Halfway down the Danube

A Random thought while working on my Burundi report

Burundi's banking system has problems, but its fundamentals are sound.

Really. Despite a lot of bad loans, most banks are firmly in the black.  They have a great deal of liquidity -- most are well above their reserve requirements, with surpluses invested in safe government bonds.  (Strange but true: since its founding in 1962, Burundi's Central Bank has never defaulted on a bond payment.)  The bad loan problem is partially balanced by the fact that most good loans are overcollateralized -- for a $100,000 loan, banks will require $125,000 or $150,000 of security.  Burundi hasn't seen an asset boom, so those valuations are surprisingly solid.

And because the system is very small, it's transparent in spite of itself -- despite lacking most of the formal mechanisms for credit analysis (credit bureaus and the like), everyone in Bujumbura knows who the bad actors are.  There's no secondary mortgage market, which is a pity, but which also means they don't have to worry about lack of transparency in rebundled loans. 

High interest rates and low operating costs have kept the banks' margins up.  Conservatism and timidity -- they like only a few sorts of loans, mostly to import/export companies and construction, and they dislike loans of longer than a year or two -- have sharply limited the banks' ability to fund development projects, but they've also limited their exposure.  Because they do just a few safe things, they're not in any danger.

So, it just struck me: in many regards Burundi's financial system is in better shape than the United States'.

Lake Tanganyika

Sitting in my hotel room waiting for some food (it's late) to wolf down before taking the car to the airport.

So, finally got to out to Lake Tanganyika yesterday.  And it's quite something.  It's huge.  It has surf!  Sandy beaches!  On the east and west sides, there are chains of high hills -- small mountains, really.  (Bujumbura sits on a sort of coastal plain a couple of miles wide between the hills and the lake.)

I didn't go in, because I'm twitchy about things like bilharziasis.  Although apparently the risk here is between tiny and zero; for some reason, whether because of altitude or surf conditions or whatever, the nastier African lake parasites are rare or entirely absent.  So maybe I should have -- the water looked very nice and inviting. 

If the lake really is safe for swimming, there's immense potential for tourism there.  In the evening the sun sets over the green hills of eastern Congo and the quality of the light turns all hazy and golden for half an hour.  Then at night the tropical stars come down close while the surf booms, night birds call, geckos click and whirr and bats wheel around the lights hawking for insects.  It's gorgeous.

I say "potential", but it actually was a tourist destination, back in the day.  Belgians and French from all over Africa came here in the 1950s to relax; there was a high-end hotel and a beach resort.  Right into the 1980s there were still direct flights from France (and, of all places, Moscow) bringing a few rich or adventurous tourists to a destination that was far out of the way, but beautiful and -- then -- fairly comfortable and safe.

The hotel and the resort are still there.  The hotel is a restaurant now; it has a tree to mark where one of the heroes of the independence movement was assassinated by the Belgians while he was sitting at his table.  (That's this whole fascinating but depressing story.  Short version, the Belgians -- though less than a year away from being kicked out -- preferred a rival, less nationalistic and anti-Belgian party.  The assassin used was Greek.  The assassination accomplished exactly nothing for the Belgians, but went a long way towards permanently poisoning Burundi's ethnic politics.)  The resort is in pretty good shape, with a lovely pool and a playground and a huge stretch of beach, but basically it's servicing World Bank missions and like that.  (We didn't stay there.  Cheaper hotel, other side of town.)  Maybe it'll get real tourists again, some day.  Someone would have to seriously invest in the tourism sector, though, which is not happening at the moment.

Okay, no food.  Hungry to the car, then, and grab some biscuits or something on the way -- and thanks to Noel for linking to these!

Burundi bits (3)

The ethnic thing is pervasive, and affects my work in weird ways. 

It's meetings meetings meetings all day long, yah?  Well, the way people respond can vary a lot depending on which ethnic group they're in.  For instance, some Tutsis -- not all, but quite a few -- are still smoldering with resentment at the fact that it's now a Hutu-majority government.  (Because Tutsis, although a minority, always ran everything that mattered.)  These guys tend to go off a lot on rants about the incompetence and corruption of the current governmet, and also to wax nostalgic about the good old days "devant La Crise".

There's a piece of truth here.  Everything was better "before the Crisis".  The decade-long insurgency and civil war was an utter disaster.  It destroyed Burundi's society and economy, slashing already low incomes by 50% and more, and dropped the country from "average for Africa, and clean and pretty with real growth potential" to "desperately poor even by African standards".  So, true that.  It's just that, in some cases, you can hear that what they're really saying is "back when the Right Sort of People were running things".

As for Hutu interviewees, there are fewer of these -- they're still underrepresented among the elites of business and trade -- but they tend to clam up a bit.  My translator is Tutsi, you see.

Labor is cheap

Standing outside an appointment, waiting for the car, I noticed a guy going past with a bundle on his head.

It was a bundle of secondhand clothes -- Africa is full of secondhand clothes from America and Europe -- wrapped and labelled: "Children's clothes, 45 kg".

"Huh," I said to the translator, "that guy is carrying 45 kilos on his head."

He shrugged.  "There are guys who can carry 100 kilos."

"On their heads?"

"Of course."

Silence for a bit.  Another guy went past with a bundle.  A couple of minutes later, another.

Where coffee comes from

I am learning a lot about coffee. 

But I'm barely scratching the surface!  Coffee is insanely complicated.  The process of turning coffee cherries into the stuff you buy in the store?  Complicated.  The social and technological mechanisms that support it, from washing stations to export auctions?  Complicated.  The politics, as the coffee growers struggle to organize for a better price, the government courts their votes, and the washers and exporters try to keep afloat?  Complicated.  Coffee financing?  Way complicated -- much more so than for most agricultural crops.  And it's more complicated in Burundi than in most places, because Burundi has 700,000 small coffee farmers, most farming a mixture of coffee bushes and food crops on a hectare or less of land.

The coffee sector here is desperately starved for credit.  Unfortunately, it also has very limited capacity to attract and absorb credit.  For instance: