In 2006, President Paul Kagame counseled members of the private sector to pool scattered resources together and venture into sizeable investments and benefit the economy.
The idea is mainly aimed at building a culture of entrepreneurship and competitiveness among Rwandans.
With his idea, the president believed more jobs would be created, and also help investors benefit from the economies of scale which would spur economic development.
Rwanda’s Private Sector Federation (PSF) embraced the president’s idea, later establishing a secretariat to implement the initiative.
That same year, the Rwanda Investment Group (RIG) was started, more like a pilot. It was an instant success. Over 20 private business people around Kigali subscribed as its shareholders.
Setting the pace for other investment groups that would later spring up, RIG invested its resources in Renewable Energy, Agri-business, Cement production, and largely took advantage of the privatisation program to own stake in a number of privatized companies.
Today there are more than 88 collective investment groups across the country.
Some of them are in form of Associations, Private Investment Groups or Corporations or private joint ventures, Private-Public Partnerships (PPP) and Cooperatives.
By the end of 2013, PSF found through an internal ‘Collective Investment Survey Report’ that the collective investments in the country are now worth more than Rwf315billion ($450m).
Mungwarareba Donatien in charge of Member services, Capacity Building and Entrepreneurship Promotion at PSF told KTPress that there are more than 88 investment groups of which 53 have capital above Rwf200M ($285,714) each.
Trade Minister Francois Kanaimba told KTPress, “The government has commissioned a survey (currently ongoing) to determine the status of investment groups in the country.”
He said the survey will help note various challenges faced by these groups and other important information which will later be used to strengthen their functionality.
Experts are still researching to update on the status of collective investments across the country. “We will have the report by the end of December,” Mungwarareba said.
The PSF says business projects by investment groups which are self-initiated by members are successful; majority of which are in commercial real estate development sector and comparatively a few in agricultural sector.
Some of the successful ventures include the modern Kigali city market complex, Nyagatare Maize investment group in east Rwanda and the East African granite industries among others.
However, according to a 2013 PSF report, investors still find Agriculture sector riskier to invest and banks too are hesitant to finance such collective investments.
Mungwarareba said the survey found that traders, most of whom are non professionals, prefer to invest in physical ventures that make quick money and avoid those requiring costly research.
Minister Kanimba admits that Investing in agriculture has more risks and this scares investors.
“However, government, through land consolidation and irrigation initiatives aims at establishing sufficient land and constant water supplies to mitigate risks in Agriculture sector,” he notes.
The report notes that majority of Collective Investments are mostly into commercial real estate development because they are easier to manage and the return on investment is a lot quicker.
Charles Haba a real estate agent says, “Traders find investment in commercial buildings secure, easy to control and not sophisticated”.
Major challenges hindering progress of the collective investments in Rwanda include; limited skills in insufficient capital, management, marketing, high cost of doing business and low supply of technical human capacity.
Eugene Nyirigira, Chairperson of Kabarore United Traders (worth more than Rwf250million) attributes success of his group to experienced shareholders that were already active traders, thus deciding to build a mall met no resistance.
However, Nyirigira noted, “The challenge for cooperatives is for members to understand the projects.”
Minister Kanimba is optimistic that despite the challenges collective investments are experiencing, they will grow stronger and attract foreign investors.
He predicts that in the few coming years, investment groups will have setup strong management framework to gain trust from foreign investors that would bring their capital into the investment groups.
“By all means we are getting there,” he said.