Burundi’s neglected economy

Burundi’s neglected economy
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A climate of fear has swept over Bujumbura, with at least 100 people killed in Burundi’s capital city since last Friday, following a string of brutal clashes between opposition groups and government forces.

Often glossed over is the economy, a key element to understanding the backdrop to the most severe crisis since April, when protesters took to the streets over President Nkurunziza’s controversial bid to extend his rule of ten years, insisting that it violated the two-term limit agreement.

Nestled between Rwanda, Tanzania, and the Democratic Republic of the Congo, Burundi is one of the poorest countries in the world.

With Burundi standing on the brink of a war, economic life in this country chronically ranks close to the foot of the human development index.

Access to basic necessities such as food, medicine and electricity are considered luxuries in a nation where 67 percent of the people live below the poverty line. With unemployment rampant among young Burundians, today’s violence stems from a bleak lack of alternatives.

Violent unrests in Bujumbura, which concentrates 70% of the country’s economic activity, have inevitably disrupted and even paralyzed trade with regional and local markets. The government recently estimated that protests over president’s third term have cost the country a whopping $33 million.

Over 220,000 people have fled the country since April, among them investors, business people, and part of the middle class. Canadian, American, French and Belgian citizens, frequent tourists and a welcome source of cash during the summer months, have all shied away this year.

The small but growing tourism industry has been crushed. With occupancy at 10%, hotels that once operated at 50% capacity now host a skeleton staff.

Since 2010, Burundi has recorded an annual growth of 4%, a figure that is dwarfed by a skyrocketing population growth and an anemic $270 GDP per capita. For the first time since the end of Burundi’s civil war a decade ago, the economy is expected to contract by 2.3%, according to the World Bank – underscoring the devastating financial toll exacted by months of political turmoil.

International attempts to silence the latest surge in violence has bordered on the negligent, but amidst growing concern over human rights abuses, pressure has mounted on Nkurunziza.

Western donors are making good on their threats to cut financial support to Burundi, whose budget relies 42 percent on aid.

Washington recently announced its decision to remove Burundi from the US African Growth and Opportunity Act (AGOA) trade agreement, a precious source of revenue that earns the country close to $4 million annually. While the EU, a major aid donor to Burundi, reconsiders its pledge of 432 million euros earmarked for development assistance for 2014 to 2020, Belgium has already suspended over 60 million euros of development aid to Burundi.

The Netherlands has also halted all programs with the Burundi government, including support to the police and army.

Deemed one of the most corrupt countries in sub-Saharan Africa by Transparency International, government procurement is conducted non transparently amid accusations of nepotism and bribery.

While fear for the country’s future is warranted, experts contend the current crisis is much more political rather than ethnic in nature. The armed forces are now made up of 50% Hutu and 50% Tutsi. Similarly, Hutu and Tutsis are split 60% to 40% in terms of total representation in parliament and the senate.

Aside from a potential civil war, Nkurunziza’s resolve to maintain his grip on power is distracting him from making much needed economic reforms. Burundi’s tax system, for example, is mismanaged and in dire need of reform. Official tax revenues for May-August are about 30% lower than expected, and 23% less than last year.

Burundi’s largest industry is agriculture, which accounts for roughly 30% of its GDP and employs over 90% of the population. Once Burundi’s bread and butter, coffee was controversially privatized in 2008 and has been steadily declining. Tea and cotton, the other traditional exports, have also plunged.

With an estimated 400 people per square kilometer, Burundi has one of the highest population densities in Africa. Burundi’s overcrowded rural population is a challenge to its land management system and a source of deep socioeconomic resentment that in part sparked the civil war. Pressures on land and food security have been heightened over the past half century by the return of people who left during the conflicts of 1972 and 1993, and are now reclaiming their land.

International experts argue that a comprehensive approach to Burundi’s land crisis is crucial—one that combines policy reform, better dispute-resolution choices, family planning, and more economic prospects that will guarantee less Burundians depend solely on land for survival.

Without some possibility for economic progress within the context of the region and the East African people, land scarcity will continue to be an affliction.

In the midst of these events, Burundi’s government has rebuffed African Union’s decision to deploy 5,000 peacekeeping forces to tame ongoing violence, declaring it will prevent foreign troops from entering its borders. If the government fails to address the protesters’ grievances, turmoil and bloodshed will only escalate, threatening the already fragile stability of the Burundi state.

The unstable security situation and uncertain prospects for national reconciliation will inevitably undermine any hope of an economic recovery.

About Author

Itziar Aguirre

Itziar currently works as a Research Consultant at JLL, a commercial real estate capital intermediary. She holds an MBA in Accounting and Finance from the University of St. Thomas and an MSc in Comparative Politics from the London School of Economics.