Trade Mark East Africa (TMEA) recently launched the second round of its Logistics Innovation for Trade Challenge Fund (LIFT), in Kigali with an aim to reduce transport time along the main East Africa transport corridors by 15% by 2016.

The application deadline of LIFT’s round two, is August 12, with Rwf.6 billion (USD 7.6 million) in ‘free’ support funds up for grabs by any inventive entrepreneur especially Rwandans who missed out on round one. 

During the launch, Sunday Times’ James Karuhanga caught up with David Mitchell, LIFT Fund Manager, who shed light on the Fund; and how it seeks to stimulate creation of innovative transport and logistics products that can improve efficiency and service in the region. 

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What is the background of the LIFT fund? 

Transport costs in Africa are amongst the highest in the world; 50% higher than in EU & USA and transport costs in East African Community (EAC) can be as high as 75% of the value of exports. High transport costs erode competitiveness of EAC goods. High costs raise the cost of living, reduce job opportunities, cut short economic development and harm poverty reduction efforts. 

LIFT is a financial instrument that shares the investment risks with innovators and entrepreneurs who contribute to reductions in the transport and logistics costs and times along the two main transport corridors. 

What kind of impacts are you looking for? 

We are looking for projects that reduce the costs of transportation and logistics services for customers; projects that improve the competitiveness of small and medium transport and logistics companies in the region. Project opportunities could include: cold storage aggregation facilities; packaging facilities; pallet logistics; transport sector education and training facilities; last-mile transport and couriering activities; and innovative warehousing solutions. 

What exactly is LIFT looking for in projects? 

We are looking for sustainability; projects that are innovative in the context of the EAC; projects that have the ability to replicate projects in other areas of EAC; stable existing businesses with demonstrable cash flows and existing customer bases; projects that deliver socio-economic benefits to the region and its people; transparent partnerships with grantees; and ability to form public and private partnerships with other industry players and organisations as well as government departments and parastatals. 

I heard about 13 projects awarded grants after round one previously and nine that are making good progress. Tell me about these nine projects. 

The nine projects in round one that are funded are based in three countries and cover four different areas of transport logistics. The first one is on ICT based solutions with things like freight forwarding software applications which allow people who want to ship cargo to liaise with people who offer transport capacity, for example. Another sector is shipbuilding which has a very interesting project on Lake Victoria; which is transferable to Lake Tanganyika and other lake areas of the EAC. The company will be building a shipyard which will build roll-on and roll-off transporter boats. 

A shipyard? Do we have any shipyards on Lake Victoria, currently? 

No, there aren’t any but there will be. So, that’s quite an interesting project. What it will do is that once shipyards are operating, on Lake Victoria and can be transferable to Lake Tanganyika by road, it will allow all those isolated island communities on the lakes to be brought into the supply chains. Anything they grow or produce will be sent to markets in the EAC or beyond. 

When exactly and where will it be built? 

They are cutting the ground, which means putting the foundation for the shipyard in July, I think. 

Where is that? 

At Jinja, on Lake Victoria. 

In which countries are all the nine projects? 

Four in Kenya, two in Tanzania and three in Uganda. 

Back to the other projects…

We have another one by a company called SPEDAG, and that’s a project that links rail cargoes to road cargo to speed up the whole process of transporting goods. The hope is that in round two, we’ll get similar projects covering the central corridor, from Dar es Salaam to Burundi, Rwanda and the DRC and beyond. 

We have another project called Mix Telematics, based in Kampala. They are building a very unique special type of container lock which cannot be tampered with. If a container is packed in Kigali, and shipped to Dar or Mombasa, nobody can open it without being recorded and this reduces container contamination or theft. If all these projects succeed, and the products and services they produce, then impact can be very significant in terms of making local companies more competitive. 

Are you able to put numbers to the envisaged impact?

We put numbers to the individual projects because they are essentially creating something that is new. We say, for example, that with one of our projects, there will be a 15 per cent reduction in time taken to go from Mombasa to Kampala. Another project might have a 15 per cent increase in SME independent tracking companies’ monthly salaries or income. 

I imagine the economic multiplier effect of a shipyard on the shores of Lake Victoria… 

It’s a big project. There is a lot of money going into that and it’s a joint venture with a Dutch shipbuilding company. There is a very high chance that it will work. The only way they encourage their joint venture partners to commit their money is by having a percentage of funds from us which shows that there is somebody from the outside the investor who believes it will work. What we are doing is we are sharing the risk of the project. 

Reduce the risk, how? 

Most of our grantees have been to banks and banks say ‘we don’t understand your project, it is too high a risk and we can’t support you.’ But if somebody else is prepared to support your project, and has put 50 percent of the money in it that means the risk is reduced. Successful applicants are required to provide matching funds of at least 50 per cent of project value. We provide the rest. 

My guess is that this is good business for you too, at the end of the day. 

No. we don’t make money out of it. The project is funded by the UK government. It’s free development money to help business develop. 

Free development money? Nothing like that exists…

Yes, free. There is no interest paid. We don’t want anything back. What we want you to do as a project applicant is to work with your funders to ensure that everything is okay. And, they understand the risk is being shared and you have a development partner, in this case, UK aid through TMEA and the LIFT Fund. 

How else do you help applicants? Does the story end with the funding? 

We are happy to liaise with you and open doors to the people you might need to speak with you, either partners or people who you might need regulatory approvals from. And we’ve done that successfully. 

When did round one start? 

The initial round started at the end of 2012. And then there was launching it, trying to raise awareness to potential applicants… 

If no interest is charged, what’s really in it for you then? 

In exchange of free money, we are expecting people who get the grants to demonstrate that not only will they develop the product but it will have a social impact and it’s beneficial. For example, if someone from Kigali was to approach us with a good project idea and the project was given a grant, they would have to demonstrate that it will have a big impact on the local Rwandan setting in reducing poverty, reducing costs in transport and basically giving Rwandan companies a better chance or opportunity to sell their products or services on a bigger stage which is the EAC and beyond. 

What lessons from round one then? 

People in Rwanda and Burundi said they needed more time to develop their concept because they don’t have the same network of support as exists in the big capitals like Dar es Salaam or Kampala or Nairobi. 

What do you mean by networks of support? What’s missing here? 

Well, the thing is, you know, that they don’t have access to the organisations other than the transport logistics companies. They are relatively young in terms of their trading experience internationally. When I took over the fund, I spoke to various beneficiaries. Those that did provide feedback said that in Rwanda, for example, ‘we need more time and we also need more support because some of these companies are quite small.’ 

They don’t have the marketing and communications functions but a small group of people doing everything and no time to develop a full proposal for a development project. We said we will give people more time to develop their concept and more time to talk to us so that our logistics experts can help them develop better proposals so they have a better chance of winning. 

And this launch is a good time to talk to them? 

Yeah, exactly. We finish around lunch time and, after that we have one to one meetings. We’ve already done one event in Kampala, and the last meeting finished after seven o’clock in the night. 

Is there a round three? Another chance?

We don’t have a round three. What the donors are doing is to try to stimulate the sector. They gave TMEA money to run LIFT as a challenge fund and then we also tried to run LIFT in two rounds, one, to see what the market was, who applied, and round two to see what we have learned from round one and what we can do better to increase the competitiveness of companies in EAC. 

What lessons or challenges were drawn from round one?

Challenges faced in round one include candidates with insufficient capital resources to successfully implement projects; long timelines to get projects to completion; and resistance from applicants to sharing data. 

What is your advice to Rwandans seeing that no Rwandan company has successfully applied before?

Have courage. Apply. The thing about entrepreneurs is that they like to do things differently. They like to do things for the first time. They are the people who are usually the most innovative, and these are the people that need to come forward with some confidence. 

There are companies that are doing well at the moment but the market changes and they have to think about how they are going to guarantee their competitive edge in six months’ time, in a year or three years, when the competition comes in. so, this is a fantastic funding support mechanism for entrepreneurs. So, have courage, and apply.

editorial@newtimes.co.rw