Government is set to initiate measures aimed at cracking down on companies it accuses of breaching contracts or failing to implement their business plans.
While government initiated a host of business reforms as part of its strategy to liberalise the market and attract investments, it has been a victim of “brief case companies”.
Daniel Ufitikirezi, the head of State Property at Rwanda Development Board (RDB) told Business Times that strong measures are in the pipeline including tightening the due diligence procedures ahead of the proposed privatisation of five companies.
Government plans to privatise Hotel Umubano, Rwanda Printing and Publishing Company (RPPC), Mulindi Tea Factory, Shagasha Tea Factory, Nyagatare Dairy and the National Hatchery by the end of this financial year.
“The problem is that some investors present “briefcase companies” which in the long run affects business and the market they operate in,” Ufitikirezi said, disclosing that strong clauses would be initiated targeting investors who fail to implement the business plans as presented.
He explained that government in the past has experienced challenges of investors capable of presenting viable business but who do not walk the talk.
Some companies accused of failure to honour their contractual obligations include Dane Associates, which prompted government to hold back its share of the contractual sum for the project to extract the Methane gas from Lake Kivu.
In 2005, Terracom, an American company, took over Rwandatel promising to revamp the telecommunication sector by buying new state-of-the-art equipment such as satellite dishes and new servers.
However, Terracom fulfilled none of its pledges but wne ahead to fired 130 employees, in the name of creating efficiency.
Rwandatel’s mobile operating license was earlier this year annulled after telecom regulator, Rwanda Utilities Regulatory Agency, accused it of failure to honour contractual obligations. Libya’s LAP Green is the majority shareholder in Rwandatel.
“Yes, we have seen failed companies that were privatised, but some clauses allow us (Government) to repossess them and this has happened to Rwandatel twice. But all in all, we have seen big improvements especially in tea factories,” the Minister of Finance and Economic Planning, John Rwangombwa said.
According to Rwangombwa, the future sale of State owned companies will be through open tenders, which gives room for due diligence.
“We have a strong team in RDB and is capable of knowing the people we are dealing with and in charge of transactions,” Rwangombwa noted.