Eight local firms need Rwf2 billion bailout

Eight struggling local firms recently listed in a Karisimbi Business Partners report, need close to Rwf2 billion to stay afloat. The report, released last week, listed the companies that deal mainly in agri-business in the domains of dairy, grain processing, and animal feeds as “underperforming, yet they have potential.”They are textiles manufacturer; Utexrwa, wheat processor, Sotiru; fruit processors, Sonafruits; New Rucep, a hide and skins processor, Rubirizi milk processor, essential oils processor, Ikirezi, Rabi an agri-processor (beans); and Sopar which produces animal feeds.The survey was commissioned by the Ministry of Trade and Industry to identify struggling local firms.Supporting these companies would have a great impact on the country’s economy in terms of job creation and revenue, according to the report.Four of the firms need at least Rwf1.8 billion to remain operational. They are Rubirizi, New Rucep, Sotiru and Ikirezi.Rubirizi milk processor has not been operational for over a year now due to “financial constraints.”Utexrwa attributes the problem to “lack of government protection” which has seen big foreign companies export cheap products to Rwanda.The prices of Utexrwa products are relatively high because of high taxes, high fuel and electricity expenditure, Ritesh Patel, Utexrwa Chief Finance Officer, told The New Times yesterday. Last year alone, Utexrwa paid Rwf400 million in value added taxes, Rwf250 million in electricity while spending at least $120,000 on fuel monthly. “We need protection from the government; foreign companies have entered the local market and their products are considerably cheap. This has made us lose the local market, even when those products can also be produced locally,” Ritesh stated in an interview. Patel disclosed that the company was subsequently forced to lay off workers to reduce costs.“This explains why we had to reduce the number of workers, from 1,200 to 600, and we will be forced to reduce them further to 400, if things continue like this,” he added.“We don’t need money; what we need is to be protected from foreign competitors and to also enjoy benefits like other EAC companies by scrapping VAT.”He also explained that they requested the government to allocate them land to plant trees to substitute fuel consumption, one of the commodities costing them dearly. “We are yet to get any response. The trees would help us produce energy for steam, hence setting fair prices for our products,” he explained.Rubirizi milk processor, on the other hand, was ordered to close down by Rwanda Bureau of Standards (RBS) in January last year, after it failed to meet the required manufacturing standards apparently due to lack of funds.RBS had requested the milk plant to procure new machines and refurbish its facilities, but the firm could not manage to do so after it failed to secure funds from financial institutions. A reliable source in the company, who preferred not to be named, said the milk plant requires either Rwf600 million to construct new facilities and procure new machines or Rwf200 million to refurbish the existing facilities and buy a few machines.The milk plant produced 2, 000 litres daily prior to its closure which rendered about 45 employees jobless. During the 2009 leadership retreat, it was agreed that the dairy firm should be helped to acquire funds to standardise it. But line institutions such as the Ministry of Trade and Industry, and the then Rwanda Animal Resources Development Authority (RARDA), now part of Rwanda Agricultural Board (RAB), did not help. Jean Marie Gatete, the manager of the Musanze-based wheat company, Sotiru, also disclosed their company requires about Rwf340 million monthly to import at least 1,000 tonnes of raw material from Argentina, Canada and Ukraine.“Locally produced raw material is not enough, and it requires us to import at least 1,000 tonnes of wheat every month to effectively compete with other big companies such as Azam and Pembe,” Gatete noted.According to Gatete, they also need another Rwf45 million to carry out repairs. Sotiru previously produced 25 tonnes daily, but production has drastically plummeted.“Lack of enough locally produced raw materials, coupled with lack of enough funds to import them has affected our business. We are now forced to work for a few days, when we get raw materials,” added Gatete.Both Ikirezi and New Rucep require US$1 million [approximately Rwf600 million] and Rwf212 million, respectively. However, Rwanda Development Board (RDB) is reportedly expected to sell off the Ikirezi business.Efforts to get a comment from government officials were futile, as some of them had not returned several emails sent to them, as they had requested.However, John Nkubana, Team Leader of Small and Medium Enterprises (SMEs) in the Ministry of Trade and Industry said, during the launch of the report, “we will continue to advocate for these companies, attract new potential investors to ensure they are revamped.”

National

Eight local firms need Rwf2 billion bailout