Identifier
Created
Classification
Origin
06KIGALI1192
2006-12-14 12:01:00
UNCLASSIFIED
Embassy Kigali
Cable title:  

Land of a thousand hills is not always a land of a thousand

Tags:  ECON EAID BTIO EINV EINT XA RW 
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VZCZCXYZ0005
RR RUEHWEB

DE RUEHLGB #1192 3481201
ZNR UUUUU ZZH
R 141201Z DEC 06
FM AMEMBASSY KIGALI
TO SECSTATE WASHDC 3564
UNCLAS KIGALI 001192 

SIPDIS

DEPARTMENT FOR AF/C
DEPT OF COMMERCE WASHDC

SIPDIS

E.O. 12958: N/A
TAGS: ECON EAID BTIO EINV EINT XA RW
SUBJECT: Land of a thousand hills is not always a land of a thousand
opportunities


UNCLAS KIGALI 001192

SIPDIS

DEPARTMENT FOR AF/C
DEPT OF COMMERCE WASHDC

SIPDIS

E.O. 12958: N/A
TAGS: ECON EAID BTIO EINV EINT XA RW
SUBJECT: Land of a thousand hills is not always a land of a thousand
opportunities



1. SUMMARY. Moses Turyazooka is one of the approximately 500,000
Rwandan refugees who grew up in Uganda and returned to Rwanda after
the 1994 genocide. He is a well-educated and driven entrepreneur
who was raised on diaspora ideology - a deep love for the country of
Rwanda and a strong desire to return home and build the nation.
Although he is frustrated by the challenges of doing business in the
developing private sector of Rwanda, he nurtures his small business
and hopes for a recovered economy and a more secure business
environment. END SUMMARY.


2. Moses Turyazooka worked for the US Census Bureau, the World Bank,
and the Rwandan Ministries of Finance and Commerce before embarking
upon Rocket 2020. As he sees it, Rwanda is ripe with untapped
business opportunities. The biggest obstacle Moses found, which is
consistently reiterated by businessmen in Rwanda, is access to
affordable capital. Even though Moses had well-paying jobs,
sizeable bank accounts, and property, the local banks only offer
5-year loans at an 18% interest rate. Microfinance institutions in
Rwanda typically do not lend beyond USD 2000, which is not
sufficient for capital intensive businesses such as a factory or
even a restaurant. The loans offered by microfinance institutions
enable farmers to procure seeds and parents to meet school fees, but
they do not enable the development of a vibrant private sector. As
Moses explains, most emerging businesses would be able to manage a
bank loan of 10%-12%, but the existing 18% is a true barrier to
market entry.


3. Fortunately, Moses was able to present his business plan for
Rocket 2020 to a group of American investors, Thousand Hills Venture
Fund (THVF). THVF was formed in 2004, and focused exclusively on
investment opportunities in Rwanda. THVF infused USD 400,000 into
Rocket 2020 in exchange for a 96% equity share of the company.
Rocket 2020 also pays a USD 800 monthly management fee to THVF.
While Moses might appear to be little more than an employee of his

own company, it was his only option launching his business. TVHF
will receive the lion share of any financial success of Rocket 2020,
but their participation ensures that this business and these
services are launched in Rwanda.


4. Rocket 2020 operates telecenters around Rwanda, offering
communications and computer services in rural communities. Five
telecenters are currently operational with 14 employees. Receipts
will fund the establishment of another 24 telecenters over the next
24 months. Rocket 2020 is currently negotiating with various
government ministries to become a portal for the government to
distribute information, including results from the National Exam.
However, Rocket 2020's goal is to expand beyond delivering services
through their centers. Eventually, it would like to become a full
eCommerce provider, building a warehouse in Kigali and enabling
customers to use the telecenters to order goods that would not
normally be available in the rural areas. Essentially, Rocket 2020
will provide the services of a Kinkos and an Amazon.com.


5. While relatively unique in his education and access to foreign
capital, Moses faces challenges that are representative of the
entire private sector in Rwanda. Currently, the biggest challenge
to Rocket 2020 is the availability of power. Electricity forms a
significant portion of the business' operational costs and
inconsistent and unreliable power threatens the very communication
services that Rocket 2020 offers. The business is essentially shut
down with every power outage, which Moses explains happens up to
several hours each day.


6. As Rocket 2020 expands to becoming a central vehicle to
distribute goods to the rural areas, its ability to quickly and
easily import goods from abroad becomes essential. Unfortunately,
the current customs procedures are complicated and time-consuming,
as his goods sit in the customs warehouse for up to four weeks.
While Moses commends the Rwandan government for its anti-corruption
efforts, especially in official tenders, he is frustrated by the
fact that those who are willing to help customs officials with
anything from a drink to their children's school fees get their
goods cleared faster and with less hassle.


7. In the end, Moses recognizes that his business prospects are
better in Uganda, or elsewhere in the region. He complains about
the troublesome access to capital, poor infrastructure, and petty
corruption in customs offices. His business partner, THVF, has
invested less than 50% of its raised capital because the cost of
electricity, transport, and customs frustrations make it difficult
to find a viable business which will earn a competitive rate of
return (septel). While the GOR pursues a rigorous economic reform
agenda, small businessmen struggle day to day. Business decisions
are made based on the bottom line, and Moses' idealism will not last
forever.

ARIETTI