19th August 2004.
Stronger private sector is the key

By Emmanuel N. Mugarura

Rwanda Private Sector Federation Executive Secretary, Mr Bart Gasana, is one man who knows exactly why his country needs a very strong private sector.

“Unless the private sector is strong enough to influence the economy, Rwanda will not achieve its goals,” he said in an interview.

“People must change their views about businessmen, they must embrace business as individuals, that’s the only way we shall turn around the economy,” Mr Gasana told The Weekly Observer.

BOOMING: Kigali is already reaping from the invigorated private sector

Before the new government came to power in 1994, Rwandans had a negative view of private businesspeople. Ordinary citizens believed that business was the responsibility of the central government, which also provided all the services.

The central government was the sole employer in the formal sector and all the people looked to it for survival, at individual and community levels.

“The only private businessmen were in the transport sector, they were drivers and they were also despised by the population,” Gasana said.

It was so hard back then to the extent that society even considered self-employed people to be thieves. Rwandans never imagined a situation where the private citizens would do business without government input.

“That’s the terrible situation this government inherited. The bureaucracy in government offices and enterprises was too much that the managers in those enterprises were demi-gods,” Gasana recalls.

Government parastatals and institutions employed virtually all the educated people, and they never thought of private investment at all. The luckier among the uneducated got employment as drivers and were generally satisfied with the status quo.

However, all that changed after 1994 when the Rwanda Patriotic Front ended the genocide and took power in Kigali under Maj. Gen. Paul Kagame.

Private people started opening banks, they started taking risks and investing in social services and other areas. “Business was starting to have some credibility, the people started looking at business as the way forward for the economy,” Gasana said.

The government also dissolved the state-run Chamber of Commerce to pave way for the new Rwanda Private Sector Federation whose mandate is to bring together private businesspeople and investors to grow the economy.

OPTIMISTIC: Mr Bart Gasana Executive Secretary of the
Rwanda Private Sector Federation

“The government decided to create a credible private sector through liberalisation and privatisation. Since then, the stigma and the views about private businesspeople have changed,” Gasana said.

The Government has created several private sector supporting institutions at policy level. In fact, the private sector is working closely with the public sector to improve the economy. Institutions such as the Rwanda Bureau of Standards [RBS], the Rwanda Investment Promotion Authority [RIPA] and others have helped businesses to establish themselves at all levels.

“Before, the environment was not enabling for any business establishment. But now, the macro economy stabilisation, the good monetary policy and the support from stakeholders have improved the business [environment] in the country.”

Gasana is happy that the security situation in the country has improved to the extent that both local and foreign investors have nothing to fear for their investments.

“It was hard before to convince someone to come and do business here. They looked at attacks from rebels and the genocide… But now things have changed and those fears have been addressed,” a smiling Gasana said during the interview in Kigali.

It is also now easier for government to internationally market Rwanda as a most favourable investment and business destination. Rwanda’s growing international appeal is evident in the many bids the country received from abroad; especially from major investors interested in buying the various government enterprises under privatisation.

In 2003, a German firm, Lahmeyer International/ Hamburger Wasserwerke GmbH/Veag, won a five-year contract to manage the state-owned power company, Electrogaz.

This year, bids to buy shares in two-state owned banks, again attracted many multinational firms, including Commonwealth Development Corporation (eventual winners) and Nairobi’s FINA Bank Kenya Limited.

These, says Gasana, are indicators that the country is ready for bigger challenges as far as local and direct foreign investments are concerned.

“These firms would not be risking their investments here, but they are confident that their money and property will be secured and protected by the government,” Gasana said.

The construction industry in Rwanda is now vibrant because more people are investing in real estate as the need for accommodation and office space increases.

“The private sector contributes significantly to the taxes and to the GDP,” Gasana said. Because the private sector has joined government to provide essential services, the situation has improved greatly. The key areas of improvement have been the public transport sector, the insurance sector (almost wholly privately owned), the banking sector and the communications sector.

Key institutions such as Bank of Kigali, MTN Rwandacell and SOGERWA (an insurance company) are in private hands, yet they contribute significantly in providing services to the population.

Where private entrepreneurs have not been able to reach, the public sector has filled the gaps. Gasana’s main worry is that while the educated young people have embraced and accepted the need to go private, they are still poor and cannot do business effectively.

He wants the banks to realise their predicament and give them loans that are cheap and affordable. “The government and the RPSF are looking for ways in which they can secure loans to these willing young people,” he said.

As elsewhere in Sub-Saharan Africa, the culture of saving in Rwanda was so poor because the major economic driver – agriculture – remained largely subsistence.

Agriculture had never advanced into commercial forms that would have given farmers the opportunity to make substantial savings.
“Because of the nature of agriculture, incomes remained low and the people remained poor for most of their lives.”

Gasana also cited major infrastructure constraints. He said insufficient electric power and water remain a hindrance to the growth of the economy.

Rwanda recently suffered an acute shortage of power because the water levels at the main source of power in Ruhengeri have been going down following prolonged drought.

According to Dr. Donald Kaberuka, the Minister of Finance and Economic Planning, Rwanda as a result lost more than 12 megawatts. That is about 30 percent of the generated capacity.

This has led to unprecedented power load shedding, which Kaberuka considers the worst experience at a time when the country is looking for investors.

Kaberuka is, however, optimistic that things will get better soon because the government is completing the installation of four thermo generators that will produce about 8 megawatts, as the country looks for more solutions.

In tourism, Gasana sees many great opportunities for the private sector because there is “ready money” in the sector. There is need to have beautiful hotels, tourist resorts and other attractive ventures. The private sector already owns 90 percent of the hotel industry but there are still opportunities to expand that sector as the demand exists and is even growing.

Gasana considers tourism to be a key factor in the economic development of any country, adding that both the state and the private sector should jointly exploit the great opportunities that tourism presents in Rwanda.

In fact, some areas so critical to the development of tourism have never been exploited. “There have been weaknesses in the sector because of lack of money. You must do something as a government to improve on some infrastructure if the private sector cannot afford it,” Gasana said.

The Government indeed strategically intervened to give the sector the critical investment and support it needed to grow and expand. In particular, the Government renovated the then collapsing Meridien Izuba Hotel in Gisenyi. Today, it is the ultra modern and magnificent Kivu Sun Hotel, managed by South Africa’s Sun Group of Hotels.

“Government is not a competitor, they are partners in development. They are improving on the infrastructure so that it can attract better prices when time for selling them comes,” Gasana said.

He added: “Government involvement removes the fear of the unknown and sets a trend to those who may think that maybe there is insecurity. It builds confidence for the investors who could be sceptical.”

According to Gasana, the Government’s decision to sell off public enterprises to the private sector was a very smart move. He said this is creating competition and efficiency, as well as providing many new jobs.

“Privatisation has set challenges to the Rwandans, people have something to look at. The joint ventures and concessions have led to improved services and the managerial capacity of the Rwandans,” Gasana added.

“People have pulled up their socks to catch up with the fast improving trends and requirements. Now Rwandans are going out to get involved in regional and international commerce. This has led to new ideas and growth in competitiveness,” he said.

Gasana is one of the leading supporters of the Government’s liberalisation policies. This is in sharp contrast to the pre-1994 governments that were not willing to work with private businesspeople.

Gasana remains cautious, though, and wants the world to acknowledge the country’s past – especially understand why Rwanda cannot readily liberalise the airwaves.

Rwanda is still recovering from the wounds of 1994 genocide, a crime against humanity in which the media – especially radios – played a key role in mobilising the genocidaires.

“We have not generated the right capacity to do some things and our people are still vulnerable, hence the need to have some limits. We must develop our capacity at technical and personnel level [before we can] liberalise some sectors,” Gasana explained.

The mismanagement and abuse of the airwaves partly led to the 1994 genocide in which Interahamwe militia and FAR government forces killed about a million Rwandans in just 100 days.
It became the world’s worst bloodbath since Nazi Germany killed 6 million Jews.

Gasana is optimistic that with time, the country will liberalise the airwaves and the entire sector. To him, the major problem the private sector is facing today is the bureaucracy in some government bodies because some people still want to keep the status quo.

“Some people don’t want to let go. They want to maintain the status quo; they go out to de-campaign the private sector,” he said.

At the end of the day, however, people realise that there is need to work together and lift the country to the next level of development.

“And that remains our role as the private sector federation, to educate the masses about the benefits of the private sector,” Gasana concluded.