Devt quest: The highs and lows of district investment companies

IN THE MID-2000s, more than 1,500 individuals joined hands to set up a strong business company to spur investment in Nyamagabe, which was then one of the poorest districts in the country. The aim was to help transform local economy and contribute to speeding up local and national development. Ten years later, the company has more than 900 active shareholders and is one of the best and strongest entities of all district investment companies. The Multi-Sector Investment Group (MIG), as it is known, has more than Rwf5 billion in assets, according to Director-General Vincent Ngarambe. Among its investments include four coffee processing plants, a honey-processing plant and a modern tea processing factory due to be launched next month. MIG is part of a larger initiative promoted by government, which sought to boost local investment by bringing together local businesspeople. The idea behind the formation of these companies, at the district and provincial level, was to have Rwandans partake in the many investment opportunities in the country. Following the initiative, at least one company was established in every district. The latest was last week in Gasabo District. Some of them are living up to their mandate while others have folded with time–after failing to grow into stronger entities. Such firms include the Huye Investment Group, which was expected to start about three years ago but has never taken off. This newspaper could not readily establish why efforts to set up the company failed as officials prefer not to discuss it as a failure, arguing that the company has generated various other investment companies and cooperatives operating in the district. Christophe Karorero, the Private Sector Federation (PSF) chairperson in Huye, refutes the idea that the district investment company is among those that failed to materialise. Karorero says it has paved way for the establishment of other companies. He singles out Ingenzi Cooperative, which is behind the multi-million Huye city market complex, Imanzi Investment Group (IIG), the National University of Rwanda (NUR) staff company that is set to build a Rwf4 billion modern polyclinic in Huye town, and other local cooperatives, which, he argues, are spearheading investment efforts in the district. “We are not lagging behind, nor have we failed to join our efforts together,” Karorero says. “[Huye] private businesspersons continue to invest in this district and we shall continue with the aim of developing it.” Job creation With the strategic Vision 2020, Rwanda aspires to become a middle-income country and transform its economy from one largely dependent on agriculture to anchored on diversified services and businesses. This means that investment in several areas is needed to spur local development and create thousands of off-farm jobs for its population. And, as part of the second Economic Development and Poverty Reduction Strategy (EDPRS 2), which runs from 2013 to 2018, the private sector is set to act as the engine of growth taking the central role in all development and investment efforts. The district (and provincial) investment companies were mainly highly ambitious and raised hopes of socio-economic transformation within their areas. For those that have performed well since they were established, their impact can be felt within local communities. Vincent Ngarambe, the MIG director-general, says ever since their company was established and started investing in Nyamagabe, thousands of residents have benefited from its investments. Although Ngarambe could not provide specific figures, he says many locals have been employed as a result of the investment in the district, while others have benefited indirectly. For instance, Ngarambe says, over 2500 individuals got employed when MIG started planting tea for its new multi-million processing factory, which will be inaugurated next month in Mushubi Sector Another 100 or 150 people will be employed when the plant starts operations. Others are also employed in the company’s coffee washing stations and honey processing factory. Local tea growers will also likely benefit from the plant as they will seek to improve their production to maximise gains. “With such big investments, people get money and they, too, invest in other activities. That contributes a lot in the transformation of local economy as well as toward poverty eradication,” Nyamagabe mayor Philbert Mugisha told The New Times. “That’s a lot of jobs that are created for our population and such investments make a big impact in people’s lives.” Rusizi mayor Oscar Nzeyimana also sees an opportunity in the companies. “The [investment companies] have a great role in transforming our economy,” Nzeyimana argued. He said Rusizi Investment Corporation is currently building a Rwf2-billion modern market, while two other local investment societies, Rusizi Border Investment and Mururu Development Cooperative, are set to establish two cross-border markets near the Rwanda-DR Congo border as well as other infrastructure. Joint ventures “We have individuals investing in infrastructure which were regarded as the sole responsibility of government,” Nzeyimana said. Foreign and local investments are regarded as key to keeping Rwanda’s economy growing over the next years. Joint ventures, such us district investment companies, are expected to boost local investment. For Ngarambe, such initiatives also present other benefits: apart from attesting to people’s commitment to contribute to the nation’s development, it also reduces the risks of loss for local investors. “With such companies you share not only benefits but also losses if you incur any,” Ngarambe said. Narcisse Kayitare, the coordinator of Ijabo Development Company, a newly-established investment company in Muhanga District, underscored the highs of joint ventures, saying it limits losses when the proprietors fail to realise the goals of their company. “Joint ventures also allow businesspeople to invest in bigger projects. And the more you invest, the more benefits you get,” he said. However, Ngarambe regrets that not all local businesspeople fully understand joint ventures. He said some people still prefer personal investments, something he says limit the level of investments and benefits. This might also justify why some investment groups have failed to start while others are struggling to execute any project.