The performance of Rwanda Development Board (RDB) has come under scrutiny after one of the leading investors in agro-processing by-passed it and instead sought direct assistance from the Ministry of Trade and Industry.
In an attempt to sort out barriers it says it encountered while putting up its investment in the country, Bakhresa Grain Milling Rwanda Ltd, a subsidiary of Bakhresa Group, sidestepped RDB’s Investor after Care department.
The Investor after Care department is a specialised unit that handles various issues concerning investors once they set up shop in Rwanda.
Among the issues that the department handles is what can be termed “the customer services” for new investors in order to have them smoothly facilitated as they hit the ground running to put up their investments.
In what may be seen as a lapse in the activities of RDB, the Minister of Trade and Industry, Francois Kanimba, has moved in to resolve an ongoing row between Bakhresa and various institutions involved in dealing with investors.
Kanimba intervened after Bakhresa wrote a letter to the ministry, containing a list of complaints after it set out to invest in the country.
Bakhresa Group is one a leading industrial house in Tanzania, but also operates in Zanzibar, Uganda, Kenya, Malawi, Zambia, Mozambique and Rwanda.
The firm’s concerns include what it calls delays or mishandling by various public institutions to sort out various challenges it encountered.
In the letter, a copy of which Business Times has seen, Bakhresa cites what it calls frustrations it endured as one of the first investors to take up space at Kigali Special Economic Zone.
“Despite the initial bottlenecks, we have started our commercial production. However, the project has encountered unforeseen cost overrun by more than US$3.5 million,” the letter reads in part.
It also pointed an accusing finger at Rwanda Revenue Authority (RRA), Kigali City Council (KCC), Rwanda Environment Management Authority (REMA), and Kigali Industrial Park Ltd (KIP), the former operators of the Kigali Special Economic Zone.
The company says its investment of over US$24 million towards putting up an ultra-modern wheat milling factory, has faced a number of challenges.
The delays, the investor says, is primarily the reason it has incurred an extra cost burden of US$3.5 million.
The challenges, according to the letter, started when KCC advised the investor to purchase land near Masaka only for the former to reject the allocation of the Masaka land and the subsequent permission to set up the project.
Instead, KCC allotted Bakhresa an undeveloped plot at Kigali Industrial Park, now renamed Kigali Special Economic Zone. In the process, Bakhresa lost what it termed as “five valuable months”, the company says.
RDB’s Chief Operations Officer, Clare Akamanzi, explained that Bakhresa came in at a time when the Kigali Master Plan was under development and the transition into the new plan led to the decision to allocate the investor a new site at the zone, adding that whatever liabilities incurred by the investor that arose out of the new move will be settled out amicably.
“Bakhresa’s liabilities are acknowledged by all parties and, once the Kigali Special Economic Zones (KSEZ) is fully established, Bakhresa will be compensated,” she explained.
When contacted for a comment, the Director of Communication and Media at Kigali City Council (KCC), Bruno Rangira referred Business Times to the Mayor of Gasabo, saying that land issues are handled at district level.
“They (Bakhresa) should not be asking for any compensation because the district never sold the land to them. Our mandate was to allocate land for construction,” Willy Ndizeye, the Mayor of Gasabo District said.
He added: “Bakhresa bought a new plot and the factory is up and running, so they should not be complaining now.”
Bakhresa also accuses Rwanda Environment Management Authority (REMA) of dragging its feet, while processing its application.
The environmental body is accused of delaying the project by four months arising from application for environmental clearance and building permits for the project site.
However, the Director General of REMA, Rose Mukankomeje, told Business Times, in a phone interview, that: “We have clear laws and procedures that we follow; if Bakhresa’s applications were approved two years ago and are now operating; I think they should not be complaining now.”
She added that REMA has laws and regulations it follows and that the environmental watchdog was not a one-stop-centre organisation, dismissing Bakhresa’s case as “none issue”.
RDB is cited as having not taken ample and timely action to address part of the extra cost burdens the investor paid while developing a plot of land that was meant to be fully serviced as a specialised economic zone.
“The site had no infrastructure services as promised by KIP Ltd. We had to purchase our own power and water supply. The issue is well known by RDB and we asked them to facilitate in vain,” the letter states.
To date, the investor cites lack of adequate electricity at the project site as one of the reasons still impacting on the project rollout as they have to rely on generators.
Bakhresa explains that Rwanda Revenue Authority (RRA) suspended a VAT refund claim it lodged of approximately US$1.5 million, a decision the investor says “hampered our operations very badly as it affected our working capital to date.”
The investor is still reclaiming a further deposit of over US$1m it paid to RRA as caution deposit for importation of 23 semi trailers from Tanzania under the East African Community Certificate of Origin.
Upon receipt of the letter, dated September, 21 2011, Minister Kanimba called for a meeting between the investor on one the hand, and the concerned public agencies, on the other hand, for the purposes of sorting out any form of poor working relationship that could have existed.
“We apologise for such mistakes if they were committed,” Kanimba said during the meeting last week.
The minister further reiterated that the government’s vision, as far as promoting investment was concerned, is to create a friendly investment climate for all.
Bakhresa Managing Director, Mounir Bakhresa, said he was satisfied with the minister’s visit of their facility which he said gives them assurance that the issues the company raised would be solved soon.
Rwanda Revenue Authority (RRA)’s Commissioner General, Ben Kagarama explained that Bakhresa’s refund request, for its caution deposit amounting to US$1m, which was brought to their attention in 2010, was delayed due to an ongoing audit but refuted suggestions that RRA had opposed the request.
“The audit is done and the two parties are working on reaching a common amount to be reimbursed,” Kagarama explained.
The complaints lodged by Bakhresa bring into focus the management of Kigali Free Economic Zone which has since changed hands. Initially, the zone was handed over to Rwanda Investment Group (RIG) through a specially incorporated purpose company, known as Kigali Industrial Park Ltd (KIP).
It is believed that KIP could not muster the heavy capital that was needed to run the special economic zone, prompting the government to take over its operations through the Rwanda Development Bank (BRD).
RIG has been in the news lately when it was reported that its other major investment at the national cement maker, Cimerwa Ltd, ran into financial difficulties. The company failed to secure funding needed to turn around the cement firm after its privatisation five years ago.
Reported by John Gahamanyi,
Fred Oluoch-Ojiwah & Saul Butera