Taxpayers are incurring costs on projects for which the government acquired loans but have either not kicked off or their execution faced significant delays.
The Parliament’s Public Accounts Committee quizzed the Ministry of Finance and Economic Planning over the issue, which it said is a sign of poor planning.
MPs and the Auditor General’s Office expressed concern that the government has paid over Rwf2.9 billion in commitment charges on different projects that have not yet started or with very low execution rate. They describe such charges as wasteful expenditure for the government.
The issue was raised on Monday, September 27, as officials from the ministry of finance were responding to queries related to the mismanagement of public funds as highlighted in the Auditor General’s report for 2019/2020.
Among the stalled projects include the Export-Targeted Irrigation Project (ETI), the Rwanda Innovation Fund (RIF), and the Rusizi III hydropower project.
In March 2018, Rwanda and the African Development Fund (AfDB) signed a loan agreement worth $30 million to finance the establishment of RIF.
The project aimed to provide equity financing for tech-enabled small and medium-size enterprises, train tech-oriented entrepreneurs in business planning and management, and increase awareness and sensitisation with respect to intellectual property rights.
It was expected to support more than 150 tech companies at various stages and invest in about 20 early growth stage opportunities. It is forecast to create more than 2,000 direct jobs and over 6,000 indirect jobs over its 10-year life cycle.
The project is expected to be completed in 2022. However, it had not yet started as of 2020 even as the government had paid over Rwf60 million as commitment fee for the implementation delay.
According to AfDB, the Fund Manager — Angaza — signed an agreement with Rwanda to be a key participant during all stages of the innovation life cycle from start-ups to the Initial Public Offering of the firms.
Under the agreement, the Fund Manager was required to raise $70 million from private investors to achieve a target fund size of $100 million.
PAC Chairperson, Valens Muhakwa said that it is the taxpayers who are suffering from such situations.
"The Ministry of Finance and Economic Planning, which pays such commitment fees, should work with the institutions in charge of implementing those projects for which the country has requested loans so that they are executed on time for the benefit of its citizens,” he said.
On the RIF, Jean-Bosco Ndayisenga, the Division Manager in Charge of Project Management and Monitoring Unit at the ministry of finance, apportioned the blame for the delay of RIF to Rwanda Development Fund (RDB), which is in charge of implementation.
Marie-Ange Ingabire, Chief Budget Manager at the ministry, said that the project financing consisted of a loan that the Government took, and the money that would be raised by the fund manager, noting that the latter had difficulties achieving that.
After realising the problem, she said, it became necessary that the project be restructured so as to help the fund manager play its part in line with the project implementation.
Meanwhile, Ndayisenga said that they expect that this project will be implemented as the firm has established an office in Rwanda, though there were implementation delays leading o high costs.
Regarding the Rusizi III hydropower project designed to generate power for Rwanda, Burundi and DRC, Ndayisenga pointed out that it has six funders, with a portfolio of about $489 million.
He said that the commitment fee charged on Rwanda is about $17 million financing from AfDB, indicating that it was a result of delayed negotiations between the parties to the project agreement.
Currently, he said, the supervising company for the project has been hired, various studies [for the project feasibility] have been completed, and the tender for the construction of a dam to generate 205 megawatts [to be shared among the three countries] is about to be offered.
For the Export Targeted Modern Irrigated Agricultural Project (ETI) project, he said that it faced challenges including slow performance of companies that were awarded tenders for its execution.
Rwanda signed a $120 million (about Rwf120 billion) line of credit with Export-Import Bank (EXIM Bank) of India in October 2013 to implement the ETI project in Mahama, Mpanga and Nyamugali Sectors in Kirehe District, Eastern Province.
According to the Rwanda Agriculture Board, among the challenges that hindered the execution of the project, there is the pressing requirement that 75 per cent of the value of goods and services needed in the project should be imported from India, and some Indian companies that were involved in the project became bankrupt.
It was envisaged to irrigate at least 7,000 hectares, setting up a tomato processing plant with a capacity of 26,000 tonnes, a 12 MW solar power plant, and an agriculture mechanization centre of excellence, among other components.
According to the Auditor General’s report, the project which was supposed to be complete by 2017, had delayed, with only 877 hectares or 12 per cent of the planned farmland having been put under irrigation in Mpanga as of October 2020, while some of the project components had not yet started.
As of July 31, 2020, the government had incurred $8.6 million in expenses to EXIM Bank of India—including principal, interest and commitment fees.