The document discusses Rwanda's party-statals and their potential impact on development. It defines party-statals as entities owned by Rwanda's ruling party, government, and military, with unclear ownership structures and lack of transparency. It analyzes three major investment holdings - Crystal Ventures, Horizon Group, and Rwanda Investment Group - and their subsidiaries operating across various economic sectors. While Rwanda has experienced strong economic growth, concerns are raised about the party-statals' efficiency, cross-ownership with state firms, and impact on stakeholders such as domestic competitors and unemployed citizens. The document calls for reforms to increase transparency and separate analysis of state-owned and party-owned entities.
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Ppt nilgun gokgur rwanda’s party statals- april 27 2012
1. RWANDA’S PARTY-STATALS:
Are they contributing or impeding development?
Nilgün Gökgür
nilgun.gokgur@gmail.com
Scholar-In-Residence
Institute of Development Policy and Management (IOB), University of Antwerp, Belgium
April 27, 2012 - ANTWERP
2. OUTLINE
• DEFINITION OF PARTY-STATALS
• RWANDA’S ACHIEVEMENTS IN PERSPECTIVE
• PARTY-STATALS IN ENTERPRISE LANDSCAPE
• THREE BIG INVESTMENT HOLDINGS AND SUBSIDIARIES
– CRYSTAL VENTURES LIMITED – CVL (Former Tri-Star)
– HORIZON GROUP LIMITED – HORIZON GROUP
– RWANDA INVESTMENT GROUP SA - RIG
• CROSS-OWNERSHIP WITH SOEs AND MILITARY ENTERPRISES
• DEVELOPMENT IMPACT OF PARTY-STATALS
– PARTY-STATAL EFFICIENCY
– DISTRIBUTION OF BENEFITS AMONG STAKEHOLDERS
• RWANDAN GOVERNMENT AND DEVELOPMENT PARTNERS
• OWNERS AND OPERATORS
• DOMESTIC AND INTERNATIONAL COMPETITORS
• UNEMPLOYED AND UNDEREMPLOYED RWANDANS
• ORDINARY RWANDAN AS CONSUMERS
• CONCLUSIONS AND RECOMMENDATIONS
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3. WHAT ARE RWANDAN PARTY-STATALS?
Party-statals are not state-owned enterprises (SOEs)
Party-statals are owned either fully or partially by the ruling
party (RPF) together with directly or indirectly by the
Government of Rwanda (MINECOFIN), directly and indirectly by
the military (MINADEF), and RPF-connected business elite
There is NO political distance between Rwandan state and the
party-state statals; “elite capture” in play
No publicly available data exist on their legal status, exact
shareholding structure, assets, accumulation of economic rent
or profits, allocation of operating surplus to investment and
social obligations; and their borrowings from the financial
sector and payback rate
No donor requested a study on impact assessment on
stakeholders—government, donors, owners and operators,
competitors, labor and ordinary Rwandans as consumers
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4. PARTY-STATALS
Ruling Party (RPF), State, Military and Business Elite Connectivity
GOVERNMENT RULING PARTY -RPF
of RWANDA
MINIDEF MINECOFIN- 30 RPF-linked
SOEs Business Elite
Horizon Group Ltd Crystal Ventures Rwanda Investment
2006 Limited (CVL - Group SA (RIG)
2 fully-owned; Former Tri-Star since 2006
6 partially-owned 1994) 3 majority-owned
(CVL, SOEs, RDB, 8 fully-owned; with GoR as an
and one UK firm as 2 partially owned equity partner;
equity partners) (GoR, SOEs, and 3 partially owned
Horizon Group as with SOEs as equity
equity partners) partners
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5. RWANDA’S GROWTH AND DEVELOPMENT IN PERSPECTIVE
ECONOMIC GROWTH (8% on average over the last decade)
REDUCTION IN POVERTY and INEQUALITY
Poverty declined from 56.7% in 2005/06 to 44.5% in 2010/11
Gini Coefficient decreased from 0.52 in 2005/06 to 0.49 in 2010/11
GOVERNANCE INDICATORS
Economic Governance (government effectiveness and regularity
quality)
Institutional Governance (rule of law and control of corruption)
Political Governance (voice and democratic accountability,
political stability and absence of violence)
PRODUCTIVE EMPLOYMENT CREATION RECORD ALARMING
Decline in on-farm employment from 89% of the working
population in 2001/2 to 72% in 2010/11
Without commensurate increase in employment /job creation
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6. ECONOMIC INDICATORS EXPLAINING GROWTH
2006 2007 2008 2009 2010 2011
GDP Growth
9.2 5.5 11.2 6.0 7.6 8.8
Share of Public Investments in GDP
6.9 7.8 10.4 10.0 11.1 10.7
Share of Domestic Private Investments (including SOEs) in GDP
12.8 12.4 13.1 11.3 11.7 12.0
Share of Foreign Direct Investments in GDP
1.2 2.2 2.2 2.3 0.8 1.5
Share of Government Revenue in GDP
12.1 12.3 14.9 12.8 13.2 14.1
Share of Official Grants in GDP
8.0 9.7 9.5 10.0 11.7 12.9
Source: Compiled from IMF, World Economic Outlook Database, September 2011
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8. RWANDA’S ENTERPRISE LANDSCAPE
Type of Businesses Number of % Persons %
Businesses Employed
Enterprise sector (including 116,839 95 224,659 80
party-statals)
Cooperatives 1,877 1 25,264 9
Non-Profit Organizations 4,238 3 16,968 6
Public/Mixed Sector/Health and 572 1 15,105 5
Education
TOTAL 123,526 100 281,946 100
Source: Compiled from Establishment Survey 2011
Employment in enterprise sector constitutes only 16% of non-agricultural workforce of
1,406,000 according to EICV3, Main Indicators Report, NISR, 2010/11; remaining 84% work
predominantly in Household Enterprises (HEs), a sub-set of micro enterprises with one worker
and un-paid household help, and 2% in public works.
9. EMPLOYMENT BY ECONOMIC SECTOR IN 2011
Share of Share Of
Employment Businesses
AGRICULTURAL SECTOR 8 0.5
INDUSTRIAL SECTOR 13 4.1
-Mining 0.1 0.0
-Manufacturing 9.4 3.7
-Construction 2.0 0.0
-Electricity/Water 0.1 0.3
SERVICES SECTOR 79 95.4
-Retail trade/repair of motor vehicles and 34.1 52.5
cycles/transportation, storage
-Accommodation/food service activity 21.2 26.7
-Other services 23.7 15.8
TOTAL IN PERCENTAGES 100 100
TOTAL EMPLOYMENT AND BUSINESSES 281,946 123,526
Source: Compiled from NISR, Enterprise Survey 2011
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10. DISTRIBUTION OF EMPLOYMENT BY SIZE-CATEGORY IN 2011
Kigali Southern Western Northern Eastern TOTAL
City Province Province Province Province
LARGE (+100 Workers)
Businesses 51 16 22 12 5 106
Employment 12,600 4,900 17,800 8,800 900 45,100
MEDIUM (30 – 100 Workers)
Businesses 204 123 74 71 41 513
Employment 10,100 5,800 3,400 3,400 1,900 24,600
SMALL (4 – 30 Workers)
Businesses 3,147 1,508 1,518 1,242 1,133 8,548
Employment 25,400 12,800 11,500 9,700 8,200 67,000
MICRO (1 – 3 Workers)
Businesses 25,767 22,253 24,147 20,750 21,412 114,329
Employment 34,300 27,400 29,400 27,000 26,400 144,600
Source: Compiled from NISR, Establishment Survey 2011
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11. FACTORS EXPLAINING TINY SIZE OF ENTERPRISE SECTOR
• Unsuccessful/failed privatization program
• Not proper sequencing of reforms for competition and regulation
• No proper competitive tendering process
• No Competition Law-Policy or Competition Commission
• Only in November 2011 Competition and Consumer Protection
Law passed the Parliament / Ineffective Competition Unit at
MINICOM
• Expansion of Party-statals over last 18 years
• Now owners and operators of several privatized entities
• Increasing cross-ownerships with the SOEs and the military
enterprise and among themselves
• Inevitable and unavoidable “elite capture”
• Economic weight (share in GDP, investments and employment)
and share in financial sector NOT yet measured but high and
increasing….
12. THREE INVESTMENT HOLDINGS and SUBSIDIARIES IN VARIOUS
ECONOMIC SECTORS, 1994-2012
CRYSTAL VENTURES HORIZON GROUP LIMITED RWANDA INVESTMENT
LIMITED FULLY-OWNED GROUP (RIG) SA
FULLY-OWNED Horizon Construction 2006 MAJORITY-OWNED
Real Contractors 2005 Horizon Logistics 2006 CIMERWA 2006
NPD/CONTRACO 1996 RWANDA Energy Company
MUTARARA Enterprises 1995 PARTIALLY-OWNED 2008
INYANGE Industries 1997 Horizon Sopyra 2009 Peat Energy Company 2009
BOURBON COFFEE SHOPS Gaculiro Property Developers Multisectoral Investment
2007 (GPD) 2008 Group (MIG) 2008
GRAPHIC PRINTING Building Materials Industries
SOLUTIONS 2009 (BMI) 2009 MINORITY-OWNED
INTERSEC SECURITY 1994 Commercial Complex in Kigali Ultimate Concepts 2010
MEDIA GROUP SYSTEMS ? 2010 Kigali Convention Center 2011
PARTIALLY-OWNED Green Horizon 2010 (in the process of getting its
MTN RwandaCell 1997 financing together despite
Africa Agropharm 2011
having reached IMF’s ceiling
Building Material Investments of US$ 250 for non-
(BMI) Limited—East African concessionary loans)
Granite and Ruliba Clays 2009
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13. PARTY-STATAL CROSS-OWNERSHIP WITH
STATE-OWNED AND MILITARY ENTERPRISES
Year Direct and Indirect Equity Participation in Party-
Established Statals
Caisse Sociale du 1962 CVL, Building Materials Industries (BMI), Real
Rwanda (CSR) Contractors (Kacyiru Apartments); Horizon Group,
Gaculiro Property Developers (GPD), Building
Materials Industries Ltd.(including East Africa
Granite Industries and Ruliba Clays Ltd.); RIG,
CIMERWA, Kigali Convention Center
Primeholdings 2003 RIG directly, Ultimate Concepts, Kigali Convention
Center directly, and indirectly in all other
subsidiaries
Military Medical 2005 Horizon Group directly and indirectly in all its
Insurance Scheme subsidiary companies
(MMI)
ZIGAMA-Credit and 1999 Horizon Group, Horizon Construction, Horizon
Savings Society Sopyrwa, Horizon Logistics, Gaculiro Property
(CSS/Micro Finance Developers (GPD), Green Horizon, Commercial
Institution) Complex in Kigali City, Building Materials Ltd., Africa
Agropharm
Source: Compiled from data on party-statal websites and SOEs from MINECOFIN
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14. IMPACT ON PARTY-STATALS ON EFFICIENCY
• FAVORABLE ACCESS TO STATE RESOURCES THROUGH
GOVERNMENT CONTRACTS
• PRIVILEGED POSITION IN PROCUREMENT
• NO INCENTIVE MECHANISM TO DETECT INEFFICIENCY AND
RENT-WITHDRAWAL SIMILAR TO ASIAN COUNTRIES
• CASE STUDY: MERGING HOUSING BANK OF RWANDA (HBR)
WITH RWANDA DEVELOPMENT BANK (April 2011) AFTER POOR
PERFORMANCE OVER THE YEARS
• GUARANTEES OF FIXED ASSETS AND FIXED RENTS
• PARTY-STATALS OPERATE WITH CONFIDENCE IN FIXED
RENTS AS WELL AS FIXED GUARANTEES IN THE ABSENCE OF
ANY PROPER RENT-MANAGEMENT SYSTEM
• CASE STUDY: CIMERWA; GoR HAD TO INCREASE ITS EQUITY
IN CIMERWA TO BORROW AND GUARANTEE LOANS FROM
KENYA COMMERCIAL BANK AND AFRICAN DEVELOPMENT
BANK FOR THE NEW PLANT; CIMERWA DID NOT INVEST AND
INCREASE PRODUCTION, RWANDA HAD TO IMPORT AT HIGH
PRICES. (October 2100) 14
15. IMPACT OF PARTY-STATALS ON STAKEHOLDERS
• RWANDAN GOVERNMENT AND DEVELOPMENT PARTNERS (NEGATIVE)
• INCREASE AND DECREASE IN NET FISCAL FLOWS FROM INEFFICIENTLY
OR EFFICIENTLY OPERATING ENTERPRISES
• OWNERS AND OPERATORS OF ENTERPRISES (POSITIVE)
• INCREASE IN PROFITS AND DIVIDENDS FROM EFFICIENT OPERATIONS
• CROSS-SUBSIDIZATION POSSIBLY LEADING TO NEGATIVE GAINS
• DOMESTIC AND INTERNATIONAL COMPETITORS (NEGATIVE)
• DOMESTIC BUSINESSES WITHOUT CLOSE TIES TO RPF EXCLUDED
• HIGH MARKET CONCENTRATION OF PARTY-STATALS
• LARGE DEMAND ON DOMESTIC BANK BORROWING
• PREFERENTIAL TREATMENT IN GOVERNMENT PROCUREMENT, IN
TAXATION, IN USE OF SUB-CONTRACTORS RPF-LINKED SMEs
• INTERNATIONAL BUSINESSES WITHOUT CLOSE TIES TO GOR
EXCLUDED
• UNEMPLOYED AND UNDER-EMPLOYED RWANDANDS (NEGATIVE)
• ORDINARY RWANDANS AS CONSUMERS (NEGATIVE)
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16. CONCLUSIONS AND RECOMMENDATIONS
TRANSPARENCY-LED REFORMS
ENHANCING TRANSPARENCY AND DISCLOSURE
MEASURING AND MONITORING STATE AND PARTY-STATAL
RELATIONS IN TWO SEPARATE CATEGORIES:
TWO CONSTRUCTION COMPANIES: CVL’s NPD/CONTRACO (civil
works) and HORIZON CONSTRUCTION (building roads): PERHAPS
NATION-BUILDERS BUT AT WHAT COST?
REST OF CONTRUCTION PARTY-STATALS, CONSUMER GOODS
PRODUCERS, AND OTHER PARTY-STATALS
FORMULATING PRODUCTIVITY-AND-JOB-RICH GROWTH
SEPARATING SOEs AND MILITARY ENTEPRISE FROM PARTY-
STATALS
INCREASING COMPETITION AMONG CONSUMER GOODS
PRODUCING PARTY-STATALS AND THE ENTERPRISE SECTOR
DEVELOPING EXIT STRATEGY FOR PARTY-STATALS
ASSETS COULD BE TRANSFERRED TO PUBLIC SECTOR
ASSETS COULD BE TRANSFERRED TO A TRUST FUND
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