Eight local companies are so hard-up that they need a bail out if they are to survive, according to a report released by a local consultancy firm.
The companies are mainly agri-business in the domains of dairy, grain processing, and animal feeds. They are also listed as underperforming yet with great potential.
They are New Rucep, a hides and skins processor that requires Rwf212 million, Rabi agri-processor, (beans), Sonafruits fruit processors, Sopar animal feed, Sotiru wheat processor, Rubirizi milk processor, Utexrwa textile manufacturer, and Ikirezi essential oils processor.
The report is based on a survey conducted by Karisimbi Business Partners and commissioned by the Ministry of Trade and Industry.
The most worrying issue about the listed firms is their management deficiencies, lack of better understanding of the market, and high operational costs that cannot keep them competitive on the market, according to Carter Crockett, a partner in Karisimbi.
“Our work was to identify the challenges, show the potential and it’s the work of government to look for investors,” Crockett noted.
John Nkubana, Team Leader of Small and Medium Enterprises (SMEs) in the Ministry of Trade and Industry, told Business Times on the sidelines of a meeting convened to discuss the fate of the companies in question that Karisimbi business partners have conducted 13 studies in a period of one year for MINICOM to identify struggling local firms.
“It’s a concern for government, and we will continue to advocate for these companies, attract new potential investors to ensure they are revamped,” he said.
Head of Agriculture Development in Rwanda Development Board, Tony Nsanganira, said his institution would use its wider network to attract investors but to also talk to government on how these companies can be re-capitalised though venture capitalists.
“Some of these companies closed because of mismanagement while others are struggling financially, but they have high growth potential despite all the challenges,” Nsanganira observed.
He disclosed that already, investors from Kenya and South Africa have shown interest in Sopar, the animal feeds firm, but negotiations are still ongoing.
“We are discussing the mode of investments because an investor will have to inherit liabilities of these companies and it’s a challenge,” he added.
Some investors want a joint venture with government to be sure of their investments, so we are still discussing the best model, he added.
Ikirezi, the essential oils processor, is one of the companies said to have great potential.
It requires US$1 million as new equity from Foreign Direct Investments. The Rwanda Development Board (RDB) says it is expected to sell off the business.
Experts say once these sectors are fully explored, it would create a great impact on the economy in terms of job creation and generating revenue.