Why Rwanda has changed the policy on privatisation

Former National Transport Company (ONATRACOM) buses parked in Kigali. RITCO became the private company to own those buses. / Sam Ngendahimana

Over the years, the government of Rwanda has reiterated its intentions to divest from business operations especially in sectors where private sector entities have demonstrated efficient management and competitiveness.

However, since the beginning of privatisation in 1996, the process has not always been smooth or without any flaws. 

 

In response to the challenges observed and lessons learnt over the years and to improve the privatization process of state-owned enterprises, Cabinet last week approved a Privatisation Policy and Strategy.

 

According to the Rwanda Development Board (RDB) which is steering the process, the new instruments which are yet to be gazette, aim at rectifying gaps and overlaps with existing laws. 

 

Globally, there have been emerging trends and practices in privatisation, some which Rwanda is yet to catch up with, the new policy and strategy will also address said gaps.

The move also aims at reducing the number of state-owned firms that continue to experience challenges such as poor performance characterised by mismanagement, underestimating investment costs and excessive indebtedness. 

Despite having plans to privatise some state-owned companies, there has not been clear priorities of firms to undergo the process which will also be solved by the new policy and strategy.

“The policy indicates parameters for the management of the privatization process; factors that can lead to identification for a state-owned asset to be privatized, relevant instruments to be used to privatise a state-owned enterprise, strategic considerations for the selection of the privatisation instruments,” a concept note by the Rwanda Development Board.

Among the proposed changes in the new policy and strategy include clear parameters to identify state-owned enterprises for privatisation.

This will be clearly defined through qualities such as companies operating in sectors where there is substantial private-sector competition in existence as well as companies that are neither generating revenues nor holding national interest to the government.

Others characteristics of companies to be privatised include firms operating in sectors which private sector entities can successfully demonstrate more efficient management.

The development will also set privatisation instruments such strategic sale, public offers, secondary market operations, private placements, trade sales or asset sales and liquidation among others. This will set defined approaches based on the context of each company.

According to a concept note of the privatisation policy seen by The New Times, to improve outcomes, the process will have defined stages; pre-privatisation, privatisation and post-privatisation.

Pre-privatisation stage will include state owned enterprises research on aspects such as business and asset valuation, market and demand studies, assessment of the workforce, supply chain assessment, due diligence of the state-owned enterprises, planning and budgeting and stakeholder consultations.

This will ensure there is value for money and return on investment.

The post-privatisation process according to officials will include regulatory oversight or instances where the government can maintain a minority stake in companies under which it shall enjoy minority shareholder rights as provided under the law governing companies.  

There are also plans to update existing laws on privatization that have been overtaken by new legal framework as well as take into consideration lessons learnt from the past 24 years.

Last year in September, government put up for sale three agribusiness firms; Burera Diary Limited, Nyabihu Potato Company and Rutsiro Honey Ltd in September last year.

So far, only Burera Diary has so far been successfully privatised.

cmwai@newtimesrwanda.com

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