Officials must act now and protect Rwanda from bad business ventures

Wednesday March 20 2019


Cimerwa cement factory in Rwanda. Despite being in existence for more than 30 years Cimerwa has struggled to cement its position in the market. FILE PHOTO | NMG 

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Why, President Paul Kagame asked the Prime Minister as the leader of government business and the Minister of Trade and Industry, is it taking so long to sell off government shares in the underperforming cement maker, Cimerwa?

Although the president seemed to have lost patience with Cimerwa’s record underperformance, he was more vexed by the fact that it had taken so long for his ministers to realise that it was time for government to pull out.

He kept asking his officials what plans they had to expedite the sale, until they finally admitted that the shares will indeed be sold by end of March.

It is not a secret: While it’s prudent for the government to have a shareholding in certain business entities, the government has not done so well. That’s why there have been concerted efforts over the past two decades towards privatisation.

In 2012, Pretoria Portland Cement (PPC) bought majority shares in Cimerwa, taking up 51 per cent shareholding, with government retaining 41 per cent, in a move that was expected to turn around the company’s fortunes. That was not to be as the company soon after plunged into losses. Not even a $170 million investment in a new modern dry process production plant, with a capacity to turn out 600,000 tonnes of cement per year could help.

In the early months of 2018, Cimerwa temporary closing of its production for annual maintenance as well as upgrade resulted in a cement shortage and sudden spike in prices.

The signs were alll there for handlers of government business to see and act, by selling off, but they didn’t.

It got worse when the company demanded government protection, expecting that when cement is no longer imported from the region, they would turn a profit. The government declined.

While the government’s delay to sell its shares may have already cost the public a lot, let us take that as a learning point.

There are other government businesses that are performing poorly in the market that need a review.

For example, government’s partnership with Korea Telecom in selling the 4G Internet doesn’t seem to be paying off.

According to a report by the US Securities and Exchanges Commission, a year after Korea Telecom opened shop in Rwanda, it made losses of $25.3 million (Rwf22 billion).

The next year, 2016, the losses grew to $27.8 million (Rwf24.2 billion), then slid to $20.1million (Rwf17.5 billion) in 2017.

In this venture, government has the same share composition as in Cimerwa; 51 per cent for Korea Telecom and 49 per cent for the government. Are the ministers waiting for the president to once again show them what to do?