WORLD TRADE  
ORGANIZATION  WT/L/645 
17 March 2006 
 
 (06-1196) 
 Original:   English 
  
 
DIRECTOR-GENERAL'S CONSULTATIVE FRAMEWORK: 
COTTON DEVELOPMENT ASSISTANCE 
 
Reports by Cotton Proponents
 
 
Communication from Burkina Faso  
 
 
 The following communication, dated 7 March 2006, is being circulated at the request of the 
Delegation of Burkina Faso. 
 
_______________ 
 
 
BRIEF NOTE ON THE PROCESS OF COTTON SECTOR REFORM 
IN BURKINA FASO 
 
 
I. GENERAL CONTEXT OF THE REFORM 
1. Reform of Burkina's cotton sector is not an is olated phenomenon but rather part of the overall 
institutional trend that has already affected the majo rity of French- and English-speaking countries in 
the subregion (Côte d'Ivoire, Benin, Togo, Chad, Ghana, Nigeria), where the various programmes 
implemented have resulted in the subsector bei ng dismantled, notably because of collusion among 
factory owners to the detriment of producers.  2. This situation has meant that farmers have  turned away from cotton and also that the 
experience gained by the subsector  in these countries has been lost. 
 
3. Taking into account these facts and in order to  avoid the risk of dismantlement of our own 
subsector, Burkina has opted for a reform progra mme based on the integrated subsector approach. 
This approach obliges ginning companies to fina nce cotton research activities, to provide producers 
with support and advice, to supply agricultural input s to producers, to buy seed cotton, to gin and 
market cotton lint and seed cotton and their by-products. 
 
II. OBJECTIVES OF THE REFORM 
4. The main objectives of the reform are the following: 
 
• liberalization and professionalization of the cotton subsector, concomitantly with State 
withdrawal from its management; 
 
• growth in domestic cotton production; 
 
• enhancing the cotton subsector's cont ribution to the domestic economy. WT/L/645 
Page 2  
 
  5. An interministerial committee comprising eleven (11) members representing the State 
(6 members), the Burkina National Cotton Producers'  Union (3 members), the SOFITEX (2 members) 
was created for the purpose of guiding the reform un til buyers were selected for the cotton zones in 
the Centre and the East.  
6. The SOFITEX commissioned an assessment of the assets and cotton-growing potential, to be 
carried out by an independent consultant. The findi ngs of this assessment were used to prepare the 
invitation to tender.  
III. MAIN CHANGES RESULTING FROM REFORM OF THE SUBSECTOR 
7. These are the following: 
 (a) Abolition of SOFITEX's monopoly
 
  As a result of the reform, the monopoly initia lly given to SOFITEX for the collection and 
marketing of seed cotton, lint and by-products ( seed) throughout Burkina Faso has been abolished. 
 (b) Increase in the number of cotton companies
 
  In addition to the SOFITEX, already active in this area, two (2) other private operators will 
engage in the same activities. 
 
(c) Division of the national cotton-growing basin into cotton zones
 
  The national cotton-growing basin has been di vided into three (3) co tton zones whose areas 
have been defined in decrees as follows: 
 
- The SOFITEX cotton zone, covering 20 provinces;  - The Centre cotton zone, covering 10 provinces  - The East cotton zone, covering 6 provinces. 
 
 Under the reform, the SOFITEX and the two (2) other cotton companies are exclusively 
responsible for collecting seed cotton in their resp ective zones and may freel y market cotton lint and 
by-products.  
(d) Management of the subsector
 
  This is being implemented in two stages, namely:  
- A transitional phase, introduced to allow the ne w private operators setting up in Burkina Faso 
to become familiar with the contex t, to build up relations with all the actors and to take part in 
managing the subsector. 
 
During the transitional period, which will end on 31 December 2004 at the latest, the subsector will be managed by the Comité de Gestion de la Filière  (Committee for 
Management of the Subsector) under the Trade Agreement in force, although this will be 
modified to take into account the new situation arising from liberalization.  It should also be 
noted that membership of this Committee will change so as to take into account the presence 
of the two new cotton companies.   WT/L/645 
 Page 3 
 
 
  - A definitive plan for organization of the subsector, which, on the one hand, will see the 
various actors in the subsector become members of  trade associations in order to protect their 
trade interests and, on the other, the creation of an Association Interprofessionnelle  (Trade 
Association) to be responsible for managi ng the cotton subsector in Burkina Faso. 
 
 The Trade Association will deal with all matte rs relating to management of the subsector, 
 inter alia , it will determine the purchase price for seed cotton and terms for the sale of 
 agricultural inputs to producers, and will ca rry out joint responsibilities, motivate producers 
 and ensure that they are paid.  
(e) The State's role in management of the reformed subsector
 
  Unlike the current situation, in which the St ate is involved in managing the sector together 
with the SOFITEX and producers, in particul ar, through membership of the Committee for 
Management of the Subsector, implementation of  the reform will lead to the Government's 
withdrawal from management of the subsector. The State's role is mainly related to the following: 
 
- preparation of the legislative and regulatory  framework for organization of the subsector's 
activities; 
 - ensuring observance of the obligations and comm itments set out in the conditions applicable 
to those engaged in the subsector; 
 - support for the development and sustainability of the subsector. 
  
(f) Supplies of agricultural inputs
 
 
 This is an important issue that has a mark ed effect on the success of the cotton season. 
  It is envisaged that the cotton companies will e ach be responsible in their particular zone of 
activities for financing the supply of agricultura l inputs (mobilization of the necessary financial 
resources, purchase and supply of inputs) and fo r recovering the input credits from producers. 
 
 The Trade Association will determine the techni cal specifications for inputs in the conditions 
which all cotton companies must respect.   The criteria for sale of agricultural inputs to producers by cotton companies will also be 
determined by the Trade Association. 
 (g) Determination of the purchase price of seed cotton
 
  This is also an important issue that is deci sive in motivating producers to grow cotton and, 
consequently, for growth in domestic cotton production. 
 
 Despite the existence of several cotton compan ies active in the various cotton zones, it has 
been decided that for producers the purchase price of seed cotton will be the same throughout Burkina 
Faso and will comprise the following:  
- a floor price set by the Trade Association that takes into account the trend in cotton 
prices on the international market; 
 
- a  Prix d'Achat Complémentaire  (PAC) (Complementary Purchase Price), also 
determined by the Trade Association, th at allows the amount of producers' WT/L/645 
Page 4  
 
  remuneration to be adjusted according to performance in the sale of lint by cotton 
companies. 
 (h) Other incentive measures for production
 
 
 Other incentive measures for producers are envi saged in addition to the PAC in order to 
increase domestic cotton production.  These are the following:   - the establishment of a support fund who se resources will be used to support the 
producer price if there is a sharp fall in co tton prices.  The ways in which the support 
fund is to be replenished, together w ith the criteria for intervention, will be 
determined by the Trade Association. 
  - introduction of methods to guarantee paym ent for the buying and selling of seed 
cotton by cotton companies for the benef it of producers.  The mechanism adopted 
aims to minimize the risk that cotton comp anies will not pay producers for the stocks 
of cotton they have built up. 
 
IV. METHOD FOR SELECTION OF BUYERS 
8. An international two (2)-round international bidding procedure was organized in order to 
select investors, Burkina or foreign legal persons , either singly or in the form of a group or 
consortium, with the necessary technical and financ ial capacity and proven experience in the sector. 
 
V. OPENING UP OF NEW COTTON ZONES - PROGRESS REPORT 
9. New cotton zones in the Centre and the East  were opened up to private operators under the 
international bidding procedure launched on 2 June 2003.  This led to the selection of the Paul 
REINHART AG/SOBA/AMEFERT Group for the Centre cotton zone and the company DAGRIS SA 
for the East cotton zone.  10. In accordance with the regulations governing the bidding procedure, the winning investors 
have set up two (2) companies under Burkina law in order to carry on their activities.  These are the 
following: 
 
(i) In the East cotton zone, the Société Cotonnière du Gourma (SOCOMA) with capital 
of CFAF 6,000,000,000, allocated as follows: 
 
 - DAGRIS SA:   51 per cent 
 - UNPCB:   20 per cent  - Burkina private investors: 29 per cent  
(ii) For the Centre cotton zone, the company FASO COTON, with capital of 
CFAF 3,300,000,000, allocated as follows: 
  - Paul REINHART AG:  31 per cent  - IVOIRE COTON:  29 per cent 
 - Burkina private investors: 30 per cent 
 - UNPCB:   10 per cent   UNPCB will actually subscribe to the capital at the latest by 1 March 2005.   WT/L/645 
 Page 5 
 
 
  VI. CONTRACTUAL DOCUMENTS SIGNED 
11. Under this process, the following three (3) legal instruments have been signed: 
  - an agreement on sale of SOFITEX's asset s in the East cotton zone, signed by 
SOFITEX and SOCOMA; 
 
 - an agreement on sale of SOFITEX's assets in the Centre cotton zone, signed by 
SOFITEX and FASO COTON; 
  - a protocol of agreement setting out the conditions applicable to operators in the 
liberalized cotton subsector, signed on 3 September 2004 by the State (represented by 
the Ministers for Industry, Agriculture and Finance) and the major operators in the 
subsector (UNPCB, SOFITEX, SOCOMA and FASO COTON).  This document outlines the structure of the liberalized s ubsector and sets the rules for the new multi-
operator context.  The subsector is he nceforward to be managed by a Trade 
Association composed of the trade groupi ng of cotton producers (UNPCB) and that 
of the cotton companies (SOFITEX, SOCOMA, FASO COTON). 
 12. The following bodies are responsible for the administration and operation of the AICB: 
  - The General Assembly
 composed of sixteen (16) representatives of the trade groups 
comprising 8 representatives of the APROCOB and 8 representatives of the UNPCB. 
 
 - The Governing Board  composed of sixteen (16) governors as follows:  
8 representatives of the APROCOB and 8 representatives of the UNPCB. 
  - The Bureau of the AICB
 composed of 4 representatives of the UNPCB and 
4 representatives of the APROCOB. 
 
13. It should be noted that the General Assemb ly and the Governing Board are chaired by the 
President of the AICB Bureau (who is the President of the UNPCB).  
14. The State will monitor the subsector and en sure respect for the terms of the contract, inter 
alia, through a Permanent Secretariat for Monitoring th e Liberalized Cotton Subsector set up for this 
purpose.  
VII. PARTICIPATION BY INVESTORS IN THE BIDDING PROCEDURE 
15. The bidding procedure for the opening up of new cotton zones in the Centre and the East saw 
record participation by traditional investors active in  the cotton subsector at the international level.  
This shows that Burkina's cotton subsector has a good reputation at the international level. 
 16. The composition of the capital of the new cotton companies set up (SOCOMA and FASO 
COTON), and particularly the presence of established shareholders such as DAGRIS SA and Paul 
REINHART AG, well known for their expertise a nd of international reputation, guarantee the 
security, sustainability, development and co mpetitiveness of Burkina's cotton subsector. 
 17. Likewise, the fact that producers particip ate in the pool of capital of the new cotton 
companies consolidates the partnership between th e major actors in the cotton subsector, namely, 
cotton growers and the cotton companies. 
 WT/L/645 
Page 6  
 
  VIII.  SAVING JOBS 
18. The SOFITEX had 382 employees in the Centre  cotton zone and 316 in the East cotton zone, 
making a total of 698 employees for the two zones.  19. All of SOFITEX's personnel working in the Cent re and East cotton zones, i.e. 698, has been 
transferred with the same contracts and seniori ty as follows:  382 employees to FASO COTON and 
316 to SOCOMA.  No jobs have been lost.  
IX. REVENUE EARNED 
20. The revenue earned by the SOFITEX as a result of the bidding procedure is some 
CFAF 16,677,000,000 for the sale of its assets in th e Centre cotton zone (C FAF 5,527,000,000) and 
the East (CFAF 11,150,000,000).  
__________