Rwanda's Auditor-General Obadiah Biraro. RDB investment arm on the spot over loss of taxpayer’s money. PHOTO | FILE
The Rwanda Development Board’s Strategic Investments Department
is on the spot for blunders it made in the privatisation of public
companies, which led to the loss millions of dollars of tax payer’s
money, according to an audit by the Auditor-General.
In a report titled A Performance Audit of Strategic Management of Privatisation Activities, Auditor-General Obadia Biraro gave examples of public assets being sold below their reserve price.
The
Rwanda Development Board is responsible for privatisation and
divestiture but monies from the sale of some assets have not been
collected, according to the report.
“One of the
blunders involved the privatisation of three companies at a cost of
Rwf335 million ($392,978),” the AG report says.
The
report further shows that some public assets were sold without
competitive bidding or carrying out due diligence on buyers. There were
also cases of the government spending more on repossessing some of its
business units.
Mr Biraro describes the blunders as “acts of omission or commission” during and after the divesture process.
He
cites cement maker Cimerwa, as one example of a public company that was
sold to a local investment company, Rwanda Investment Group, at Rwf2.7
billion ($93.1 million) in 2006 without competitive bidding, raising
questions about whether the government got value for its money.
“The
privatisation guide requires that a public business be privatised in a
transparent and competitive process to ensure that a suitable investor
is found,” says the AG report.
Other companies that
were privatised without a competitive bidding process are Gite Ituze
Cyangugu to Cyangugu Catholic Diocese, Ginkoko Rice, Nshili Kivu Tea
Factory, Bugarama Rice Mill and Kabuye Rice Mill.
Competitive bidding
However,
the Rwanda Development Board said 81 out of the 87 public companies
that were privatised were sold through a competitive bidding process.
“Going
forward, we shall improve to make sure a competitive bidding process is
used,” RDB said in response to the Auditor-General’s report. The board
is also faulted for selling Mukamira Maize Mill, Gite Ituze and Nkora
Coffee Factory below the reference value.
According to
the Auditor-General’s report, the reference value of the three companies
was over Rwf253.3 million ($297,138) but they were sold for Rwf151.2
million ($177,368), contrary to the privatisation guide, which requires
the selling price to be above or equal to the reference value.
“There
were cases of public companies that were sold for an amount that was
less than 65 per cent of the reference value. The Rwanda Development
Board did not provide documents to explain why the selling price was
less than the reference value,” the audit report said.
The
repossession of privatised companies that failed to adhere to business
plans and contractual obligations is another blunder costing taxpayers’
money.
The government is forced to refund investors’ money even in cases where they failed to implement a business plan.
The government is forced to refund investors’ money even in cases where they failed to implement a business plan.
For
instance, the government paid Rwf449.2 million ($526,943) to repossess
Kibuye Guest House and Lake Ihema Fishery an amount that was higher than
what investors paid for the public companies.
Pascal
Munyampirwa, the investor who bought Kibuye Guest House for Rwf75
million ($87,980) was paid Rwf174.7 million ($204,935) when the
government repossessed the facility.
The government
also paid Rwf411.2 million ($482,366) to get Lake Ihema Fisheries back
after the investor paid Rwf62 million($72,730) for it.
The
report also raised concern over the failure to privatise seven
companies that have been marked for restructuring or liquidation for the
past 20 years.
The companies include Rubilizi National
Hatchery, Gishwati Diary, Zaza Paper Mill, Wisumo Sawmill, Kabuye Rice
Mill and RWANTEXCO.
According to the Auditor-General the companies are in dire straits, which has reduced their value.
The
Auditor-General’s report also raised concern over the transfer of
Kabuye Sugar Company, Ovibar — a banana wine plant, Lake Kivu Fisheries,
Kinigi Guest House, Kamatsira Sawmill and Cimerwa to investors without
their reference value.
Contradiction to best practises
According
to the report, the transfers were made in contradiction to best
practises, which requires that a bidder does not pay for an asset below
its reference price in order for a public business to get value for
money.
“Privatisation without a reference value could
result in the government losing revenue due to selling below the market
value,” Mr Biraro said.
“The Rwanda Development Board
is banking on revising the privatisation law and rigorously monitoring
investors to reduce the risks cited by the Auditor General’s report.
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