Doing Business in Africa: Burundi

Doing Business in Africa: Burundi

In this AFKInsider series, we explore the regulatory conditions that an entrepreneur is likely to face when setting up a business in sub-Saharan Africa. AFKI presents Doing Business in Africa: Burundi.

Bordering Rwanda to the south, Burundi is small Central African state that was colonized first by Germany and then administered by Belgium after the World War I. Effectively governed as part of Rwanda while under Belgian rule, Burundi was deeply affected by the region’s Hutu-Tutsi ethnic conflict almost immediately upon independence in 1962. Even before independence Burundi became something of a refuge for Tutsi driven out by ethnic massacres in Rwanda.

Under the country’s first leader, King Mwami Mwambutsa IV, ethnic tensions between Hutu and Tutsi led to a failed Hutu coup against the monarchy that was ruthlessly suppressed by the Tutsi-dominated military. In 1966 the monarchy and any pretense at ethnic comity was abolished and a military-led, Tutsi-dominated republic was instituted. From there, things unsurprisingly spiraled out of control as the Tutsi-led government was confronted by an increasingly militant Hutu-led organization called the Burundi Workers’ party that carried out attacks against Tutsis both inside and outside government.

Fighting between the two sides culminated in a at least 100,000 deaths and created as many refugees in neighboring countries – mimicking on a small scale the later ethnic mass killings that would hit Rwanda in the 1990s. From the 1970s into the mid-1980s Burundi effectively became a one-party state dominated by ethnic Tutsis fearful of the Hutus they dominated. The country was led by Jean-Baptiste Bagaza, a colonel who came to power in a bloodless coup in 1976.

The colonel was, in turn, replaced by a major in yet another coup in 1987 that brought Pierre Buyoya, another ethnic Tutsi, to power. Buyoya, a relative liberal, attempted economic and political reform and made a stab at ethnic reconciliation. Unfortunately, a Hutu uprising in 1988 led to 20,000 deaths. It also, however, led to the creation by Buyoya of a constitutional commission that would aim at both democratization and reconciliation between Hutu and Tutsi.

Peace was not to be had, however, because while democratic elections instituted an ethnically neutral government in 1993, the winner of that election, Hutu intellectual Melchior Ndadaye, was deposed and executed by the Tutsi-dominated Burundian military in October of that year after just three months in office. The country promptly returned to civil war – with 150,000 people slaughtered in the process. Chaos reigned until former President Buyoya was able to cobble together enough military support to take over via military coup in 1996.

Buyoya’s second term as Burundi’s ruler, like the first, was marked by efforts at ethnic reconciliation, liberalization, and reconstruction. This effort was aided when civil war ended in Rwanda, putting a stop to the the anti-Tutsi genocide by Hutu extremists. Rwanda’s current president, Paul Kagame is still in power in Rwanda, but Buyoya stepped down in 2003 as a result of a UN-backed peace deal between the Tutsi government and Hutu rebels. He was replaced by Domitien Ndayizeye, a Hutu, who shepherded further democratic reforms and was in turn peacefully replaced by Pierre Nkurunzizza, a former Hutu rebel commander and the country’s current president, who won democratic elections 2005.

Ease of Doing Business

So how does all this influence business conditions? According to the World Bank, Burundi currently ranks 181st out of 183 countries on its Ease of Doing Business Index – a measure created by the bank to gauge the degree to which commercial enterprises encounter regulatory hurdles, legal threats to property, and the time and money spent on things such as registering a business, ensuring right of title to property, and acquiring licenses. By way of comparison, the United States ranks 4th on ease of doing business, right after Singapore, Hong Kong, and New Zealand.

What does this ranking mean? Take, for instance, the bank’s measure of how easy it is to start a business. The bank defines business-creation costs as the time and money involved in the series of legal steps an entrepreneur must take to legally establish an in-country firm. Using this framework, the bank then tasks researchers to establish in-country averages.

When this metric is applied to Burundi, the bank finds that Burundi ranks 135th out of 183 in ease of starting a business, making Burundi one of the more difficult places on Earth to start a legal commercial enterprise. To start a business in Burundi one has to complete 11 bureaucratic procedures that take a total of 32 days at a total cost of about $194, with no minimum capital requirement imposed by the government for the start-up. For Westerners this is a miniscule amount, but for most Burundians this represents more than a year’s income.