Confusion surrounding share capital contribution in Southern Province’s Gikonko Rice Factory has caused anxiety among members of UCORIBU, a rice farmers’ co-operative operating in Gisagara, Huye and Nyanza districts. The farmers, who are protesting the lack of clarity on the amount of share capital the co-operative is supposed to pay, say the situation has resulted into non-payment of dividends to members.

UCORIBU owns a 40 per cent stake in Gikondo Rice Factory, while Australian-based company, ICM Rwanda, owns the rest.

The co-operative with a membership of 12,000, grows rice on 2,360 hectares of land.

The problem

The co-operative entered an agreement with the government to buy 40 per cent of shares in the factory at Rwf157 million during the privatisation of the plant. However, ICM later signed a deal with the government, allowing it to carry out another valuation exercise on the factory, arguing that the first one was overvalued.

Jean Pierre Mushokambere, UCORIBU president, told Business Times that after the second valuation, the co-operative was asked to pay Rwf100 million for their stake, while ICM would contribute Rwf150 million for the 60 per cent shareholding in the firm.

Mushokambere said UCORIBU paid the money between 2008 and 2010 using the Rwf47 million profits registered by rice co-operatives and Rwf53 million from farmers’ contributions in 2012. It is however yet to get a debt clearance certificate from Rwanda Development Board (RDB) for its shares.

He said when they expressed concern over the issues, RDB informed them that it "validated the agreement that UCORIBU had with the government before the Australian investor, but added that the investor’s valuation was also valid because it was signed by an authoritative government body”.

He said RDB also noted that the validation of the ICM valuation would be decided by the Cabinet, arguing that it recommended the rice factory sale.

"Two years have elapsed without having a reply, which has caused a lot confusion and demoralised members, a situation that is affecting operations,” Mushokambere said.

"This issue is a major hindrance…we cannot share dividends because of the confusion. We are afraid that Cabinet might later recommend that we pay Rwf57 million stipulated in the initial agreement, and we might not have the means to pay by then,” he said.

Enter ICM Rwanda

Mushokambere said ICM was contracted after realising that more money was needed to refurbish the factory, but the co-operative could not afford to raise such capital.

He noted that the current confusion on how much money they should pay for the 40 per cent stake in the factory could criple the co-operative’s plans if it is not resolved soon.

Sharon Umuratwa, ICM chief operations officer, said the joint venture agreement between UCORIBU, ICM and the government indicated that the initial investment in the company would be Rwf250 million, with ICM contributing Rwf150 million for its 60 per cent stake, and UCORIBU Rwf100.

"The joint venture was signed on December 19, 2006 between ICM, UCORIBU and Privatisation Secretariat on behalf of the government as the witness,” she said.

Umuratwa said ICM had requested for the re-valuation of the business because the Rwf157million arrived at earlier was too high as the mill was in poor state.

"The government agreed that we conduct another valuation, which put it at Rwf100 million that was okayed by the government; that’s why they signed as a witness in the joint venture between ICM and UCORIBU,” she explained.

Francis Gatare, the RDB chief executive officer, told Business Times that Gikonko factory was awarded to UCORIBU and a sale agreement signed between government and the co-operative. He noted that the deal is clear on how to handle such challenges.

"The obligations of each party were clearly outlined in the agreement, as well as the process for dealing with disputes.

"We are not aware of any changes to that agreement, and therefore recommend that the parties use the existing mechanisms provided for in the agreement in governing their relationship to address the issue,” he said.