The World Bank, in its annual Doing Business in East Africa report, says the environment in Burundi is improving, but it could learn from some stronger economies in the region.
Burundi, a Great Lakes country of eight million people, has been described by the World Bank as one of the worst environments for business. In 2011, it ranked 177 out of the 183 economies evaluated. This year the young democracy has moved up eight positions, making it one of the most improved economies.
Laurent Corthay, a World Bank advisor, describes Burundi’s potential. “We have a good coalition for reform in the country, including the private sector. But also because within the region, in the EAC (East Africa Community), there are many good practices and the dynamic of the EAC integration is also spurring some changes in Burundi,” said Corthay.
Burundi’s progress is reminiscent of its northern neighbor, Rwanda. A few years ago, Rwanda was also at the bottom of the Doing Business rankings. After several state-driven reforms targeting the investment climate, Rwanda now ranks 45th in the world.
Similar reforms are being made in Burundi.
In 2009, the Office Burundais des Recettes, or OBR, was established as a semi-autonomous tax authority. Strictly enforced tax collection is providing much-needed revenue. The reformed OBR has also made business fairer.
Nadeem, an entrepreneur in Bujumbura, says he has seen an improvement. “They’ve really controlled the amount of fraud, what was happening previously, where we had people importing things and containers could enter the country without any duty paid depending on who you are or who you’ve paid," he noted. "But today, things have really been controlled. It’s helped level off the business, so we’re playing more or less on the same playing field.”
The Burundi government has made other efforts to develop the private sector. The “New Company Law” reduces the time and money it takes to start a business. The registration fee has been cut from $350 to $40; the process can now be completed in a day. The law also strengthens the investor protection framework for both local and foreign shareholders.
Despite the state-led reforms, significant challenges remain beyond the scope of legislation.
Business owners face rampant corruption, an unskilled labor force, and a lack of basic infrastructure. A landlocked country, imports to Burundi are costly and often delayed, subject to the customs regulations of Kenya and Tanzania, neighboring countries with international ports.
Nadeem describes the delays he’s experienced. “Just to open something small you’d have to pre-think 4, 5, 6 months in advance," he said. "Everything would have to be imported. It’s a little better today, but still the basic things are not available, and you have to go far to look for them.”
Armand is opening a French bakery in Bujumbura. Unreliable electricity has forced him to buy costly generators to power his ovens and refrigerators. “When we arrived in Bujumbura, we are forced to invest now $50,000 at least to save the quality of the power,” he stated.
Joanna, a young Burundian restaurateur, has had difficulties with construction. “Because of the materials everything is so expensive and the quality is not that great so for example for the cement, it was a hassle," she added. "I had to do it twice actually, to build this, and finally I found that cement was going away so I had to do it again.”
Business owners in Burundi, like Nadeem, often cite unskilled labor as a major problem. “For example we’re trying to hire waiters, there is no training school for waiters, or for the hotel and tourism industry. We have to do all of the training in house, whereas in Kenya you have hundreds of colleges training people in services,” he explained.
Despite the challenges, World Bank adviser Corthay is optimistic about the country’s progress. “We actually see that there is also some investment, even though we recognize that it remains a frontier market, but we see progress and actually the first marks of that is foreign investment coming in,” he said.
Many have sensed the potential of investing in Burundi. In recent years several multinational companies have arrived in the telecommunication, financial, and tourism sectors.