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Burundi is all set to privatise

Nimrod E Mkono, Olivier Binyingo, Happy H Ntwari and Gustave Niyonzima
Mkono & Co Burundi

Since the late eighties, Burundi has adopted a policy of reducing the role of the state in the productive sectors, alleviating the financial burden of public companies on the Public Treasury and improving the efficiency of those companies. In 1992 it was agreed that the state would pull out of most public companies, and a privatisation strategy and calendar were adopted in this respect. Nevertheless, the disengagement of the state from the economic sphere has been very limited.

In the second half of 2008, the privatisation debate was revivified, stimulated by a World Bank report on public expenditure and financial accountability, as well as by some rumours of a continuing privatisation operation involving the Libyan Arab African Investment Company (LAAICO). Although a lot of the information turned out to be inaccurate or tendentious, the will to privatise appeared to be genuine.

This impression was emphasised by the amendment of the law on privatisation in early 2009, followed by the announcements of government officials on the privatisation of the Office National des Télécommunications (ONATEL) – the public telecommunications company – before the end of 2009. Furthermore, state-owned companies in Burundi's coffee and tea sector might soon be reaching out for private investment, as might the Régie Nationale d'Eau et d'Électricité (REGIDESO) – the public company involved in the production and distribution of water and electricity.

The legal framework

Today, the core document of the legal framework regarding privatisations in Burundi consists of the law of February 19 2009 reviewing the 2002 law on the organisation of the privatisation of public companies, public services and works (Privatisation Law). This comprehensive law contains provisions on the privatisation procedure, as well as on the administrative entities involved, and applies to all companies in which the state, a municipality or a public corporation holds one or more shares – the so-called Sociétés à Participation Publique (SPP).

A privatisation procedure is initiated by a presidential decree authorising the transfer of part of the property of an SPP, or the transfer of its assets or management, from the public sector to the private sector. However, if a transfer of the shares of an SPP results in the loss of the majority held by the state in such a company, a legislative intervention is required. This requirement of a legal authorisation for the loss of majority shareholding by the state guarantees democratic accountability for the transfer of state-owned companies to the private sector, which is of paramount importance when companies with a strategic value are involved.

Furthermore, the Privatisation Law attempts to counter the fear that all of the state's shares in an SPP would end up in the hands of foreign investors, by reserving for Burundian citizens or for companies in which Burundians hold a majority share the right to acquire a percentage of those shares during a certain period. The percentage to be reserved for Burundians, as well as the period during which Burundians will be able to use their preferential right, is determined by the Inter-ministerial Privatisation Committee (Comité Interministériel de Privatisation or CIP).

The CIP is the central organ responsible for the execution of the privatisation policy and the supervision of privatisation operations. In the performance of its task, the CIP receives technical assistance from the Service Responsible for Public Companies (Service Chargé des Entreprises Publiques or SCEP), a governmental advisory body under the authority of the Minister of Good Governance and Privatisation.

The SCEP takes care of the determination of the value of the company or its shares, is responsible for the drafting of the notice of consultation or the public offering and participates in the evaluation of the bids. For each phase, the SCEP is required to seek the approval of the CIP, which will eventually negotiate and sign the contract with the private investor.

Onatel is first in line

On January 16 2009, a presidential decree authorising the sale of part of the state's shares in Onatel was adopted. Onatel is a 100% state-owned company that provides a landline network, GSM and internet services. Its installations spread throughout the country allow network coverage across the entire Burundian territory.

Despite the good results of Onatel compared to some other state enterprises, the national telecommunication company is facing severe competition from private telecommunication companies. The Burundian government has therefore identified privatisation as the way forward to increase the company's competitiveness. On several occasions, government officials have expressed the will to finalise the procedure in December 2009, putting Onatel first in line for privatisation.

Thereafter, Burundi might want to attract some additional private capital for its agro-industry, which is still Burundi's most important industry. Specialists agree that Burundi has great potential, especially for coffee and tea production. However, the lack of proper investment has resulted in a decline in the quantity and quality of production. Through the privatisation of tea-processing factories and washing stations for coffee, Burundi is hoping to compete with the countries producing the highest quality tea and coffee.

Finally, increasing pressure from international donors is to be expected regarding the privatisation of Regideso. The ability to increase electricity production will be a key factor for the growth of Burundi's economy. The World Bank and the Burundian Government agree that, over the medium term, such increased production will require the participation of the private sector, which will include the privatisation of Regideso.

Burundi has been waiting in vain for the privatisation of state-owned companies for quite some time. Over the years, reports have been drafted, declarations have been made and rumours have been spread. But this time it seems to be real: privatisation might actually become effective in Burundi in 2009.

See also


Legislation guide

Burundi is all set to privatise