Last week, Rwanda’s sovereign wealth fund, Agaciro Development Fund (AgDF), announced that it had invested over $8 million in the capital stock of the Eastern and Southern African Trade and Development Bank (TDB), becoming its latest institutional shareholder. Headquartered in Bujumbura, Burundi, TDB, formerly PTA, is also commonly known as the financial arm of the Common Market for Eastern and Southern Africa (COMESA). Agaciro becomes the first sovereign wealth fund to invest in the bank joining a total of 18 other institutional investors from Africa, and the rest of the world including pension funds, insurance companies, and development finance institutions among others. The move, fund management says is mainly informed by the need to diversify investment especially in the international community where its investment is still undersized. The investment also comes at a time Agaciro recently divested two local firms, Multisector Investment Group (MIG) and the Mushubi tea factory, bringing its portfolio down to 31 companies. The New Times’ Edwin Ashimwe caught up with the Fund’s Chief Executive, Gilbert Nyatanyi, on Monday, October 17, for a breakdown on the recent development, current performance of the fund, profit base, as well as anticipated short-term investments. Excerpts; To start with, what is Agaciro Fund’s shareholding in the bank following the $8 million outlay? Though $8 million is huge for us, it remained quite modest for TDB. The bank has some stronger players, but for us the most important thing is to diversify our investment, be it in terms of assets or geographical. Until now, we have one investment abroad, which is in the United Kingdom (UK) and it’s around 0.65 per cent of our Assets Under Management. So, it’s really very small and so is the investment in TDB where we will acquire 0.47 per cent. In addition to Agaciro, we also have Rwanda Social Security Board (RSSB) and the Government of Rwanda investing in the bank. When combined, the stake is slightly above 6 per cent. What informs the decision to invest in foreign stocks, especially at a time of global economic turbulence? First of all, when you look at the global picture for the moment, you see how Europe is struggling; you look at the inflation pressures in the US, the UK. When you also look at the Rwandan franc compared to the United State Dollar, let’s say from the past 6-7 years, we went from Rwf700 to Rwf1000, and looking at TDB, they have been paying dividends on return on equity investment between 13 per cent and 10 per cent. So when you take that into account, performance of TDB, position of the Rwandan franc, position of the United State Dollar, the global economic outlook, then we think it’s a good investment on our end. We also make the comparison between term deposits in Rwandan francs, and treasury bonds, and when you do the calculations, figures don’t lie. Does that not add on the risk? Not really, because TBD is a regional focused bank. It’s not one that will be exposed to the western or American turmoil. There were mixed reactions when you announced the development, with part of the people expressing concerns that their money is invested abroad. How do you respond to this? True. I have seen some of the reactions of people saying that they are taking our money abroad. But in 2022, abroad has become very relative. (Today) We are part of the East Africa Community (EAC) and also the Africa Continental Free Trade Area (AfCFTA) where you have free movement of goods, people. But again, based on the figures, this is really something important for Agaciro, for the country and also for Rwandans. This investment is quite substantial, and again TBD is becoming more and more involved in the Rwandan economy. It’s not something that went out and will never come back, because that money will be part of the money that TDB will invest in Rwanda and in other countries. But again, the dividends received are welcome for the economy. Expected return and feasibility? Our target, based on the figures, is realistic. Its 10.2 per cent return on equity. Meaning for an investment of $8 million, we receive $800,000 every year. I think the number is realistic because in the past, it has even been up to 13 per cent. Let’s say 10 per cent is really realistic. But do you think some of the concerns are valid, particularly investing in local firms? This is something that we will have to look at more closely. This is part of our strategic plan elaboration, and very soon, not later than next month, we will start elaborating our new strategic plan. So among the points to focus on is our role in contributing towards the socio-economic development of the country. We should be able to identify gaps for us to support the SMEs, or even the micro enterprises, medium enterprises among others. But also, very importantly is to look at our portfolio. It used to be at 33, we are now at 31. We really need to market and see which companies we need to keep, which companies to turn around, look for strategic partners, or turn around and sell or just sell straight away. Our aim is to empower such companies making them a reference for the country, making them a reference for the region. Circling around my previous question, what is the current state of the fund? We are now at $269 million dollars, coming from $250 million last year. The categories still remain the same; we have equity investment-74 per cent, we have fixed income-24 per cent, and we have one small percentage which is cash and cash equivalent. And also related parties transactions. Compared to last year, our assets under management increased, we are of course still looking at how to increase it. Does that mean you have major investments in the pipeline? We are not planning any new investment in the very short term, because we want to first fix our strategic plan, and to know what we will focus on. Based on that, we can now make targeted investment in line with our strategic plan. But of course if there is any opportunity we would like to make, we would not mind. We really need to deep-dive into our portfolio companies. Sometimes there are drastic unpopular decisions to be made, for those that are not performing. But there are also those that we can look at and see potential. For such, we will be working towards scaling them and getting the potential out of them. This is something that is really urgent, and has to go hand in hand with our strategic plan. How would you rate your current profit base? Compared to two years ago and now, we moved from two or three companies paying dividends, to about nine companies paying their dividends. So this is something we really need to focus on and see how we can maximise the value of our shareholding in these companies. And this will be part of our deep-diving into portfolio companies, of course dividends are an important fact to look at but it’s not the only one. We can have companies in our portfolio which have huge potential, and we have done little to support them to exhaust their potential. But for dividends, we still have a lot to do. How does this affect you at the end of the day? We used to have a position where we felt we had to intervene in these companies, but what we are trying to do now is to make them (companies) responsible. Before, they used to bail us out on grounds that whether they pay back or not it remains the same. Today, if you want a shareholder loan, we will of course not apply the interest rate of 16 per cent or 18 per cent, but you will still have to pay an interest of 10 per cent. If you are a defaulter, we will send you a default notice. Another option is to facilitate them through getting a bank loan, so that at least they know they owe that to the bank. Before, it used to be quite costly but we are moving now to make them feel responsible, business minded and business oriented. Parting words Maybe to clarify that voluntary contributions have not been phased out. It is true there is no more obligation, or strategy on going back to contributions but we are not locking doors for those who want to make their contributions. Accounts are still available.