BURUNDI THE LANDSCAPE FOR IMPACT INVESTING IN EAST AFRICA WITH SUPPORT FROM ACKNOWLEDGMENTS This project was funded with UK aid from the UK Government though the Department for International Development’s Impact Programme. The Impact Programme aims to catalyse the market for impact investment in sub-Saharan Africa and South Asia. www.theimpactprogramme.org.uk The Bertha Center at the University of Cape Town contributed to this report by providing their database of active impact investors operating across sub-Saharan Africa. We would further like to thank the tireless Open Capital Advisors (OCA) research team—Nicole DeMarsh, Rodney Carew, Getrude Okoth, Christine Njuguna, Charles Njugunah, Jerioth Mwaura, and Ann Munyua—for interviewing impact investors, eco-system players, and entrepreneurs, and for conducting rigorous data collection under tight timelines. We would especially like to thank our interview participants–without their key insights this report would not have been possible. We include a full list of interviewees in the Appendix. GIIN Advisory Team Amit Bouri, [email protected] Abhilash Mudaliar, [email protected] Hannah Schiff, [email protected] Laura Gustafson, [email protected] Open Capital Advisors Annie Roberts, [email protected] David Loew, [email protected] Neal Desai, [email protected] AUGUST 2015 LIST OF COMMON TERMS AND ACRONYMS AFD | Agence Française de Développement GIIRS | Global Impact Investing Ratings PPP | Public-Private Partnership (French Development Agency) System PTA | Preferential Trade Area Bank AfDB | African Development Bank GIZ | Gesellschaft für Internationale | Rwanda Development Board Zusammenarbeit (German Agency for RDB BIF | Burundian Franc International Cooperation) RFP | Request for Proposal BIO | Belgian Investment Company for Growth-stage business | Company has | Rwandan Franc Developing Countries RWF a functioning business model and its SACCO | Savings and Credit Co-operative BoP | Base of the Pyramid current focus is developing new products / services or expanding into new markets SAGCOT | Southern Agricultural Corridor CEPGL | Communauté Économique of Tanzania des Pays des Grand Lacs (Economic HDI | Human Development Index Community of the Great Lakes Countries) ICC | International Criminal Court SDG | Sudanese Pound COMESA | The Common Market for ICT | Information and Communication SGB | Small and Growing Business Eastern and Southern Africa Technology SME | Small and Medium-Sized Enterprises CSR | Corporate Social Responsibility IFAD | International Fund for Agricultural SOE | State-Owned Enterprises DFI | Development Finance Institution Development SOS | Somali Shilling DFID | The Department for International IFC | International Finance Corporation Development (United Kingdom) SSP | South Sudanese Pound IMF | International Monetary Fund DRC | Democratic Republic of the Congo TA | Technical Assistance IRIS | Impact Investing and Reporting EAC | East African Community Standards TIC | Tanzania Investment Centre Early-stage business | Business that has KES | Kenyan Shilling TZS | Tanzanian Shilling begun operations but has most likely not LP | Limited Partner UGX | Ugandan Shilling began commercial manufacture and sales Mature business | Profitable company with a UN DESA | United Nations - Department of | European Investment Bank EIB developed and recognizable brand Economic and Social Affairs ESG | Environmental, Social, and MDG | Millennium Development Goal UNCTAD | United Nation’s Conference on Governance Trade and Development MFI | Microfinance Institution ETB | Ethiopian Birr USAID | The United States Agency for MSME | Micro, Small and Medium Enterprise FDI | Foreign Direct Investment International Development NGO | Non-Governmental Organization FMCG | Fast-Moving Consumer Goods VAT | Value-Added Tax Non-focus countries | Countries covered in | Nederlandse Financierings- VC | Venture Capital FMO the study but have limited non-DFI impact Maatschappij voor Ontwikkelingslanden investor activity. Namely Burundi, Burundi, Venture-stage business | Sales have N.V. (Netherlands Development Finance Eritrea, Somalia, South Sudan, and Sudan begun but cannot sustain the company’s Company) operations. The business model is still OFID | OPEC Fund for International | Countries under the being aligned with the realities on the Focus countries Development study where non-DFI impact investors are ground most active in. Namely Ethiopia, Kenya, OPIC | Overseas Private Investment WASH | Water, Sanitation, and Hygiene Rwanda, Tanzania, and Uganda Corporation WHO | World Health Organization GDP | Gross Domestic Product PE | Private Equity GEMS | Growth Enterprise Market Segment PPA | Power Purchasing Agreement PPP | Purchasing Power Parity BURUNDI SMALL MARKET, GROWING OPPORTUNITY IV • THE LANDSCAPE FOR IMPACT INVESTING IN EAST AFRICA TABLE OF CONTENTS Introduction .............................................................................2 Country Context ......................................................................3 Gross Domestic Product .........................................................4 Foreign Direct Investment .......................................................5 Inflation and Exchange Rates ....................................................6 Supply of Impact Investing Capital ..................................................7 Broader Investing Landscape ...................................................7 Impact Capital Disbursed ........................................................8 Instrument ..........................................................................8 Demand for Impact Investing Capital ..............................................9 Development Context ...........................................................9 Entrepreneurs ......................................................................13 Enabling Impact Investing: The Ecosystem .........................................13 Regulatory Environment .........................................................13 Ecosystem Players ................................................................15 Challenges and Opportunities for Impact Investors ...............................16 Challenges .........................................................................16 Opportunities .....................................................................17 BURUNDI • 1 INTRODUCTION Burundi is a small, landlocked country with a population of just over 10 million people. Bordering Rwanda, PLEASE NOTE the Democratic Republic of Congo, and Tanzania, Burundi is strategically situated between the East Africa As with the rest of the Landscape for Impact Investing in Community and the Economic Community of Central East Africa report, research and writing for this chapter were largely conducted in the fourth quarter of 2014, several African States (Figure 1). months before the attempted military coup on May 13, 2015. Ongoing unrest and uncertainty is expected through Burundi has a nascent private sector with approximately Burundi’s scheduled elections in June 2015, which may also 3,000 registered companies, most of which are small and be contested. Those interested in Burundi are cautioned to re- medium enterprises, providing employment to a total of view the latest news reports on the rapidly developing political situation. approximately 37,000 people. While the government of Burundi (GoB) has introduced reforms to foster private sector development and investment, the sector remains constrained by numerous factors including inadequate road networks, unreliable energy, political instability, corruption, limited qualified human capital, underdeveloped regulatory frameworks, and insufficient access to finance. To date, Burundi has seen limited impact investing activity. Few non-DFI1 impact investors operate in Burundi; however, DFIs have been more active, deploying more than 30 times the amount of capital that other types of impact investors have deployed in known deals. FIGURE 1: MAP OF BURUNDI BURUNDI 1 Due to the unique nature and large size of development finance institutions (DFIs), the authors of this report analyzed their activity separately from those of other types of impact investors (“non- DFI”), and present this separate analysis when appropriate. See the Introduction and Methodology section of this report for more details. 2 • THE LANDSCAPE FOR IMPACT INVESTING IN EAST AFRICA COUNTRY CONTEXT Burundi has experienced periods of sustained internal conflict since independence in 1962, often due to ethnic tensions. During the 1980s, more than 100,000 Hutus were killed by Tutsis, forcing thousands to flee the country. In 1993, a full-scale civil war was triggered by the assassination of then President Melchior Ndadaye. Despite peace talks in the intervening years—including talks facilitated by then South African President Nelson Mandela—Burundi’s conflict continued for more than a decade. In 2003, Pierre Nkurunziza, leader of the Hutu rebel group Forces for Defense of Democracy (FDD), signed a peace agreement with President Domitien Ndayizeye, ending fighting by one of the major rebel groups. In 2005, the FDD triumphed in parliamentary elections, leading to the election of Nkurunziza as president by parliament. Despite his election, clashes continued until a peace agreement was signed in 2008.2 Since his election and re-election in an uncontested poll in 2010, Nkurunziza has implemented various economic measures intended to stabilize the country.