During the Covid-19 pandemic, the world economy shivered almost to a halt, and monetary policy alone was not the answer. Governments around the world had to resort to expansive fiscal policies.

Countries with sovereign wealth funds, however, relatively had a higher fiscal capacity to increase spending, while responding to emergencies and lowering taxes when necessary to stimulate their economies.

It is no surprise that sovereign wealth funds’ direct investments reached a five year high in 2020 to $65.9 billion, almost doubling from $35.9 billion in 2019.

The investment level, according to the International Forum of Sovereign Wealth Funds, which Rwanda’s sovereign wealth fund, Agaciro Development Fund is part of, has continued into 2021.

As of August, their direct investments had reached a total of $39 billion, already higher than the whole year of 2019, according to the available data.

The New Times’ Edwin Ashimwe, caught up with the Fund’s Chief Executive Gilbert Nyatanyi, for insights on the local market, effects and lessons brought by the pandemic as well as future investments.

Excerpts,

It has been close to a year since you joined Agaciro Development Fund. Would you like to give insights on the fund’s shape, then and now?

Well, I think first of all, I found a fund that was in a good shape, despite the Covid-19 crisis of course.  I found a capable team in place that managed to consolidate what was acquired before the crisis and also during the crisis.

So I can highlight that we are now at approximately $235 million Assets under Management (AuM) and shareholder in 33 companies.

Above the management of the assets and management of these portfolio companies is a challenge, but it's an interesting one.

You assumed office at the time the pandemic was at its peak. What are some of the major consequences battled as you weathered through?

So, first of all, as you know, the main source of our income used to be contributions, voluntary contributions from the private and public sector, this was about 60 percent of our revenue.

This has been phased out with the Covid-19 crisis because it was considered, if I may call it, an additional burden to companies and population. So 60 percent of our revenue is not there anymore.

The second source of our income was dividends from our portfolio companies, which most of them didn’t pay.

For example, banks, if they would even be willing to pay dividends, were not allowed as per the instruction from the national bank.

Our third source of income is profit from our term deposits with the banks. And really it has been a struggle to have the same condition from the banks because of the effects of the pandemic.

Before we used to have about 11 percent interest so now it has reduced to 10 percent or 9.5 percent or sometimes even as low as 9 percent.

And lastly, some of the investments we would like to have made were not possible just because of the crisis.

One of the examples is a former Hotel Umubano, which is our property that we are trying to divest but we have been struggling to find potential candidates or interested candidates.

Taking into account these challenges, what could you say are the main lessons learnt?

All in all, what we learned is that really; it is important to have prudent cost management and to have a very prudent investment strategy, because the income that we are now having is coming from the investment we made before Covid-19 crisis.

So, cost-effective and prudent management and very risk calculated investments are the things which we managed to consolidate and I would say that we are at a level to be proud of at the moment.

With the economy slowly picking up, is there some sense of optimism?

Yes. We see that the economy is picking up, I think you saw that banks were allowed to pay out dividends. So this was a very welcome, and unexpected income for us.

We also see partners coming in inquiring about the socioeconomic situation, the financial situation in Rwanda, possibilities of co-investment, financing projects.

All this is basically proving to be showing a positive trend towards recovery.

What is the current general state of the fund’s activities?

The majority is of course equity investment. We are shareholders in different companies, like the Bank of Kigali, Mara Phones, Africa Improved Foods; we also have shares in Rwanda Gaming Corporation, as well as Ngali Holdings Limited.

So it's in very large sectors activities of the economy and it accounts for 80 percent.

And then the 20 percent is in the fixed income investment, we have the treasury bonds from the national bank, and then we have some commercial papers and also fixed term deposits with the commercial banks.

Looking at the changes that have transpired in the past months, one would make a case for diversification. What is your take on this?

Absolutely. Taking into account the changes we went through for example, the fact that there are no contributions anymore, and also the fact that we are now shareholding in 33 companies, we are looking at how to diversify our investments.

So we keep the treasury bonds, we keep some term deposits, but we also start thinking on how we can co-invest with other sovereign wealth funds, or shall we go into real estate or shall we try some private equity?

We are still brainstorming on the basis of the changes, which happened in between when the fund was set in 2012, and now 2021.

We are basically doing something like an exercise on a trajectory plan on where we come from, where we are now, where we want to be in the next five to ten years and then most importantly how we get there.

Can you say that you were able to meet your targets during this time despite Covid-19 limitations?

I would say yes and no. If you look at what we were expecting as income from contributions and from dividends, then we did not meet the target. Because the contributions were phased out, dividends were not paid, so there we were about 60 percent of our target.

But when you readjust to take into consideration the consequences of the crisis and the consequences of phasing out the contributions, then we are above 80 percent, which I think is a very good performance.

Again, we are repositioning ourselves and setting new targets on the basis of these new parameters. And especially since we have a target of reaching $1 billion in 2030 and we are ready to take up that challenge.

Two years ago, Agaciro Development Fund joined the International Forum of Sovereign Wealth Funds. What have been some of the early benefits?

I can highlight, for example, the Santiago principles which really focus on corporate governance and transparency.

And I think we learned a lot and it imposed on us a certain discipline to remain transparent and this means accountable but also put in place corporate governance.

Another advantage that we got from it is that we can exchange with other sovereign wealth funds with experience, we learned from each other, we  learn what we can do and what we better don't do and also learn from international best practices.

Would you also like to share some of the future investments in the pipeline?

Currently we are co-investing with OCP Africa, a subsidiary of the Moroccan public private company to set up a fertilizer factory in Bugesera Industrial Park.

It is really important for the country because it will reduce imports of the fertilizers among other benefits.

Secondly, we are working with a Belgian firm, OVO. The idea is to set up a common vehicle where we will invest and they also invest to pick 10 startup companies each year.

These are mainly companies which have no access to the banks, because they don't have any track record or any tangible information to share with the banks.

The other good thing is that we will have coaches from both sides following up on the companies.

It can be agribusiness tech, financial services, as long as we see there is a potential.

We look at making it formal this year, there's already 10 companies selected. So we look to formalize our corporation this year and continue next year and the year after.

And then after three years, we'll evaluate the results.

Agaciro Development Fund will be celebrating its 10 year anniversary next year. What do you have in store and what is the target?

Well, the main growth was in 2018 because that's when the government decided to transfer most of their shareholding in Companies to the fund.

It was relatively silent prior to that, and then the major one coming last year, Ngali Holdings Limited, but we might expect one or two before the end of the year or early next year.

Like you said, next year will be the 10th anniversary of the fund, we are working very hard to be able to present the new Agaciro by the 10th anniversary.

We are looking at $300 million for next year, and as I said, the target is $1 billion for 2030.

Your parting shot?

Only two things, when the fund was set up of course there was a big mobilization, so afterwards it was a bit silent, so that's why I wanted to emphasize from the beginning that, we are still there and, the money contributed by, Rwandans, friends of Rwanda has been managed really in a prudent way with a calculated risk.

And just to emphasize other sovereign wealth funds depend on income from natural resources or budget surplus, but our main resource is the human resources from Rwanda.