ADF IDENTIFIES POTENTIAL PROJECTS IN BURUNDI

UNCLAS BUJUMBURA 000411

SIPDIS

C O R R E C T E D COPY (SIGNATURE ADDED)

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FOR DEPT AND AF/C
E.O. 12958: N/A
TAGS: EAID EINV EFIN BY
SUBJECT: ADF IDENTIFIES POTENTIAL PROJECTS IN BURUNDI

REF: BUJUMBURA 409


1. SUMMARY: During a May 20-27 visit to Burundi, African
Development Foundation (ADF) representatives identified promising
sectors for future support and attended Burundi's Donor Round Table.
ADF gauged the climate for economic development for small and
medium sized enterprises and surveyed current market opportunities,
focusing on coffee, juice and fruit production, and microfinance.
Local businesses cited the need for affordable credit in order to
expand their operations. ADF also explored staffing and security
issues with a view towards opening an office in Burundi at the
beginning of fiscal year 2008. ADF met with the Burundian Second
Vice President's office to further discuss the requisite
ADF-Government of Burundi (GOB) Memorandum of Understanding (MOU).
While the document is still unsigned, the GOB expressed strong
support for ADF's assistance in Burundi. END SUMMARY


2. US African Development Foundation Regional Coordinator Christine
Fowles arrived in Bujumbura on May 20 and was joined by ADF's Trade
and Investment Advisor Don Welty on May 23. Ms. Fowles and Mr.
Welty met with local and international NGOs, government officials,
businesspeople, and industry representatives. In discussions with
all partners, ADF stressed the importance of working directly with
grassroots, African owned organizations that have a direct effect on
every aspect of the supply chain, especially rural producers. The
private sector opportunities are somewhat limited at this point
given enterprise ownership that is often not entirely Burundian.
On-going reforms in the coffee sector also will take place in the
coming months and serve to better guide USADF's intervention
strategy. In discussions with local NGOs, ADF's interlocutors
responded favorably to ADF financing proposals and provided further
contacts for consultation. According to many of these
organizations, the most prominent need for small and medium sized
enterprises is capacity building.


3. ADF met with several business people in the coffee, fruit,
cheese, livestock, and banking sectors. The microfinance sector
presents a possibility for ADF financing. While ADF usually focuses
on agro-processing and value-added programs that have the strongest
potential for profitability, socio-economic impact and
replicability, micro financing is an avenue that quickly and
efficiently affects large numbers of individuals. ADF expressed
interest in working with those credit programs focusing on women and
small farmers in the coffee and tea sectors, and especially with
credit institutions having already received their accreditation as
MFIs from the Central Bank of Burundi. In meetings with the Burundi
Enterprise Network (BEN),ADF learned that the three major obstacles
to growth in Burundi are the high taxes on imported items, the
expensive and inconsistent energy supply (all electricity is
produced hydroelectrically),and the usurious levels of interest on
credit (18% - 21%) provided by local banks. The BEN sees ADF's no
interest loans as a great resource for its members. Many
organizations also highlighted the endemic corruption in Burundi and
its crippling effect on business development, among other things.
Other businesspeople stressed the importance of coffee to the
Burundian economy and its people. Estimates put the coffee sector
as supporting as many as 800,000 farmers. ADF also explored other
opportunities to reach small producer associations through the
Catholic Church development network.


4. In arguably ADF's most successful consultation, the local juice
maker Fruito provided a tour of its factory. In subsequent
exchanges, ADF and Fruito identified several impediments to further
growth of the company - structural, logistical, and financial. None
of these constraints are substantial and should not inhibit further
development provided they are addressed by Fruito. Improving the
supply chain and working with farmers to increase and sell their
fruit to an assured market has exciting potential and likely
significant socio-economic impact.


5. Ms. Fowles and Mr. Welty also met with the Second Vice President
of Burundi, Mr. Gabriel Ntisezerana, and his staff to discuss the
details of the MOU that outlines the terms of an ADF and Government
of Burundi partnership. Members of the Second Vice President's
staff stressed that they are committed to the ADF proposal, but
added that as yet Burundi's legal experts have not fully vetted the
document. Thus, the GOB could not discuss the proposed MOU
substantively. ADF also participated in the US delegation to the
GOB's Roundtable for International Donors (reftel).


6. ADF also identified possible future points of contacts to
represent them in advance of establishing a permanent presence in
Burundi. Ms. Fowles asked several NGOs to expand on their
experiences in hiring local staff, the challenges of obtaining an
office, and security concerns for a locally-staffed ADF office and
its employees.

MOLLER