A battle between allies

The last few days have had many Kigalians buzzing rather unexpectedly. No January blues here…thank God! Who do we have to thank? A rather surprise pick, the bureaucrats at the mighty City of Kigali. Not to be outdone by the fireworks bonanza at the Kigali Convention Centre, the city authorities decided to set off fireworks of their own rather belatedly, on Jan 5th, 2017. The package was a dull looking 2 page document on white A4 size paper. Looks can be rather deceptive; the contents of the ‘package’ were surprisingly explosive! So much so that the aftershocks are still being felt to this day, a whole week after they were unleashed on the unsuspecting Kigali business community. I refer of course to that most combustible of substances, namely policy regulations in the form of directives in this case from the city authorities. Kigalians are usually a calm lot but the last few days have brought out their animated side. Watching RTV’s PRIMETIME LIVE on Wednesday 11th January, had me witness perhaps the most heated business related debate ever shown on Rwandan TV’s English programming. This followed a week long social media debate that is still ongoing as I write. Why all this excitement in the usually dull business month of January? The said explosive package contained the message to the effect that all businesses operating in designated residential areas should relocate before 31st March 2017 to commercial areas as per the Kigali City Master Plan (KCMP) of 2013. This directive affects multitudes of small businesses (SMEs), Civil Society Organizations and other NGOs that seem to prefer residential houses as their offices. This is often due to the extra floor space one gets for relatively lower rental fees compared to setting up offices in the commercial buildings around Kigali City. City of Kigali authorities have made their position repeatedly clear. There is a need to follow the zoning guidelines stipulated in the city’s master plan. What seems to have irked most SME owners however, is the open secret that this directive is partly motivated by the need to fill the commercial buildings that have recently sprouted around Kigali such as Makuza Peace plaza, CHIC shopping complex and Kigali Heights among others. That notwithstanding, City authorities are acting within their mandate to ensure an orderly city in the long run. There is a common saying that “the end always justifies the means”. In this particular case, I beg to categorically disagree. While the intended “end” is justifiable, the means being employed by City of Kigali are exceptionally punitive to the small business owner and in turn the landlords currently collecting rental fees from the residential houses turned offices. SMEs by nature grow organically. That means that entrepreneurs minimize costs while trying to expand the market for their products or services. Among business overhead costs, rent always features significantly and thus is a primary target in an entrepreneur’s cost cutting efforts. By compelling SMEs to move to commercial districts where rates for rent are at a premium, the city of Kigali authorities are practically forcing these businesses to incur more overhead costs than they are currently comfortable with. This shrinks the SME’s working capital and strangles its growth prospects. This seems counterintuitive to the economic aspirations of the country as a whole since growth at business unit level should translate into more taxable income which means a bigger cut for the taxman (RRA) and more goes into the national coffers for the development projects that all Rwandans benefit from. Without courting controversy, I dare say some SMEs are actually best suited for residential areas. Think of businesses like clinics. If you have a sick child at night, you would most appreciate the proximity of a neighborhood clinic that is most probably a residential house that has been converted into a health facility. Perhaps you are a working young couple and you have an infant that you need to put in a day care facility, do you want to drive across town to drop your infant off or rather use a neighborhood day care that is conveniently located a few streets from your home albeit in a converted residential house? By all means, any kind of processing or manufacturing facility should relocate to a zoned industrial area, bars and restaurants to entertainment districts and so on so forth but even these will require more than the stipulated 3 months notice period being accorded by the City of Kigali authorities. By default, human beings struggle to adopt to change. Where livelihoods are at stake and that is the case here, a structured and phased approach would serve everybody well. Here is my proposed 4 step approach to reach a compromise that would potentially resolve the current disquiet; 1. City of Kigali should begin by liaising with Rwanda development Board (RDB) and create awareness of KCMP zoning guidelines among new business owners at the time of registration to avoid new businesses ending up in the wrong zoning areas.2. City of Kigali should give a 2 to 3 year grace period with a clear time-table for existing businesses in the wrong zoning area to relocate to an appropriate zoning area.3. City of Kigali should conduct a comprehensive study of different SME subsectors and their general work space requirements and their capacity to pay for these spaces.4. City of Kigali should work with property developers and landlords of commercial buildings to design appropriate work spaces as per the requirements of potential tenants. As was the case with the Car Free Zone in the central business district of Kigali, City authorities should appreciate that while they have the power to enforce these directives, it in everyone’s interest if they communicate effectively and give Kigalians ample time to adjust to the proposed changes. That way, the man on the street can have a sense of ownership of the entire process of making Kigali a world class City as it is destined to become in the near future. Over to you City of Kigali! The writer is a consultant and trainer specializing in Finance and Strategy.

Opinions

A battle between allies