BusinessExecutivesPEOPLE | Clare Akamanzi : Business development at the grassroots

Mon,16Jul2018

Posted on Tuesday, 19 June 2018 15:21

PEOPLE | Clare Akamanzi : Business development at the grassroots

By Charles Idem in Kigali

PAUL KAGAME/FLICKR
The chief executive of the Rwanda Development Board has far-reaching plans to build up the local business class and achieve the country’s ambition of middle-income status

 

As the woman steering the Rwanda Development Board (RDB), Clare Akamanzi has a big goal: “We want to be a middle-income country. What that means is that we want our per capita income to grow from $740 to $1,240. What drives that? We hope it will be services in the future. We hope it will be manufacturing in the mid-term,” she says. Her institution is the fulcrum of Rwanda’s bootstrapping development, closely aligned to the presidency and wielding significant power and resources.

And it needs them, because it has to square a difficult circle: using an activist state to stimulate individual companies. While the country’s economy has been growing at around 7-8% for a decade, it now has to manage a tricky economic transition. Created in 2009, the RDB cuts across various departments in government, a nod to the Economic Planning Board of General Park Chung-hee’s South Korea or Japan’s ministry of international trade and industry.


BUILDING A DOMESTIC BASE

To reach the goal of being a middle-­income country Akamanzi wants more private sector involvement in the economy – something it is currently lacking. Rwanda is dominated by one or two large conglomerates, such as the government-­linked Crystal Ventures, and hosts large foreign multinationals. It lacks a solid base of domestic companies.

Akamanzi brings a deep understanding of President Paul Kagame’s development strategy to the job of boosting local economic actors. She was previously deputy director of the Rwanda Investment and Export Promotion Agency, and head of the strategy and planning unit in the presidency.

To build up local firms means starting from the grassroots. “We need to grow Rwandan small and medium-sized enterprises (SMEs) so that they can export more, they can sell more and they can become more productive. How can we make it easy for them to operate?” she says.

At the top of the list is finance. “We created something called the Business Development Fund,” says Akamanzi, “which is a guarantee fund that supports SMEs to access financing from banks, but which are guaranteed by the Business Development Fund, a government entity.” This gives the heft of a sovereign guarantee to the banks, while allowing cheaper funding rates for the companies. There is also a lighter tax regime for SMEs, allowing them to avoid the 30% income tax bigger companies pay. The government has also issued new provisions for guaranteeing property rights.

More revolutionary is the ability for SMEs to use new forms of collateral in their dealings with banks – traditionally a sticking point on the continent, where banks ask for huge guarantees before lending. “We’ve allowed SMEs to use immovable property and movable property for mortgages,” says Akamanzi. “So they can use their crops, their motorcycle, they can use anything that’s movable. The law allows that to be used as collateral by banks.”


FOCUS ON THE FUTURE

The Rwandan state has a two-pronged approach to supporting the kind of companies that it wants to help emerge. First, it is trying to reduce the number of Rwandans who rely on agriculture for their livelihoods. The skills that farmers have would allow them to be absorbed into the manufacturing sector, says Akamanzi, who points to construction materials, textiles and agri-processing as the kind of manufacturing that will be prioritised.

The second prong is a focus further into the future. The country is investing in telecoms, health services, logistics and aviation. “RwandAir today flies to 23 destinations all over the world,” she adds. Tourism is a significant part of the strategy, with an effort to promote the country for medical tourism, as well as conference tourism. The Kigali Conference Centre was finally completed earlier this year and has hosted several large events, which Akamanzi argues will put the capital on the map for event planners globally.We believe that the market should produce more solutions, more […] equity financing

“And these are services that are already being built in the economy but in the future – once our people have skilled up and we have a lot more people that can actually become information and communication technology engineers, medical experts, oncologists – the future is going to be there,” she says. “But you don’t wait for the future. You start setting that up now.”

But the present remains the task at hand. Moving farmers towards agro-­processing is a challenging task across the continent (see Financing the Farmer, page 48). So how will Rwanda ensure that the necessary funds reach those who can need it?

Partly this will happen through the Business Development Fund, which has branches in every district called Business Development Centres. They work with the economic officers of every district to popularise the fund and to let banks know that this fund exists so that they advise businesses to apply for help.

“But obviously, that’s just one solution by government,” says Akamanzi. “We believe that the market should produce more solutions, more venture capital, more equity financing. And we think that as the country grows, we will begin to attract more of those to invest in the country and invest in these businesses.” With local reports of more than 100,00 families hit by famine in the east of the country in 2016, there is concern that neither state nor market has yet been able to meet the challenge.

Akamanzi says that conventional banking is not necessarily the answer. “The way it’s designed, it doesn’t cover the ordinary person.” She points to savings and credit cooperatives (SACCOs) as a successful alternative in the country, with professional groups such as teachers, nurses and police all having their own SACCOs. “Our access to bank accounts by individuals is about 25% of the population. But if you factor in people who use banking through SACCOs, it comes to around 70%”, says Akamanzi. They have worked as a bridging method until an individual is saving enough to warrant a bank account with its higher costs.


CHINESE MANUFACTURING

Another factor that the Rwandan government hopes to exploit to speed up the boosting of their SMEs is China’s interest in setting up manufacturing facilities in the country. “We are looking at how Rwandans can learn from China,” says Akamanzi. “Particularly Chinese businesses in manufacturing that have been very successful and are beginning to find it very expensive to do business in China because of very high rising costs. We want to attract them to Rwanda.”

In a special economic zone outside of Kigali, there are currently two Chinese manufacturing companies at work: one in making garments, the other in electronics assembly. “We want to see more of those. We want them to become not just two but 20, maybe 200 some day!” she concludes. 

“We believe that the market should produce more solutions, more […] equity financing”

 

From the September 2017 print edition 



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