BURKINA FASO: GOVERNMENT CONTINUES TO TOUT SAMANDENI DAM

UNCLAS SECTION 01 OF 03 OUAGADOUGOU 000394

AF/W FOR EMILY PLUMB, JASON HUTCHISON
DEPT PASS TO USTR FOR LAURIE-AGAMA
DEPT PASS TO USAID FOR AFR/WA
ACCRA FOR USAID
DAKAR FOR FAS RHANSON
SIPDIS

E.O. 12958: N/A
TAGS: ECON EAGR EAID SENV EFIN PGOV UV
SUBJECT: BURKINA FASO: GOVERNMENT CONTINUES TO TOUT SAMANDENI DAM
AMID CRITICISM THAT PROJECT WON'T HOLD WATER

REF: Ouagadougou 237

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1. Key Points:

- In earl 2008, the Government of Burkina Faso (GOBF) annouced
that it had secured financing for the long-aticipated Samandeni dam
and that construction woud begin in 2009. With a projected storage
capacity of 1,050 million cubic meters, the Samandeni would be
Burkina Faso's third largest multipurpose dam.

- Despite government optimism, many critics, including Prime
Minister Zongo, point to two previous projects, at Bagre and
Kompienga, as proof that dams do not guarantee economic success for
surrounding communities.
- In an effort to counter growing criticism about the cost of
Samandeni, Government proponents point to numerous potential
economic benefits including a free trade zone, increased
agricultural development, and tourism potential.

2. Key Judgments:

- With a price tag of 281 billion CFA (US 672 million),the
Samandeni dam is one of the most ambitious projects ever undertaken
by Burkina Faso. Unable to justify this considerable cost to Asian
aid agencies, the GOBF turned primarily to Middle Eastern
development funds, claiming that completion of this project was an
important milestone in meeting its Millennium Development Goals.

- Many detractors believe that the dam is an ill-conceived attempt
to pacify growing criticism that the GOBF has ignored the economic
well-being of the nation's southwestern region.

- Opponents continue to question the return on investment of a 22.6
meter high dam that could potentially irrigate 21,000 hectares (ha),
but will only irrigate 1,500 ha during phase one of its
implementation.

End Key Points and Key Judgments.

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With Financiers on Board, Samandeni is a Step Closer
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3. Several weeks prior to his departure from office (reftel),then
Minister of Agriculture Salif Diallo confirmed in the daily
newspaper "L'Observateur Paalga" that the GOBF had secured necessary
funding for construction of the Samandeni dam, installation of a
hydro-electrical plant, and irrigation of the first 1,500 ha. The
three-and-a-half year, 281 billion CFA (US 672 million) construction
project is scheduled to begin in May 2009.


4. The annual "Day of the Farmer" was held at the future site of
Samandeni in February, with President Compaore officially breaking
ground driving a "Caterpillar" earth mover. The site is in the
southwestern province of Houet, approximately 50 km from Bobo
Dioulasso, the second largest city in Burkina Faso. Located at the
confluence of two tributaries of the Mouhoun River, Samandeni will
be 15 meters deep and have a projected capacity of 5.05 billion
cubic meters. Upon completion, the Samandeni will be the third
largest dam in Burkina Faso, just behind Kompienga (2,000 million
cubic meters) and Bagre (1,700 million cubic meters). The 22.6
meter high dam could potentially irrigate 21,000 ha, but plans for
the first-phase call for development of only 1,500 ha.


5. The idea to construct a hydro-agricultural/hydro-electrical dam
in Samandeni first took root in 1976 feasibility studies conducted
by the Autorite pour l'Amenagement des Vallees des Volta (Volta
Valley Authority),an agency designed to oversee immigration into
the Volta River Basin. Despite the Government's keen interest in the
project, successive attempts to secure financing in collaboration
with cooperation agencies from Korea (1984),China (1990),and Japan
(1994) were unsuccessful.

6. Convinced of the importance of the project, the GOBF recommenced
efforts to secure funding in early 2005, citing the dam's importance
in the nation's fight against poverty and its potential contribution
towards Millennium Development Goals. GOBF engaged Arab banks and
development organizations and in 2006, engaged the Millennium
Challenge Corporation. A portion of the project, irrigation work
downstream of the dam, was part of the proposal presented to the MCC
for inclusion in the MCC compact. Subsequent MCC due diligence
pointed to many issues related to social planning, donor
coordination, and timing and sequencing of project completion. MCC
informed the GOBF in 2007 that the MCC would not be able to fund any
portion of the Samandeni project.

7. The GOBF was finally able to find 20-30 year loans with

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concessional terms for the entire project. More than 30 years after
its conception, the National Assembly ratified 10 loan agreements in
late 2007 with the following eight financial institutions: the West
African Development Bank (BOAD); Islamic Development Bank (IBD);
ECOWAS Bank for Investment and Development (EBID),Saudi Development
Fund, Kuwait Fund for Arab Economic Development (KFAED); Arab Bank
for Economic Development in Africa (ABEDA),OPEC Fund, and Abu Dhabi
Development Fund.
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GOBF Continues its Hard Sell of the Samandeni
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7. During his time in office, former Minister Diallo repeatedly
justified his pet project by touting cost-benefit analyses in the
dam's feasibility studies which indicate a possible return on
investment of 8-17 percent. According to the GOBF, the associated
hydro-agricultural project could have a significant economic impact
with an estimated annual production of 750,000 tons of agricultural
products; 1,200 tons of fish through traditional fishing, and 500
tons of fish through aquaculture. The project also includes a
hydro-electrical component: a 16 gigawatt per hour (GWH) power
station that could provide affordable electricity.


8. The GOBF believes that the lure of lower cost electricity would
entice an estimated 100 new factories to a free trade zone
surrounding the dam. The GOBF also claims that the project would be
equitably managed so that tillable land could be made available both
to small-scale farmers for cultivation of rice, maize and tomatoes,
and agro-businessmen for large-scale production of sugar cane,
citrus fruits, pawpaw, bananas, and pineapples. The dam is not
expected to have any impact on cotton production. Dam proponents
have also cited the 150 sq km size of the dam, which makes it a
veritable lake that could be used for water sports and tourism.
Among probable investors in the free trade zone is the U.S. company,
Continental Eagle, which intends to locate one or more plants in the
zone that will produce bio-diesel from cotton seed.


9. In an attempt to further leverage the project's perceived
financial benefits, the GOBF has opted for a mixture of heavy
machinery and local labor crews to construct the dam. The GOBF
estimates that this approach could lead to the creation of 164,850
jobs and additional income of 115 billion franc CFA (US 275 million)
to the local economy.


10. Despite his continued endorsement of the Samandeni, Diallo
conceded that before construction could begin, the GOBF would have
to deal with an additional complication: relocation of an estimated
12,000-14,000 people from eight villages: Diefourma, Sinfra,
Nabolodiassa, Mangafesso, Banakorosso, Kokoro, Sabina and
Soungalodaga. In addition to construction costs, 2.5 billion francs
CFA (US 5.9 million) would be required to compensate villagers for
the loss of their homes. To make the move more attractive to the
displaced populations, the GOBF promised to build schools and health
centers in the new villages.

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Criticism Mounts as Construction Plans Take Shape
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11. In the face of mounting criticism, the GOBF continues to stress
the potential economic benefits for Bobo Dioulasso and the
surrounding areas. This optimism, however, has been greeted with
skepticism by members of the press. The opposition newspaper
"L'Independent" recently opined that large-scale dams were not a
panacea for agricultural problems in Burkina Faso and even likened
the construction of the Samandeni to an "ill-conceived utopia." In
subsequent publications, the newspaper added that the Samandeni had
all the makings of a political deal used by President Blaise
Compaore to pacify dissatisfaction in the southwest.


12. Other press reports echoed the criticism of "L'Independent" by
cautioning against government optimism and commenting on the
mitigated success of previous large-scale dams in Burkina Faso. In
February, the newspaper "L'Observateur Paalga" recalled Sourou, a
water project in the northwest, had originally been touted as a boon
for agricultural and economic development, but had fallen far short
of it goals because of gross mismanagement. "L'Independent" offered
a more colorful criticism when it referred to the Sourou as "a dream
abandoned like a dead white elephant on the northwestern plains."


13. The newspaper "L'Independent" recently concluded that the
success of the Samandeni was an equation with several unknown
factors. One key element is the limited profit potential for
businesses in the free trade zone because they will have to compete

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with cheaper counterfeits. Detractors cite the recent bankruptcy of
several large companies including SAVANA (fruit juice),SONACOR
(rice),and SOBFEL (fruit and vegetable processing). Many blame
their demise on corrupt customs officials who look the other way
while foreign counterfeits entered the country. Critics maintain
that unless the Government deals with existing market inequities
caused by corruption, the success of this huge investment will be
jeopardized.

Jackson