Rwanda: Government Puts Its Stake in Cimerwa On the Market

The Government of Rwanda has finally put its last stake in Cimerwa on the market, calling on individual investors and companies to show interest for its shares.

The Government has 16.54 per cent stake in Cimerwa held through Agaciro Development Fund, Rwanda's Sovereign Wealth Fund.

However, other shareholders, including SORAS Group, Rwanda Social Security Board (RSSB), and Rwanda Investment Group (RIG) have also expressed interest to offload their shares.

Rwanda's cement demand has been rising of late. Photos by Sam Ngendahimana.

The Minister of Trade and Industry, Soraya Hakuziyaremye, noted at the press conference in Kigali on Monday that it was at the "discretion of shareholders to exercise their right to increase or not to increase their shareholding" when the Government offloaded its shares.

Currently, South Africa-based Pretoria Portland Cement (PPC) is the majority shareholder in Cimerwa with 51 per cent shareholding which it bought back in 2012.

The firm had been expected to turn around the cement industry but Government lost patience and interest after the company failed to meet the domestic demand for cement.

Consumers continue to decry of high prices of cement and available data shows that more consumers are still importing cement, especially the region.

While Cimerwa is the largest cement producer in the country, the firm is currently unable to meet local demand as it operates below its production capacity of 600,000 tons per year.

Last year, Cimerwa produced only 364,864 tons of cement - less than 60 per cent of the total demand. The country imported 318,854 tons to meet the demand of 640,455 tons, according to the statistics from the National Bank of Rwanda.

The company has been making losses over the years.

The firm accumulated losses worth Rwf7.4 million as of September 2016.

In the following year, over the same period, the firm's losses stood at Rwf5.5 million and that increased to Rwf 7.1 million in September 2018.

This are among the factors that prompted the Government to exit the business.

Exit strategy

"The Government of Rwanda (GoR) through the Agaciro Sovereign Wealth Fund and Rwanda Development Board is seeking interested individuals, companies and/or consortiums to submit their expression of interest to buy shares owned by GoR and some of its affiliates in Cimerwa," a notice by RDB reads.

According to RDB, Government has already established a panel of representatives to review the viability and fit of prospective investors with a view to determining whether they are a suitable for the Government and the other shareholders in Cimerwa.

It has set July 5 as the deadline for interested investors to submit the proposals to buy its stake.

This comes following an announcement by the Government in March this year that it was in the process of withdrawing its investment which essentially has not been profitable despite more efforts to keep the company afloat.

According to the information memorandum, the Government is offering the shares in Cimerwa in entirety. The shares are 5,817,543 representing 16.54 per cent.

RSSB has 7,115,303 representing 20.24 per cent; Rwanda Investment Group has 4,027,530 shares representing 11.45 per cent, and SONARWA Group has 268,502 which is a representation of 0.76 per cent.

In total, 17,228,878 shares are available for investors. That is 49 per cent of the total shares in the cement maker.

But what case is the Government making?

The Government is trying to appeal to investors, saying that it is seeking to level the playing field for all players in the cement industry, highlighting that Cimerwa still has an edge as it is the leading cement producer in the country.

"The company is projecting to be profitable this year and is expecting to declare dividends from 2021," an information memorandum reads.

Hakuziyaremye highlighted that with the construction of another cement factory which is underway in Musanze district, there was hope that the country's domestic producers would satisfy the market.

Milbridge Group through its local firm Prime Cement last year in August kicked off the constructionof their cement factory, and once complete, this will end Cimerwa's monopoly in the market.

Growing demand

Rwanda's cement demand has been rising. Cement demand moved from 493,587 tons per year in 2013 to 640,455 tons in 2018.

This is a result of on-going mega infrastructure projects like the construction of Bugesera International Airport in Eastern Province, Gisagara peat energy plant in Southern Province, and the construction of Base-Butaro-Kidaho tarmac road in the Northern Province.

Construction is also underway for several stadiums across the country, including the 10,000-capacity multisport Kigali arena built specifically to cater for hand games in Rwanda.

The planned Kigali Innovation City is another highly anticipated infrastructure project. The 70-acre development is expected to host world-class universities, technology companies, biotech firms, and commercial and retail real estate.

Demand is forecast to be driven by real-estate construction such as the low cost housing projects. 10,000 affordable houses are set to be constructed in Rwanda.

According to a 2012 study conducted by Planet Consortium (An international consulting company) and the Ministry of Infrastructure, the annual demand for new dwellings in Rwanda was 31,279 housing units per year against the supply of about 1,000 units.

This demand is expected to reach 340,000 units by 2022, mainly for affordable and mid-range housing.

According to a report by EcoBank in 2016, East Africa's installed cement capacity was estimated at 15.6m tones, with 0.15m tones of that total being produced in Rwanda representing 0.9 per cent.

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