Introduction
Government Policies
In 2001, the GOR issued the Poverty Reduction
Strategy Paper (PRSP). The PRSP recognizes
that a successful poverty reduction policy must be based on a high
rate of growth of the economy. In this respect, following the liberalization
measures introduced since 1996, the major challenges in the medium
term are increasing export earnings, increasing agricultural production,
supporting to non-farming activities in rural areas, and diversifying
the economy, the latter comprising development of services, including
information and communication technologies related services. A major
emphasis is placed on market oriented education, to create a competitive,
highly skilled labor force that can exploit fully the advantages
of national bilingualism.
Strategic prongs specifically oriented to improving
the economy of poor rural people and rural poverty reduction include:
securing land tenure, development of micro-finance institutions
based on savings mobilization, improved natural resource management
and fight against land degradation, investing in rural transport
and market infrastructure, participatory agricultural technology
generation and transfer, demand driven agricultural research, measures
to reduce rural food insecurity, and promotion of off-farm income
generating activities and employment. The institutional reform aimed
at strengthening the rural community representation in the lower
levels of local public administrations, through a democratic election
process is designed to increase representation and empowerment of
the poor in the development planning and implementation process.
The process of reconciliation is encouraged through dialogue and
careful weighing of public interventions to avoid conflicts and
discrimination.
Privatization Policy (with regards
to the Tea sector): The privatization program set up by the GoR
in 2003 concerned all 9 tea factories managed by OCIR-Thé.
Assets proposed for the privatization include the factory, the industrial
bloc, woodlots and social infrastructures (mainly workers’
houses). With regards to factories that are processing smallholders’
and/or smallholders’ cooperatives green leaves production,
a percentage of their share capital after privatization will be
allocated to smallholders or their cooperatives, such as follows:
(a) 10% for smallholders and, (b) between 15 and 35% for cooperatives[1]
. In 2002/2003, MINECOFIN launched a pilot privatization process
for 2 tea factories: Mulindi and Pfunda. Pfunda was successfully
privatized in November 2004[2]
while Mulindi privatization offer has been removed from the market
(price offered by private investors too low compared with the estimated
industrial asset value and percentage of share capital detained
by the Mulindi cooperative i.e. 35% considered too important by
private investors).
In the light of the difficulties to negotiate
the privatization of the remaining tea factories with private national
and/or international investors, the Privatization Secretariat will
contract a local consulting firm with a view to analyze the three
following scenarios opted by the GoR for the privatization of the
remaining tea factories: (a) sale of the tea factories assets to
private investors with or without smallholders and/or cooperatives
stake in the share capital, (b) leasing of the tea factories assets
to private investors and, (c) management contract to operate tea
factories awarded to private investors. The GoR has pushed aside
the possibility of privatizing tea factories through smallholders
holding 100% of their share capital. This option has been considered
too risky with regards to the current lack of capacity of smallholders
to effectively and efficiently own and manage a tea company[3]
. The results of this analysis will be available at the end of 2005
and the GoR final decision with regards to privatization of the
8 remaining tea factories will be taken during the first semester
of 2006. This new deadline offers to the reformulated tea component
time to set up and build up the financial resources of a smallholders’
financial institution that will be able to participate in the privatization
process of the remaining tea factories.
Land Law: A new Land Law has been
drafted and should be enacted by the GoR in 2006. The draft Land
Law specifies that rural and agricultural land could be sold or
leased to individuals or associations with legal personality. Terms
and conditions for sales of land vary with the nature and size of
the land. Terms and conditions for leasing contract are to be discussed
on a case by case basis. Leasing duration is comprised between 3
and 99 years.
[1]
With regards to share capital allocation for the 3 existing and
registered cooperatives, the proposal of MINECOFIN through the Privatization
Cabinet was as follows: 35% for the cooperative in Mulindi, 20%
for the cooperative in Shagasha and 15% for the cooperative in Mwaga-Gisakura.
[2]
Pfunda Tea Company Ltd share capital is held by a London-based company
(LAB International) at 55%, the GoR holding the remaining 45%. In
accordance with its privatization policy, the GoR has transferred
10% to the smallholders while the remaining 35% will be proposed
to Rwandan investors. Price paid by LAB is USD 1.06 million. LAB
has made affirm commitment to invest an additional USD 1 million
to modernize and develop plantations in Pfunda. It has also committed
to take over all employees currently working in the factory.
[3]
The option consisting in smallholders holding 100% of the company
and contracting out a tea specialist as Manager of the factory is
also considered as too risky. In line with its policy aiming at
promoting private investments, the GoR favors a mixed shareholding
comprising of private investor(s) holding a major share and smallholders
and/or smallholders’ cooperatives/associations holding a minor
share specialized management |
