State-backed corporations vie to dominate Rwanda's business landscape

In a battle between the ruling Rwandan Patriotic Front party and the nation's army, one might be hard-pushed to back a winner.

The scenario itself is not as far-fetched as it might sound. To rebuild Rwanda after the 1994 genocide, both party and army established private corporations to do everything from bridge construction and coffee export to mining granite and making shoes.

"When the struggle ended, government coffers were completely empty - not a cent was left in the central bank, not a cent was left in the commercial banks," says a party member familiar with the corporations. "Our party had accumulated some monies from contributions during the struggle and we built the country with it."

Crystal Ventures, the private company born out of the ruling RPF, and Horizon Group, still under the control of the ministry of defence, employ 11,000 workers between them. Among their many undertakings, from property to agro-processing, packaging to telecommunications, they compete with each other for road-building contracts.

This year, the Kigali city administration split a road-building tender down the middle between Crystal and Horizon. Along a misshapen dirt road in the residential back streets of Kigali, big trucks are preparing the ground for 400 Horizon workers to lay 35-kilometres of aggregate as part of a $18.5m contract. NPD-Cotraco, the engineering subsidiary of Crystal Ventures, won the contract for the other 35km.

"At times we win, at times NPD-Cotraco wins, at times the Chinese win," says Sam Kayitare, technical adviser to Eugene Haguma, Horizon's chief executive and a former high-ranking army officer. "Now we have too much work."

Horizon has 15 projects on the go outside the capital alone. It has lately completed contracts such as building the Kigali public library, maintaining the airport runway and constructing border posts.

Mr Kayitare beams as he explains that in 2008 Horizon became the first local company to build an asphalt road. Horizon and Crystal are the only domestic entities that have the ability to execute such contracts. "In future, Chinese and other companies will be phased out as we gain capacity," he says.

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Academic Nilgun Gokgur, in a 2012 paper for the university of Antwerp, describes them as "partystatals" that function as "extractive economic institutions, concentrating power and opportunity in the hands of only a few".

She talks of an "incestuous relationship" with contract-awarding ministries and national banks that has operated the detriment of the private sector. "The ruling party is intolerant of any economically powerful private sector that could constrain the state," she argues, adding that state companies have absorbed scarce fiscal and monetary resources.

Others worry about who exactly profits from Crystal Ventures' operations. Its owners are described solely as "Rwandan business people" on its website. "It's very hard to track their tax records," says a senior western diplomat. "It's a weird and really vague structure and the thing that is not clear is who benefits."

The World Bank, asked by the government to analyse the role of the partystatals, this year gave the all-clear. "The Government asked us to look into levels of competition in sectors where it is sometimes assumed party-owned companies dominate," says Carolyn Turk, country manager at the World Bank. "In the sectors that we explored and using the data available to us, we found no real evidence that these companies were engaging in non-competitive behaviours or earning abnormal profits."

Several Crystal Venture subsidiaries are lossmaking, limiting the ability of government to sell its stakes, as it has with more profitable investments such as telephone operator MTN.

Inyange Industries, the dairy, water and fruit juice processor owned by Crystal Ventures with a near-monopoly on milk sales, has a modern factory but one that at present only operates at 40 per cent capacity. "Most of the raw materials are imports so it's really tough on us," says Kris Romeo Kabalira, sales and marketing manager at Inyange. The company, which collects milk produced nationwide, is diversifying into ice cream and butter but says its actions remain limited by Rwandans' low buying capacity. A deal last year to sell to Kenya's Brookside Dairy fell through.

"Some of [the subsidiaries] are lossmaking but in the end the assets are growing, the turnover is growing," says a Crystal Ventures shareholder, adding that Crystal will sell its stakes when the time is right. "You can't allow a situation where the party is broke," he says.

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