Miga has issued four guarantees for a total of US$6.1mn to Agro-Industries Sud (Dagris) of France, covering its loan guarantee to local financial institutions to enable them to extend loans to local entities to finance the acquisition of shares in the project enterprise, Société Cotonniére du Gourma, Burkina Faso. The guarantee covers against the risks of breach of contract, expropriation, and war and civil disturbance for a period of up to four years.

The project consists of (1) the acquisition of the cotton ginning assets of the former monopoly, Société des Fibres Textiles, in the eastern region of the country by a commercial operator; (2) the modernisation and expansion of the cotton ginning capacity in eastern Burkina Faso; and (3) the promotion of local entrepreneurship through the financing of the acquisition of shares in the project enterprise, Société Cotonniére du Gourma, by local cotton growers and Burkinabé investors.

The expansion aspect of the project will consist of upgrading an existing cotton ginning plant in Fada, thus increasing capacity from 23,000 million tons to 35,000 million tons in the first year of operation.

In addition, a new ginning unit will be constructed and operational by end of the second year of operation in Diapaga.

The project is part of the government’s efforts to liberalise the cotton sector by allowing commercial operators to purchase assets and operate in what was previously a monopoly area. The project is also expected to contribute to the improvement of public finance management by shifting a significant part of the cotton sector’s financial risk from the former monopoly, in which the government has a 35% stake, to a private sector company.

Miga’s support of the project is expected to strengthen the country’s export-oriented growth, which is consistent with the World Bank Group’s strategy to help Burkina Faso. Miga’s participation in the project is also aligned with several agency priorities, including supporting the poorest in Africa.