Rwanda: Ailing Agro-Processing Firms Could Get Government Bailout

The government has commissioned an assessment into the operations of agro-processing firms as it weighs up options of saving struggling businesses.

The study, which is due to be published in September this year, was informed by the fact that some 34 large and medium sized agro-processing plants closed shop between 2016 and 2019, leading to undesirable consequences on the entire agricultural value chain.

This prompted the Ministry of Trade and Industry as well as its affiliated parastatals to conduct studies that would inform government's strategic interventions.

The Minister for Trade and Industry, Soraya Hakuziyaremye, said yesterday that in, some instances, some firms could be bailed out.

She disclosed that preliminary findings show that among the largest reasons for low survival rates for firms engaged in agro-processing, include mismanagement, poor planning and the nature of business plans.

Halting of operations often has consequences to multiple stakeholders, including financial institutions that provide capital, farmers who end up being left without markets as well as jeopardising efforts to ensure food security.

For instance, a number of wheat farmers in Nyamagabe District are grappling with the lack of market after the sole processing facility in the area halted its operations.

The stalled wheat factory, Gitare Mills, was the largest in the region. It was co-owned by Société Mutuelle de Garantie et de Financement (SMGF) and a private investor, Venant Kabandana.

Hakuziyaremye noted that, in some instances, firms have been victims of poor planning practices while others were being run down by malpractices.

"At times we have learnt that some traders who were former importers of foodstuff moved to start factories without a proper understanding of the nature of operations while for others it was a case of outright mismanagement," she said.

Among those so far eligible for a bailout include Kinazi Cassava plant and Kitabi Mills in Nyamagabe District.

Kinazi Cassava plant was found to have challenges in machinery and equipment which, if replaced, could see the firm return to profitability.

Crackdown on errant traders

Meanwhile, the Ministry said at a news briefing yesterday that it was keen on launching a crackdown on traders who hoard agricultural commodities, which leads to hikes in food prices.

Officials say that the trends has been picking up on a number of commodities, largely occasioned by unprofessional traders seeking to make a quick buck.

Among the most susceptible products to this trend, according to the ministry, include rice, sugar and cement, among others.

Hakuziyaremye told journalists that the Government was moving to curb such practices.

She said that regular and frequent inspections across the country showed that a section of traders were unjustifiably inflating prices.

It is such exercises that led the Government, in partnership with Cimerwa, a local cement producer, to issue statement on the acceptable prices of cement in recent weeks.

She said that, so far, a number of traders who have been implicated in the price inflation have been fined up to Rwf4 million with inspections expected to continue.

"Prices are supposed to be a response to demand and supply but also within justifiable ranges. We will not allow some traders to unjustifiably inflate prices as they please. In some cases, we give them margins to make sure the public gets fair prices," she said

The minister noted that the price hikes are often occasioned by speculative tendencies on products expected to be scarce in the market, coupled with hoarding of commodities.

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