Kenyan firms make a beeline for Burundi

By Jackson Okoth

It is a race against time as local companies rush to set up base in Burundi, the next investment frontier in the East African region after Southern Sudan.

On the list of companies planning to set up camp in Bujumbura, the capital of Burundi, include Kenya Commercial Bank (KCB) and giant supermarket chain Nakumatt Ltd.

A resumption of peace in the war-torn Burundi — now a year since rebels were integrated into government — has opened up the country to investors from the East African region.

"We have seen an influx of traders, individuals and companies from Kenya coming into Burundi to seek for opportunities," Benjamin Mweri, Kenya’s ambassador to Burundi told Financial Journal.

Burundi President Pierre Nkurunziza.

Figures indicate there are more than 300 Kenyan families living in Burundi, in addition to traders who move in and out of the country.

Influx of traders

"We have women traders from Kenya who come to exhibit their wares here every two months. Burundians have been flocking to these exhibitions, which are now becoming a major attraction," said Mr Mweri.

It is expected that with the signing of the East African Community (EAC) Common Market Protocol last year, which provides for the free movement of people, labour and capital within the member States, there will be an influx of more Kenyan enterprises into this market, said Mweri.

Burundi is positioned as an emerging market in the region, providing a vital link to Democratic Republic of Congo (DRC) and the Great Lakes region.

Burundi is a hinterland with no coastline and thus obtains the bulk of its imports through Kenya’s port of Mombasa. This implies that balance of trade between Kenya and Burundi is heavily skewed in favour of Kenya.

While the Northern Corridor, a vital road link between Mombasa and Burundi, is still too costly to transporters owing to numerous roadblocks and EAC regulations on cargo trucks, air transport links could provide a reprieve.

"There are several non-tariff barriers within the EAC which must be addressed for trade in the region to grow. For instance, there is a law that does not allow cargo trucks from Mombasa to Bujumbura to load cargo on their way back," said Mweri.

Signs of battle between Kenyan multinationals are already evident in the aviation industry.

Battle of airspace

It is only the national carrier Kenya Airways that has been plying the Nairobi-Bujumbura route. This will, however, change as Fly540, a low-cost airline, enters joins the route next month.

While low-cost airlines have been offering stiff competition to Kenya Airways on local routes, there is a likelihood that this price war could move to regional routes.

As competition on local routes intensifies, Burundi could be the next frontier for local and international airlines. This is as demand for air travel peaks — for a country just coming out of civil war.

"We are playing our part to meet this need and we are confident the route offers strong prospects for growth," said Nixon Ooko, operations director, Fly540.

Major airlines flying to Burundi include Kenya Airways, Brussels Airlines and Ethiopian Airlines.

Burundi, which became part of the EAC in June 2007, is considered one of the poorest countries in the world. Since it begun taking the first steps out of a 12-year, ethnic-based civil war, Burundi is becoming a hunting ground for foreign investors, including aggressive Kenyan companies.

Since its independence in 1961, it has been plagued by tension between the dominant Tutsi minority and the Hutu majority.

The ethnic violence sparked off in 1994 made Burundi the scene of one of Africa's most intractable conflicts.

After years of efforts to reconcile the two tribes, Burundi is now beginning to reap the dividends of a peace process. But it faces the formidable tasks of reviving a shattered economy and forging national unity.

Subsistence farming

Available profile information indicates that Burundi's economy is based predominantly on agriculture, accounting for 34 per cent of its national income.

Although Burundi is potentially self-sufficient in food production, the civil war, overpopulation, and soil erosion have contributed to the contraction of the subsistence economy by 30 per cent in recent years.

Large numbers of internally displaced persons have been unable to produce their own food and are dependent on international humanitarian assistance.

The main cash crop is coffee, which accounts for the largest portion of the country’s exports. It is this dependence on coffee that has increased Burundi's vulnerability to fluctuations in seasonal yields and international coffee prices. Coffee processing is the largest State-owned enterprise in terms of income.

Uncertain security

Little industry exists except the processing of agricultural exports. Although potential wealth in petroleum, nickel, copper, and other natural resources is being explored, the uncertain security situation has prevented meaningful investor interest. Industrial development also is hampered by Burundi's distance from the sea and high transport costs. Lake Tanganyika remains an important trading point.

Burundi is also heavily dependent on bilateral and multilateral aid. The IMF estimates that more than 81 per cent of Burundians live below the poverty line.

Serious economic problems include the state's role in the economy, the question of governmental transparency, and debt reduction. In January last year, the IMF and the World Bank decided that Burundi satisfied the requirements toward reaching its completion point under the Heavily Indebted Poor Countries Initiative (HIPC) and waived $424 million in debt.

Burundi's transition from war to peace and the establishment of a democratically-elected government in September 2005 is still under close watch.

This is as the country prepares to hold elections in 2010.

jokoth@standardmedia.co.ke