Startup: Rwanda More than a decade after the genocide, the tiny African nation
has reemerged as a mecca for American entrepreneurs seeking redemption and
profits alike.
By G. Pascal Zachary, Business 2.0 Magazine
August 1 2007: 7:45 AM EDT
(Business 2.0 Magazine) -- Rod Dubitsky sits under an umbrella at a
roadside restaurant near the center of Kigali, munching on a plate of cooked
bananas, stewed goat, and roasted beans. If the 43-year-old Wall Street bond
analyst from Hoboken, N.J., feels a little out of place on his first trip to
Rwanda, the feeling doesn't last more than a couple of minutes.
An attractive white woman walks up to the table and, with a distinct French
accent, introduces herself, explaining that she's scouting locations and talent
for an upcoming movie. "I'm from Paris," she says. "We film genocide movie this
summer. I am casting. I want you. I need white men."
Fresh coat: A Rwandan worker puts the finishing touches on a
new shopping center in downtown Kigali.
"Not many countries get this kind of fresh start. The upside in
real estate alone is huge," Rob Fogler, investment fund manager.
"My husband is one of many expats here because of postgenocide
guilt. He wants to do good. I want to make money," Alissa Ruxin, owner Heaven
Cafe.
"We are the headline American investor. We have an obligation to
do better," Chris Lundh, CEO, RwandaTel.
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Dubitsky drops his fork and laughs, recalling that one of the reasons he's in
Kigali, Rwanda's capital, is because he saw Hotel Rwanda, the Oscar-nominated
film about a hotel manager who saved his guests from slaughter during the 1994
genocide. Dubitsky is even staying at Mille Collines, the luxury hotel that
inspired the film.
The woman apologizes for not having a business card and hands Dubitsky a
flier describing the film. He looks at her ruefully. "I'm too busy for a
movie," he says. "I'm here to invest in Rwanda."
Dubitsky isn't joking, and he's not alone. A growing number of Americans,
South Africans, and other foreign businesspeople are investing in the country's
rebuilding, taking obligatory trips to genocide memorials (Dubitsky went to
three), dodging casting agents, and assessing the prospects for financing and
running profitable ventures.
Rwanda is home to one of the most hopeful, if little noticed, transformations
in the bottom-line world of business. An African killing field, roughly the
size of Vermont, turning into a mecca for venture capitalists?
"In Africa, the smart investors go places where no one else wants to go,"
says Chris Lundh, a Californian who arrived in December to run RwandaTel, the
country's largest telephone company and Internet supplier. "There's less
competition, and you can do very well." The country's reform-minded government
is also one of the continent's most stable and least corrupt. That logic is
what drew Dubitsky to travel here on his own dime to scout for new prospects.
While he favors investment over aid, he admits, "sympathy is part of the
equation. Rwandans deserve help."
They are getting plenty, courtesy of well-heeled Yanks who spy profit
possibilities in helping to rebuild a landlocked country of about 8 million
people - one of the poorest and most densely populated in the world. The
genocide of 1994 took the lives of nearly 1 million Rwandans. Much of the
killing might have been avoided if other countries had intervened. President
Clinton has apologized for the failure of the American government to do so.
Whether driven by profit, conscience, or a combination, Americans are looking
for first-mover advantage. Even Google (Charts, Fortune 500) is eyeing the
possibilities. In the spring, seven of its employees canvassed the country,
pondering how and where to open the company's first African computer center.
"Yes, part of the interest stems from pangs of conscience," says Eric Schmidt,
Google's CEO. "But there's also genuine opportunity for business and the draw
of an African government that's treating foreign investors fairly."
Other prominent players are on the way. Qualcomm (Charts, Fortune 500), the
$8 billion cell-equipment giant, plans to open its first African training
center here. The CEO of Boston-based software company SolidWorks was here
earlier this year to help launch Rwanda's first high-tech outsourcing firm. An
Illinois maker of off-road vehicles wants to open an assembly plant in Kigali.
And an executive at BNSF, the Texas railroad company, arrived in April to give
the government advice about creating a light-rail line.
Then there's Dubitsky's lunch companion, Rob Fogler, who runs a small Rwandan
investment fund backed by 25 U.S. investors, including the wife of eBay
(Charts, Fortune 500) co-founder Pierre Omidyar. Fogler, 39, is visiting to
check on his portfolio companies, field pitches from locals, and persuade
Dubitsky to invest in a new fund devoted either to real estate or to new
business ventures backed by Rwandans.
"The upside in real estate alone is huge," Fogler says. Demand for housing is
high, from both locals and Rwandans living in Europe and the United States. And
prices are low: An American-style three-bedroom home can be had for less than
$75,000, and there are plenty more bargains in a country known for its scenic
beauty, wildlife (Diane Fossey fell in love with gorillas here), and an easy
climate. Quincy Jones owns a luxury home in Rwanda, and Oprah Winfrey has
reportedly been looking at a similar property.
To be sure, there's a madcap element to all this sudden activity. The country
imports almost everything it consumes, 90 percent of its people are dirt-poor,
and its sprawling neighbor to the west, the Democratic Republic of the Congo,
is highly unstable and home to armed rebels who have vowed to destroy the
current government. "There's a Field of Dreams quality to Rwanda," says Peter
Bartig, another American executive at RwandaTel. "What if we build it and
prosperity doesn't come?"
Investing in Rwanda clearly isn't for the faint of heart. But for some, the
work here carries, along with the promise of profit, more than a whiff of
romance. Fogler gave up a thriving legal practice to build a series of
investment funds in Rwanda and, despite constant setbacks, has plans to expand
his portfolio. "The genocide, while tragic, meant that about 100 percent of the
business elite changed," Fogler says. "Not many countries get that kind of
chance for a fresh start."
Moving in on retail and real estate
On a curving asphalt road that divides one of Kigali's poshest neighborhoods
from a modest one, a heavy rain is falling and the roadside ditches are
spilling over, lapping against the wheels of Fogler's red Toyota Tercel. The
car has a musty smell, which reminds Fogler why he always packs extra air
fresheners when he comes here. This is his 13th visit, and he has long since
stopped renting cars from agencies, which invariably force customers to pay for
a driver - at a hefty premium. Instead, Fogler pays an airport employee $28 a
day to use her Tercel. Driving yourself around Kigali, however, means
negotiating the city's patchwork of streets and its vigilant traffic police.
When the rain lets up, Fogler jerks the car to a halt and scrambles outside.
He points his camera at a cluster of houses being built across the valley. Then
he spins and snaps shots of vacant hillsides. "We can build here, here, and
here," he says.
Fogler has a dream. He thinks hundreds of U.S. investors will sink money into
burgeoning Kigali, a city of about 850,000. But as Fogler knows, even those
aware of the opportunity here can't readily invest as individuals. "People
always ask, 'I have $15,000, how can I invest in Rwanda?' The answer is, you
can't." Not alone, anyway. The time required to manage an investment here
prohibits most Americans from attempting solo ventures. That's why Fogler pools
relatively small investments from wealthy Americans into funds large enough to
buy into different sectors of Rwanda's economy. Fogler's first fund is aimed at
backing businesses with high growth potential. His next fund, of $5 million to
$10 million, is the one that's going after property. "The time," he says, "is
right for real estate."
Extreme telecommuting
Back inside the car, Fogler shifts into low gear and climbs a steep hill. To
his right is a large billboard advertising new homes. He stops in the middle of
the road to snap a few more pictures for potential investors back home, then
drives on, turning left at the next intersection and pulling over for more
shots. A Kigali police truck pulls alongside, with two cops in the front seat.
"Where did you learn to drive?" one asks.
Fogler feigns innocence. "What did I do wrong?"
"You stopped in the middle of the road."
Fogler apologizes, explaining that he just wanted to take a photo.
"Would you do that in America?" Fogler shakes his head, and the cop,
apparently satisfied, warns him never to do it again.
Later on, after his property drive-bys, Fogler heads over to one of Kigali's
tallest buildings - a six-story complex near the presidential compound - to
attend a board meeting of his first Rwandan venture. Called Rocket2020, it's a
chain of Kinko's-like stores that offer Internet connections, computers for
rent, and an online shopping service. Fogler envisions the stores evolving into
a kind of Rwandan J&R Electronics, peddling a variety of small consumer goods,
from memory sticks to digital cameras.
It's a radically different vision, too, for Fogler, who just three years ago
was putting in long days as a corporate lawyer in Denver. Despite a thriving
practice, he wanted to add something extra to his life - a higher purpose. Not
long after he saw Hotel Rwanda in 2004, he got an invitation to meet with a
trade delegation from Rwanda. When he showed up, he found himself the only
American in a room with Paul Kagame, Rwanda's president. "Enough with foreign
aid, we want foreign investment," Kagame told Fogler, who by the end of the
meeting was sold on the idea.
By 2006, Fogler - aided by the success of the movie - had raised $1 million
for a business investment fund, Rwanda's first ever. With $300,000 of that,
Fogler started on the launch of Rocket. The premise seems sound: People in the
countryside are overcharged and underserved, so there's ample opportunity to
scoop up sales using computer networks to reduce costs and prices. Shoppers
select goods from an online menu. Orders are collected and filled from a
central location. Rocket2020 fits a big niche - and comes with big risks.
Fogler's five stores (he plans to open 25) are packed with people, but they're
mainly using the Internet, not buying goods. Per-store sales currently hover
around $50 a day, or $1,500 a month. Monthly losses total a few hundred dollars
per store.
As he sits down at the conference table, Fogler plops down a plastic bag
filled with 40 1-gigabyte memory sticks he bought in Denver for the bargain
price of $10 apiece. They're not freebies for workers; he's replenishing
inventory. Rwandans are accustomed to paying $50 a pop for these, Fogler
explains, so they should sell fast.
That's the good news. The week before he arrived here, Fogler had to fire
Rocket's chief executive, who proved incapable of sticking to company rules on
handling cash. Sitting across the table from Eugene Nyagahene, the one Rwandan
who invested in his fund, and Kalinda Beau, a Rwandan who has just moved back
home after a stretch in the States, Fogler dives into discussions about
reducing the company's burn rate, finding a new CEO, and introducing new
merchandise. Eager to fit in, he speaks softly and displays the utmost
patience. ("I want to be trusted here, respected," he explains later in
private. "The business community is very small, and your reputation can turn
quickly if you drop the ball.")
The interim CEO, a Rwandan who helps Fogler manage the fund, reports good
news on slashing expenses. The burn rate is down sharply, he says, and for an
unexpected reason: "Our former CEO enjoyed talking on the phone. Since his
departure, phone expenses have drastically come down."
Building the dream: The Heaven Cafe
Atop one of Kigali's many hills, 60 or so Rwandan construction workers are in
motion on a large residential lot with stunning views of the verdant
surroundings. A ranch-style home is being expanded to accommodate an outdoor
cafe, a bar, and a large kitchen. Some men are laying tiles. Others are piecing
together the foundation for a wide wood deck and laying out the beginnings of a
roof.
Choreographing the action is the only woman on the site: Alissa Ruxin, a
32-year-old native of San Francisco, who issues stern instructions to the
workers in French. Her new enterprise, she says, will be called the Heaven
Café. In addition to the restaurant, she will open an adjacent bar and spa. She
and her husband, Josh Ruxin, an American development and public health expert,
have invested their life savings - about $100,000 - in the place, situated in
Kigali's best neighborhood. "In the United States, I never could have done
this," Ruxin says. "The opportunities are everywhere. Anything seems possible
in Rwanda."
The Ruxins came to Rwanda a year and a half ago. During the day Josh helps
poor farmers; in the evenings he listens to his wife's tales of doing business
in a landlocked, isolated African country. "My husband has a savior complex,"
Ruxin says. "He's one of many expats here because of postgenocide guilt. He
wants to do good. I want to make money."
At the moment, her prospects seem bright. Hundreds of millions of dollars in
foreign assistance are pouring into the country, and scores of new American and
European aid workers need to eat. Ruxin estimates that one upscale restaurant
can gross around $2,000 a day, with meals running about $20 each. Ruxin still
can't believe that she will open by Labor Day with only a few serious rivals
and says her profit could double or even triple her original investment within
a year.
To succeed in the construction phase, though, Ruxin must involve herself in
every aspect of the business - most important, controlling costs. "We came from
Manhattan, where everything is just sky-high, and thought it would be dirt
cheap here," she says, shaking her head.
How wrong she was. Consider the cost of wood for the deck. There are no Home
Depots (Charts, Fortune 500) in Kigali, and since wood is rarely used as a
building material, Ruxin sent one worker to a forest in neighboring Congo to
select individual trees for cutting. A thousand pieces of wood cost her a
breathtaking $5,000, not including thousands more to pay for milling and
finishing.
Managing the locals - as Fogler, too, has discovered - is a constant trial by
fire. At first Ruxin hired a foreman, but she took over herself after he made
some costly mistakes. She also pays a guard - who reports directly to her - to
dole out building materials. In the rush before the lunch break, she explains
to her electrician that fluorescent lights are to be used only in staff areas.
Customer areas will receive more expensive lighting. The electrician argues
against her decision, then quietly accepts.
Ruxin next inspects the work of some masons and spots several cracked tiles.
"You must replace these," she says to one worker, who seems not to understand.
Fortunately there are leftover tiles, and she asks the worker to sort through
them and find a few good ones. She watches him do so - then winces as a
pristine tile slips from his hand, falls, and breaks.
Most of the men make $2 a day; the skilled laborers earn as much as $7 a day.
That sounds like a pittance, but it adds up, Ruxin says. Several men even work
through their lunch hour, moving piles of dirt that would otherwise cost Ruxin
$25 per truckload. "We're already over budget," Ruxin says, "and we need to
save where we can."
Cultivating a company of coders
Soft-spoken Antoine Bigirimana is quite possibly Rwanda's top software
engineer. How he wound up here suggests another path toward profitability:
importing tech talent and leveraging distance-defying computer networks.
Bigirimana, a Rwandan who grew up in exile in Russia, studied engineering in
Belgium and then moved to California in the 1980s. He wrote chipmaking software
for several Silicon Valley companies, made a small fortune, and in 1987 started
a company called E-Tools. When the Soviet Union collapsed, Bigirimana was among
the first to hire groups of Russian programmers, outsourcing jobs to Moscow and
forging teams with Russians, Americans, and Rwandans like himself.
The world of the Internet
Four years ago Bigirimana opened an E-Tools branch in Kigali, trading on his
software skills to land consulting contracts with the Rwandan government and
businesses, which often had to fly in experts from Europe at great cost.
E-Tools offers market-quality service at close to local prices. (Recently,
Bigirimana has been writing code to update Rwanda's border-control software.)
With deep ties to influential members of Rwanda's vast diaspora, Bigirimana
draws on his knowledge of the country but not on family connections: His
relatives were killed in the genocide. "For a virgin country like this," he
says, "almost anything will work, so long as you do it right."
One smart decision early on was to persuade one of his top programmers in
Moscow, Serge Iroshnikov, to relocate to Rwanda. Though Kigali is hardly a
technological nerve center, Iroshnikov maintains his programming chops through
periodic visits to Russia, where he studies advanced computer concepts, among
other topics. But he doesn't feel he's slumming it in Rwanda. Given his coding
skills and international ties, he says, "I don't think it's important where I
live."
Besides, the homegrown Rwandan coders are coming up fast. "With the
additional education given by us to the Rwandans, they are getting onto a good
level," Iroshnikov says. Bigirimana gives some of his toughest coding
assignments to 24-year-old Clotilde Tingiri. She started at E-Tools in 2005 as
an intern; today she makes about $750 a month, a fraction of what Bigirimana
would need to pay her in Silicon Valley.
Understanding the risks
If Americans are seen as saviors in Rwanda, the sentiment comes with some
unpleasant baggage - and Fogler and others quickly find out why. Two years ago
an Internet millionaire named Greg Wyler persuaded the government to let him
take over Rwanda's ailing national telephone company. Wyler had a plan to
crisscross the country with fiber optics, creating instant Internet everywhere.
As part of the $20 million deal, Wyler received rights to launch a mobile-phone
company, which in Africa - given the growth in wireless technology and the tiny
number of landlines - is a veritable license to print money.
But troubles began immediately. A neophyte in Africa, Wyler misunderstood the
difficulties of inheriting a state-owned company and soon faced a staff revolt.
He also underestimated the costs of bringing new Internet services to locals.
"I certainly made plenty of mistakes," Wyler admits. His good intentions, he
adds, actually contributed to his miscues, such as mismanaging the sky-high
expectations of Rwandans. "We didn't know how to say no to unrealistic
demands."
Nonetheless, Wyler was vilified in the media and in government circles as a
foreign capitalist staggering from one blunder to the next. "As a manager, he's
a disaster," says Shyaka Kanuma, editor of Focus, Rwanda's leading weekly
newspaper. In December the government told Wyler to revamp the company and
bring in a professional manager, or else leave the country.
Wyler's answer was to hire Lundh, an executive from Southern California with
experience working in several African countries. Lundh moved quickly to
distance himself from Wyler, upgrade Internet service, and invest more in the
company's operations. In May, Lundh changed the company's name back to
RwandaTel, rolled out a new logo that incorporates national colors, and slashed
prices on phones and mobile services. "We are the headline American investor
here," Lundh says. "We have an obligation to do better."
Though RwandaTel is only breaking even, Wyler says, Lundh pushed through a
capital spending budget of $20 million for 2007, with two-thirds going to
mobile telephony. As a result, Rwanda will have real competition in the market
for the first time. Lundh also is experimenting with laying new landlines in
some neighborhoods of Kigali that can deliver, as a bonus, cable TV - a first
in the country.
The turnaround is still a work in progress, but so far Lundh has impressed
Rwanda's business elite. "Only the Americans are the right investors for this
country," says Raj Rajendran, managing director of Rwanda's largest textile
plant and one of Fogler's portfolio companies. "Americans are transparent,
predictable, and make fast decisions. Rwanda needs them."
G. Pascal Zachary, a frequent contributor to Business 2.0, writes often about
technology and development in Africa.
To send a letter to the editor about this story, click here.
Sharangabo Rufagari
Montreal
http://www.rpfinkotanyi.org/?page=indirimbo
RWANDA RAVE REVIEWS
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