Deregulation: A modern day Trojan horse?

Deregulation: A modern day Trojan horse?

A. Nkindi

The great conceit of the 1990s was that previous experience counted for nothing: “The Internet changes everything.” All the old rules needed to be torn up. But history has a way of taking revenge on those who think the past is irrelevant.

When it first broke into public view, the Internet seemed like an economic as well as a technological miracle. Consumers came to expect that the information and services they found online would be free, while investors believed that the Net would generate billions of dollars in profits. A miracle is exactly what it would have taken to realize both those expectations.

Right after the Internet changed everything, the dot-com boom collapsed in the classic pattern of a stock-market bubble, and many of those who had explained to old-timers why companies with no earnings could be worth billions were shocked to discover that the old rules still applied.

Although the Internet mania helped to set it off, the telecom boom differs in several ways. First, compared with fizzy dot-coms, telecom companies develop tangible assets that are valuable in the information age: fiber-optic networks, routers and other telecom equipment, satellites, wireless systems, and upgraded telephone and cable TV networks capable of providing high-speed Internet connections.

Second, the telecom industry was not only well-established but had long been the very embodiment of stability and guaranteed returns.

Third, and this is a key distinction between the dot-com and telecom booms — governments all over the world, led by the United States, opened up their telecom markets to competition. Public policy was inviting new entrants to jump in. Competition meant that returns were no longer guaranteed, but the simultaneous rise of the Internet and advent of deregulation created an unprecedented opportunity to make money — and, as many discovered, to lose it.

Creating an industry that induces a gold rush of sorts creates an environments were massively parallel systems are built up. Only for companies to realize that there simply isn’t enough business to go around, and begin a race “to gain market share” in a burst of “hypercompetition” and “vicious price wars” that drive down revenues.

Rwanda is hardly at a point of market saturation in the ICT industry but the “Vision 2020” policy aims to make Rwanda an ICT centre of excellence for the region, the continent and in the long run internationally. In this regard, when a point of market saturation is reached, policy makers will be able to pat themselves on the back for having reached the goals they set out to achieve.

To date, Rwanda has two mobile phone operators which is a clear sign that the regulatory body as well as the investment authority conduct a careful sieving process that makes sure that the companies that emerge with the coveted licenses are reputable, of adequate financial standing and their presence in Rwanda will beneficial to the country.

Needless to say that this state of affairs will change in the near future, Rwanda is already accepted as an emerging economy and that status is encouraging local and international investors to try their hand at expanding the industry which at this point is without a doubt a great investment.Competitiveness in the global information economy can only be driven by creating a strong reputation in the electronics, semiconductor, software design and telecommunications sectors. On a worldwide scale, the electronics industry has been growing rapidly in response to the information technology revolution. Even as the PC market has stalled, the market for new electronic end products such as PDAs, mobile phones, DVD players, video games and software applications that make life easier has exploded. Designers and marketers of these products are based in the United States, Europe and Asia, but Rwanda is emerging on the playing field, a much younger player, but a skilled one nonetheless. In light of Rwanda’s “Vision 2020”, the country has set it self up in a manner that companies can find a competitive advantage for manufacturing of electronics and software components. Key initiatives in government policy with regards to local ICT industries hopes to increase foreign direct investment allowances that will spur strong industry competition in both telecommunications products and services, opening the door for growth in the Internet economy.One of the key questions that need to be answered in an open market environment in the telecoms industry is whether players will be allowed to provide their own infrastructure as if the answer is yes, then Rwanda will see massive growth in the industry, but if it is determined to be no, we will likely see a rise in grey market services and the current infrastructure providers – will in effect still control the price of telecoms services.

 

Fortunately in Rwanda, the key players, MTN Rwandacell and Terracom Communications are indeed providing their own infrastructure, setting up their own networks with their immediate and long term goals in mind which leaves prices at the discretion of the providers. 

The early delays and continuing disappointments especially with regards to internet services should not obscure the big picture: Competition in telecoms is a powerful force, with both positive and destabilizing effects. As in the early stages of the long forgotten telegraph and telephone development, competition accelerated the deployment of new networks and the introduction of new services.

The great benefit of competition is a rapid rollout of new technology. Companies in the long-haul fiber-optic, local-telephone, wireless and other sectors of the industry are undertaking massive capital expenditures to develop and upgrade networks. As a result, telephone companies will offer high-speed access to their subscribers in most areas of the country. With huge investments in spectrum technology, wireless service will dramatically improved and charges will fall.

The flip side of this rush is that network expansion can also lead to huge overcapacity. Companies build networks and use untold amounts of money. It would be a shame to see fiber-optic networks costing billions of dollars remain unused because there is no prospective demand for them, and the companies that built them left with their books in the red.

Telecom regulation originally emerged from the realistic assessment that full-scale network competition is inefficient and unsustainable. Outside the industry, there are always demands for public protection against monopoly power. Inside the industry there should be recognition that a stable regulatory environment offers advantages for long-term recovery of investment as we will not see redundancy in the networks.

As ICT investors come into Rwanda, watch out for intermodal competition — alternative technologies offering the same consumer service. A century ago, only the telegraph offered an alternative to the telephone for instantaneous messages. Today, wire, wireless, cable, direct-broadcasting, satellite and conventional broadcasting compete to some extent with one another internationally. It is important to remember that despite the romantic appeal of competition and the imperfections of regulation, that at the end of the day, old market and business principles still hold a lot of water so that as we become an ICT centre of excellence we do not fall into traps that have already snared many larger economies that at one point were emerging economies as well.

One of the “Vision 2020” key aims is to stimulate competition and create opportunities for innovative companies. Companies that invest generally do so in response to competitive threats and to take advantage of competitive opportunities. The framework facilitates market entry and encourages investment by ensuring a level playing field for new companies, while providing users with basic services at affordable prices.

New entrants and incumbents should respond to competition by investing to extend and upgrade fixed and wireless network infrastructure in order to cut costs and provide innovative services.

In conclusion, competition drives investment. The Rwandese regulatory framework has the flexibility to handle new and volatile markets, and has the tools for regulators to take account of the need for risky investments to generate an adequate return on capital when mandating pro-competitive access obligations.

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Business Process Outsourcing (BPO) in Rwanda

Business Process Outsourcing (BPO) in Rwanda

 

By Alpha Akariza

First of all it is with pride that we notice our compatriots have not stopped the use of their magic wand to enrich the media output of our a thousand hill country. Business in Rwanda is the latest contribution in this field. This latest contribution to Rwanda’s media is welcomed as a well-timed one.

Rwanda is in a challenging period of its development, in order to achieve sustainable growth, it has to reinvent itself. The Government of Rwanda has embarked on a series of far-reaching reforms with a view to promoting investments and instilling a new business culture. With little natural resource and infrastructural resources, Rwandese can only rely on our minds, how we can develop our intellectual capital and services in order to sell this to the global market. Rwanda could easily break new ground by providing certain services to the global market from the continent of Africa.

Today’s global economic conditions are forcing companies across the world to find new ways of cutting costs. But how do you reduce expenses without sacrificing services? As the cost of business continues to escalate, this question becomes more and more prominent. Companies are looking at Business Process Outsourcing (BPO) as a solution to this problem.

Business process outsourcing (BPO) is the act of giving a third-party the responsibility of running what would otherwise be an internal system or service. For instance, an insurance company might outsource their claims processing program or a bank might outsource their loan processing system. Other common examples of BPO are call centers and payroll outsourcing.

Typically, companies that are looking at business process outsourcing are hoping to achieve cost savings by handing the work to a third-party that can take advantage of economies of scale by doing the same work for many companies. The varying costs of living in diverse geographical regions dictate that labor costs will equally vary, creating an opportunity for companies to save on labor costs through off-shoring.

In exchange for the potential cost savings, the company in question must relinquish control over an aspect of their business which explains why business process outsourcing is often reserved for non-critical, non-core type of work.

Rwanda is a prime candidate in this business arena due to due to factors like language skills, time zone/geographical location and an underemployed workforce with resulting low labor costs. Rwanda is rapidly producing French and English speaking professionals in various fields including engineering, ICT, financial management and accounting.

With a global services sector which is facilitated by information communication technologies and Rwanda’s competitive labor costs, off shoring activities can be scaled up and the nation can position itself in niche markets of the global sector. The key vertical market niches Rwanda could focus on include coding, billing, data processing and customer contact processes. Rwanda can eventually serve as an off shoring hub for countries in the West by starting off as a third-party or subcontracting hub for more established off-shoring destinations like South Africa in particular.

Investment in IT-enabled services sector is a key factor that can potentially transform what the Rwandan economy has to offer the global market. Business Process Outsourcing ((BPO) is the catch phrase of this business, it is the delegation of one or more IT-intensive business processes to an external provider that in turn owns, administers and manages the selected process based on defined and measurable performance criteria. Business Process Outsourcing (BPO) is one of the fastest growing segments of the Information Technology Enabled Services (ITES) industry

South Africa and Egypt are the largest African players in providing services to the global market. One foundational aspect for growth in this field is the government support in terms of investment and proving BPO policies. Egypt and South Africa have the benefits of large populations of about 75million and 45 million respectively, with a huge talent pool of professionals that is boosted by a high language quality and variety that includes Arabic, English and French. This aspect can particularly favor call centre services to different destinations provided there are competitive telecommunication rates. Mauritius, Botswana and Kenya are also competitive destinations for outsourcing companies.

With Rwanda’s growing financial services sector and growing tourism industry, the country can scale up agent positions for BPO services. This will ultimately require investment and development in infrastructure, telecommunication services, human resource capacity and provision of a stable business environment.

 

Rwanda’s path to prosperity

Rwanda’s path to prosperity

By Doreen Kagarama

Growing up in exile, I formed images of my motherland but when I first came to RwandaRwanda was devastated. From the damaged infrastructure and bullet ridden buildings, it was obvious Rwanda’s economy had collapsed beyond repair. However, something deep inside told me the struggle was not over.  It had just changed from struggle for peace to struggle for prosperity. in 1995, what I saw was in sharp contrast to all I envisaged.

Twelve years later, Kigali’s skyline is gloriously speckled with numerous multi-storied buildings; among them the recently inaugurated Union Trade Center. As the city evolves, so do the cultures of the Kigali city dwellers; Rwandan holidaymakers are visibly excited about yet another new place to ‘hang out’ while young professionals are eager to indulge in the ‘finer things in life’ like glossy magazines, sea food, French wine and much more from the unlimited choice of products available at the city’s largest shopping mall. Kigali has indeed evolved from nothing to a blooming metropolitan capital in every sense.

I listen to a distinguished speaker on developing nations, Mr. Michael Fairbanks, address a group of students at the recently refurbished School of Finance and Banking (SFB), I sigh with relief. Rwanda is a transformed nation and her private sector is increasingly playing its role in the struggle for prosperity.

“Prosperity is a choice”, says Michael Fairbanks, a former Havard, Stanford and Georgetown lecturer. Michael’s words resonate with my views. The choice to prosper has already been made by Rwandans, now all that is left to do is address some key factors that will stimulate and sustain Rwanda’s wealth and growth.

Globalization

Globalization is accelerating integration of the world’s economies and societies. Political boundaries are disappearing and costs of communication are rapidly declining. To achieve prosperity therefore, we must understand and embrace globalization.

Already, a lot is going on for Rwanda, coffee and tourism, two of Rwanda’s biggest exports, have captured global market share, Rwanda’s specialty bourbon coffee is fetching higher prices on international markets, discerning tourists are paying $375 to see the gorillas, handicraft is doing the same with the ‘Agaseke’ baskets. Rwanda must take advantage of Globalization to access markets that were previously out of reach.

Value Addition

In his New Year address, President Paul Kagame stressed the need for value addition.  country must seek ways to serve lucrative market niches. This will in turn increase the price Rwandans receive for their products. Value addition requires more learning about customer needs.

Such strategic market research is already available from On The Frontier Group in Rwanda. On The Frontier is the first Venture-backed US firm to focus on developing nations. The organization is presently offering its consulting services to the Government of Rwanda in nation’s tourism, coffee and agro-industry sectors. Information available is in sectors such as coffee, tourism, tea, horticulture, hides & skins and mining. Existing strategies for these industries suggest Rwanda’s export could reach $300 million by 2010 if all investments were made.

 Understand that wealth in the future is based on higher forms of capital

 The time of comparative advantages is over. No nations can create prosperity based on its natural resources alone. New forms of capital include trained human capital, strong institutions, insights and cultural attitudes.

 The past ten years have seen significant investments in training, institution building, legal reforms and a new mindset for Rwandans. At least 32 per cent of private sector firms view human resource capacity and staff training to be their primary challenges in operating their businesses – second only to access to capital.

 The Rwanda Private Sector Federation (RPSF) established nation-wide Business Development Services (BDS) centers to enhance private sector capacities through training, information distribution, facilitating access to finance, and consultative services. Such initiatives must be scaled up.

 Assist the private sector

The government must do everything it can to assist the private sector, except to impede competition.  The private sector needs several inputs to create products. It needs qualified people, good infrastructure and, most importantly, a non-defensive dialogue between the public and the private sectors.

 The government is winning international accolade for its openness to the private sector.  Significant investments are being made in developing required infrastructure and policies have been established that will boost the key priority sectors. Rwanda has created a culture of public-private dialogue through several forums including the National Investment Dialogue, the Public-Private Forum and even industry level workgroups.

 Our moral Purpose: ‘A high and rising standard of living for the average citizen.’

Vision 2020 calls for Rwanda to become a middle income nation with a per capita income of $900.  To stimulate growth, Rwanda’s leadership has prioritized anchor export industries—coffee, tourism and tea.  Given that eighty-five percent of Rwandans are farmers; these sectors provide the most potential for reach the largest cross-section of Rwandans while developing a service component to the economy.

The informal private sector will require a similar focus. Rwanda boasts 70,000 micro and small-scale enterprises. These small-scale businesses are the foremost job provider outside of agriculture.  The country must articulate support programs to support this important component.

As I reflect on the past twelve years, I cannot help but think that slowly but surely Rwanda is winning the struggle for prosperity.

 Doreen Kagarama is the First Secretary at Rwanda’s Embassy in the United States. In the past she has served as a Senior Analyst working with OTF Group, a Boston-based economic development firm advising Rwanda’s Public and Private Sectors on achieving economic growth through competitiveness.

West African Banks enter Rwandan market

West African Banks enter Rwandan market

By Babu Emile

Experts predict an improvement in the quality of financial services and banking products that will ignite a highly competitive financial sector following the entry of West African based continental banks into the Rwandan banking arena.

On the 6th of July 2007 Ecobank officially took over ownership of Bank of Commerce, Development and Industry (BCDI) to create Ecobank Rwanda. This development follows the sell of 75 % shares of BANCOR SA. to yet another West African banking giant, Access Bank. Continue reading

Business Success: BCR’s story!

Business Success: BCR’s story!

 

Coming up from near collapse, BCR suffered very poor performance following the 1994 genocide. In quick genius, the government of Rwanda offered it for privatization. The outcome is arguably the most successful privatization deal so far.

At privatization, government aimed to improve BCR’s financial performance and attract an internationally recognized shareholder. Actis, a private equity investor took on the challenge seeing the business potential in BCR. By the end of 2004, Actis had sealed a deal that saw it walk off with 80% controlling interest in the bank. This ground breaking investment was the first major privatization deal in post genocide Rwanda. This year as BCR celebrated a registered 101% profit from Frw 1.04 billion in 2005 to Frw 2.1 billion, the benefits of privatization are clear. Continue reading

EABL now in Rwanda

EABL now in Rwanda

 

On March 31st, leading East African brewery officially entered the Rwandan market, one they’ve been already active in without an official launch. In this issue of The Corporate, we trace the roots of East African Breweries and its growth on the continent.

By any standards, East African Breweries is a successful brewery. The portfolio of companies it owns includes Kenya Breweries, Uganda Breweries, Central Glass – a glass manufacturer, Kenya Maltings and United Distillers and Vintners (Kenya) Limited. Continue reading

Kwita Izina: Growing from a national event to a Global brand

Kwita Izina: Growing from a national event to a Global brand

 

Babu Emile,
Kinigi

 Musanze a tiny township in Rwanda’s Northern Province stole international limelight when it hosted the president, first lady, government leaders, global celebrities, foreign corps, business community, international media and the general public on the 30th of June to celebrate the annual fete, ‘Kwita Izina’.

Distinctive pageantry and cultural majesty were on show as thousands flocked the dazzlingly decorated Kinigi hill on the fringes of Parc National des Volcans to celebrate the third edition of the Gorilla Naming Ceremony. Refreshing entertainment, corporate brand presence and impressive orderliness are what epitomized this year’s event, now dubbed. Continue reading