Tuesday, March 12, 2013

RPF cashing in on Crystal Ventures?

Looks to me like the Rwandan ruling coalition (the RPF) is liquidating a lot of assets.  I wonder why.

First, note that the finances of the RPF are inseparable from the finances of Crystal Ventures.  Then, check out this article detailing the RPF's sale of more than half its former 45% stake in MTN-Rwanda to the umbrella South African MTN.  RPF is poised to sell more than half of its share in Inyange Industries, the country's leading food processing company.  Some of Crystal Ventures' other investments may also be on the chopping block.

On the other side of the income statement, I can't find many new investments like this granite factory which opened mid-2012.

To further drive the point home, it seems that the RPF is calling in $9 million in debts from the Rwandan government itself.

Why is this happening? I suspect two reasons.
 - Rwanda's government is heavily dependent on foreign aid, which has comprised more than half its national budget in direct aid alone, in recent years. But, following the M23 scandal, many donor governments have shut off the spigot, including Britain,
 - In order to weather the coming storm, the RPF may be saving up a "war chest," for maintaining both political allegiances, as well as covering military contingencies.

Jennifer Cooke of the CSIS identifies two potential future narratives for Rwanda, one of rapid development, and another of spiralling political repression, resentment, and alienation of government from population.

Viewing events within this framework, the liquidation of RPF holdings and the OECD's move away from direct aid to Rwanda's government budget can be interpreted in two ways.  Pessimistically and cynically, one could say the RPF is selling its country short, selling off in-country resources to external accounts in a move of calculated capital flight in an environment of declining FDI.  More optimistically, one might say the ruling party is privatizing industries to spur growth.  As usual, both are probably true.

Update:  Now this is called raking in the cash! Hope the big push works.
http://www.reuters.com/article/2013/04/26/rwanda-eurobond-idUSL6N0DD3S920130426

"Rwanda plans to use half the proceeds from the issue to repay outstanding loans on the Kigali Convention Centre and on a development plan for the national airline, RwandAir.
The remaining funds will be used to pay for the completion of the convention centre and to finance a hydro power project."

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