EAC funding under threat as donors object to Nkurunziza’s third term

Saturday August 22 2015

The EAC faces a funding crisis that could see

The EAC faces a funding crisis that could see many of its projects stall as donors call for the isolation of Burundi. FILE PHOTO | TEA GRAPHIC |  NATION MEDIA GROUP

By TREVOR ANALO and SCOLA KAMAU, The EastAfrican

As Burundi’s President Pierre Nkurunziza begins his controversial third term in office, the whole of East Africa will soon feel the effects of a donor freeze occasioned by his decision to extend his stay in power.

The EAC faces a funding crisis that could see many of its projects stall as donors call for the isolation of Burundi.

Sources within the EAC Secretariat and the East Africa Legislative Assembly (EALA) in Arusha confirmed to The EastAfrican that GIZ, a leading German global development agency, has asked the bloc to exclude Burundi from all programmes that the agency funds on regional integration.

Asked to explain the decision, a representative of GIZ said the organisation “is a not a donor agency but an implementing agency for the German government” and instead referred us to the Ministry of Economic Co-operation and Development in Berlin.

The threat to withhold funding may derail regional integration, expose the bloc to a future funding crisis, and put several key infrastructure projects at risk.

Western development partners have already announced several measures against Burundi that would lead to the loss of hundreds of millions of dollars annually in aid, over President Pierre Nkurunziza’s controversial re-election.

The US has suspended several security co-operation agreements with Burundi, and according to Thomas Greenfield, the Assistant Secretary of State for African Affairs, a decision to remove the country from Agoa will come “sooner rather than later.”

European nations led by Belgium, France and The Netherlands have also cut aid to Burundi.

And as President Nkurunziza settles in for his third term after being sworn in in a low-key ceremony on Thursday, Western countries could impose further sanctions.

The EAC cannot afford a freeze at this time when reduction in funding has led to a scaling down of some of its projects.

This year, the EAC’s budget has been reduced by 13 per cent to $110 million. Development partners — who foot 70 per cent of its bills — will chip in $73 million. The five member states will raise $42 million.

Although GIZ is only cutting aid to Burundi and not pulling the plug on the regional bloc, excluding any member from joint programmes could slow down the integration process.

“It complicates the decision-making process,” said Peter Kiguta, who is the Director General of Customs and trade at the EAC. “The EAC makes decisions through consensus, which means we cannot progress on some projects when one member is not present.

“Decisions cannot be made with the exclusion of any state. We cannot hold planning and policy meetings without one member present,” Mr Kiguta added.

Of major concern is the possibility that other European nations and donor agencies could follow the precedent set by GIZ.

Belgium, Denmark, the UK, Finland, France, Norway, Sweden, the EU, Canada and Japan are the major funders of the bloc. Given Germany’s big influence on EU policy, some of these countries may also demand that Burundi be excluded from any EAC projects that they fund.

Some of the biggest donor agencies include the African Development Bank, the Japan International Co-operation Agency, the Norwegian Agency for Development Co-operation, USAid, the World Bank and the Infrastructure Consortium for Africa.

GIZ has been the top contributor to the EAC Secretariat since 1997, providing hundreds of millions of dollars in funding and key technical support in deepening the political and economic integration of the region.

It has focused mainly on strengthening the EAC secretariat — even gifting it with headquarters worth $14 million — to advance trade liberalisation, eliminate non-tariff barriers, harmonise taxes and implement a Customs Union in the region.

GIZ has also its footprint on some of the biggest infrastructure projects in the region.

One of the biggest infrastructure projects at stake is the 220Kv electricity transmission line between Rwanda and Burundi, which is part of a $390-million multinational project to interconnect the power grids of Kenya, Uganda, Rwanda, Burundi and the Democratic Republic of Congo.

The 143-km transmission line from Kigoma in Rwanda to Gitega in Burundi will cost $42 million. Jointly funded by Germany’s KfW bank and the EU, the former is providing $22 million while the latter will give $18 million.

The EU will finance the line in Burundi, which will cover 81 km, while KfW will contribute an additional $3 million for the Rwandan section that will cover 62 km. 

Even though Germany is only contributing $3 million to cover the Burundian section, the whole project could collapse if the EU — which has said it will impose sanctions on Burundi — decides to withhold funding.

The EU is also financing several multimillion-dollar regional programmes through the EAC in the maritime security, energy and transport infrastructure sectors.

It has also been actively involved in the establishment of one-stop border posts across the region — significantly speeding up clearance.
The construction of the one-stop border post on the Tanzanian and Burundi border is already 70 per cent complete.

The EU is also funding several projects under the East Africa Northern Corridor, which links the five member states.

Even though the EAC leadership has condemned the conduct of the presidential elections in Burundi, the bloc has failed to create a path to peace for Burundi.

Exit options

If the Burundi crisis threatens to drag down the whole region, especially with regards to the financing of important regional projects, what options does the region have?

The Treaty establishing the EAC provides for ways in which a state can have their membership withdrawn.

Article 145 allows a member to withdraw on their own volition if two-thirds of the members of its national assembly support the decision; a notice of 12 months is given within which the member can rescind the withdrawal.

Article 146 gives the EAC the power to suspend a wayward member who fails to observe and fulfil the principles upon which the organisation was founded. This also includes failure to meet financial commitments to the bloc within a period of 18 months.

Article 147 allows a member to be expelled for gross and persistent violations of the EAC’s founding principles — a notice of 12 months must however be given to the member upon whose expiry the partner state loses its membership.

But if the other member states want to stand with Burundi, there are viable options.

First, the EAC would have to ensure that all members clear their arrears in order to offset the funding gap that would be occasioned by GIZ’s exit.

It could also raise the bar for members’ contribution to its fund. In the 2014/2015 financial year, members were only 10 per cent in arrears, a significant improvement from past years.

EAC could also try to find ways of being self-reliant; the proposed one per cent levy on all imports into the region could finance the bloc without having to rely on donors.

Burundi could also finance its own participation.

Burundi may be excluded from planning meetings and policy workshops funded by GIZ, but its leadership would still participate at the highest levels of decision making at the EAC.