Tuesday, 18 February 2014

Burundi Seeks To Join EADB

Adam Ihucha / / 0


By ADAM IHUCHA—Burundi mulls over joining the East African Development Bank (EADB), six years later after its peer member state of Rwanda had admitted into membership of the regional oldest institution.

Rwanda and Burundi were admitted to the East African Community (EAC) on November 30, 2006. In 2007 Kigali requested to join the EADB and granted its wish in 2008, leaving behind Bujumbura.

Now, the EAC deputy Secretary General, Planning and Infrastructure, Dr. Enos Bukuku says that the Bujumbura had submitted its application to join the Kampala based regional financial body.

“Burundi has applied to join the EADB and I hope its application will soon be reviewed by EADB’s board of directors and subsequently by the shareholders,” Dr. Bukuku told the EAC-EABC-GIZ regional business journalists conference in Arusha recently.

The bank’s governing council through the respective ministers of finance of the four EAC countries will either approve or reject the bid.

The three Member States of Uganda, Kenya, and Tanzania are principal shareholders of the Bank, having equal shares. 

As to why it took so long for Bujumbura to join EADB, the deputy SG says that key among the reasons, was that the country belonged to the Francophonie - the group of French-speaking countries. 

It is understood that in 2012 Burundi begun making moves towards membership of a rival Anglophone - English-speaking organization, the Commonwealth. 

Burundi is looking to emulate its Rwandan neighbour, which joined the club of mainly former British colonies way back in November 2009.

“Contrary to the Rwanda which had become an Anglophone country, Burundi’s membership to francophonie impeded the country from joining the EADB” Dr Bukuku says.

Former Director-General and Chief Executive Officer of the Commonwealth Business Council (CBC), Dr. Mohan Kaul says Burundi’s desire to join the Commonwealth will make the EAC a Commonwealth exclusive club and will help bind the union together and make in a strong investment and business destination.

However, other sources say that the $137 million compensation case filed by the Tanzanian transport firm Blueline Enterprises against EADB was the factor behind the Bujumbura to be cautious to join the EADB because the country did not want to inherit liability.

“Should the court ruled in favour of Blueline, shareholders would have been liable to bailout the bank and Bujumbura did not want to bear burden” the EAC source says.

The Court of Appeal in Tanzania on December 2012, 28 ruled in favour of EADB, quashing a High Court order that had directed it to pay $137 million to the Blueline Enterprises.

The appeals court declared as null and void the entire proceedings of the High Court and faulted the lower court for wrongly entertaining the execution proceedings after the EADB had pleaded immunity. 

For EADB, the battle with Blueline, has been a gruelling two-decade-long affair that has shackled the ability of the bank to operate and participate in big syndication club deals with the likes of PTA Bank and AfDB, continental development banks.

EADB's asset quality has substantially improved since the management team was reshuffled in 2009. Impaired loans have been cut to 10.7 percent of loans at end-2011, from 27.3 percent at end-2010, and should stand below 7 percent at end-2012. 

Although this is still high, it is more in line with the ratios of other development banks in the sub-region. 

The new management team has also restored profitability and the loan portfolio had shrunk to $76.5m at end-2011, from $226m at end-2007, as a result of massive write-offs and a more cautious approach to lending. 

Created in 1967, EADB is a sub-regional MDB based in Kampala, Uganda, with staff of 78 at end-September 2012. Its interventions mainly take the form of project loans; finance leases and equity participations aimed at leveraging private funds in the sub-region.

In January 2013, the African Development Bank (AfDB) injected $24 million into EADB in new equity, bringing its shareholding to 15 percent. The new ownership table in EADB equity is not yet publicly available.

Adam Ihucha


My Name is Adam Ihucha, Journalist worked at Nation Media Group, Business Correspondent at The East African Newspaper.
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