25 January 2013

Rwandair Could Be Privatised in 2015 As Umubano Deal Drags On

Rwandair Express could be privatised in 2015, when it is expected to have become profitable.

The national carrier is one of the high profile companies on the Rwanda Development Board's (RDB) list of public entities that are yet to be privatised. Its sale stalled because the company is not making any profits presently to attract investors, John Mirenge, the RwandAir chief executive officer (CEO), said is however, optimistic that the airline would soon become profitable and, thus, enhance government's chances of finding an investor to take it over.

"There is some level of profitability we must reach before the government can consider calling for bids from possible investors," Mirenge said yesterday.

Mirenge, however, declined to give figures on the firm's current financial health, saying: "We are not making profits at the moment, but we are working hard to improve the situation. Though we are performing progressively well and I am hopeful that we shall be ready in 2015."

Rwandair's fortunes have changed for the better since it relaunched operations in 2002.

"The airline's sale is still on hold until it overcomes its challenges. We are not certain when they will be able to acquire all the requirements for privatisation, but when they do, the process will begin," Daniel Ufitikirezi, the head of asset and business management at RDB, said in an interview.

RwandAir's clientele has been growing steadily, from 130,000 travellers in 2010 to 200,000 in 2011. The number doubled to 400,000 travellers last year.

Air Rwanda, as the national carrier was called before rebranding in 2002, was bought in 1996 by Alliance Air, a South African airline, through a deal that reduced government's stake to 39 per cent. The airline, however, reverted to the government when Alliance Air collapsed.

After repossessing it, the government decided to first revitalise it selling it, Mirenge said.

RwandAir now boasts a fleet of eight passenger aircraft that fly to over 20 destinations across the world.

Umubano privatisation on hold

Meanwhile, financial problems facing the Libyan government have affected the proposed privatisation of Hotel Umubano in Kigali.

The Rwandan and Libyan governments co-own Umubano through Sopratel, a company that manages the hotel.

The Libyans had pledged to inject in an undisclosed sums of money to improve the hotel but did not honour their commitment, according to the Rwanda Development Board. As a result, the hotel is in a sorry state.

"The Libyan government is neither honouring the deal nor willing to sell its stake in the hotel. They keep changing positions and, yet time is valuable. The privatisation process is now on hold, although negotiations are still ongoing," Daniel Ufitikirezi, the head of asset and business management at RDB, said.

"The government wants to sell its 40 per cent stake...It requested the Libyans to also sell their share to an investor, who would expand and elevate its standard to a four star hotel, but the Libyans are drugging their feet," he added.

Umubano Hotel was formerly managed by Laico Group, one of the companies started by the former Libyan government of President Muammar Gadhafi, who was killed during a revolution in 2011, ending his 40-year rule.

The Rwandan government repossessed the hotel in 2011 after Laico had failed to implement the agreed investment plan.

Sixty-two public companies have been sold successfully and seven others liquidated since the enactment of the Privatisation and Public Investment law in 1996.

The law was introduced to reduce government's financial and administrative burden, as well as to improve efficiency of state companies.

The Energy, Water and Sanitation Authority is among 12 other government entities that are to be sold off.

According to the Rwanda Development Board, the process has been successful, earning the government over Rwf100b since it started in 1996. RDB noted, however, that wooing credible investors was still a huge challenge.

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