Immersed in the East African private sector, Dennis Karera explains the close interrelation between East African countries and the collaborations between their public and private sectors that are spurring a dynamic business environment with a host of exciting investment opportunities, with the real estate sector as a prime example of international interest gaining pace from countries in Europe and the US.
Christine Lagarde, Managing Director of the IMF said three of Africa’s biggest challenges were to build people, build infrastructure and build institutions. How would you assess the work done by Rwanda regarding building institutions and what challenges still lay ahead?
Institutional development is a key requirement for the development of the continent, and for the economies of the continent as a whole. We must commonly work within regionally defined institutional frameworks. This inner-state collaboration guarantees the success of the private sector. Private sector growth is the backbone of a growing nation. When it is seen as a secular entity, it becomes disconnected to the public sector, making meaningful results rather hard to achieve. Creating common institutional frameworks are key for us.
In the case of East Africa, we are organized under the East African Business Council (EABC). This institution works with governments and parliaments across borders so that issues affecting the private sector are properly addressed. The growth of our economies ought to be private sector led to attain long-term sustainability. We cannot afford to have the public sector leading it any longer. The public sector shouldn’t be directly related to business. It should be an engine aimed at articulating positive policies for the private sector to thrive under. From the protection of enterprises to reduction of risk, the public and the private sector must work together to create an enabling environment for business. To achieve this collaboration, we need regional frameworks organized under cross-national trade federations and development boards. You can work and work as much as you want, but at the end of the day, what truly matter are the results of your work, and without these common bodies, the latter becomes impossible to measure.
Africa’s largest untapped market and its biggest opportunity for progress are right on its doorstep. In 2014 in Europe 69%, Asia 52% and in North America at 50% exports were intraregional and Africa had the lowest level of intra-regional trade at 18%. As Chairman of the East African Business Council, the private sector has already advanced significantly in terms of regional integration, however, when it comes to the public sector/politicians, it seems that there are still bottlenecks to move in the integration direction. How wide is the window to make this happen and what are the milestones achieved by EABC?
The EABC is the voice of the private sector of the region. One of the key objectives of our leadership is to ameliorate regional integration. From a business point of view, national markets are too tiny for the region to grow; isolated nations are not interesting because our individual populations are too small. Regional integration is the answer to economic development! In this region, the largest market is Tanzania with 45 million, not attractive enough. However, if you look at the EAC as a common economic block, we represent a market of over 140 million people with well-distributed goods and services!
The key to success is regional integration. Now, the challenge is to go beyond the rhetoric and the mere name of the organization. You need to ask questions, how well connected are you? How many projects are you commonly running? How are your private businesses organized? Speaking about our region specifically, we have negotiated with the multiple governments a way to facilitate cross-border movement.
To us as business people, what also interests us is how much money you are carrying in your pocket. So the more we facilitate movement of people the more we increase movement of money. That is how we grow.
To encourage this movement, we have installed an ID system so that passports are not needed any longer in order to travel. On a regular day, back when passports where still a requirement, about 4,500 individuals would cross the border. The day we introduced this ID system, 24,000 people crossed the border! In terms of money, it meant that cash could finally flow freely.
So in front of this success, we went a step further and created a single regional visa. Why would a tourist need to get a separate visa for every country he wishes to go to? Tourists come here with dollars to spend and we wanted to attract them to the region as a whole. So we facilitated visa requirements to a single multiple entry visa for some $100. Tourists enjoy our countries, and we enjoy their dollars. It simply makes sense.
So we went even further, we asked ourselves, why don’t we create a single custom window? Harmonizing our custom policies was a major tool to save time and money. Before, it used to be a nightmare. Each country had its own requirements, and the whole process could take up to seven days. We had trucks spending seven days at the border. We have reduced that to the point that from Mombasa port to Kigali, the maximum travel time is of seven days. If that schedule is not respected, the next day I can call Honorable Minister Kanimba and ask him, “Why is my truck delayed?” Again, effective regional integration is the answer. It allows us to be self-sufficient by collaborating amongst each other. Can you believe that some West African countries import potatoes from Europe because it is more attractive and less costly than importing them from a neighboring state? That kind of regional relationship impeaches growth. We want to be a harmonized collaborative economy where inner-regional trade is encouraged.
Another priority for the development of Africa is industrialization. Industrialization will allow African countries to be less reliant on foreign exports. What is your take on this phenomenon?
When you get to where we are now, what else do you do? Do you keep spending your dollars on finished products import? Or do you start manufacturing at home? The trend in Rwanda is to have people starting to industrialize. It could start with small-scale industry but we must attract FDI for greater projects.
Another benefit of regional integrations is that the materials we are not able to produce here can be obtained from our neighbors. To give you an example, let us consider the market of secondhand cars. There is a plan to sell used cars because people are looking for cheaper options. The latter is not so profitable because the cars are imported. So, as a region, we decided to open two assembling platforms to produce cheaper and newer cars. Once that is done, regional integration allows these platforms to distribute their products in a cost-efficient manner to the region.
Over the next six to seven years, we want to get rid of our used cars to encourage local production. The same thing happened with secondhand clothing. Our textile industry completely died, killed by the influx of secondhand clothing. However, if we consider our region as a whole, textiles can be sold to more than 160 million people! Very attractive market if, and only if, we reduce trade barriers and encourage free movement of goods.
You mentioned that the public sector should be an enabler, not a competitor, to the private sector. How smooth is the dialogue between the private and the public sector here in Rwanda?
Here in Rwanda, there is a structured engagement arrangement. Twice a year we sit with the president to discuss our issues and to provide him with feedback. At a lower level, we also have repeated ministerial meetings. If I have an issue with power sources, I can arrange a meeting with the Minister of Infrastructure in the space of two days. There is a beautiful engagement from the public sector. We dialogue with the RDB on a daily level to discuss challenges and progress. Thanks to the proactive approach of the public sector, dialogue has become excellent from a national point of view.
I am the chairman of a regional organization, and I know that dialogue is also enforced from a larger point of view. I directly engage with presidents of neighboring states to find collaborative answers to our common problems. The most important challenge now is not “what can we do?” but rather “when can we do it?” Our Heads of State now speak the same language and that has facilitated the entire process. To give you an example, when there is a discussion about power production, the different actors of the private sector reach out to the various regional governments so that the latter are able to localize which energy sources are most strategic to use.
Governments work together in organized clusters so that when private companies identify a challenge or a need, they are able to address it in a timely and effective manner. To some extent, the private sector has now become an integral part of the regional governmental body.
You are a business entrepreneur with many years of outstanding and diversified experience in Real Estate development. You own Park View Courts and are Managing Director of one of Kigali’s new landmarks, Kigali Heights. Please tell us more about these projects.
Real estate is an exciting area in the region, and Kigali is a particularly fast-growing city. What I did was to spot out amongst the many growing activities one that I could put myself into. I picked real estate because I identified a need for housing, office and business space. Kigali has an obvious need for new infrastructure. I therefore decided to make investor’s infrastructure my priority sector.
From an ideological point of view, this line of work is very rewarding. I currently employ over 500 workers and I also address my country’s problems. In fact, Kigali Heights was designed to be an iconic building. Our aim was to create a standalone construction with an emblematic nature. I looked at how Kigali was growing, and I decided to build something for tomorrow; it is not a building for now, it is a building for the future. Kigali Heights will provide large office space, luxury shopping areas and high connectivity. We have already received a request from the CEO of Liquid Telecom to set up offices there, and we are expecting other important figures to come in.
What does Kigali Heights mean for Kigali City?
It gives the city a different face. It will become the construction the city deserves. It is not only a question of housing; it is a matter of connectivity and infrastructure. To become what we aspire to be, we need buildings of the highest standards. We evolve on a specific governmental masterplan to enhance Kigali’s attractiveness, the Kigali City Master Plan. To start construction, we had presented our plan to the government and we won them over. There is a fast growing middle class in Kigali and this will soon create a need for housing.
So for Kigali City it is not only a matter of design, it is a matter of addressing the recent trend.
Going further, my next project will regard residential housing so that international businessmen are attracted to stay here.
Many of our interviewees told us international investors should not see Rwanda as a marked of 12 million people, but as a gateway to the region. What business opportunities would you like to highlight to international businessmen?
You cannot look at the market here as simply Rwanda. All the initiatives we priory discussed are aimed at creating an enabling investing environment. The opportunities are regional, not national.
Are you open to partnerships and joint ventures?
Yes, we are. My partners for Kigali Heights are currently European, from England and Finland. We have also actively approached USA businessmen thanks to the US Corporate Council of Africa. American businessmen want to partner with us because we are opened and willing to work collaboratively. For us, having a US partner is an amazing opportunity because it grants access to loans and good rates in dollars. Again, we are opened to partnerships.
In a recent interview you said for you to succeed and get to the top, you had to “think outside the box”. Which lessons did you learn during your business journey and what are the innovations you are the proudest of?
The first innovation is to overcome the fear of doing big things. Deleting the old school thinking to pave the road for the brightest of futures. The project we’ve done is worth $40 million. In the next project, I want to go for $100 million because my aim is to keep on progressing. Traveling fuels my innovation. Thanks to my trips, I have identified developments in other cities that I wish to repatriate here in Rwanda. As a business team, we must be keenly observant as to what happens elsewhere. Our larger goal is to transform the lives and ways of doing business by providing social and professional innovations.