Kinazi Cassava Plant is set to receive a bailout from government as it desperately seeks to turn around its unprofitable business operations.
The intervention was informed by government assessment of the operations of Kinazi Cassava Plant, which revealed that the firm was operating below capacity.
The assessment also revealed that the firm is grappling with technical issues such as insufficient equipment.
Kinazi cassava plant based in Ruhango District. President Kagame recently suggested that government should divest from unprofitable ventures. File.
The assessment is part of the government effort to identify local firms in which it holds shares that are unprofitable or not performing at full capacity.
Ruhango-based plant’s shareholders are the Development Bank of Rwanda and Agaciro Development Fund.
The Minister of Trade and Industry Soraya Hakuziyaremye told The New Times that following the assessment, they established key aspects that need intervention.
Top among the challenges is equipment which was found to be a limiting factor.
Hakuziyaremye said that with the right equipment, the production capacity of the plant can be boosted significantly.
The intervention will involve recapitalisation as well as overall business restructuring to make it profitable.
The firm was established in 2012 under the financing of the Development Bank of Rwanda with an investment of Rwf6 billion.
At the time, it aimed at creating a market for cassava, reducing farmers’ post-harvest losses as well as add value to the food crop. Ruhango District is one of the major cassava growers in the Country.
However, over the years, the firm has been grappling with numerous challenges including low cassava supplies from farmers to meet its input needs, low quality of cassava from farmers and limited technical capacity among others.
The minister said that most of the challenges have been dealt with over time with equipment being the remaining one.
According to Emile Nsanzabaganwa, the Chief Executive Officer, in the last three months of 2018, the production capacity averaged around 67 per cent but across the year 2018, capacity was about 25 per cent.
The factory has the capacity to produce 30 tonnes of flour per day, equivalent to 7,200 tonnes per year.
The challenges in capacity have persisted in the midst of the rising production of cassava by farmers.
According to the Ministry of Agriculture and Animal Resources, cassava production increased to more than 1.127 million tonnes in 2018 from 1.041 million tonnes in 2017
The local demand for cassava has also gone up as it increasingly becomes a vital ingredient for making pizza, bread, biscuits and chapattis.
The firm also recently had its certificate of registration by the United States Food and Drug Administration (US FDA) renewed guaranteeing them access to the American market.
If the intervention is successful and the company becomes profitable, government will exit from the business.
This is part of the government’s move to divest from businesses that are not paying off as well as hand over profitable ventures to the private sector.
More industries are being analysed and considered for sale-or-keep would be based on factors including government priority sectors and impact.
The intervention to firms such as Kinazi the ministry said is also meant to prepare firms to serve the local market as well as be competitive to enter regional markets as the African Continental Free Trade Area Agreement implementation date draws closer.
Other ongoing interventions include facilitation to standards compliance, research and development and reduction of production costs among others.