INVESTORS GUIDE BURUNDI

1

PREFACE

This book was prepared by COMESA Regional Investment Agency in cooperation with l’Agence Burundaise de Promotion des Investissements (API) – Burundi Investment Promotion Agency. It was written to give the busy executive a quick overview of the investment climate, taxation, forms of business organization, and business practices in Burundi. Making decisions about foreign operations is complex and requires an intimate knowledge of a country’s commercial climate. Companies doing business in Burundi, or planning to do so, are advised to get current and detailed information from experienced professionals. This book reflects information current as of March 2012.

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Investor’s Guide To BURUNDI

INVESTOR’S GUIDE TO

BURUNDI In the preparation of this guide, every effort has been made to offer current, correct and clearly expressed information. However, the information in the text is intended to afford general guidelines only. This publication is distributed with the understanding that COMESA RIA is not responsible for the result of any action taken on the basis of the information in this publication, nor for any error or omission contained herein.

Investor’s Guide To BURUNDI

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CONTENTS 1.

Politics & General Country Information........................................................................... 6 1.1.

General information................................................................................................ 7 1.2.

Structure of Government........................................................................................ 7 1.3.

Legislative Branch.................................................................................................. 7 1.4.

Judicial Branch....................................................................................................... 8 1.5.

Executive Branch................................................................................................... 8

2. Economy............................................................................................................................. 9 2.1.

General Economic Information............................................................................. 10 2.2.

Government Policy............................................................................................... 10 2.3.

Macroeconomic Indicators................................................................................... 12 2.4.

Inflation................................................................................................................. 13 2.5.

Foreign Exchange................................................................................................. 13 2.6.

Trade..................................................................................................................... 14 2.7.

FDI in Burundi....................................................................................................... 15 3.

Demography and Labour Force..................................................................................... 16 3.1.

General National Population Statistics................................................................. 17 3.2.

Urban and Rural Population Information.............................................................. 17 3.3.

Labour Force........................................................................................................ 17

4.

Labour Situation Analysis............................................................................................... 18 4.1.

Terms of Employment........................................................................................... 19 4.2.

Labour Legislation................................................................................................ 19

5.

Natural Resources & Geographic Profile...................................................................... 21 5.1.

Geography............................................................................................................ 22 5.2.

Geology................................................................................................................ 22 5.3.

Ecology: Flora, Fauna and the Environment........................................................ 22 5.4.

Hydrology and Water............................................................................................ 22 5.5.

Climate................................................................................................................. 22 5.6.

Land use............................................................................................................... 22

6.

Licenses, Permits and Taxes.......................................................................................... 24 6.1.

Business Licensing............................................................................................... 25 6.2.

Taxes.................................................................................................................... 25 6.3.

Entry Licensing..................................................................................................... 25

7.

Legal Framework............................................................................................................. 27 7.1.

Investment Laws and regulations......................................................................... 28 7.2.

Important Laws:.................................................................................................... 29 7.3.

Investment Protection and Promotion Framework............................................... 30

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Investor’s Guide To BURUNDI

8. Investment Regimes and Free Zones............................................................................ 31 8.1.

Reasons to Invest in Burundi............................................................................... 32 8.2.

Performance Requirements and Incentives......................................................... 33 8.3.

Free Zones............................................................................................................ 33 9.

Market Access................................................................................................................. 34 9.1.

East African Community....................................................................................... 35 9.2.

Common Market for Eastern and Southern Africa (COMESA)............................. 35 9.3.

Economic Community of Central African States (ECCAS)................................... 36 9.4.

Economic Community of the Great Lakes Countries (ECGLC)............................ 36

10. Infrastructure................................................................................................................... 37 10.1. Roads and General Information........................................................................... 38 10.2. Water.................................................................................................................... 38 10.3. Railways............................................................................................................... 38 10.4. Air Transport......................................................................................................... 38 11. Services............................................................................................................................ 39 11.1. Fuel....................................................................................................................... 40 11.2. Telecommunications............................................................................................. 40 11.3. Water and Sewage............................................................................................... 40 11.4. Electricity.............................................................................................................. 40 12.

Banking and Financial Services..................................................................................... 42 12.1. The Banking System in Burundi........................................................................... 43 12.2. Insurance companies and other financial institutions.......................................... 43 12.3. The Role of Microfinance..................................................................................... 43 12.4. The use of currency.............................................................................................. 43

13. Sectors............................................................................................................................. 44 13.1. Sector Information................................................................................................ 45 13.2. Services................................................................................................................ 45 13.3. Mining................................................................................................................... 45 13.4. Agriculture............................................................................................................ 45 13.5. Manufacturing...................................................................................................... 46 13.6. Tourism................................................................................................................. 47 13.7. Transport.............................................................................................................. 47 13.8. Energy................................................................................................................... 47 13.9. ICT........................................................................................................................ 48 13.10. Real Estate........................................................................................................... 48 13.11. Trade..................................................................................................................... 48

Investor’s Guide To BURUNDI

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1

6

Politics & General Country Information

Investor’s Guide To BURUNDI

1. Politics & General Country Information 1.1. General Information Official name:

Republic of Burundi

Political system:

Parliamentary Democracy

Country area:

27,834 km2

Population:

8,800,000 inhabitants

Official languages:

Kirundi, French

Religions

Christianity ± 75% Indigenous religions ± 20% Islam 2-5%

Time:

GMT +2 hours

Climate:

Tropical

GDP per person:

350 USD (average)

Main exports:

Coffee, tea, manufactures

Currency:

Burundi Franc, BIF

Exchange rate:

1 Euro = 1,750 BIF

The Republic of Burundi is a landlocked country in the Great Lakes Region of Eastern Africa bordering Rwanda to the North, Tanzania to the East and South and the Democratic Republic of Congo to the West, with its south-western border adjacent to Lake Tanganyika. With a land area of 27,834 km², Burundi has an estimated population of 8.8 million and its capital city is Bujumbura.

While its origins date back to five centuries ago, the territory of modern day Burundi has been occupied by the Twa, Tutsi, and Hutu ethnic groups for centuries. Ruled as a kingdom for over two hundred years, Burundi became a Belgian colony known as Ruanda–Urundi (encompassing today’s Rwanda) at the beginning of the twentieth century, which was indirectly ruled by the Tutsi–dominated aristocratic hierarchy.

Since independence was achieved in 1962, Burundi has experienced four wars, the latest of which ended with the Arusha Peace Agreement in August 2000.

Since then Burundi has made a successful transition to a multi–party government system from 2000 to 2005.

In February 2005, a new Constitution emphasizing power sharing and protection of minority rights was approved by referendum. Recently, Burundi completed the second communal, presidential, and parliamentary elections and a new Government was sworn in at the end of August 2010.

Burundi has quota and duty–free access to major international markets (such as the EU and the US).

Burundi also enjoys free access to regional African markets through its membership of various regional economic communities such as Economic Community of Central African States (ECCAS), the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC). Burundi is a member of various international organizations and fora such as the United Nations and the African Union, and has been and continues to be supported by the European Development Fund, World Bank, IMF, African Development Bank, and others.

Burundi is densely populated, with substantial emigration. Cobalt and copper are among Burundi’s natural resources. Some of Burundi’s main exports include coffee and sugar. Burundi is divided into 17 provinces, 117 communes, and 2,638 collines (hills).

Provincial governments are structured according to these boundaries. In 2000, the province encompassing Bujumbura was separated into two provinces, Bujumbura Rural and Bujumbura Mairie. Burundi’s provinces include Bubanza, Bujumbura Mairie, Bujumbura Rural, Bururi, Cankuzo, Cibitoke, Gitega, Karuzi, Kayanza, Kirundo, Makamba, Muramvya, Muyinga, Mwaro, Ngozi, Rutana, Ruyigi.

1.2. Structure of Government Burundi’s political system is a presidential representative democratic Republic based on a multi–party State.

There are currently 43 registered parties in Burundi. The President of Burundi is the Head of State and Head of Government. The Burundi Government is divided into three branches including the Executive, Legislative and Judicial branch. The Executive division comprises of the President and the Cabinet, the Legislative comprises of a National Assembly and a Senate while the Judicial section consists of the Supreme Court and the other constitutional courts.

The President holds the most important position in the Government of Burundi and is also responsible for electing the Cabinet. The President serves the country for five year terms after which elections are held.

The Burundi political parties play a key role in governing the country. The National Council for the Defense of Democracy (CNDD-FDD), the FNL (National Liberation Front), the Burundi Democratic Front (FRODEBU), and the Unity for National Progress (UPRONA) are the major political parties of Burundi.

1.3. Legislative Branch Burundi’s legislative branch is a bicameral Assembly, which comprises the National Assembly and the

Investor’s Guide To BURUNDI

7

Senate. The National Assembly includes 100 directly elected members plus additional deputies appointed as necessary to ensure an ethnic and gender balance as mandated by the Constitution of Burundi (60% Hutu, 40% Tutsi, 30% female, and 3 Batwa members).

Members of the National Assembly are elected by popular vote and serve for five-year terms.

The Senate has fifty–one members, and three seats are reserved for former Presidents. Due to stipulations in Burundi’s Constitution, 30% of Senate members must be female. Members of the Senate are elected by electoral colleges, which consist of members from each of Burundi’s provinces and communes. For each of Burundi’s seventeen provinces, one Hutu and one Tutsi senator are chosen. One term for the Transitional Senate is five years.

Burundi’s legislative branch elects the President for a five–year term. Burundi’s president appoints officials to his Cabinet, which is also part of the Executive branch. The President can also pick fourteen members of the Transitional Senate to serve on the Cabinet. Members of the Cabinet must be approved by two–thirds of Burundi’s legislature. The President also chooses two Vice–Presidents. As of 2005, the President of Burundi is Pierre Nkurunziza. The First Vice-President is Therence Sinunguruza, and the Second VicePresident is Gervais Rufyikiri.

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Investor’s Guide To BURUNDI

The Burundi multi–party system consists of 43 registered political parties, of which CNDD– FDD (the National Council for the Defense of Democracy), FNL (the National Forces for Liberation), FRODEBU (the Front for Democracy in Burundi), and UPRONA (the National Unity and Progress Party) are national, mainstream parties. Other opposition parties include MSD (Movement for Solidarity and Democracy), CNDD (Council for the Defense of Democracy), PARENA (the Party for National Redress), and FRODEBU Nyakuri (part of the mainstream FRODEBU) that won important swing votes in the National Assembly in the 2010 elections).

1.4. Judicial Branch The judicial branch consists of the Supreme Court and the other Constitutional Courts. The Supreme Court is Burundi’s highest court, below which are three Courts of Appeals. Tribunals of First Instance are used as judicial courts in each of Burundi’s provinces as well as 123 local tribunals.

1.5. Executive Branch The Executive power lies with the President, the First Vice-President in charge of political and administrative affairs and the Second Vice-President in charge of social and economic affairs and the Cabinet. The President holds the most important position in the Government of Burundi and is also responsible for electing Cabinet.

ECONOMY

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9

2. Economy 2.1. General Economic Information The current political stability and the improved financial management contribute to Burundi’s improved economic performance. The Burundian economy grew at an average rate of 2.5% per year between 1998 and 2007. Overall, GDP growth is forecasted to pick up to 4.5% in 2012 and 4.8% in 2013.

According to the Economist Intelligence Unit, the manufacturing sector is expected to continue on its growth path, and increases in the production of beer and household consumer goods are also expected.

Furthermore, more than a quarter of the GDP is generated by agricultural production alone (27.1%), followed by public services (25.6%), manufacturing and handicrafts (12.2%) and transport and communication (5.4%). Agriculture also accounts for about 60% of exports. Major crops grown include coffee, tea, cotton, corn, sorghum and bananas. Burundi’s natural resources include nickel, cobalt, copper, platinum, gold, tin, and limestone, most of which are mined in small quantities. The manufacturing sector is dominated by light industries such as textile, leather goods and food processing.

Of the country’s entire workforce, the agricultural sector

employs more than 90% of the population, therefore representing the dominant employer in the economy.

For further details on the economic performance of Burundi in recent years, please refer to Table 2 (Burundi Annual Indicators).

In terms of business and investment climate, the Government of Burundi has undertaken bold reforms as well, leading among other things to an improvement in its Doing Business ranking. Indeed, in 2012, Burundi jumped 12 positions in the Doing Business ranking and was classified among the 10 top reformers in the world and the 4th in Africa.

In its role as a regional trading hub, the capital, Bujumbura, will benefit from continued stability, and further integration with the EAC, which in return, should stimulate growth in the wholesale and retail sectors. According to the Economist Intelligence Unit, the average inflation rate was of 13% in 2011, and is forecasted to be of 11% in 2012.

2.2. Government Policy Economic Policy Since 2000, the Government of Burundi has implemented a program of financial and structural reforms to stabilize the economy and revive economic

Annual Indicators 2007a

2008a

2009a

2010a

2011b

1,060.1

1,386.2

1,637.1

1,843.9

2,051.8

GDP (USD bn)

1.0

1.2

1.3

1.5

1.6

Read GDP growth (%)

3.6

4.5

3.4

3.6b

4.0

Consumer price inflation (av %)

8.3

24.1

11.0

6.4

9.6

Population (m)

7.7

7.9

8.2

8.4

8.6

Exports of goods fob (USD m)

58.8

69.6

68.2

101.9b

108.2

Imports of goods fob (USD m)

257.6

338.1

335.0

440.3b

534.4

Current account balance (USD m)

-110.9

-68.5

130.1b

-208.4b

-276.2

Foreign exchange reserves excl. gold (USD m)

176.3

265.7

322.0

330.7

325.9

1,081.9

1,185.7

1,230.2

1,230.7

1,260.8a

GDP at market prices (Bufr bn)

Exchange rate (av) Bufr:USD a Actual b Economist Intelligence Unit estimates Source: Economist Intelligence Unit

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Investor’s Guide To BURUNDI

activity. These have included: prudent monetary policy implemented by the Central Bank in the context of a liberalized foreign exchange regime, prudent fiscal policy with poverty-focused expenditure priorities, steps to strengthen and improve transparency in public financial management, etc.

Successful implementation of the government’s economic reform programme enabled Burundi to reach the Heavily Indebted Poor Country (HIPC) decision point in August 2005 and HIPC completion point in January 2009. Debt relief to Burundi under the enhanced HIPC Initiative will total about USD 832 million in Net Present Value (NPV) terms, with the International Development Association (IDA) contributing to more than half of it (USD 425 million).

Fiscal Policy The Burundi Government is expected to adopt an expansionist approach, increasing spending on civil–service and military, and implementing various measures of the national development strategy. The semi–autonomous revenue agency (known as Office Burundais des Recettes) will have a positive impact on domestic revenue growth.

In March 2011 the IMF announced that it had completed its fifth review of Burundi’s extended credit facility and approved a USD 10.4 million disbursement.

Monetary Policy The Banque de la République du Burundi (BRB) is the Central Bank and supervises monetary policy and the banking sector. BRB has made several efforts to engage with the Ministry of Finance in view of improving monetary and fiscal policy coordination. In this regard, the BRB will receive help from donor–funded technical assistance, which will be characterized by the aims of creating looser credit conditions that are more conducive to economic expansion, while restricting the growth of money supply sufficiently to avoid inflationary pressures in the face of rising international prices for staple foods and commodities.

In recent years, BRB has taken steps towards enforcing prudential requirements in the financial system. Alongside the development of microcredit, the effectiveness of the traditional banking system is a key factor in stimulating growth. The Central Bank has taken actions in favour of consolidation and strengthening of the financial sector. The measures are aimed primarily at: (i) increasing bank capital, for which the minimum is now set at BIF 5 million; and (ii) facilitating the recovery of banks in difficulty. The BRB also plans to review bank licensing procedures, update

the banking law, and launch a comprehensive study to evaluate the financial sector.

Government Priorities and International Programmes The Government of Burundi approved its first Poverty Reduction Strategy Paper (PRSP) in September 2006, following an extensive participatory process unprecedented in the country’s history. PRSP consultations took place in all 17 provinces and involved more than 145 civil society organizations and 14 sector and thematic groups. The current PRSP has four strategic priorities: (i) improve governance and security; (ii) promote sustainable and equitable economic growth; (iii) develop human capital; and, (iv) prevent and control the spread of HIV/AIDS. The first Annual Progress Report (APR) on the PRSP, which was prepared on the basis of the same broad participatory process as the 2006 PRSP, was received by the World Bank and the International Monetary Fund (IMF) in November 2008. The Government has just submitted a new PRSP based on the prioritized sectors outlined during the Consultative Group Meeting held in October 2009, and on the 2025 Vision of the Government to accelerate growth and poverty reduction in Burundi.

In June 2008, the World Bank’s Board of Executive Directors discussed the current Country Assistance Strategy (CAS) for Burundi. The World Bank then provided an estimated US$280 million in IDA resources to support the development program of Burundi over the following four years (mid–2008 to mid–2012). Based on Burundi’s PRSP, the World Bank’s strategic directions will continue to support Burundi’s transition from a post–conflict economy to a developing economy by selectively assisting the Government to implement a credible PRSP. This will help the country: (i) promote sustainable and broad–based economic growth through increased productivity of food crops, larger exports base, improved business environment, and improved infrastructural services thanks to regional integration; (ii) improve access to social services to consolidate social stability through more efficient and transparent public financial management and improved access to quality basic services; (iii) diffuse good governance and anti–corruption practices by strengthening Burundi’s governance strategy and institutions to improve public financial management.

Vision Burundi 2025 Vision Burundi 2025 is a long–term plan devised by the Government of Burundi to constantly improve living conditions in the country and make Burundi a safe, clean and healthy place to live and work in. Burundi 2025 is a tool for long–term development planning,

Investor’s Guide To BURUNDI

11

which will guide policies and strategies for sustainable development, in order to meet the needs of the present without hampering or compromising the chances of future generations.

It is also an expression of determination to build a new, democratic, reconciled, unified Burundi, a land of opportunities for all. In order to achieve this, the Vision Burundi 2025 identifies eight interrelated pillars: 1. Good Governance and Capacity Building of the State; 2. Human capital; 3. Economic growth and the fight against poverty; 4. Regional integration; 5. Demographics; 6. Social cohesion; 7. Land use and urbanization; 8. Partnership.

The development of the Vision “Burundi 2025” takes place in a context of important political change marked by the restoration of peace and security and a favourable economic outlook. Vision “Burundi 2025” aims at providing Burundi with an efficient instrumen t of development policies planning in order to develop policies and strategies for sustainable development which will bring forward changes within one generation.

This vision was developed based on a participatory approach and reflected a national consensus.

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Investor’s Guide To BURUNDI

2.3. Macroeconomic Indicators Traditionally, the primary sector is the backbone of Burundi Economy and the main source of employment in the country. It occupies more than 90 per cent of the workforce. Moreover, Agriculture provides more than 90 percent of the food supply and is responsible for 90 per cent of the Burundi export earnings. A major focus of Agricultural policy is food production growth to offset the growth of the population and ensure food sufficiency Another axis of Burundian agricultural policy is the promotion of export crops mainly coffee, and to a lesser extent, tea, cotton, sugar, palm oil, and tobacco. Today, tea and coffee crops totalize the majority of export earnings. Coffee, including the production of coffee Arabica representing 96 per cent of total national production, is the main Crop export of Burundi, and is grown almost throughout the country on a surface of approximately 60 000 ha.

Generally, total agricultural production was $ 231 million in 2005 compared to $ 255 million in 2000 and 300 million in 1990. This situation indicates however that there is potential growth in the sector through stable political and economic conditions.

Burundian agriculture sector is characterized by a high concentration in export product dominated by coffee, tea and to some extent manufactured products. In 2005, coffee was 71.2 per cent of total exports, 15.6 per cent tea and manufactured products 9.1 per cent.

1980 – 1989 Average

1990 – 1999 Average

2008

EAC 2008 Average or total

Population (million)

4.8

6.1

8.0

130.7

GDP at market price (million of dollars)

1.1

1.0

1.1

73.2

227.0

164.3

137.6

560.7

4.1

-2.9

4.8

4.5

Agriculture, hunting, forestry, and fishing

54.7

50.3

37.1

28.0

Industry

17.6

19.1

19.6

20.7

Services

27.7

30.6

43.3

51.2

Exports of merchandise

97.7

77.2

57.3

10,690.7

Exports of services

12.8

13.0

44.0

5,216.6

Imports of merchandise

190.1

188.6

402.3

24,542.9

Imports of services

106.4

83.9

186.0

4,899.2

Exports G&S (% of GDP)

9.5

8.7

8.0

22.9

Imports of G&S (% of GDP)

20.8

22.7

32.4

38.7

Net FDI flows

2.6

0.7

3.8

1,734.7

Net flows, private creditors

-0.3

-1.4

0.0

-18.0

Net flows, official creditors

71.9

40.1

-6.5

871.9

Donations, including technical assistance

95.5

165.9

499.2

5,756.2

FDI flows (% of GDP)

0.3

0.1

0.0

2.4

GDP per capita (dollars) Real GDP Growth (%) GDP per sector (%)

Trade (million of dollars)

Capital flows (million of dollars)

Concerning the industrial sector, as in the case of the agricultural sector, the Government has been the main actor. Burundian industry consists mainly of primary processing of agricultural products, approximately 70 percent of total industrial production, as well as some mechanical and chemical industries. The services sector is one that generates more income and contributes 45 percent of Burundian GDP.

The services sector will benefit from most of regional integration. Indeed, this initiative is a real opportunity for the country to overcome its landlocked position, and expand its business activities. It would be then possible for Burundi to become a centre of transit for the countries of the Region (EAC), and a number of related services (mechanical repair, renovation services, hotel etc.) could be developed.

Bujumbura traditionally represents a purchase and sale business of wholesale center and retail although strongly affected by the crisis and especially the embargo of the end of the 1990s, the commercial sector is on track to grow again thanks to the political stability.

2.4. Inflation

Burundi has significant potential level of tourism. In addition to cultural heritage (historical sites, handicrafts, traditional dances), Burundi has many natural areas, offering diversity of landscapes. The country is, indeed, strewn with lakes and already has some national parks with a much diversified flora and fauna. Burundi can also build on its strategic geographical location in the Great Lakes Region and border with Tanzania.

2.5. Foreign Exchange

The Economist Intelligence Unit forecasts an average inflation rate of 11% in 2012. According to the IMF the average inflation in Burundi is expected to go down to 5% by 2015.

The Burundi Franc (BIF) is the official currency of Burundi. It was first issued in 1963. In 2011 the most recent exchange rate was 1,710 BIF to 1 EURO and 1,220 BIF to 1 USD. Notes come in denominations of 10, 50, 100, 500, 1000, 2000, 5000 and 10,000. Coins come in denominations of 1, 5, 10 and 50.

Investor’s Guide To BURUNDI

13

2.6. Trade

Export Destinations 2010

Export per Sector (BIF millions) 100,00

0%

90,000

4%

80,000 70,000 60,000

23%

50,000

2008

40,000

2009

30,000

2010

50% 0% 23%

20,000 10,000

ap s So

ig ar et te s C

Be er

H

or tic ul

tu re

Te a

de s hi w Ra

co tto n

Region EU EAC USA & Canada Asia & Near / Middle East Rest of Africa

C

om

m

er ci

al co ffe e

0

Import per Sector (BIF millions)

Import Sources 2010

140,000 2%

120,000

0%

0%

100,000 21%

80,000 60,000

2008

40,000

2009

20,000

2010

29%

1%

47%

Ag ric

ul tu

re

an d

M

et al L Bo Fo ive s st od ile oc rs In ,m du k ac s C on trie hi ne s st ru ry ct an i on C d he m m ec M ic ha Tr ni iner als at c a al or l s, ap Oil s ve pl P ia hi ar n cl t s ce es , a Ele and s O c n T t d th oo tr ric er ls go ans Ma po tre od ia r s (e t ve ls le ct hic le ro s ni c, Fo et od c. pr Te ) od x til uc ts Ve es (c h ic on le Ph sum s ar p t m ac ion ) eu tic al s

0

14

Investor’s Guide To BURUNDI

EU Rest of Europe Asia Africa USA & Canada Oceania

2.7. FDI in Burundi In terms of international investment, Foreign Direct Investment (FDI) in Burundi rose from an average 0,5 million USD in 1999 to 100 million USD in 2010 and 2011 (API Burundi, 2011). When domestic investment is included, the total yearly investment has exceeded USD 200 million over the last two years. This is due for the biggest part to peace restoration and actions taken by the Government in recent years to attract FDI. The Government of Burundi’s official attitude toward Foreign Direct Investment is reflected in the new Investment Code, which was formally enacted in September 2008. The Investment Code aims at attracting and reassuring foreign investors by encouraging and facilitating acquisitions, production, transformation and distribution of goods and services.

The Investment Code outlines the Government’s desire to stimulate foreign investment but highlights a continuing lack of transparent, specific regulations to foster significant foreign investment.

Foreign investors in Burundi can count on sound business-friendly policy which guarantees equal and fair treatment of all foreign and local enterprises. Not only Burundi has no overall economic or industrial strategies that discriminate against foreign investors, but it has no general limits on foreign ownership or control of enterprises, nor are there established processes or criteria for the review of foreign investments. The 2008 Investment Code provides a streamlined and fair process for all investors, whether local or foreign.

Furthermore Burundi’s judicial system upholds the sanctity of contracts. In case of a dispute involving foreign interests, a Centre for Arbitration and Mediation has been established by the Government to handle such issues. Additionally the plaintiff has the option of

referring its complaint to either national courts or an international arbitration.

There is no explicit discrimination against foreign investors at any stage of the investment process, nor are there any laws or regulations specifically authorizing private firms to adopt articles of incorporation or association which limit or prohibit foreign investment, participation, or control.

There are no restrictions on business sectors open to foreign investments, with the exception of arms and military enterprises, investments in this sector are conducted on a government–to–government basis.

The government is in the process of privatizing Burundi’s coffee industry –– the largest source of foreign exports – and with many foreign companies purchasing Burundian coffee, the interest in investing in this industry is high.

Major investment projects in Burundi have originated in Kenya, Switzerland, India, Uganda and the United States mostly in the financial services sector. Some of the recent investments into Burundi include: • Jubilee Holding (Kenya) – Financial services • Commercial Bank of Africa (Kenya) – Financial services • Kenya Commercial Bank (Kenya) – Financial services • Diamond Trust Bank (Kenya, Switzerland) – Financial services • Aga Khan Development Network (Switzerland) – Financial services • United Bank of Africa (Nigeria) – Financial services • Global Trust Bank (Uganda) – Financial services • Healthcare Global Enterprise (India) – Health Investor’s Guide To BURUNDI

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Demography and Labour Force

Investor’s Guide To BURUNDI

3. Demography and Labour Force education.

services

3.1. General National Population Statistics

3.2. Urban and Rural Population Information

According to the IMF, the total population of Burundi is 8.8 million in 2010 and it is forecast to reach 9.1 million by 2015. Given the small area covered by the country, the average density of population is about 315 inhabitants per km².

According to the World Bank the rural population makes up 89.6% of the total population.

Urban centers will collect only 8% of Burundi’s population, 75% of which is concentrated in the city of Bujumbura. This assumes a lot of pressure in the use of arable land, where the soil is less productive.

This added to the rapidly growing population increases the need for greater agricultural productivity and job creation in secondary and tertiary sectors.

The age structure of the population of Burundi is similar to that of many developing countries and shows that 46% of the population is young (0–14 years), 51.6% (15–64 years) and 2.5% (65 years and over). Males accounted for 49.51% of the total population in 2010 and females for 50.49%.

The adult illiteracy rate is declining but remains high, it was more than 60% in the 1990s and moved down to 43.9% (with a majority of women 48.9% against 38.6% men) in 2007. The gross primary enrolment rose growing from 72.8% in 1990 to 81.9% in 2005, but with a fall during the conflict period. Over 50% of youth leave school at the end of primary school. At the secondary level the enrolment rate remains low and increased slowly from 5.6% in 1990 to 11% in 2005 (AfDB, 2008). About 1% of the population is in tertiary

3.3. Labour Force Burundi’s government has identified education as one of its main priorities and it currently spends 5.1% of its GDP on education.

One of the main effects caused by the conflict that affected the country during the conflict period was a brain drain and under–investment in the education sector. A significant effort has been observed in recent years as state investment in education has increased significantly with, among other measures, free school fees, enacted in 2005. This has had a significant impact and resulted in increased enrolment. The gross primary enrolment rose from an average of 81% in 2003–2004 to 105.2% in 2006–2007 (The gross enrolment rate can exceed 100 percent because of the inclusion of students with an age more or less than the legal age of school entry, gifted children and repetitions) (IMF, 2009). In addition, English and Kiswahili were introduced in school curricula and efforts are being made to improve the enrolment of girls in the school system.

The Burundi Government is well aware that in order to guarantee a long–term strengthening of human capital and, in turn increase its ability to attract FDI, more emphasis shall be put on investments in the education system.

EVOLUTION OF THE GROSS ENROLLMENT RATE 1990

1995

2000

2005

Primary

72.8

50.6

59.8

81.9

(Male)

79.4

55.4

66.4

88.1

(Female)

66.2

45.9

53.2

75.6

Secondary

5.6

7.3

10.3

13.0

(Male)

7.0

9.0

11.6

15.0

(Female)

4.0

5.5

9.0

11.0

Source: African Development Bank (AfDB)

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4

18

Labour Situation Analysis

Investor’s Guide To BURUNDI

4. Labour Situation Analysis 4.1. Terms of Employment • Minimum age for employment: 16 years • Working hours: 8 h per day; maximum 40 h / week.

(The Ministerial Ordinance n° 630 / 117, 9 May 1979 with exceptions, up to 45 hours / week).

• Legal limits for certain benefits • Example: accommodation costs that exceed 60% of salary will be subject to taxation.

• Freedom of work contract, without formalities or prior authorization.

• Two types of work contracts exist: fixed–term contract and contract for an indefinite period • Mandatory Business regulation: 15 employees or more • The compulsory Works Council: 20 employees or more • Termination of employment contracts shall be notified to the work inspection • Employment of expatriate staff is free but is subject to a series of conditions

4.2. Labour Legislation The Labour Code Law No. 1 / 037 of 1993 legislation regulates key aspects of the labor market such as contracts, wages, safety and hygiene, collective agreements, the right to strike, dispute resolution as well as vocational training. In general, this regulation is fairly comprehensive and contains no major constraints for the determination of wages and the procedures for hiring and firing workers. The very competitive cost of labour is considered an important comparative advantage for the country.

The law sets two basic types of employment contract: the fixed–term contract and the open–ended contract.

Trial contracts and temporary employment for short– term work is also contemplated within the law. The law also provides that, in the absence of a written document, the content of a contract can be established by any other means.

Duration and timing of fixed–term contracts are defined by agreement of the employer and the employee in the following instances: (i) the execution of a specific task, (ii) the replacement of an absent worker or during an exceptional or unusual work pressure, and (iii) a future and certain event which does not depend exclusively on the willingness of the parties but which is indicated accurately. Article 26 of the Law provides that the continued provision of service beyond the agreed date of a fixed–term contract, “automatically” results in the execution of an open–ended contract. The fixed–term contract cannot be renewed more than twice, except in the case of temporary workers. For trial contracts,

these cannot exceed 12 months for high skilled workers and six months for less skilled workers. Open–ended contracts can have a trial clause including a probation period.

The legal working time is fixed at forty–five hours per week and eight hours a day. Overtime is allowed and the law provides for compensation for overtime: (i) the first two hours of overtime shall be subject to an increase of 35%, (ii) beyond the first two hours, the increase is 60%, and (iii) overtime on a bank holiday or a day off shall be subject to a 100% increase. The legal minimum wage in Burundi is very low, fixed per day to 160 BFI in the urban areas of Bujumbura and Gitega and 105 BFI in rural areas. Most employers pay higher wages, however, which is around 1,500 BFI (about 1.2 USD) per day.

The annual leave is set at 20 days per year. Employers may increase paid annual leave of at least one day for every five years of service.

Regarding the termination of the employment contract, a fixed–term contract may be terminated before its term in the cases foreseen in the contract itself, in case of serious misconduct or any other provision included in the rules of the company. In line with the standards applied in other countries, by serious misconduct, it is meant, in the case of the employee, serious breach of contractual obligations, the intentional degradation of material and the violation of safety standards and in the case of the employer, acts of dishonesty, intentional material damage, the reduction or undue withholding of wages and delay in the payment of wages. The right to terminate an employment contract on the basis of “business rules” is not described, leaving a significant ambiguity in the law.

The cancellation of an open–intended contract, in turn, must be preceded by a notice period. The Law specifies that the notice period is set by the collective agreement, but it sets a mandatory minimum period if the termination is initiated by the employer. Based on a very liberal approach, this minimum varies from one to three months depending on seniority. The employee on the other hand only needs to give a notice period that is half that the employer should give.

The Law clearly defines the valid reasons for dismissal and the cases of abusive redundancies. As such, the dismissal must be based on a real reason. The Law establishes (Article 70) the economic reasons for dismissal whose criteria must be clearly determined by collective agreements. Some of the reasons considered real are stated within the law, these include:

Investor’s Guide To BURUNDI

19

qualification and professional competence, seniority, age and family responsibilities. Under the terms of the Law, the employer does not need a specific administrative authorization for such dismissal. He/she just needs to first inform in writing the business council or employee representatives.

Workers are entitled to a severance pay except in cases of gross negligence. The amount of compensation is set by collective agreements or employment contracts.

However, the Law sets a minimum for this benefit, a threshold that varies with seniority (one month pay for three years or less of service to a maximum of three months if the worker has 10 years of service). When

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Investor’s Guide To BURUNDI

notice is given by the employer, the worker is entitled to be absent in order to look for another job (a maximum of one day per week of full pay). The law does not require any obligation to provide additional training to an employee before dismissing him.

Burundi is a member of the International Labour Organization (ILO) and recognizes ILO conventions respecting worker’s rights. Unions represent approximately 10% of the formal private sector and 50% of the public sector. Workers have the right to join unions and to strike, though permission is required from the employer, and pre–notification of the Ministry of Labour is required.

Natural Resources & Geographic Profile

Investor’s Guide To BURUNDI

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21

5. Natural Resources & Geographic Profile 5.1. Geography Often called “the Heart of Africa,” Burundi covers an area of 27,834 km² and lies between 2º30’ and 4º30’ latitude South and between 28º50’ and 30º53’30’ longitude East. Bounded to the North by Rwanda, to the West by Democratic Republic of Congo, and to the East and South by Tanzania, Burundi is part of East– Central Africa. It is part of the Region of Great Lakes (Burundi’s south-western border is adjacent to Lake Tanganyika) and the Rift Valley, which extends through Central Africa from the Red Sea to Lake Malawi through Ethiopia.

5.2. Geology Burundi is relatively rich in minerals. Geologists found that the country is particularly rich in nickel, uranium, rare earth oxides, peat, cobalt, copper, platinum, and other resources such as vanadium, niobium, tantalum, gold, tungsten, kaolin, and limestone. These findings make Burundi a potential candidate for investments in mining.

5.3. Ecology: Flora, Fauna and the Environment The growth and development of Burundi Flora and Fauna depends on the location and the climate of the country. However, the flora of Burundi has undergone huge exploitation throughout the past and consequently the fauna of Burundi has also been affected. Savannah grasslands cover most parts of Burundi. The trees thriving in Burundi concentrate in the regions surrounding the lakes and they include eucalyptus, acacia, fig, and oil palms along the lake shores.

Wildlife was abundant before the region became agricultural. Still found are the elephant, hippopotamus, crocodile, wild boar, lion, antelope, and flying lemur, as well as such game birds as guinea fowl, partridge, duck, geese, quail, and snipe. Some 451 breeding bird species have been reported. The crowned crane is prevalent.

As the region becomes more densely populated, some species are dwindling or disappearing.

In Lake Tanganyika there is a great variety of fish, including the Nile perch, freshwater sardines, and rare tropical species. Most of the 133 fish species in Lake Tanganyika are found nowhere else in the world.

5.4. Hydrology and Water The originality of Burundi’s hydrography lies in the role played by the Congo Nile Ridge in the division of the catchment basins. There are two basins: The basin of

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Investor’s Guide To BURUNDI

the River Congo, comprising all the rivers to the West of the ridge and the Kumoso, a tributary of the Maragarazi River and the Nile basin, comprising all the tributaries of the Ruvubu and the Kanyaru. With this basin, Burundi can claim to possess the most Southern source of the Nile River, located near Rutovu commune. In addition to Lake Tanganyika, which covers most of the country’s western and southern borders, there are many inland lakes commonly known as the “bird lakes” in the North– East of the country; among them are Lakes Rwihinda, Cohoha, Rweru and Kanzigiri.

5.5. Climate Burundi has a moderate tropical climate with average temperatures between 23 and 24ºC, a fortunate average for a country located near the Equatorial area renowned for its heat and humidity. In the capital, Bujumbura city, average temperatures are about 25ºC. The country has two important seasons: the dry season from June to September and the rainy season from October to May (average annual rainfall is about 150 cm).

5.6. Land use In terms of land use, Burundi has 35.05% of arable land and 14.02% of land containing permanent crops.

Parts of the country witnessed soil erosion as a result of overgrazing, therefore agriculture has expanded into marginal lands; deforestation is a serious environment issue, in fact little forested land remains because of uncontrolled cutting of trees for fuel.

Agriculture provides over 94% of employment and more than 50% of the Gross Domestic Product (GDP) of Burundi. In addition, the agricultural sector supplies 95% of the nation’s food needs and over 90% of its export earnings. Food crops, primarily for consumption by the rural families that grow them, cover 90% of cultivated land; industrial crops (coffee, tea, cotton, and sugarcane) cover 10%. However, industrial crops bring in over 80% of Burundi’s foreign exchange earnings.

Therefore, the agricultural sector is the sector with the naturally highest growth potential—for both traditional and non-traditional products.

Among the food crops cultivated in Burundi are bananas, sweet potatoes, cassavas, beans, sorghum and maize. Before 1993, growth in the food production offset the growth in population and guaranteed relative food self–sufficiency. However, since the 1993 crisis, subsistence production fell sharply, causing severe food crises, particularly since the early 2000s. Between 1990 and 2005, production of legumes decreased by 35% while cereals decreased by 5% (Ministry of Agriculture and Livestock, 2005).

The other axis of the Burundian agricultural policy was the promotion of export crops, mainly coffee, and to a lesser extent, tea, cotton, sugar, palm oil, pyrethrum and tobacco. Today, tea and coffee are the bulk of export earnings but less than 5% of GDP. Coffee is the main export crop of Burundi. It is grown in most of the country, mainly on family–type farms. An area of ​​about 60,000 hectares is devoted to this crop, especially in the production of Arabica coffee, which represents 96% of the total domestic production.

Coffee represents a potentially attractive sector for foreign investors as the Government of Burundi tries to modernize and privatize coffee production. Historically coffee production has been very irregular, alternating campaigns with good results and others at very low production.

This can be explained by the strong dependence of production on weather conditions, soil erosion due to overexploitation of the land, aging coffee trees, as well as conflicts. In addition, farmers have limited financial resources that do not allow them to buy chemical fertilizers to increase productivity.

COFFEE PRODUCTION (1991–2008) (Tons) 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

2001-02

2000-01

1999-2000

1998-99

1997-98

1996-97

1995-96

1994-95

1993-94

1992-93

1991-92

0

Source: OCIBU

Investor’s Guide To BURUNDI

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6

24

Licenses, Permits and Taxes

Investor’s Guide To BURUNDI

6. Licenses, Permits and Taxes 6.1. Business Licensing Types of Companies Under the provisions of the Commercial Code, investors can choose various legal forms of incorporating their companies in Burundi, such as: 1. Private Limited Company (In French Société de Personnes à Responsabilité Limitée or SPRL) 2. Public Limited Company (in French Société Anonyme or SA) 3. Limited Liability Company (in French Société Unipersonelle à Responsabilité Limitée or SURL) 4. Cooperative Society (in French Société Coopérative (SC) Minimum shareholders required: • From two to fifty (2 to 50) • Minimum three (3) for a limited company (member of the Board of the SA must have at least a share of the company).

• One (1) for a Limited company (a Limited company cannot be the sole shareholder of a company Unipersonnelle).

• Minimum two (2) for the cooperative society.

Social Capital: • General rule, there is no capital share • There is no minimum social capital required to validate trading company in Burundi, only for some exceptions. However the absence of capital would be against the law.

A minimum of social capital is required for companies active in some specific sectors: • Bank: BIF 5,000,000,000 (as of 31 December 2009); • Financial institutions: BIF 4,000,000,000 (as of 31 September 2009); • Import and export petroleum companies: BIF 1,000,000,000 (as of 13 July 2009); • Insurance companies: BIF 300,000,000 (as of 29 November 2002) • Furthermore, no shareholder can hold more than 33% of the capital.

Registering a business and getting permits The most common categories of companies used are SARL (Limited Liability Company). This category provides similar benefits as those available in companies with legal personality in most countries.

Basically, two days are enough for an investor in Burundi to settle his business.

Land Ownership • Foreign moral or physical persons enjoy the same rights and protection than nationals; • A few restrictions related to the right of foreigners to purchase property in full ownership exist. However, if a commercial business is registered under Burundian law, the latter becomes Burundian and thus this distinction becomes no longer applicable; • Land for agriculture or livestock can be assigned to them only in terms of concessions for emphyteusis or use; • Different procedures for the acquisition of land not built regarding whether they belong to the public or private domain.

6.2. Taxes Income Tax General Tax on companies

35%

Income tax on companies which have registered a loss

1% of turnover

Withholding of taxes at the source: dividends

15%

Taxes on wages (per year): Tax brackets

Tax rate

0 – 300,000

0%

300,001 – 400,000

19%

400,001 – 500,000

23%

500,001 – 600,000

27%

600,001 – 700,000

31%

701,000 – 800,000

35%

801,000 – 900,000

40%

901,000 – 1,000,000

41%

1,000,001 – 2,000,000

43%

2,000,001 – 3,000,000

47%

3,000,001 – 4,000,000 and more

55%

More than 4,000,000 - taxes should not exceed 35% of taxable revenues

60%

VAT General (including on the rent of office leases)

18%

6.3. Entry Licensing People going to Burundi require a passport valid for at

Investor’s Guide To BURUNDI

25

to Vice–President or above). The business letter must:

least six months from the date of entry. The maximum stay in Burundi is 60 days and visas should be obtained in a Burundi Embassy or Consulate before arrival.

√√ Briefly introduce the applicant and specify employment status/position held √√ State the nature of the business to be conducted (i.e. business meetings, contract negotiations, etc.) and the name and address of companies to be contacted in Burundi. √√ Specify the type and desired validity of the visa (i.e. a one year multiple entry visa). √√ Guarantee sufficient funds for travel.

In order to be issues a tourist or a business visa, visitors have to submit the following information: • Original signed passport, with at least 6 months of remaining validity; • 3 Passport–type photographs; • Copy of round trip tickets or confirmed itinerary; • Yellow fever vaccination – copy of international certification of vaccination for yellow fever; • A letter from a hotel in Burundi confirming the name(s) of the guest(s) and the dates of the reservation. The letter must be printed on hotel letterhead and signed by a hotel agent; • For business visas only, a business letter from the sending company, printed in company letterhead, addressed to the “Consulate of Burundi, Visa Section” and signed by a senior manager (equivalent

Burundi offers three types of tourist/business visa, up to 30 days, 60 days or 90 days, single or multiple entries. The table below shows the process and cost of getting a visa for Burundi; please note that while the processing time is similar for all countries the cost of visas may vary from country to country. Here below we report the cost for the US and many European countries.

COSTS AND PROCESSING TIMES FOR TOURIST AND BUSINESS VISAS Type of visa

Max. stay

Processing time

Embassy fee

Service fee

Total cost

Single entry

Up to 30 days

4 business days

USD 90

USD 44.95

USD 134.95

Multiple entry

Up to 30 days

4 business days

USD 90

USD 49.95

USD 139.95

Single entry

Up to 60 days

4 business days

USD 180

USD 44.95

USD 2244.95

Multiple entry

Up to 60 days

4 business days

USD 180

USD 49.95

USD 229.95

Single entry

Up to 90 days

4 business days

USD 270

USD 69.95

USD 339.95

Multiple entry

Up to 90 days

4 business days

USD 270

USD 69.95

USD 339.95

Other visas, such as those for long–term business stays, may be obtained by applying to Burundian Embassies and Consulates overseas.

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Investor’s Guide To BURUNDI

Legal Framework

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7

27

7. Legal Framework 7.1. Investment Laws and regulations Burundi Investment Code A new Investment Code is in force since 1 January 2009. This Code is the result of a revamp of the 2003 business regulatory framework aimed at improving existing business law and promoting investment and the private sector.

The Code is applicable to both foreign and domestic investors. One of the major advances consists in the fact that all investments are now subject to common law procedures, guarantee conditions and advantages of the general scheme instead of the complex old system which provided four licensing regimes (one basic and three special). The new code also provides more guarantees to foreign investors in particular with respect to expropriation, the guarantee of transfer of capital and accessto international arbitration. The Code also takes into account the specific regime for investments in free zones.

• New Burundian Investment Code (law no 1/24 of 10th Sept 2008) on the investment of Burundi’s code since January 1, 2009; • Grants to investor guarantees and advantages of the General Scheme (freedom of establishment of capital guaranteed property to any person without any discrimination, free transfer of foreign capital and revenues); • Prohibition of any nationalisation and expropriation of the investments made in the Burundian territory, thus any measures of equivalent scope, tax credit for investments by enterprises newly created without prior approval; • New code simplifying existing legislation and harmonizing legislation in the East African Community (Kenya, Uganda, Tanzania and Rwanda); • Creation of Investments Agency (API), whose main missions are promotion of investment and export.

Further provisions of the new Investment Code on FDI The 2008 Law on the Investment Code is based on a very open and liberal policy for the entry and establishment of FDI, and contains no restrictions.

Freedom of investment and establishment applies to all persons or entities and for all activities except for those involved in the production of weapons and ammunitions, which are governed by specific laws.

Applicable sectors All economic sectors are open to foreign investment and no restrictions are exerted on foreign investments

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Investor’s Guide To BURUNDI

either in the Constitution, the Investment Code, the Commercial Code or other laws relating to investment. In addition, the state monopolies that still exist, namely in the areas of landline telephony and electricity, are part of a privatization programme open to foreign investment. Reforms are ongoing in the telecommunications sector (specifically mobile telephony and privatization of landline telephony), electricity sector and recently the coffee sector as well. Before 2005, the Government retained an important role in the coffee sector but with the Decree 100/012 of 2005, all economic operators, national or international, enjoy freedom of establishment and operation in all parts of the chain of production, marketing, processing and export financing.

The mining sector is also open to foreign investors. The only restrictions present in article 19 of the investment code is that natural persons or legal entities active in mining are required to take up residence in Burundi.

Services are of strategic importance for Burundi and are not restricted to foreign investment. However, Burundi has made ​​very few commitments under the General Agreement on Trade in Services of the World Trade Organization (WTO). The commitments made ​​by the sector in Burundi relate to construction services and related engineering, distribution, health and social services, those relating to tourism and travel, and some business services.

The common law applies to the establishment of investors and the act of investing is not subject to any particular formality of approval or authorization. In addition, the Investment Code does not foresee any statement for establishing an investment.

The new Investment Code provides that the creation or expansion of a business should follow the law requirements established in the Code of Private and Public Enterprises and the Commercial Code. The incorporation of a company is subject to the settlement formalities, signing of the statutes, deposit of the capital, the authentication of statutes and acts, registration and official publication. Additionally, the Commercial Code provides further requirements for business registration with the Commercial Court and other conditions for the presentation of information.

The new Code of private and public companies provides in article 14 that foreign enterprises that do not register a company in Burundi can also establish a branch office or an agency with the same rights and conditions of a Burundian company.

7.2. Important Laws: Competition Law The regional integration processes involving Burundi as a member of COMESA and most notably as a member of the East African Community (EAC) have spearheaded a series of legal reforms in the country.

The establishment of the EAC Common Market and the adoption of the EAC Competition Act in 2006 urged member countries to put in place national competition laws and institutions. Burundi enacted its Competition Law on 25 March 2010 and is in the process of establishing responsible institutions.

The Competition Law defines competition, the individual anti–competition practices, competition restrictive practices (non–competition clauses, resale at loss, refusal to sale, etc.), collective anti–competition practices (fixing prices, abuse of dominant position, market concentration, monopolies) as well as the penal provisions applicable in case of violation of one or more of the provisions of the Competition Law. The new legal regime on competition will be applicable to all the sectors of the national economy, to all operations relating to production and commercialization of products, to all services rendered or intellectual copyrights on the national territory by natural or legal entities, public, semi-public or private.

Equally, it might be applied to the enterprises located out of the national territory subject to agreements and treaties binding Burundi and the countries where these enterprises are located and also subject to provisions resulting from agreements or treaties signed by Burundi in the matter of competition.

Moreover, the application of the Competition Law is subject to the setting up of an ad hoc Commission, namely the Competition Commission (Article 9 of the Competition Law). Such a commission has not been put in place yet. The implementation legislation of the Competition Law is not yet into force.

Land ownership In terms of regulatory framework, land ownership is governed by the law 1/008 of 1986 (Land Code).

The Land Code takes the colonial approach that favored the dual method of statutory and customary law to classify land. The use of these two systems is therefore the source of many inconsistencies and ambiguities.

Recognizing this problem, the Ministry of Environment, Physical Planning and Public Works has prioritized security of land tenure, land registration and the

definition of tenure. In this sense, the Department initiated a comprehensive reform of the sector.

A draft reform of the Land Code has recently been put forward providing simplified acquisition and land registration procedures (for urban land, intensively managed land and wetlands) that will allow a unification of the two existing regimes.

Property Rights including IPRs Secured interests in property, both movable and real, are recognized and enforced. The legal system protects and facilitates acquisition and disposition of all property rights, such as land, buildings, and mortgages. Burundi adheres to key international agreements on intellectual property rights. There is a law providing for protection of intellectual property, patents, copyrights, trademarks and trade secrets dating from 1962.

Burundi is a member of the World Intellectual Property Organisation and it abides by most international conventions on this subject. The Department of Arts and Culture within the Ministry of Youth, Sports and Culture is responsible for the copyright offices, whereas the Ministry in charge of Trade oversees the work of the industrial property offices.

Environmental law The environment is governed by the National Strategy for the Environment of Burundi adopted in 1997 and by Law No. 1/010 of 2000, also known as the Environmental Code. The Environmental Code, in addition to introducing the principle of “polluter pays”, contains provisions on the main acts against the environment, the areas of enforcement, evaluation criteria for impact studies and other principles relating to environmental issues.

The Environmental Code establishes a procedure to be followed for projects, whose size and activities may harm the environment. In this respect, the procedure requires that a study on the environmental impact be carried out following standard criteria: (i) analysis of the initial state of the site and its environment, (ii) assessment of the predictable consequences of the implementation of the project on natural and human environment, (iii) a description of measures envisaged to eliminate, reduce and where possible, compensate for the harmful consequences of the project, and (iv) presentation of other potential alternative solutions. An implementation decree is meant to determine the types of operations or structures subject to such impact studies. However, projects related to maintenance and major repairs are not subject to the procedure of impact assessment.

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29

As far as the application of the law and the infliction of penalties for eventual breaches are concerned, the Burundi Government tasked a special section of the National Police with the protection of the environment and compliance with the code. Depending on the seriousness of the offense, fines range between 1,000 BIF and 100 million BIF while sentences vary from one day to twenty years of prison. No appeal process is mentioned in the law.

7.3. Investment Protection and Promotion Framework

Investors are protected by a series of norms and regulations which grant them and their investments legal stability in Burundi.

In addition, Burundi is a member of the Convention

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Investor’s Guide To BURUNDI

establishing the Multilateral Investment Guarantee Agency (MIGA), which allows foreign investors to hedge against four types of risks associated with the country of establishment: (1) restrictions on transfer of currencies, (2) expropriation, (3) war and public disorder, and (4) breach of contract. In January 2009, MIGA provided a project for a total exposure of 0.91 million USD. Burundi has signed Agreements for the Promotion and Protection of Investments (APPI) with Germany (1984), Belgium and Luxembourg (1989), and the UK (1990).

Agreements were also signed with Comoros (2001), Kenya (2009), Mauritius (2001) and the Netherlands (2007) but they are not yet ratified. These agreements contain all the provisions of conventional APPI under the admission procedure.

Investment Regimes and Free Zones

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8

31

8. Investment Regimes and Free Zones 8.1. Reasons to Invest in Burundi • A new investment code including attractive incentives.

• A business environment constantly improving with: √√ The simplification of administrative procedures; √√ The creation of the OBR to boost tax service and customs, and the fight against corruption √√ On-going reforms to liberalize all sectors, privatize state enterprises, etc.; √√ Burundi’s integration to several economic communities such as EAC and COMESA. This gives companies established in Burundi access to a wider market larger than 450 million consumers.

• Promising business sectors; • A country in full reconstruction; • The new investment code incentives; • Freedom of settlement and investment; • Granting of visas, fixing and moving residence to expatriates required by investment freedom, title to any person or entity, without any discrimination.

Access to markets Burundi is member of economic communities CEPGL, COMESA, EAC totalling more than 20 countries and 450 million consumers. Since 2008, the process is started for the integration of these three communities into a single regional community, (AEC) African Economic Community The attractiveness of Burundi as a place to invest lies on the improvement of the business climate by the Government. The efforts in improving the latter are focused on increasing the competitiveness of the economy in order to enable the Burundian Economy to take advantage of the opportunities offered by open markets.

Indeed, the integration of Burundi in the Eastern African Community (EAC) and in the Common Market for Eastern and Southern Africa (COMESA) represents an opportunity in terms of Direct Foreign Investment.

The EAC increases the size of the market accessible to Burundian products and stimulates the diversification of local production. Moreover, the country will be the focal point of trade within the region, linking up Central Africa, Eastern Africa and Southern Africa.

Indeed, if the infrastructures of transportation are developed further, countries such as Rwanda and Uganda will make the choice of transiting their goods through the port of Bujumbura for their commercial exchanges with Southern Africa via Tanganyika Lake.

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Investor’s Guide To BURUNDI

The same applies to the exchanges between the East of the Democratic Republic of Congo and Eastern Africa. Burundi could represent a strategic position for foreign investors wishing to invest in the region and to enter neighbouring markets.

The opportunities and challenges currently facing Burundi are strongly linked to regional integration that forecast the creation of new realities for Direct Foreign Investments in the country.

Capital transfer Capital transfer advantages include: • Free transfer of foreign capital and income after payment of taxes; • Transfer of unused professional income by foreign employees; • The transfer of capital remuneration in the form of dividends, in full for enterprises with foreign capital; • Protection of private property; • Non–nationalization and non–expropriation of investments implemented in its territory as well as any measures of equivalent scope.

Tax advantages All new investments are automatically entitled to: • Waiving of mutation on the acquisition of property rights and land; • Deduction of 37% as tax credit on the amount of depreciable invested good; • No refund to the fiscal administration with disposed assets that raised tax credit for a period of five years; • Tax credit during the implementation of investments for new businesses or for the extension of existing businesses; • Reduction of 2 and 5% in the rate of tax credit on the profits of companies that respectively employ between 50–200 employees and over 200 employees.

An Investment Promotion Agency (API) entirely at your service The IPA: • Has several high–qualified bilingual French–English staff; • Assists investors in all steps: drafting of statutes, registration of companies in Burundi, obtaining tax identification, compiling the file required to access the Investment Code incentives, obtaining work and residence permits, etc.

A business environment in constant improvement • Simplified administrative formalities • Obtaining Trade Registers and Tax Identification

Number in approximately 3 days • Creation of the Burundi Revenue Authority to boost services of taxes and customs, and to fight against corruption • Declaration only necessary with the services of the customs to have the exemptions of customs rights and Value–Added Tax (VAT) on facilities and raw materials • A set of reforms in progress: the total liberalization of all sectors, the privatization of state-owned enterprises, etc.

8.2. Performance Requirements and Incentives Incentives include: • Exoneration of charges incurred for acquisition of buildings and land; • Corporate tax credit equivalent to 37 % of the value of depreciable goods invested for any investment of at least BIF 100 million (app. 77,000 USD) creating at least 10 permanent jobs for Burundians in Bujumbura, or any investment of BIF 50 million (app. 38,500 USD) creating 5 permanent jobs for Burundians outside Bujumbura; • Raw materials and capital goods rated at 0% during customs’ clearance; • No payment of VAT (18%) on imported investment goods for any investment of at least 500 million BIF; • Corporate tax reduction of 2% and 5 % for companies employing respectively between 50-200 employees, and more than 200 employees.

Performance requirements or incentives are applied fairly and uniformly to both international and domestic investors. To encourage investment Burundi applies investment incentives to both international and domestic companies in the form of income tax deferrals, and exemption from import and export duties.

To qualify for these incentives, however, the investor must meet special requirements concerning the size of the investment, the number of jobs created, and the location of the business. For example, a business may be granted extra incentives to locate and invest in rural areas. There is no general requirement that the business purchase goods from local sources. An exception is made, though, for companies licensed for export only which operate in the Free Economic Zone (FEZ). Companies which take advantage of FEZ tax incentives are required to purchase goods in Burundi, where possible.

There is no requirement that Burundian nationals own shares in the foreign investment, or that technology be transferred to Burundian entities over the time of the investment. The share of the foreign–owned equity in the investment need not be reduced over time. No “offset” requirements, whereby major procurements

are approved only if the foreign supplier invests in items related to the host country, are required.

Burundi does not impose conditions on permission to invest, except for companies that apply for special incentives, such as specialized tax advantages embedded in the Investment Code. The Government of Burundi does not impose enforcement procedures on companies, and investors are not required to disclose proprietary information to the government as part of the regulator process. Burundi does not impose any discriminatory or excessively onerous visa residence, or work permit requirements that would hinder a foreign investor’s mobility, or operate tariff barriers that would constitute preferential or discriminatory export or import policies.

8.3. Free Zones The free zone regime was established in 1992 with the Legislative Decree 1/3.The latest amendments to the Act were adopted in 2001 with the law 1/015 and 2002 with the Ministerial Order 750/649.

The regime gives legal status to companies who automatically qualify for a set of tax and customs exemptions.

The regime has the distinction of being organized as a legal unlimited geographical area. Free zone companies are divided by sector and are referred to as free companies in the industrial, commercial, services or agricultural sectors. The main criteria for eligibility are: • The export of all production; • Creation of substantial added value; • Compliance with environmental, health and safety regulations; • The importation or re–export after further processing or packaging of imported products can be based on a list established by the Minister responsible for the free zones.

The main benefits of the free zone are: • Full exemption from corporate tax for the first ten years of operation and payment of a reduced rate of 15% thereafter; • Tax exemption on dividends for an unlimited period; • Right to repatriate capital and income; • Permission to have foreign currency bank deposits; • More flexible labor regulations than that provided in the Labor Code; • Imports of businesses located in these zones are exempt from all duties and taxes, direct or indirect, without an import license; • The regime also applies to duties on exports.

Burundi is a member of many Regional Economic Communities and accordingly has preferential access to many international markets. Below is a list of the main organizations of which Burundi is a member.

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9

34 34

Market Access

Investor’s Guide To BURUNDI

9. Market Access 9.1. East African Community Burundi is one of the 5 Member States of the East African Community (EAC), one of the most integrated regional economic communities in Africa with a population of 133.5 million people, a combined GDP of 74.5 billion USD and a land area of 1.82 km2. Burundi joined the EAC in 2007 along with Rwanda bringing up to five the number of EAC member countries.

The regional economic group encompasses Burundi, Kenya, Rwanda, Tanzania and Uganda and its realization bears great strategic and geopolitical significance and prospects of a renewed and reinvigorated East African Community.

The EAC aims at widening and deepening co–operation among the member countries in, among others, political, economic and social fields for their mutual benefit. To this extent the EAC countries established a Customs Union in 2005 and launched a Common Market in

9.2. Common Market for Eastern and Southern Africa (COMESA) Burundi is one of the 19 Member States forming the Common Market for Eastern and Southern Africa (COMESA), the largest Regional Economic Community (REC) in Africa, with a population of over 430 million, and a combined GDP of over USD 447 billion. Burundi is one of the 14 COMESA Member States currently taking part in the COMESA Free Trade Area which grants it tariff–free and quota–free access to 13 other major markets in the COMESA region.

MAP OF THE COMMON MARKET FOR EASTERN AND SOUTHERN AFRICA Libya

Egypt

Sudan

MAP OF THE EASTERN AFRICAN COMMUNITY

Eritrea Djibouti

Ethiopia Uganda Rwanda

DRC

Kenya

Burundi

Seychelles Zambia

Comoros

Zimbabwe

Mauritius Madagascar Malawi Swaziland

2010, and are working towards the establishment of a Monetary Union by 2012 and ultimately a Political Federation of the East African States.

The regional integration process is at a high pitch at the moment as reflected by the encouraging progress of the East African Customs Union, the signing in November 2009 and ratification in 2010 of the Common Market Protocol by all the Partner States.

The negotiations for the East African Monetary Union, which commenced in 2011, and fast tracking the process towards East African Federation all underscore the serious determination of the East African leadership and citizens to construct a powerful and sustainable East African economic and political entity.

Source: COMESA Regional Investment Agency Having successfully launched its Customs Union in 2009, COMESA is continuing on the road of regional integration by supporting the continual creation of better investment conditions, making it an increasingly internationally competitive economic community.

The importance of Burundi’s membership of COMESA and its FTA lies in COMESA’s higher FDI growth rate (an increase14.6% in 2010 compared to a decrease of 9% in Africa for the same period) as well as its high average GDP growth rate (5.7% in 2009).

COMESA Member States include: Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea,

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35

Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia & Zimbabwe.

9.3. Economic Community of Central African States (ECCAS) Burundi is one of the 11 Member States forming the Economic Community of Central and Eastern Africa States (ECCAS), the Regional Economic Community (REC) in Africa encompassing most Central African countries. Apart from Burundi other ECCAS Member States include Angola, Cameroon, Central African Republic, Chad, DRC, Equatorial Guinea, Gabon, Republic of Congo, Rwanda, Sao Tome and Principe.

9.4. Economic Community of the Great Lakes Countries (ECGLC) Burundi is one of the 3 members of the Economic Community of the Great Lakes Countries (ECGLC).

ECGLC membership includes Burundi, DRC and Rwanda. ECGLC is a sub–regional organization with multiple objectives created by the signing of the Agreement of Gisenyi in Rwanda on September 20, 1976, aiming at ensuring the safety of member states, favoring the creation and the development of activities of public interest, promoting the trades and the traffic of the persons and the possessions, establishing the cooperation in a narrow way in all the domains of the political, economic and social life.

MAP OF THE ECONOMIC COMMUNITY OF CENTRAL AFRICAN STATES

36

Investor’s Guide To BURUNDI

Infrastructure

10

Investor’s Guide To BURUNDI

37

10. Infrastructure 10.1. Roads and General Information In terms of general transportation and infrastructure, Burundi presents several opportunities for investment.

Currently, there is one International Airport in the Capital City Bujumbura that has a total runway length of 3,047 meters; and 12,322 km of roadways across the entire country. Given the size of the country, there are no existing railways. However, there are international flights that connect Burundi to Central, Eastern and Southern Africa.

The Burundi roadways provide the opportunity to explore the country by car. However, there is room for investment in the road network programme.

Additionally, the founding members of the EAC decided, in collaboration with their development partners, to initiate a draft regional network of roads to facilitate their integration. More specifically, the ECA regional network consists of five corridors: 1. Corridor 1: Mombasa – Malaba – Katuna (linking the Kenyan coast to Uganda and Rwanda) 2. Corridor 2: Dar – Es – Salaam – Isaka – Masaka (connecting the Tanzanian coast to the East and Uganda) 3. Corridor 3: Biharamulo – Lockichogio (linking Eastern Tanzania, Kenya, Uganda and South Sudan) 4. Corridor 4: Tunduma – Nyakanazi (linking the Southern and Eastern Tanzania) 5. Corridor 5: Tunduma – Namanga – Moyale (linking Southern Tanzania, Kenya and Ethiopia) The entry of Burundi in the proposed regional road network is a significant opportunity for the country.

Corridors 1, 2 and 4 are indeed of direct importance to Burundi since the first connect to the port of Mombasa through Rwanda, the second would give direct access to Dar–Es–Salaam and the fourth would connect it to Southern Tanzania (and Southern Africa) along Lake Tanganyika.

10.2. Water Burundi waterways are served by the ports and harbors in Bujumbura. Apart from this, Lake Tanganyika also

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Investor’s Guide To BURUNDI

proves to be an important waterway in Burundi. With the available air route and road route facilities, getting around Burundi is easy and convenient.

10.3. Railways Burundi does not possess any railway infrastructure, although there are proposals to connect Burundi to its neighbours via railway. Most notably, the East African Railway Master Plan is a proposal for rejuvenating existing railways serving Tanzania, Kenya, Uganda an d extending them initially to Rwanda and Burundi and eventually to South Sudan, Ethiopia and beyond.

The plan is managed by Infrastructure Ministers from participating EAC countries in association with transport consultation firm CPCS Transport International Limited.

10.4. Air Transport The hub airport in Burundi is the Bujumbura International Airport, which is situated in the capital city of Bujumbura. Airlines flying to and from Burundi include: • Kenya Airways: connecting to Nairobi and Kigali • Ethiopian Airlines: connecting to Kigali • Rwandair Express: connecting to Kigali and Johannesburg • SN Brussels Airlines: connecting to Nairobi and Belgium.

• China Postal Airlines: connecting to Kigali • South Africa Airlines: connecting to Kigali and Johannesburg • Air Uganda: connecting to Entebbe • Air Burundi The services sector is the biggest single contributor to national wealth as it generates 45% of Burundi’s GDP. This sector has been growing fast in the last decade (2000s) and presents the best potential for development when compared to other sectors. There is great potential for investments and the Government is increasingly more inclined to get private sector involvement which to-date is quite limited.

Services

11

Investor’s Guide To BURUNDI

39

11. Services 11.1. Fuel The Eastern African region is said to be particularly rich in fuel and gas reserves, with at least 28 prospective sedimentary basins out of which Burundi has two, which have not been exploited yet.

Most energy consumed in Burundi comes from wood and charcoal (about 95%). Other forms of energy include petroleum products, hydropower and peat. The country’s electrification rate is very low (1.8%) and more than 90% of electricity is consumed in Bujumbura.

The hydropower potential is 1,700 megawatts (MW) of power theory, of which 300 MW is considered economically exploitable. At present, only 32 MW are operated. In addition, Burundi imports about 40% of its energy consumption, mainly from the Democratic Republic of Congo.

11.2. Telecommunications The biggest investments that Burundi has known since the beginning of the crisis were in the telecommunications sector, characterized by high flow of FDI in 2000, valued at 11.7 million USD. This peak was due to the liberalization of mobile telephony put forward by the Government in the 2000s.Two licenses were indeed granted to foreign companies, Africell and Spacetel (Econet), whose respective international partners are Alcatel in France and Ericsson in Sweden. The same year, the U.S. USAN Burundi settled as an internet service provider. In 2008, the Egyptian company Orascom bought U–Com, owned by the Indian group Global Vision. In addition, two additional licenses were awarded, one to HITS Telecom a joint venture Uganda– Saudi Arabia, and the other to a Nepalese company called Lacell SU (Smart Mobile).

Regarding telecommunications, the country has four fixed telephone lines per 1,000 inhabitants mostly in urban areas. While 90% of the population lives in rural areas and 90% of subscribers are located in urban areas, network coverage in the country is very low. There are six operators, the largest of which is U–Com (formerly known as Télécel), a company that was recently privatized. Other operators include the public operator ONATEL, which offers fixed and mobile telephony services, followed by foreign private operators Africell, Econet, Lacell SU and HITS Telecom.

The current telephone density is 2.5 lines per 100 inhabitants, landline and mobile combined (UNDP and

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Investor’s Guide To BURUNDI

Vice–Ministry of Planning, 2008). As regards to Internet, estimates point to 14,000 users in Burundi, five users per 1,000 inhabitants. Internet service providers include CBINET, USAN Burundi, ONATEL and U–Com.

11.3. Water and Sewage Currently various sources of water (including Lake Tanganyika) provide water to 71% of the population of Burundi. The Ministry of Energy and Mines is responsible for the water sector. Lake Tanganyika has great potential not just for transport and fishing but also for tourism and water sectors as well.

The role of donors is also essential. To this end, the multi–sectoral water and electricity infrastructure project launched in 2008 and funded by the World Bank for 50 million USD is an encouraging initiative.

This project aims at increasing access to drinking water services in Bujumbura and strengthening the operational capacities of key sector institutions including the Ministry of Energy and Mines. This program will greatly encourage initiatives such as: • The creation of a technical team that is able to define a reform strategy; • A policy and investment strategy to improve the generation, distribution and marketing of electricity and water, and • Coordination of the various technical assistance initiatives.

In addition, it is recommended that Burundi maximizes the benefit to be derived from existing investment programmes, including those from African or regional initiatives such as NEPAD and the African Development Bank (ADB). These organizations have indeed made water access and investment in infrastructure a real priority and can contribute to the development of Burundi. Most importantly, Burundi must take advantage of its entry in the EAC by participating in regional infrastructure development projects.

11.4. Electricity The country’s electrification rate is very low (1.8%) and more than 90% of electricity is consumed in Bujumbura.

The hydropower potential is 1,700 megawatts (MW) of power theory, of which 300 MW is considered economically exploitable.

Burundi has a relatively small financial sector that is dominated by banking and the Government retains stakes in several banks.

EASTERN AFRICA - COMPARATIVE TARIFF (cents US / kWh) REGIDESO

ELECTROGAZ

NEC

KPLC

EEPCO

UEGCL

CEB

(BURUNDI)

(RWANDA)

(SUDAN)

(KENYA)

(ETHIOPIA)

(UGANDA)

(MAURITUS)

Social tariff (E=100kwh/month)

1kW

3,70

13,99

3,04

9,70

4,25

23,74

8,42

Single phase domestic usage (E=200kwh/month)

2kW

3,82

13,99

9,88

13,50

5,09

24,79

10,04

4kW

3,82

13,99

9,88

13,50

5,09

24,79

10,04

Triphase domestic usaqe (E=600kwh/month)

6kW

5,84

13,99

9,88

15,40

6,26

25,49

14,04

10kW

5,84

13,99

9,88

15,40

6,26

25,49

14,04

Commercial usage (E=1 800kwh/month)

12kW

11,79

13,99

12,29

15,90

7,69

24,25

12,45

15kW

11,79

13,99

12,29

15,90

7,69

24,25

12,94

Semi - Industrial & motive power (E=2 500kwh/month)

20kW

11,79

13,99

12,25

8,45

6,42

25,50

8,03

25kW

11,79

13,99

12,25

8,45

6,42

26,26

8,53

250kW

11,40

13,99

4,97

7,25

4,54

12,83

7,05

Medium voltaqe (E=35 000kwh/month) Source: UPDEA

COMPARATIVE TARIFF GRAPH

TARIFFS (Cents USD/kWh)

30 25 20 15 10 5 0

(BURUNDI)

(RWANDA)

REGIDESO ELECTROGAZ

(SUDAN)

(KENYA)

(ETHIOPIA)

NEC

KPLC UTILITIES

EEPCO

(UGANDA) (MAURITUS) UEGCL

CEB

Social tariff (E=100k Wh/month) 1kW Single phase domestic usage 2kW Single phase domestic usage (E=200k Wh/month) 4kW Triphase domestic usage 6kW Triphase domestic usage (E=600k Wh/month) 10kW Commercial usage 12kW Commercial usage (E=1800k Wh/month) 15kW Semi-industrial&motive power 20kW Semi-industrial&motive power (E=2500k Wh/month) 25kW Mediumvoltage (E=35000k Wh/month) 250kW Secretariat, Comparative Study of Electricity Tariffs used in Africa, 2009

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12

42

Banking and Financial Services

Investor’s Guide To BURUNDI

12. Banking and Financial Services 12.1. The Banking System in Burundi In terms of main commercial banks in Burundi, three have private capital. The three most important banks are the Commercial Bank of Burundi, Interbank and the Credit Bank of Bujumbura, all of which are foreign owned, mostly by Belgian banks. Over the last few years, several international banks have settled in Burundi including Diamond Trust Bank in 2009, Ecobank in 2009, Access Bank which became the majority shareholder of Finbank Burundi in 2010, and Kenya Commercial Bank in 2012.

In the banking sector, foreign investors are already present, particularly those installed since colonial times. The Pan–African Bank of Africa Group and two Belgian companies, BIO and the Bank De Groof, have bought shares in the Credit Bank of Bujumbura, which employs around 300 people. This shows the ability of Burundi to attract FDI and the potential of the financial sector to foreign investors.

On average, approximately 20% of the top three banks’ total asset base is nonperforming, which indicates a relatively stable banking environment. Lending rates are around17–20% per annum in mid–2007.

The formal banking sector mainly serves Burundi’s small elite of wealthy business people and government officials, as well as its middle class.

The main development bank is the Banque Nationale de Développement Economique (BNDE). Banking regulation is bureaucratic and arduous.

The Banque de la République du Burundi (BRB) is the Central Bank and supervises the banking sector. In recent years, BRB has taken steps towards enforcing prudential requirements in the financial system, licensing financial institutions and currently plans to review bank licensing procedures, update the banking law, and launch a comprehensive study to evaluate the financial sector.

12.2. Insurance companies and other financial institutions The insurance sector is small, but there are private as well as partially government–owned companies.

The sector is regulated by the Insurance Regulation and Control Agency, which falls under the Ministry of Finance. There are private or partially state–owned insurance companies operating in the country.

12.3. The Role of Microfinance In recent years there has been a proliferation of microfinance institutions, the vast majority of which could not sustain their activities. Restoring the credibility of the microfinance sector is crucial in improving the supply of credit in rural areas. Given its central role for growth and poverty reduction, the Central Bank of Burundi (BRB) is now closely supervising the financial activities of the microfinance institutions. It has also encouraged the creation of a Network of Microfinance Institutions (RIM) in order to definitively restore order in this sector. Overall, 26 microfinance institutions were licensed by the BRB at end of 2007. Their financing is based primarily on contributions from projects and from NGOs involved in the sector.

12.4. The use of currency

• Operations in foreign currency (concerning common international operations) can be done freely.

• Any person legal resident or non–resident may open an account in foreign currency at an approved Bank, receive and make payments on these accounts.

• Some types of payments however require prior approval of the Central Bank (Bank of the Republic of Burundi – BRB).

• Non–residents who invest in Burundian Currency are obliged to justify the origin of their currency by foreign exchange operation.

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13

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Sectors

Investor’s Guide To BURUNDI

13. Sectors 13.1. Sector Information Burundi features a number of comparative advantages such as regional strategic access to Lake Tanganyika, membership of various regional economic communities, including COMESA and EAC and relatively low labour costs. These advantages should be exploited in its sector strategy to attract Foreign Direct Investments.

The Burundi economy is dependent on a number of sectors whose development will have significant impact on its potential growth in the years to come. The sectors identified as key for the Burundian economy are: • Services • Tourism • Mining • Energy • Agriculture • Manufacturing • Transport • ICT

13.2. Services The impact of economic reforms is quite remarkable in the services sector in Burundi where the potential for increasing investment is great. Of all sectors, investment in the ICT sector is booming as this has proven to be the most open sector to Foreign Direct Investments in recent years, particularly mobile telephony. Investment opportunities in services are increasingly facilitated by the entry of Burundi into the Eastern African Community (EAC), which (i) increases the market size, (ii) stimulates service diversification, and (iii) allows the country to be a sub–regional corridor. Indeed, strategically located at the interstices of Central, Eastern and Southern Africa, Burundi could become a centre for transit trade in the sub–region.

In this context, the role of the IPA is important to promote this image of key transit centre to the investors’ community and to attract Foreign Direct Investments in general services and facilities, such as construction, mechanics, repair activities, catering, distribution and hotel industry, which can meet the needs of economic actors in transit. In the long run, the IPA could expand its activities to include legal services, management consulting to private firms and other ICT services.

13.3. Mining The mining sector is a priority sector for the Burundi Government. Mining could considerably contribute to job creation, thus reducing pressure on agricultural

employment, as well as to the diversification of the economy, have the effects of technology transfer and result in an increase of state revenue. Burundi’s mineral resources are varied but fairly modest, the main one being nickel. Mining is so far mainly traditional bu t industrial exploration licenses have been granted to foreign investors since 2007.

It is recommended that the Government clarify certain elements relating to mining and negotiations and align the new Mining Code with the investment environment and business codes currently under review. The Government is currently preparing a new Mining Code.

With regards to the mining sector • The country is full of many natural resources: nickel, cassiterite, colombo tantalite, gold, phosphates, limestone, slate, and hydrocarbons; • Exploitation is still hand–crafted, therefore an opportunity for potential investors; • Some mining conventions exist for exploration of nickel and gold; • The mining market remains open; • A study on the development of the mining sector is underway.

13.4. Agriculture General Information Burundi’s economy is mainly rural, and is thus essentially based on agriculture (coffee, tea, cotton) and livestock.

More than 90% of the population depend on it; it also represents more than 50% of GDP. The Agricultural National Strategy comes at the right time to respond to multiple functions that the agricultural sector is called to ensure.

In July 2008, the Ministry of Agriculture and Livestock of the Republic of Burundi validated the agricultural policies under the title “Agricultural National Strategy”.

There are four strategic axes to the strategy: (i) sustainable growth of productivity and the agricultural production; (ii) promotion of agribusiness; (iii) support to the professionalization of the producers and development of the private initiatives; and, (iv) backing of the capacities of management and development of the agricultural sector.

The agricultural sector in Burundi benefits from several assets: • Vast plains of the very fertile Imbo that is suitable for modern agriculture; • Rainfall for 9 months every year;

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45

• Possibility of irrigation (artificial lakes) • Possibility to harvest twice a year for an output of more than 10 tons per ha (rice and cereals)

the country have enough supply of water coming with relatively constant streams throughout the year.

The main export crop is coffee; its industry is in the process of being privatized and FDI potential is considerable. These factors could have a significant impact and improve the quality and increase the productivity of the coffee sector.

The fishing sector is in the hands of the private sector.

It is divided in three types of activities: • Semi–industrial; • Craft fishing; • Traditional.

Livestock and fish farming • Opportunities for intensive or extensive breeding; • Animal production lines, livestock, dairy processing, production of organic manure; • Several regions are adequate for fish farming

Fish is sold on rural markets fresh, dried and smoked.

Similarly, fish is often transformed by drying and smoking before being put on the market. Refrigerated storage and transportation facilities are available in the country.

Fishing Fishing is an important activity for Burundi’s economy and social dimension. The production of fish in Burundi represents 1% of the GDP and contributes to the food of riparian population. Every inhabitant consumes about 2 kg/ year.

Although production levels depend heavily on planning, experience shows that locally, as far as tilapia nilotica is concerned, 500 kg to 1 500 kg/ ha/ year can be obtained within a nine month production cycle, each fish weighing between 150 gr and 300 gr.

The total surface of water exploitable in Burundi is of 2,300 km², of which 95% is in the Northern part – the East of Lake Tanganyika is adjacent to the country on a distance of 150 km. The other 5% encompasses the lakes of the North (Cohoha and Rweru) and rivers.

Lake Tanganyika covers a total surface of 320,000 km², the Burundian share of the Lake represents close to 8% of this surface, the rest being shared between the Democratic Republic of Congo (45%), Tanzania (41%), and Zambia (6%). The yearly production capacity of the Lake has been estimated at 250,000 tons (30% – 40%), but yearly production is about 167 000 tons.

Lake Tanganyika is an ecosystem that can allow for an industrial fishing. It contains many sought–after fish species. It harbours a particularly rich and diverse fish fauna, with close to 300 species of cichlidae and non–cichlidae, approximately two–thirds of which are endemic. Lake Tanganyika is known to overflow with some of the tastiest fish.

Burundi offers excellent opportunities for the development of farming cooperatives and community on the shores of Lake Tanganyika.

This sector benefits from some advantages: • Temperatures offering potential for breeding ponds which are usually located at altitudes between 1,500 m and 1,800 m; • Although temperatures are generally lower than the highest standard for tilapia nilotica, it was discovered that in fact, nine months growth cycles produce acceptable crop; • Most provinces located in the centre and West of

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Investor’s Guide To BURUNDI

Fish farming is accessible to new investors looking for new opportunities.

13.5. Manufacturing While the industrial sector could definitely become mo re competitive and diversified, the Government is still very present. The export potential for this sector mainly lies in sub–regional markets and opportunities exist, among others, in the agro–industrial sector.

Some non–exhaustive examples to explore: • Production, packaging, marketing of agricultural equipment and inputs; • Production of fruits and vegetables for export; • Food processing industry for domestic production (rice, cereals, tomatoes, milk, vegetables, etc.); • Packaging and transport; • Tea factories in the South of the country (there are 4500 ha of land adequate for the cultivation of tea); • Research and development on the conservation of agricultural foodstuffs; • Fertilizer plants (phosphates in the North of the country) • Cement plants (raw materials available in the North-East) • Textile industry • Untapped opportunities in the construction sector including glass windows and doors, metal bars, tiles, cement production, etc.

• Production of chemicals including fertilizers for breeding and farming; • Textile and shoe-making industries; • Pharmaceutical industry as very few medicines are produced locally;

• Almost all manufactured consumer goods are imported offering plenty of opportunities in almost all industries.

13.6. Tourism Located at the heart of Africa, Burundi is endowed with hills, white sandy beaches, different landscapes, and crops.

The hospitality and kindness of Burundian people are legendary, and the country has much to offer. 17 Provinces offer visitors different experiences: Lake Tanganyika, the deepest in Africa, an incredible and wonderful variety of flowers, a rocky landscape, waterfalls, the Rusizi delta, a calm oasis, and fertile valleys. For animal lovers, the North -West primary forest is a paradise for primates and the Northern Lakes are a safe haven for birds.

Burundi has a cultural legacy that includes not only dances and traditional music but also the famous Gitega drummers known worldwide.

Geographical position of Burundi is in the centre of the large regional communities (ECAC, CEPGL, COMESA, and EAC). Burundi, therefore could become the focal point for business and tourism with the beauty of its hills and the hospitality and kindness of its people. Its position allows easy access in less than 2 hours of flight to Africa’s most attractive tourist sites (ex: Serengeti and beaches in Zanzibar).

Burundi has an untapped tourism potential that the Government wishes to develop and that is also at the core of the development strategy of the country.

Experience in other post-conflict countries shows that the development of tourism, including through Foreign Direct Investments, can help boost the country’s economic situation and therefore support restoration of lasting peace. Putting forward its comparative advantages, Burundi should try to integrate into the East Africa Region. In this area, it will nevertheless be important to separate the roles of the IPA and the National Tourism Office.

Different tourist attraction sites include: • Wide sandy and sunny beaches • Water sports locations along Lake Tanganyika • The Nile source at Rutovu • The Thermal waters of Muhweza • The faults of Nyakazu • Natural reserves of the Rusizi River • The falls of Karera in Rutana • Lakes in the North of the country (bird lakes) • Stanley and Livingstone Stone • The chimpanzees in Vyanda

Examples of opportunities: • Installation and development of the relaxing activities such as the thalassotherapy • Improving seashore tourism and water sports on Lake Tanganyika; • Introduction of ecotourism; • Construction of hotels and lodges in national parks; • Construction of conference centres; • Regional tourism: Burundi is under an hour away by plane from Lake Victoria, Serengeti • Park, mountain gorillas of DR Congo and Rwanda, etc.

Useful link: http://www.burunditourisme.com

13.7. Transport Burundi, strategically located in relation to different Regional Economic Communities is a Member State of ECAC, COMESA, CEPGL, EAC, has the ability to become a platform for trade on the continent.

Opportunities include: • The dredging of port of Bujumbura to accommodate larger vessels; • The development the maritime transport for goods and passengers; • Improving the automated load planning in the port of Bujumbura; • Enlarging the port of Bujumbura to give more space to large passenger and container carrier ships; • Improving passenger and cargo transportation on Lake Tanganyika for connection with DR Congo, Tanzania, and Zambia; • Construction of a naval building site; • Increasing the use of the sub-regional network (Tanzania, Uganda, DR Congo and Zambia); • Installation of a cold chain at the airport of Bujumbura; • Installation of a cold chain at the Bujumbura port;

13.8. Energy Burundi has multiple opportunities in the energy sector: Potential commercial hydroelectric power production of 300MW is far from being exploited; Investment needed for the project RUZIZI III project 143 MW; Investment needed for hydroelectric power production on the Mumwendo site (Ruvubu) - 80 MW; Investment needed for hydroelectric power production project on the Jiji-Mulembwe-Siguvyaye sites - 100 MW; Investment needed the RUZIZI IV hydroelectric power production project – 205 MW; Many other sites for hydroelectric power generation; Potential commercial geothermal power production of

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18 MW not exploited yet; Good potential for wind energy production; Huge potential for solar energy development.

13.9. ICT Opportunities in the ICT sector include: • High-speed internet for which the market is still unexploited • LTSP network locations: their costs are more accessible to companies and to the public • The ability to develop ICT in enterprises and schools for better competitiveness • E–technology (trade, teaching, telephony, etc.)

• Call centres are virtually non-existent so far • Database management centres • The state-owned company Onatel (landline and mobile telephony, and internet) is soon to be privatized; • Access to the Regional Network Program for Communication Infrastructure requiring nearly 1500 km to be constructed in the EAC Region; • Numerous opportunities will arise from the installation of fibre optic including e-administration, e-banking, etc.

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Investor’s Guide To BURUNDI

13.10. Real Estate The country has a number of top class hotels in Bujumbura, on the edge of Lake Tanganyika and Kiriri Hill that overlooks the capital city. Although new hotels are being built in the country, hotel capacity is still very low and the hotel sector remains under exploited, representing an opportunity for investors.

13.11 Trade Bujumbura, the capital city of Burundi, is the largest city and the main shopping center of a territory by far larger than Burundi. Indeed the Eastern and South Eastern part of Democratic Republic of Congo, host to a population of 16 million people on a territory of 621,334 square kilometers, is only 15 kilometers away from the borders. Also, a fairly large part of Tanzania, home to 42,476,620 inhabitants living on a territory of 947,300 kilometers, is very close to Bujumbura, and more specifically the North-West and West of Tanzania (Kigoma, Mwanza, and Tabora regions). Being linked to Tanzania, the Democratic Republic of Congo and Zambia via Lake Tanganyika, Burundi offers investment opportunities in trade.