13 March 2019

Rwanda: Govt Ready to Cede Its Stake in Cimerwa

The Government is in the process of withdrawing its investment in Rwanda's leading cement producer, Cimerwa, with the timeline for the completion of the process set for end of March.

The government holds 49 per cent in the cement producer, which has been accused of deploying monopoly tendencies, selling expensive products and failure to produce sufficient cement for the market.

South Africa's Pretoria Portland Cement (PPC) holds the remaining 51 per cent.

According to Minister of Trade and Industry Soraya Hakuziyaremye, the assessment of the exit strategy has been completed.

Prime Minister, Edouard Ngirente, told delegates at the 16thNational Leadership Retreat on Saturday that, among the exit options, government had given PPC the opportunity to buy its stake before inviting other parties that might be interested.

PPC is yet to specify if it is interested in increasing its stake in Cimerwa.

Hakuziyaremye told journalists yesterday that government would give prior consideration to interested local private sector stakeholders who would want to be part of the investment.

"The sale of government shares is ongoing with all the government stakeholders involved. Starting with the local private sector to give them a chance to own and be involved in the sector," she said.

The government withdrawal from the firm is, among other things, based on its inability meet domestic demand for cement at competitive prices compared to imports.

Despite government backing, the firm has been citing losses in its business operations.

With the construction among the fastest growing sectors, domestic demand for cement is growing rapidly hence the need for more supplies.

For instance, data from Rwanda Revenue Authority in 2017 showed that at least 79,573 tonnes of cement was imported from Tanzania while an additional 164,814 tonnes were imported from Uganda.

In 2018, the construction sector grappled with a shortage of cement supplies for over a month, causing price hikes of up to nearly 50 per cent.

This is after the cement producer cited a temporary shutdown of its temporary shutdown of its Rusizi based plant.

The plant also has not been able to meet its full capacity of 600,000 tonnes of cement per year, sustaining shortfall of 100,000 tonnes annually.

PPC's latest annual report admitted to challenges in 2018 noting that result revenues and profits dipped citing cost high costs of maintenance and production during the shutdown period.

"The Cimerwa results were impacted by the planned upgrade to debottleneck the plant and increase production output. Realized cement prices were at similar levels to last year," the report read in part.

International firms in most African countries have been known to have innovative ways of profit repatriation even in the event of losses through ways such as inflated management fees.

The sale of its shares Cimerwa is part of the government move to divest from business, the government said.

More industries could be considered in coming days on basis of criteria such as government priority sectors, impact as well as social impact.

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