4 3 Services 2.6 6 Commercial Gross invest- margins 7.3 16 ment 3.6 9 Total GDP 38.8 Imports 9.4 Exports 3.7 Import sur- plus $57 13 Total avail- able re- sources 44.5 44,5 1/ Those estimates were worked out by the team of experts which prepared the five-year plan. APPENDIX The Extension Services in Upper Volta Among the various factors which hamper the economic development of Upper Volta, one of them is the use of primitive methods of cultivation. Taking into account the studies made, particularly in Upper Volta by various research organizations, it appears that the application of simple but, more modern methods could result in higher yields. That implies the establishment of extension services to train cultivators in these new methods. The Govern- ment of Upper Volta is well aware of this problem and is p7anninj to develop the efforts made along this line. The results of the experiments already made seem promising and justify the Government's efforts. Although the Government has developed a small extension service of its own it largely relies on the services of foreign, inainly French. organizations, among them the "Compagnie Franqaise pour le LAveloppement des Fibres Textiles" (CFDT), the "institut de Recherches pour les Huiles et Oleagineux" (IRHO), the "Socitd d'Assistance Technique et de Crdit Social Outre-Mer" (SATEC). A team of Israelis is training the population in the region of Bobo Lioulasso, but this experiment is only at a preliminary stage. Finally certain small experiments are under way by various private organi7- ations, mainly Christian Missions. We now consider briefly some of tnese experiments. A. Compagnie Frangaise pour le DNveloppement des Fibras Textiles - CFDT This company was established in 1951 to promote cotton cultiv- ation. For a long time the results have not been striking. Farmers were reluctant to cultivate cotton for political reasons. The small quantities produced were sold mainly to local weavers who sometimes offered a better price than the company could offer for exports. Only when the Government started to support the CFDT effort did the exportable production begin to increase. The CFDT gives advice to the farmers, sells them selected seeds, and buys their production, assumes responsibility for the transportation of the cotton from the local market to the cotton ginning plants in Cuagadoagou and Bobo Dioulasso, and then exports the lint. The CFDT appoinbs six advisers who each have charge of supervising 7,000 ha. Under these six advisers are sixty extension workers. Each of them has charge of supervising about 700 ha. In 1963-64 the acreage cultivated for cotton under the super- vision of CFDT was estimated at 40,000 ha., increasing from 28,000 ha. during the preceding year. The methods of cultivation recommended by the CFDT are studied in liaison with the "Institut de Recherches Cotonni6res Tropical" (IRCT), which is a research institute specializing in the problems of cotton cultivation. Thanks to these methods, the yield per ha., which has been roughly 200 kilos per ha., has increased in certain sectors supervised by CFDT to 1200-1500 kilos per ha. The CFDT hopes to increase the production over the coming five years to 27,000 tons of cotton seed without increasing the acreage cultivated. The cost of this experiment is estimated at about 12 million CFA francs for the period 1963-1964. -2- B. Institut de Recherches pour les Huiles et Oleagineux Tropirawo (TRHO) This organization was establishr.d in 1950 to study shea tree cultivation, and also groundnut cultivation in Upper Volta. Since 19'9, the IRHO has tried to trairn far.i.re w:lth the use of more modern methods of cul- tivation developed by IRHO. In 1960, the IRHO trained 165 farmers in The region of Fanfora, south of Bobo Dioulasso; in 1963 it trained about 2,500. Its objective is to increase tae groundnut yield per ha. from 400 to 1,500 kgs. The results are encouraging. IPHO sells to the farmers selected seeds and buys their production. For this job the IiHO has appcinted two directors, one in Banfora, the other in Dedougou. Under these directors there are supervisors (one for 200-00 trained peasants). 'hese supervisors have their primary school degree and are traine.d on the spot. In additior. there are local extension workers who advise farmers in the village where they live, These workers do not receive a Salary but receive a bonus calculated on the base of the yield of production in their sectors. C. Soci6t6 d;Assistance Techniaue et de Cr6dit Social Dutre-Mer (SATEC) The purpose of this society is to advise and train small pro- ducers: farmers, fishermen, and craftsmen. It was established in 1961, near Ouagadougou. Contrary to the practice of "cFDT" or "IRH{O" the SATEC does not limit its action to one crop: "cotton" or "groundnuts". After a careful study of the local conditions, SATEC began its program, which is based on a cei-tain number of techniques. a) The use at the outset of a relatively high number of extension workers to establish a close contact with the peasants and to train local extension workers; b) The establishment of small cooperatives in order to facilitate training and to help the peasant to obtain resources for buying small agricultural implements; and c) The carrying out of a work program with the following characteristics: 1st year - use of a donkey-drawn hoe and row planting; 2nd year - use of fertilizer and dressed seeds; 3rd year - improvement and extension of farm crops with first steps towards introducing manure in field cultivation; and hth year - use of donkey-drawn cart and introduction of mixed farming. In 1962, 32 cooperatives were established with 455 members. In 1963 there were 148 cooperatives with 1,908 members. In 1964 SATEC hopes that there will be 4,500 members in about 600 cooperatives. If we compare the results of this program for the first two years, the results are, accord- ing to very rough estimates, the following: - 3 - a) The area cultivated by each peasant increased batween 1962 and 1963 from an average of 1.5 ha. to 2.6 ha. b) The yield per ha. increased by about 5O% during the same period. For the functions above-mentioned the personnel employed by SATEC has been: about 220 agents in 1964, of which 100 were trainees. The cost of this program will be about 150 million CFA francs in 1964. Taking into consideration the rather promising resalts of these experiments, the Government is planning to extend the activity of these organ- izations. It decided to assign certain areas to each organization, with each organization being the only extension service in its zone. However, iRh and CDT will be spervising all cultivation, and not only groundnuts (for IRHIO) and cotton (for CPDT). In addition, the Goverment is plannring to assign other areas to the same organizations and to otier organizationn. Tho objective of the Government is to train at the end of the coming five years the population of 1,500 villages out of the approximately 7,000 vi-llages of Upper Volta.