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.
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