4 April 2013

Rwanda: Technical Challenges Still Hamper Investment Groups

A special project is needed to provide technical assistance for investment groups in provinces across the country to help them succeed, the Private Sector Federation of Rwanda (PSF) recommended in a recent report.

PSF says provincial investment corporations need technical help, especially in planning and managing business projects, if they are to take off and succeed.

In an internal report titled, "Collective Investment Survey Report", which was based on a survey conducted, last year, and published in January, PSF said although it facilitated the legal formulation of a number of investment groups, the majority still struggle due to weak management structures, especially the Provincial Investment Groups (PICs).

"PSF, in collaboration with the government, needs to design a project for Technical Assistance for Collective Investment Schemes to address key challenges identified, bring on board transaction advisors for major projects, and project management support for the small inexperienced ones," the report recommended.

Stalled projects:

The Federation said the transformation of many investment projects that were initially identified by most PICs has stalled due to limited business management skills and expertise of the groups' members.

"It eventually emerged that most projects required feasibility studies before they could be rolled out. There is also limited awareness of business ethics and principles of good corporate governance," PSF says in the report.

PICs are collective investment groups initiated by PSF in all the country's provinces and Kigali City in 2007 to pool funds and invest in priority areas in the regions.

The initiative is a brainchild of President Paul Kagame, who had advised private investors in the country back in 2006 to mobilise resources and make sizeable investments to benefit from economies of scale, create employment and contribute to the economic development of the country, while benefiting shareholders.

With PSF's guidance, all the provinces had finalised soliciting start-up capital in form of share pledges by the end of 2009.

But the PSF's target for the regional corporations to be operational by the end of 2010 with at least one project running for each PIC was not met.

Reluctant to invest:

Many of the groups are still collecting contributions from those who pledged their shares and have not been able to launch business projects on their plans.

The PSF Director of Member Services, Capacity Building and Entrepreneurship Promotion, Donatien Mungwarareba, says the groups remain reluctant to invest the money they have already collected because their business plans are not sound enough and some banks are not keen on financing their projects.

"Most of them collect money, but they don't know what to do with it and they are reluctant to invest," he said on Tuesday.

Mungwarareba said PSF will soon hire someone in charge of regional investments to provide special technical assistance to the groups. He also appealed to interested persons to initiate projects to train members of the groups in business development and management.

Although many investment corporations have yet to undertake investment projects, some smaller groups, especially in commercial centres across the provinces and in Kigali City, have been successfully investing their money, particularly in commercial buildings.

Those experienced in managing cooperatives agree that it requires shareholders to understand the idea of working together and managing their business projects in order to succeed.

According to Eugene Nyirigira, the president of Kabarore United Traders, whose 53 members have built a multi-million business mall in Kabarore Trading Centre, Gatsibo district in Eastern Province, provincial corporations will only be functional if their members grasp the idea of working together.

"The challenge for cooperatives is for members to understand the projects," he said, adding that his cooperative succeeded mainly because its shareholders were already involved in business as traders and it sounded logical when they came up with the idea of building a mall together.

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