Burundi: General Business Law
Country of a thousand hills
With a population of 12 million, Burundi is an essentially agricultural economy. Surrounded by Rwanda to the north, Tanzania to the east, and the Democratic Republic of Congo to the west, the green country is bordered to the south-west by the superb Lake Tanganyika. A land of a thousand hills, Burundi has gone through several political crises, the last of which, in 2015, affected its economy, notably because of the decline in foreign aid and foreign direct investment. Fortunately, the recent elections of May 2020 brought an end to the contested third term of the former President, the late Pierre Nkurunziza. Indeed, the election of the new President of the Republic, His Excellency Evariste Ndayishimiye, breathed a wind of hope into the population, undermined by decades of civil war and poverty, that a prosperous Burundi is still possible.
Improving the business climate
Since the 2010s, Burundi has undertaken several reforms to improve its business climate and even managed to become one of the top 10 reformers in the world in 2013. As early as 2008, Burundi effectively passed an Investment Act (still in force) that provides protection for foreign investments, and two years later a Competition Act, 2010. Furthermore, the Government accelerated the process of incorporation of companies by establishing a one-stop shop: The Investment Promotion Agency. Apart from French, English also became an official (non-African) language of the country from 2014.
However, the judicial system remains very archaic and the administration of justice cumbersome and time-consuming. The transparency of the procedure is often criticised. This can lead companies to prefer resolving their disputes through arbitration, instead of resorting to state courts. In fact, in addition to being part of international treaties on international arbitration, notably the New York Convention on the Enforcement of Foreign Arbitral Awards and the ICSID Convention, Burundian law is favourable to domestic and international arbitration and facilitates the enforcement of foreign judgements from all over the World.
In 2020, Burundi revised crucial laws including the Insurance Act, Income Tax Act, VAT Act and Tax Procedures Act. In the same year, the Parliament finally ratified the EAC Double Taxation Treaty. Previously, in 2018, the Parliament passed a new Insolvency Act and revised the Press Act. In its drive to transform commercial justice, the Government revised the Commercial Act, 2015, and the Bill of law revising the Code of Civil Procedure, 2004 is currently under consideration.
A new Labour Act was adopted in November 2020, creating a host of new obligations and rights in its wake. While this new law has the merit of having updated its old version (1993) and resolutely ensures the protection of employees, its other great advantage is the limitation of compensation awarded for wrongful dismissal, allowing the employer to know the incurred risk in advance. Nevertheless, it is feared that the new legislation is not sufficiently flexible and adapted to the needs of employers in 2021 and could not ultimately promote job creation as expected.
On a different note, the Government of Burundi has recently instituted a Special Economic Zone which aims to stimulate economic growth, introduce industrial innovation into the country, contribute to technology transfer and industrial growth, promote exports, and establish competitiveness and growth poles.
In regard to the electricity sector, investment is liberalised and the new Electricity Act, 2015 is favourable to foreign investment. The main power producer is the public company Régideso. According to a local newspaper, Régideso produces and operates more than 97% of the electricity; i.e., 30.8 MW of electricity from hydropower and 5.5 MW of electricity from thermal sources. The remaining 3% is produced by the Office du Thé du Burundi (OTB), ABER (Agence Burundaise d'Electrification Rurale) and a private company Brarudi (the largest and oldest brewery in Burundi) for its exclusive consumption. Independent power producers are legally allowed to operate within the country.
Burundi's mining potential is often neglected. Indeed, its subsoil contains minerals such as gold, nickel, coltan, vanadium, phosphates, carbonates, platinoids, rare earths, etc. These mining reserves are important. For example, the rare earths of Gakara and Minago have a reserve of 5,000 tons and the phosphates of Matongo have a reserve of 270,000 tons. Artisanal mining is concentrated in the northern provinces of Burundi: Kayanza, Cibitoke, Kirundo and Muyinga. Four main minerals are exploited there: gold, wolframite, coltan and cassiterite.
A modern legal framework was put in place with the adoption of a new Mining Act, 2013 with the implementation of its regulations following in 2015. Among other provisions, mining permits are renewable and granted for a long term (25 years), the formation of a joint venture between the State and a mining company can facilitate mining operations, a mandatory State participation in the company's capital of at least 10% is provided, a fast-track procedure for the granting of mining permits/licences and prospecting authorisations, and relatively modest associated fees.
The sector of telecommunications is particularly regulated in Burundi, with several reforms underway, including those aimed at regulating and protecting personal data, as well as those concerning the protection of advertising messages, including online. Like other countries, Burundi is considering the establishment of an adapted legal framework to better control and regulate the activities of digital giants (GAFAM and BATX).
According to the 2020 inflation statistics of the Central Bank of Burundi, the inflation rate decreased (6.7%) in August 2020. And in the August 2020 Report on the business indicators of the Central Bank, commercial bank lending rates were 15.26%, while they were 15.74% at the same period in 2019. The borrowing rates, meanwhile, were 5.55% in August 2020 and 5.26% at the same period in 2019. The loan facility marginal increased from 6% in August 2020 against 5.35% in August 2019, according to the same report. The 13-week treasury bill rate was 3% in June 2020 compared to 2.44 in August 2019. As for the liquidity rate, it was 2.77% in August 2020 against 2.55% the previous year. The interbank market rate also increased from 3.58 in August 2019 to 4.27 in August 2020.
Previously, the Government modernised and enacted a new Banking Act in 2017, in view of the technological context which has been completely transformed by digital technology, the insolvency of banking sector players, the increasingly acute concern for consumer rights, the country's economic situation, the multiplicity of scattered and contradictory regulations, and so forth. In the same year, a specific regulation for payment institutions was put in place, allowing players other than traditional financial institutions to enter the electronic payments market including mobile network operators, microfinance institutions and fintech start-ups.