19th August 2004.
Rwanda sells 2 main banks

By Emmanuel N. Mugarura

After two weeks of intense negotiations, the Rwanda Government finally sold off two major commercial banks. The Finance and Economic Planning ministry handed over Banque Commerciale du Rwanda (BCR) and Banque Continentale Africaine (BACAR) to two foreign investors early this month.

Actis, a new firm created by the Commonwealth Development Corporation (CDC), now owns 80 percent of BCR – also known as the Commercial Bank of Rwanda. The government is retaining 20 percent equity.

DONE DEAL: The Minister of Finance and Economic Planning, Dr. Donald Kaberuka (L) and National Bank of Rwanda Governor, Mr Francois Kanimba addressing the media following the sale of the two banks.

CDC, in which the British government is the principal shareholder, also owns Development Finance Company of Uganda (DFCU).

Kenya’s FINA Bank Limited, and a Botswana-based financing company, Enterprise Holding, also bought 80 percent of BACAR.
National Bank of Rwanda Governor, Mr Francois Kanimba, said that the two banks had failed to conform to the central bank’s regulations, and needed to be re-capitalised by the central bank.

Kanimba said the role of the central bank is to ensure that banks strictly follow commercial and banking regulations. The central bank’s other role is to streamline the banking sector, which could not be done with the two banks still in that sorry state.

“The banks were no longer commensurate with central bank regulations. The best way was to sell them when we still could,” Kanimba said.

Dr. Donald Kaberuka, the Finance and Economic Development Minister agreed, which explains why he was so eager to sell. “I’m very happy to announce that we have moved a step towards modernising the banking sector. This is the moment everybody has been waiting for,” a smiling Kaberuka told journalists in the BCR boardroom in Kigali.

Kaberuka said President Paul Kagame’s government is satisfied that it clinched a fair deal, adding that the arrival of such major investors would turn around the banking sector. The government and the investors agreed on issues both parties consider important to revamp the sector.

“The issue is not the size of the bank, but competitiveness and efficiency, and we are happy with what was presented to us,” Kaberuka said of the investors’ development plans.

Valuers weighed BCR at US $6.05 million and BACAR at $3.76 million, drawing accusations of a cheap bargain from some financial quarters.

Kaberuka does not agree, and explained why. “These banks were valueless, they were in negative. They were insolvent and should have been liquidated. So the issue of value doesn’t arise at all,” he said.

Mr John S. Taylor, the managing director of FINA, said that his bank’s involvement in the Rwandan economy would yield immediate results.

“We are here to make business and in three years you will see a changed banking sector,” Taylor, a veteran banker told The Weekly Observer.

He said FINA would within the short term make changes and have a controlling stake in Rwanda’s banking industry. “We shall maximise shareholding, and make profits. We look at achieving our goals in the next three years,” Taylor said.

The investment principal of Actis, Mr Asanka Rodrigo, said that their initial acquisition would lead to a larger investment in mortgage, leasing and the modernising of the bank’s branch network.

BANKABLE: Commercial Bank of Rwanda, recently acquired by the Commonwealth Development Corporation.

BCR is the second largest commercial bank in Rwanda, after Bank of Kigali. It once controlled 40 percent of the banking industry before it went down. It was wholly owned by the Rwanda Government.

Several other major enterprises, service providers and government-owned industries are also about to be sold or given on concession to other developers.

The government is already processing the divestiture of Rwandatel; a government owned telephone service provider, as well as several hotels. Rwandatel will be gone by October 2004.

Minister Kaberuka, however, said that the government would keep a major interest in all the businesses, especially by supporting the private sector where it cannot go it alone.

“We call it partnership…the private sector works in partnership with the public sector to develop the economy. Where one is not able, the other intervenes,” the minister told The Weekly Observer in an interview.

It is under such strategic state intervention in the economy that the Rwanda government recently re-developed two major hotels in Kigali and in the northwestern town of Gisenyi.

President Kagame this month officially opened the Kivu Sun Hotel, a magnificent structure on the shores of Lake Kivu. South Africa’s Sun Group is managing the hotel.

According to Kaberuka, the problem Rwanda has been facing was lack of investor confidence. “We don’t have investors lining up our doors for opportunities, they are still hesitant. But we can assure them that the opportunities are now available, come and invest,” he said.