article from minesite in london

January 29, 2008

Burundi


By Our Risk Reporter from Risk Bureau



Burundi’s turbulent history – a twelve-year civil war, ethnic strife, poverty – has left it battered. It is only now on the verge of some semblance of peace following a ceasefire agreed in September 2006, but the underlying mistrust between the country’s Hutu majority and its dominant Tutsi minority will, in all honesty, take much longer to resolve. Not surprisingly therefore, Burundi is among the poorest nations on earth with a somewhat fragile political environment.
A Hutu former rebel leader, Pierre Nkurunziza was elected president in 2005, the sole candidate in elections which his Force for the Defence of Democracy (FDD) won. It was a significant development that, it was hoped, would bring to an end over a decade of fighting between Hutu rebels and the Tutsi-controlled army. Given the challenges faced by his nation, President Nkurunziza’s stated goals remain: reassuring the Tutsi minority and reviving the economy. Accordingly, the $2 billion rejuvenation plan, essentially funded by foreign donors and aimed at the agricultural sector, was unveiled in 2005.

Burundi’s bloody history has played havoc with its infrastructure – a further disincentive to foreign investment – which has been recognised by the help it has begun receiving from international institutions. As a landlocked country dependent on its road network for external trade, the damage inflicted on its roads during the civil war has meant that the World Bank has had to step in. It approved a credit of $51.2 million for the rehabilitation of damaged roads.

The truth however remains, that this is a war-torn country that has yet to be stitched back together. In December 2007, the UN extended the mandate of the United Nations Integrated Office in Burundi for another year, acknowledging that there was still more work left to be done; essentially the completion of the peace process with the Forces Nationales de Libération (Palipehutu-FNL), the last major rebel group. In July 2007, the group withdrew from the Joint Verification and Monitoring Mechanism set up to monitor the ceasefire it signed with the Government in 2006. It is a measure of the international community’s concern for Burundian reconciliation that UN Secretary-General Ban Ki-moon has warned that the deteriorating political situation could lead to the peace process unravelling.

Thus, tackling lawlessness appears to be topping the domestic agenda. Three ministers in charge of security met recently to take measures toward curtailing movements of the police in public areas in the hope of suppressing the `surge’ of armed robberies committed by `people in uniform’. Some elements of the police force have been implicated in various crimes; and the rise in crime levels led the ministry of security to arrest 150 policemen and dismiss a further 100 from the police force. An agent of the national intelligence services recently revealed that even the chiefs of his department were not entirely innocent. A dysfunctional police force can turn out to be more of a hindrance than a help for a nation struggling to put itself back on its feet.

But as is so often the case, politically questionable environments often have huge allure for foreign investors, not least when they hold mineral reserves. This truth applies to Burundi. The country is thought to have at least 185 million tonnes of nickel-bearing deposits and interesting associated metals, including copper, cobalt, and platinum. It has some small gold deposits, although for many years it exported gold smuggled in from South Kivu in the Democratic Republic of Congo. Equally, niobium, tin and tungsten are revenue earners. Given its mining potential, economic growth has been relatively impressive for 2005/06. Even so, much depends on the country achieving a modicum of political stability.

To bring in foreign investment, Burundi has reviewed its code of investments: the procedures of enterprise approval have been simplified; foreign exchange policy has been simplified; it has adopted a trade liberalization policy by abolishing quantitative restrictions on imports. On-going fiscal reforms aimed at modernisation include the revision of the general tax code, and significantly, the setting-up of the unique identification to create an inventory of all taxpayers which should help broaden the tax base and imposition of taxation on the informal sector. However, given Burundi’s abysmal police and security apparatus, it is hard to imagine rapid implementation.

Forecast: War ravaged country with mineral potential
Burundi has been at war with itself for well over a decade. Its peace process is fragile. Half its population live below the poverty line. Even so: there is a relative peace thanks in no small part to international mediation; and its mineral potential is interesting, to say the least. It would still take a huge leap of faith to argue that Burundi will come right in the end, but perhaps there is a chance that it will. Investing and working in Burundi is therefore, not for the faint hearted.

• Burundi still being stitched together again
• A challenging investment destination