Clawing It’s Way Up

The Independent (Kampala)

Judith Basutama

15 July 2011

analysis

Still ranked at the bottom of the ..Burundi is making ambitious business reforms

After ten years of study in France, Oscar Niyonkuru, a Burundi national, returned home in May 2011 with high hopes of launching a high-tech engineering company. For one thing, he thought, the required investment would be substantially less than what was needed in France, and secondly, after 13 years of civil war, Burundi’s high-tech sector would be in need of new, qualified minds.

But as Niyonkuru attempted to put his idea into practice, he began confronting an investment process littered with bureaucracy, long delays and high procedure costs.

“In Senegal, you can start your business within 48 hours,” he says. “In Burundi, you are lucky if you complete all the procedures in a month. With so many interlocutors in the way, you are asked to go there, to bring that, to come back.” Eventually, Niyonkuru returned to France.

According to the World Bank’s “Doing Business Report 2011,” which uses nine indicators such as access to loans, cross border trade, ease of starting a business and property transfers, to assess a country’s business climate, Burundi ranks 181 out of 183 countries. The report unearthed that investors need at least 32 days and 11 procedures to start a business, and to transfer a property it requires approximately 94 days and 5.8 percent of the property value in capital.

In a June 10 meeting with senior government officials and top business executives, Jean Marie Nibirantije, Burundi’s minister of water, environment, land management and urban planning, told delegates that such reports, “tarnish Burundi’s image and has negative consequences on the promotion of direct investment we need to boost the national economy.”

But in recent years, the government has shown some initiative to reform its business climate to ensure that people like Niyonkuru stay and invest in the country.

“Since six years, Doing Business is making reports each year and Burundi was always at the bottom but the government did not react,” explains Consolate Ndayishimiye, chairperson of the federal chamber of commerce and industry. “If there has been such a political will to initiate the reforms, we should also feel confident they will be implemented. All it needs is a follow up of civil servants to ensure they implement them.” To this end, she says, the chamber intends to create a service for dissatisfied investors to lodge their complaints, which would be examined daily, before being sent to the second deputy president for review.

In July 2009, the Burundi Revenue Authority (OBR) was established to help the country streamline its economic policies with those of the East African Community (EAC) and to reduce poverty through an improved tax collection system. In May 2011, OBR announced that it collected more than $29 million, an increase of 35 percent compared to the revenue it had collected a year earlier.

Moreover, the Burundi Investment Promotion Agency (API), which was established in October 2009, has helped to oversee development and investment promotion in Burundi. According to Eric Ngendahayo, a spokesman for API, investments are expected to grow from $208.5 million last year to $241.3 million this year. In the first five months of this year, says Ngendahayo, Burundi has received $83.5 million.

Burundi receives about 40 percent of its investment from foreign sources, especially the other members of the EAC. Their main interests, says Ngendahayo, are food-processing and mining, while domestic investors prefer tourism and construction projects. Surestream Petroleum Ltd., a U.K.-based explorer, has also been active in the country for the past two years searching for oil. In February the company said that it is “almost” ready to start identifying locations for drilling,

Since June 2011, API has also been behind numerous business reforms, including tax credits on investments of at least $81,000, a reduction on corporate taxes based on the number of Burundians employed and the removal of value-added tax on imported goods to be used in projects of at least $405,000.

The new reforms have streamlined certain investment procedures as well; to register a new business investors need only to go through two procedures–registering their business at the trade court and ascertaining a fiscal number at the OBR–instead of the previous 11 procedures. The cost associated with the procedure has also been reduced from $382 to $43. In terms of property transfers, the previous 94 day procedure has been reduced to 14.

Another idea that has been launched would see government services such as the trade tribunal, the ministry of commerce and the OBR, be hosted in one building. The so-called, “one-stop window,” is supposed to be operational before the end of the year, yet by the end of June none of the services had moved.

The country also faces challenges in certain sectors of the economy such as agriculture, where a recent government intervention has threatened to derail one of its most productive industries: tea.

After deregulation in 2007 four private companies, including the national Promotion Théicole en Province Mwaro (Prothem) and three international companies–Complex Burundo Hollandais, Caspian SA and Camellia–emerged to challenge the government owned Office du Thé du Burundi (OTB).

In May 2011 Agriculture Minister Odete Kayitesi ordered Prothem to stop buying tea leaves from farmers in Mwaro on the grounds that villagers had to sell their tea leaves exclusively to public factories in compensation for the supervision facilities, subsidized fertilizers and inputs they had received from OTB.

In a press conference that month, OTB Chief Executive Officer Alexis Nzohabonimana added that the company was ready to face competition, but would not “allow people to reap where they did not sow.”

But Prothem’s Chairman of the Board of Directors Epitace Bayaganakandi has questioned the public company’s role in providing farmers with this assistance; although OTB introduced tea plants to villagers living around its tea transformation industries in the 1970s, it did so with the help of different international partners, most notably the Belgian Technical Cooperation, the Caisse Française de Development and the European Development Fund.

“Tea leaves therefore do neither belong to OTB nor Prothem but to tea growers themselves who can sell to whoever they want,” said Bayaganakandi.

But for Mwaro province to have reached its current 1109 hectares, OTB maintains that it set up free nurseries to prepare tea plants for farmers, which cost the company over $2 million. OTB also claims it alone repairs the rural road network to facilitate the collection of tea leaves. Farmers, however, argue that all the facilities they had received from OTB were paid for because OTB deducted the cost of fertilizers before paying them.

Farmers in Mwaro were also frustrated with OTB’s May directive once it emerged that Prothem was willing to buy their produce for 16 cents per kilogram in contrast to OTB’s offer of 12 cents. Both sides are now waiting for a regulation agency to settle the matter, but on July 6, OTB announced that it will start to purchase a kilogram of tea leaves at 18 cents.

Farmers welcomed the increase but demand that OTB pay them rapidly; normally OTB collects the tea leaves, records the quantity sold and subsequently pays the farmers after two months. However, even if the question of price is settled, the regulatory body is still needed to ensure there is a loyal competition in the tea sector.

Once the OTB dispute is out of the way, the government will need to focus its efforts on diversifying its economy; the country, according to the Interna­tional Monetary Fund, still relies on cof­fee industry to employ 800,000 house­holds and to generate two-thirds of its exports.

AllAfrica – All the Time