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The privatization
process was initiated 5 years ago now. 72 companies
and institutions were included in the program.
Which models have been applied during that period
and which ones have proved to be the most successful?
Privatisation as a whole started in March 1996
when Parliament gave the government the go-ahead
to oversee the entire process. In the same year,
the government issued a decree setting up a national
committee for privatisation and on the structure
to be used to run the entire process. In December
1996 the Cabinet officially issued a list of 72
companies. The Secretariat was set up at the end
of 1997. The first privatisation operations were
carried out in 1998. This was in the spirit of
globalisation of the economy with multilateral
partners; IMF, World Bank, and it was also in
the framework of good governance.
At the time, many companies were closed because
either the managers had been killed or had fled
outside of the country. Another reason is that
the government had no money with which to revitalise
many companies.
So, we started with smaller companies, mainly
those that were closed at the time. Another aspect
that is quite important is the context. We all
know how the Genocide tarnished the country's
image. We thus had to encourage investments, including
local investments. We needed to be able to attract
the right amount of investments, as well as the
right kind of expertise in order to boost these
companies.
75 % of what has been privatised so far has
been taken over by the locals. Do you believe
more work is needed to sensitise the outside market
to pick on these opportunities?
We feared to start with the larger companies like
those dealing in Telecommunications, water and
electricity. We also have a large tea sector.
So, we first focused on smaller companies that
obviously got mostly taken over by locals.
In 1996 - 97 we were not sure we could attract
good investors. We also needed to change laws,
title deeds, etc. So far, we are satisfied with
what we have achieved. 70% of companies that were
privatized are functioning well. We have tackled
many sectors for example the agro-industry, the
sugar sector, coffee, livestock and the tourism
sector.
It has been said that some of the companies
sold were in poor conditions. Today, how do you
make sure that the companies' health will be upgraded
to a reasonable level before putting them on the
market?
We have learnt a lot during these four years of
privatisation. The Rwanda Investment Promotion
Agency started less than three years ago. We also
started decentralization with government organs.
This has speeded up decision making within companies.
The main problem is that we have not been able
to address problems concerning banking facilities.
The main problem faced by the private sector is
that funding is too costly. There are no long-term
loan facilities. A loan that takes 4 - 5 years
has an interest rate of 15 - 16%, even 18%. This
does not help investment in the agro-industry.
Another existing problem concerns non-performing
loans which account for over 45% in the sector.
In many countries, the banking sector is the
first one to be target by a privatization process.
Here, it looks like the reverse situation. How
do you explain the late privatization of the banking
industry?
The Government has tried to find a solution to
the problems in the banking sector, by trying
to recover bad loans that represent today 49.5%
of banks' total portfolio, and seize the property
of those who fail to repay their loans. There
is also much work to be done on the legal side.
The government has been trying to tackle the problem
in stages, beginning with the bigger cases. We
have also had a problem of lack of Human Resources
within the private sector.
How would you describe the dialogue between
the Government and the private sector?
The situation is improving very fast. The government
has decided to create a joint partnership between
the public and private sectors in order to discuss
these issues. We in the privatisation process
are endeavouring to carry out a very wide communication
system to foster interaction between the two sectors.
For example next week we plan to have a meeting
between the private sector, within the mining
sector.
We shall first have to validate the strategy,
send it for the cabinet meetings for the final
decision. We are trying to create interaction
before the final decision is made, for example
in the tea sector we shall have meetings with
all the existing tea growers' associations.
We want the private sector to be actively involved
in the privatisation process. This is going well
but as it happens in other countries there are
problems to be faced. For example we are being
accused of giving out the property of a whole
nation to just one or two people.
The time spent for evaluation and auditing of
the firms to be privatised has been criticized.
How long was the privatisation supposed to take
when launched in 98?
In the beginning, we were very ambitious. We thought
that the whole privatisation program would be
completed in just three years. However, I don't
think that the problem concerns perceptions. It
is rather a problem concerning procedures. We
had to finalise a big project; Competitiveness
and Development Enterprise Project which is financed
by the World Bank. The negotiations took place
and there were many conditions put in place by
the World Bank. This is only one of the reasons
for the delays. As the project was being set up,
each and every step required approval from the
World Bank. To date we are able to say that the
process is moving much faster.
Within the privatization process of companies
of strategic interest, the main current issues
are Rwandatel and Electrogaz. What are your expectations
for those two companies?
Let me say one thing contrary to RWANDATEL or
ELECTROGAZ. The issue of water and electricity
is quite sensitive and difficult. We decided to
draw up a management contract for five years.
In Senegal for example, the process failed due
to the many existing problems. The last time we
toured Senegal it was experiencing many management-related
problems in the field of water and electricity.
It took a whole year to finalise discussions in
order to draft a contract of 16 pages, because
some of the conditions were too difficult for
us to fulfill; for example the question of who
would be responsible for setting up the tariffs
- would it be the private operator, or the Government?
What would be the role of the Government and that
of the operator? What would the day-to-day activities
be? What would be the role and status of the employees?
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Have
you set up a timeframe?
We have made a business plan. We sent it to all
the pre-qualified companies which have to send in
their response. In the pre-qualification phase,
we set up commissions in which we feel companies
my take an active involvement, for example concerning
the background , size of the company, experience
so far, etc.
In all this, the government will maintain a very
important role because for water and electricity
we will need an investment of about 160 million
US$ to rehabilitate all the networks. We shall also
need donors, who shall have to be reimbursed.
Companies of strategic interest are still to
be privatised: Rwandatel, Electrogaz, Tea factories,
tourism… What do those companies still need
to achieve before getting ready for privatisation?
We have one of the highest rates (and also availability)
of water and electricity in the sub-region. We cannot
compete, though, in terms of investment. If an investor
was not sure of the availability of water and electricity
and he was planning to open a factory that requires
water and electricity then there would be a big
problem. Some sectors have requested an assurance
that they will have 100% water and electricity and
this is difficult to provide.
What are the main incentives for an investor
to take over those strategic companies?
First of all, as I said, we started by small companies
for which international investors would not be interested
at all. Now we have started another phase that will
be very important. The whole of the tea sector,
water and electricity, telecommunications and the
mining sector. Even though the interest in privatisation
has increased, we have tried to work on boosting
incentives in terms of staff and facilities for
example administrative facilities including work
permits. This is called the One-Stop Window or Shop.
This facility was introduced in order to open the
market to international investors.
Now we are working on the issue of a Free Trade
Zone. We also try to distribute the necessary information,
and try to work in transparency. This is very important.
So far I have not heard many complaints concerning
this.
However, many foreigners still have in mind what
happened in '94 and current tensions in the Great
Lakes region. What do you answer to those worried
about the current political situation in the region?
The regional security situation is described as
somehow dangerous, which is not the correct image
of Rwanda. To counter this wrong image, the Rwandan
Government is working very hard on the issue of
security and this is our first priority. Of course,
this is an ongoing process.
What has been the total amount raised from the
privatisation process so far and how much do you
still intend to raise with the privatisation of
the last strategic companies?
We have 4 billion Francs so far and we expect at
least two or three times this amount in the near
future. We are expecting good results especially
in the tea sector. The telecommunications sector,
however, is facing many problems.
Can you tell us where the funds stemming from
the privatization process will be directed to?
A: According to the liability of all those companies,
in terms of francs we shall not have a lot because
we have many liabilities in terms of tax. We had
many companies that were indebted especially tax
debts, debts towards the Caisse Sociale, old debts
to ELECTROGAZ, so the main task now is to deal with
these debts.
We also need to call for experts to support these
companies. Some of the companies being privatized
are closed, so I cannot say that privatisation will
have a big impact in terms of investment.
We propose to the government to invest this money
in the private sector in general. We have had a
start-up fund. If there is a special need in a certain
sector, e.g. coffee or tourism, we can use this
money to invest in that sector. However it has to
be mostly in the private sector.
In your opinion, what has been the best foreign
investment in Rwanda so far?
The Madhvani Group in the sugar sector. They are
Indian, and have done a very good job. The company
they invested in had been closed and now it is functioning
and is very well managed.
A sector that currently requires much investment
is the agro-industry. On the other hand there is
SHELL. We have sold to them a large number of petrol
stations and this is another example of how good
investment can improve the situation. However, I
think the Madhvani investment is the best example,
since through them we have reduced the need to import
by one half.
Apart from being responsible for the privatisation
Secretariat, you have also been very active in other
areas such as the volley ball federation but also
the National Olympic Committee. Can you tell us
more about yourself, about your professional background?
I am the Chairman of the National Volleyball Association.
I am 45 years old, and I have worked for 10 years.
I started by working in a Canadian agro-industrial
project dealing in rice, in the north east of the
country. The project comprises 400 families. I worked
there as Managing Director for four years. After
the War I started my own company dealing in furniture,
named MANUMETAL. I worked there as Managing Director.
Afterwards I was called upon to undertake this job.
I have also been the Secretary General in the National
Olympic Committee, and Chairman of the National
Security Fund. I am currently Chairman of ONATRACOM.
Last but not least, I studied Business Administration
at University.
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