BURKINA FASO INVESTMENT CONTEXT
Over the last decade, the government of Burkina Faso has undertaken a series of institutional and legislative reforms in an attempt to create a favourable climate for foreign investment. As part of its 2011-15 strategy for accelerated growth and long-term investment (in French, Stratégie de croissance accélérée et de développement durable or SCADD), the government’s goals include improving transport and communication infrastructure, as well as diversifying and increasing its electricity production capacity. The successful implementation of the SCADD requires the government of Burkina Faso to turn to the private sector to seek technical expertise and alternative financing options. In this context, on May 30, 2013 the government adopted Law No. 023-2013/AN governing the framework law on investment in Burkina Faso, which lists public-private partnerships (PPPs) as a guiding principle of investment policies in Burkina Faso and a commitment to identify priority sectors and major projects to be implemented as PPPs. Nearly concomitantly, the promulgation on June 24, 2013 of Law No. 020-2013/AN establishing the legal framework for PPPs in Burkina Faso (PPP Act) by Decree No. 2013-493/PRES constitutes an essential step in fostering public-private sector collaboration.
KEY PPP ACT PROVISIONS
The PPP Act is the first legislative initiative of its kind in Burkina Faso. It establishes a specific legal regime for PPPs by outlining conditions for entry into such partnerships and requirements governing the selection of private partners by public authorities. Pursuant to the PPP Act, a PPP is a partnership between a public authority and a private partner (including an individual) established for the purpose of providing services or goods to the public by optimizing the performance of the public and private sectors in order to promote projects with a social purpose or to develop infrastructure and public services (Section 2). However, the PPP framework construed under the PPP Act generally applies, with some exceptions, to projects specifically identified in the PPP program adopted by the Council of Ministers (Section 7). While all PPPs are subject to the PPP Act, the rules applicable to PPP processes launched by the state are more strictly monitored than those of its divisions.
The launch of a potential PPP is subject to a preliminary assessment consisting of a comparative review of the various options for completing a given project, a cost-benefit analysis relative to risk allocation and performance, and an evaluation of the impact of the project on the government budget and public debt taking into consideration its social and environmental impact (Section 9).
We note however that the PPP Act provides for implementing regulations to address matters covering the creation of an agency in charge of promoting PPPs and supervising the tender process, pre-qualification procedure and the criteria for evaluation and selection of bids submitted by private partners, and the conditions for unsolicited proposals for the implementation of projects outside a call for tender process. Such implementing regulations have not yet been adopted but are reportedly forthcoming.
AN ATTRACTIVE FRAMEWORK FOR FOREIGN INVESTORS
Several provisions of the PPP Act offer some insight as to how private partners are to be selected and signal an equal playing field approach to the PPP tender process. Section 14 of the PPP Act specifies that private partners are to be selected following a fair, competitive and transparent call for tenders. The complexity of the project will determine whether the call for tender process will be open to national or international private partners, the participation of consortium being permitted. The selection of a private partner involves a pre-selection process following which the pre-selected entities are invited to participate in a competitive tender process in one or two stages (Sections 17-23). However, in certain situations of an urgent nature where the continuity of public service is at risk, where a service can only be provided by a unique partner or where a pre-qualification or call for tender failed to identify a potential bidder and launching a new call for tender is impracticable, the award of a public-private partnership contract may bypass the call for tenders process (Section 24).
Other PPP Act provisions provide some comfort to foreign investors, for example, public authorities may grant guarantees and exonerations tailored to a project (Sections 12 and 47); make the site of the project available or facilitate the acquisition of rights to a site (Section 35); and in the case of termination of the partnership, the private party is to receive fair compensation corresponding to expenses incurred or losses suffered (Section 44). In terms of the contract itself, the sharing of risks will be determined on a case-by-case basis and negotiations will take place between the selection commission and the selected bidder (Section 28). Additionally, the PPP Act stipulates the option to refer a contractual dispute to a national or international arbitral tribunal (Section 45) and addresses other important issues such as the confidentiality of the process (Section 27) and corruption or fraud (Chapter IX).
COMPULSORY PPP CONTRACT PROVISIONS
The partnership between the public authority and the private partner will take the form of a contract, pursuant to which the public authority grants the responsibility of one or more phases of a project to a private partner for a specified time period: design, financing, construction/renovation, operation and/or maintenance, and management (Section 4).
The PPP Act clearly sets out the provisions which must be covered by any PPP contract awarded pursuant to the PPP Act (Section 32), including the following:
- A limited term (tailored to the life cycle of the infrastructure/equipment)
- Financial and security arrangements
- Conditions for risk allocation between the public and private partners
- Terms and conditions of remuneration of the public and private partners
- Performance objectives for which the private partner is responsible
- Procedures for the public authority to control and monitor contract performance
- Obligations to ensure continuity of public service
- Consequences for failure by the private partner to meet its performance obligations
- Consequences for failure by the public authority to meet its obligations
- Conditions allowing for amendment and full or partial assignment of the contract
- Consequences of contract termination, whether or not anticipated, and in particular regarding the ownership of the works and equipment and the conditions for their transfer.
Burkina Faso’s ambitious SCADD objectives offer investment opportunities now supported by the PPP Act, which will be further developed by regulation. The SCADD infrastructure improvement goals are also reflected in the government’s Transport Sector Development Strategy covering the 2011-25 period and include the development of airports, road and railway networks.
We will continue to monitor the impact of the PPP Act and any projects identified by the Council of Ministers in the PPP program as well as the framework law on investment in Burkina Faso and provide further information as it becomes available.
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