Gregory Mthembu-Salter
Reports have emerged since South African energy giant Engen sold Engen Petroleum Rwanda in December that it was forced to abandon its operations in Rwanda following death threats against its senior management.
Engen sold the company, which it had acquired from BP Fina in 1998, for an undisclosed amount to a Rwandan company, Sakirwa. Sources say it was for a “knockdown price”.
The director of Sakirwa, Alfred Kalisa, is also the director of the Bank of Commerce, Development and Industry, which plays a financing role in Rwanda’s business dealings in the rebel-held territories of the Democratic Republic of Congo. He is known to be close to Rwandan President Paul Kagame, and some Cabinet ministers are believed to have a stake in Sakirwa.
In a press statement Engen claimed the sale was part of a “decision to consolidate our assets in Africa and to focus on investments in larger markets with greater potential”. However, this fails to explain why Engen is remaining in Rwanda’s war-torn neighbour Burundi, where it has also acquired BP Fina’s assets. The petroleum market there is even smaller than in Rwanda.
A Rwandan business source said that under Engen’s tenure there was a vast deterioration in the company’s annual turnover. The source blamed Engen for failing to bring in capital to turn the business around, and said that management was weak.
The latter may be a reference to Pule Tsatsi, who was deployed by Engen as general manager in Rwanda following the resignation of Stuart Lesley. Lesley fled the country in late 2000 after receiving death threats.
After dismissing Rwandans in key management positions in the company on charges of corruption, and replacing them with South Africans, Tsatsi also allegedly received death threats. Engen will not comment on the death threats, but has confirmed that Tsatsi “withdrew from Rwanda at his own request” in November.
While in Rwanda Tsatsi had experienced problems with officials, for example, having to renew his visa and thus leave the country every three months.
Engen encountered bureaucratic obstruction at every turn, and the extent of the tax arrears inherited on its purchase of the company in 1998 was only revealed months later.
Rwanda’s commercial and political elite is interconnected and accustomed to having its own way. Engen’s problem was that it failed to secure politically well-connected Rwandan partners, leaving it with little protection when the competition got tough.
By contrast, SAA and MTN have good connections in the country.
In partnership with the Rwandan government, SAA controls Alliance Air, which runs two flights a week between Johannesburg and Kigali. The flights are usually empty and run at a loss, but SAA has apparently been able to compensate by securing lucrative handling and cargo contracts from the Rwandan government.
MTN has a 31% stake in MTN-Rwandacell, Rwanda’s highly profitable cellphone company. Cellphones are popular in Rwanda, and with no competition MTN-Rwandacell is perfectly placed to cash in.
But things are about to change. The state-owned landline phone company Rwandatel is to be privatised, and needs to sell its 28% stake in MTN-Rwandacell. MTN and the other major shareholder, Tristar, a Rwandan investment company, have pre-emptive rights to buy the stake, the acquisition of which will be critical to the future of the business.
MTN says the investment climate in Rwanda is good and it is confident of its future there. However, others warn that MTN may go the same way as Engen, and in a few years be hounded out to make way for the Rwandan elite, who can then profit from MTN’s substantial capital investments.
South Africa has good diplomatic relations with Rwanda, and the Rwandan government says it welcomes further investment. But the lesson South African companies are learning is that diplomatic relations count for little in the Great Lakes region, and that you venture there without friends in high places at your peril.