Efficient contract enforcement is critical to private sector economic growth. Unfortunately, in Burundi, contract enforcement is a difficult and time-consuming process. The World Bank Doing Business index for 2009 ranks Burundi 170 out of 181 economies on efficient contract enforcement. This is a drop in ranking of 22 places from 2008 when Burundi was ranked 148. The number of estimated days needed to enforce a contract increased from 558 in the World Bank’s 2008 index to 832 in 2009.
Because of the difficulties involved in enforcement and because Burundian culture does not favor written agreements, many small and medium-sized enterprises doing business within Burundi simply do not use written contracts. Instead, such businesses restrict their clients to people they know, or otherwise structure their business transactions to avoid disputes. As a result, it may be difficult for such businesses to expand their client base and grow.
Larger enterprises, especially those conducting business across borders, do use written contracts, often based on a "master agreement," such as the European Delivery Contract for Coffee. Such agreements usually call for arbitration at an international forum. Even when larger enterprises do not have arbitration clauses in their agreements, businesses have long used an informal system of arbitration to resolve disputes rather than take disputes to court.
Burundi does have a Commercial Court, but because local businesses do not generally use written contracts and international businesses use international arbitration, the Commercial Court is primarily used by banks to enforce credit agreements and foreclose mortgages.
While a strong system is not in place in Burundi for enforcing contracts, some positive signs suggest that such a system may develop as Burundi continues to emerge from a prolonged period of conflict and becomes more actively engaged in regional and international trade. Burundi’s commercial laws are being extensively rewritten and modernized. However, comprehensive judicial reform, which would assure an efficient system of enforcement of the new laws, will take time.
[1] As the chart above reflects, implementing institutions and social dynamics are the areas in most need of immediate attention. In the meantime, through the use of formal, as well as informal, arbitration systems, Burundi should be able to improve its performance in the area of contract enforcement. Burundi’s active participation in the East African regional economy should also lead to the development of a more efficient and workable system for contract and commercial law enforcement.
[1] See USAID: Guide to Economic Growth in Post-Conflict Countries at 46 (Oct. 2007).
