For the past few months, Nyamagabe district farmers have been grappling with low prices for wheat owing to the fact that the only available wheat processing facility in the area halted its operations.
The stalled wheat factory, Gitare Mills, is the largest in the region. The factory is co-owned by Société Mutuelle de Garantie et de Financement (SMGF) and a private investor, Venant Kabandana.
The biggest concern currently is that smallholder farmers are unable to sell their produce to national or regional markets.
Majority sell their grains to rural traders who usually offer prices well below the prevailing market rate.
The New Timeshas learnt that the owners of the factory are saddled with debt.
The company which operates the factory acquired a loan from Ecobank Rwanda to conduct its other businesses, but staked the assets of Gitare Mills as collateral.
The firm failed to honour its obligation and is now involved in a court battle with Ecobank to salvage Gitare Mills from possible auction.
Emmanuel Ndahimana, the Chairperson of Gitare Mills and the Managing Director of SMGF, confirmed that they defaulted on Ecobank loan, which halted the operations of the factory.
“It is true that Ecobank took over the factory after we failed to pay the loan that we had borrowed from the bank,” he said in agreement.
SMGF, which owns 43 per cent stake in the factory was charged with managing the operations of the factory.
Even though Kabandana owned majority shares in the factory, couldn’t oversee the management of the mill as SMGF had given him a loan, surrendering the right manage its operations.
Kabandana told The New Times that SMGF promised to inject more capital in the miller and that they wished to run its management.
“When I entered an agreement with them [SMGF], they requested me to run the management of the factory and because they were investing more money in operations, I did not deny them that right,” he said.
Kabandana, however, said that he had no clue that the factory had been staked in the bank as collateral because he was not involved in its daily management.
SMGF is a licensed local financial institution whose business line includes microfinance, trade finance and venture capital.
They have been financing everything from SACCOs, energy projects and small and medium-sized businesses.
Ndahimana claimed that the failure to continue operating the factory was beyond the loan default and largely a result of other external influence.
According to him, SMGF borrowed about Rwf340 million from Ecobank, part of which was invested in Gitare Mills and the rest was loaned to investors involved in infrastructural projects.
“In fact, we did not invest a big portion of the loan in the factory’s operations. The big share was loaned to private investors who were involved in road infrastructure and later failed to pay us back. Since we had secured the factory as a guaranty, Ecobank took it over,” he explained.
Willingness to revive factory
Francois Kanimba, one of the investors who are willing to revive the facility indicated that the fact that factory owners are in courts is a big impediment for them to move ahead with their investment.
“We know the company owners are in court and we don’t know the outcome of the court proceedings. This is a serious problem for us and addressing it is critical for us to move forward,” he noted.
Kanimba, the former Minister of Trade and Industry, together with a few other investors have established an investment company, Wheat Ventures Holding (WVH), with an idea to invest in Nyamagabe and Nyaruguru.
“Our mission is not to help farmers per se. We invest in wheat commercial farming with a bottom line objective of linking wheat farming to market. There is no fixed number of farmers we are planning to work with,” he noted, adding that they are currently negotiating a five years lease agreement with a few land owners.
If the existing wheat mill in Nyamagabe district can be upgraded to produce high quality flour, he added, their intention would be to link wheat farmers to the mill by aggregating the wheat produce and supply to the factory.
Wheat Ventures Holding is willing to operate the mill under a lease agreement to be negotiated with the owners of the mill, and they say the number of wheat farmers to be reached by such a programme is significant.
Wheat is one of the top crops grown in Nyamagabe District. The district is one of the 11 districts that grow wheat extensively. Most farmers however still practice on traditional farming and wheat farmers use poor post-harvest handling techniques, affecting productivity and production.
Kanimba says the potential in the wheat sector is big as currently almost 100 per cent of the wheat used by the wheat milling industry in Rwanda is imported.
“There is an import substitution opportunity if all efforts are made by different stakeholders to increase productivity of wheat farmers and improve the quality to compete with imported wheat,” he noted.
According to the assessment conducted, the investors need $60,000 (about Rwf54.1 million) for the factory to be upgraded and resume operations.