Small companies in Burundi are not small large companies

A company's value can be attributed to its workforce, or the machines it owns, or factor productivity (the value that it extracts from its workers and machines).  A small company may be a smaller copy of a large company if they have, for example, one hundredth of the number of workers and machines in the large company, but use them in the same way.

In Burundi, many companies have big problems with electricity supply, and some have private generators to produce electricity.  Here is the percentage of electricity produced by generators for small, medium, and large companies in the capital Bujumbura (company size is classified by numbers of employees):

Source: World Bank Enterprise Surveys

Smaller companies in Burundi produce lesser shares of their electricity using their own generators.  They are not just small large companies, they use different machines and so probably have different productivities from the machines they use.

The Rwandan government works hard for further investment

Spot the odd one out:
Mohammed, Mohamed, Omar, Hassan, Muqrin, Paul, Mahmoud.

Paul Kagame, President of Rwanda, is in Egypt today for a conference entitled "Egypt the Future".  The conference aims to demonstrate the reforms in the Egyptian economy and investment opportunities in the country.

The majority of the senior representatives are from Middle Eastern and North African countries (the names of some are in the list at the start), or those with historical or other ties.  However, the Rwandan leader and the head of the national development board are attending to show solidarity and for the investment opportunities, according to a quotation in the Rwandan New Times.  There are an impressive number of companies represented, as well as powerful figures from finance and economics.

Kagame has become a controversial figure in Western countries in recent years, with accusations of repressive rule.  Nevertheless, it is hard not to admire the continuing economic focus of his government, some twenty years after he gained power.  As well as benefiting the Rwandan population - and in low income developing nations, non-mining economic development should be the most important thing for a government by far - the strength of the economy probably consolidates his hold on power.

I don't believe the Burundian or DRC governments have high representation at the conference, although the Egyptian government may not have invited them.

Central power, and DRC revenue collection and allocation

There's a report on Radio Okapi stating that the DRC central government is to give one million United States dollars per month to Katanga province.  Katanga is a centre of the mining industry, and the regional finance minister wants to receive five million dollars instead, claiming that Katanga generates 11 million in revenue.

I wrote about the possible allocations of money between Katanga and the central government last month.  If we take the regional finance minister's figures on revenue generation as true, then the central government seems to be showing most of the power in the relation between the two.  In recent years, the government has been politically and militarily weak in the east of the country, so there is a contrast between the implied power in the allocation and the actual power manifested in the past.

The potential and limitations of "Made in Rwanda"

There's an advert / editorial in the Rwandan New Times newspaper, entitled "Made in Rwanda: Let us consume local to reduce trade deficit".  I'm not sure whether the government or industry has paid for it.  Putting aside the subjective position taken, there are some attractive presentations of individual Rwandan manufacturing companies throughout the article.

The presentations (and some searching on-line for further information) show companies with genuine Rwandan stamps on them: in the materials used, production processes, and ownership.  Nevertheless, foreign goods, skills, and investment are also present: in vehicles and machines used, and in training and management.  Rwandan industry is developing impressively, and is becoming internationally competitive, and has required use of goods and skills that are "made somewhere else".

The early stages of this industrial evolution may be associated with a widening of the trade deficit, as foreign equipment is purchased.  The next stage of evolution, where companies may become internationally competitive and able to produce more cheaply than in the developed or newly developed countries, will tend naturally to result in a reduction of the deficit or emergence of a trade surplus.  The surplus emerges because of the quality of the goods, rather than nationalist preferences.  This isn't an inevitable path, but it is a common one.

Having said that, if I was in Rwanda today, I would consider the Rwandan goods shown for my house, factory, or supermarket, as their quality seems high.

Investing In Africa was off-line for a few days

My website www.investinginafrica.org was off-line for a few days last week, due to unanticipated but required changes.  The website should now work better, and will hopefully not require any more adjustment in the foreseeable future.

Rwando-Congolese border enforcement may alter trade patterns

Rwanda and the DRC are putting up boundaries marking the border between the two countries.  The boundaries apparently restore those installed a hundred years ago by colonial authorities.  The News of Rwanda comments:

"The demarcation of borders between these countries will end the confusion about the borders especially for Congolese soldiers. They are often arrested on Rwandan territory claiming they are on Congolese territory."

These sentences neglect the many grave consequences of porous borders for the two countries, no doubt intentionally.

Economically, borders have a strange effect, which I don't think has been fully explained by economists.  The effect is that trade drops off sharply when a border is crossed.  Even if two countries have no restrictions on movement across borders and a common language, the amount of trade by businesses and people within a country is much more than the trade by businesses and people across borders, after controlling for distance (there may be a more precise statement of this effect, but this is the broad idea).

It seems remarkable that sticking 22 posts in the Rwando-Congolese ground may alter trade patterns so dramatically.  I think that, for entrepreneurs, any changes in this direction should be monitored closely so that lost customers are not a shock, and potential new customers can be captured.

Government moves closer to business in Burundi, at least geographically

The Burundian Foreign Minister met with his Swiss counterpart last week to sign an agreement on decentralisation of powers by the Burundian government.  The Swiss have agreed to support the project financially.

The decentralisation will bring government closer to the level at which most Burundian businesses operate, and hopefully make it more receptive to their concerns.  Business in Burundian is almost entirely local.  A 2006 survey in the capital Bujumbura found that 95 percent of businesses sold most of their goods locally, and only 5 percent sold most of their goods nationally or internationally.

The changes may free the central government for macroeconomic management, and promotion of the interests of companies that operate nationally or internationally.  Such companies have different concerns from locally oriented companies, with the former group saying that access to finance, and customs and trade regulations are their main problems in operation.  Locally oriented companies report that electricity and access to finance are their main operational problems, with customs and trade regulations not mentioned at all.