kigali

The intricacies of relocating all businesses operating in Kigali’s residential facilities to commercial buildings

On the 5th January 2017, Rwandans woke up to the news that all businesses (including NGOs), operating in residential houses, have three months to relocate to commercial buildings.[1] In the article, a city official said that the city administration had given written notice to businesses to relocate by the 1st March or face closure.

The reasons, given by the City of Kigali official, for this directive include  the following:

  • Availability of commercial spaces
  • Low occupancy of the commercial spaces , leading to defaulting on the loans by the investors
  • Businesses operating in residential houses drives the rent rates up , making it unaffordable for anyone looking for a home and
  • It is against the city’s master plan to have businesses in residential houses.

Those reasons are the ones that sparked a conversation in the country, especially on social media; I will briefly look at each reason and its implications.

Availability of commercial spaces and low levels of occupancy

The first two reasons are interrelated and I will discuss them together. The government encouraged people to invest in commercial buildings as commercial spaces were lacking. Investors listened and fancy new buildings were built in the city, such as Kigali Heights and CHIC among many others being erected in the city. The issue now is the availability of those spaces but very low levels of occupancy. The City of Kigali is putting the blame on the residential houses that are cheaper to rent for businesses, but is this not the nature of business? Why would  business owners subject themselves to high rental tariffs when they can pay cheaper? Why is the city administration getting involved in this, instead of letting the market regulate itself? The City also says that as a result of the low occupancy, the investors can’t repay their loans, what about the owners of those residential houses who also have loans to pay and also the business owners who are trying to make a profit and can’t do that when they have high rental fees to pay. It seems like the directive is aimed at protecting the investment of a few at the expense of many businesses which I think also, has adverse effects on the economic growth of the country.

Residential houses are expensive as a result of them being used by businesses

This is a very valid reason, especially for many young people who are trying to be homeowners and are at the early stages of their careers. Although it is a valid reason, it is not a good enough as the City should have urged investment in affordable housing before commercial spaces. The solution is for the city to make those commercial spaces cheaper so that they can be affordable and be an incentive for businesses to move in without sacrificing their profit and growth … also urge investment into affordable housing.

The relocation is part of the master plan of the City of Kigali

This is also another valid reason, the issue is the implementation. The adherence to the master plan is very important in order for Kigali to become a world-class city, but that adherence should be organic, it should not be marked by knee-jerk reactions in forms of directives. The three months period is unrealistic as it doesn’t take into account the rental contracts that have already been signed for the whole year,  annual  plans that have been already made and didn’t account  for the increase in  rent (in case of NGOs)  and many other related issues.

President Paul Kagame in his  2017 New Year address to the Nation said that everyone has a right to ask for explanations in case they are not satisfied and also give input. So we are asking the City of Kigali  if  consultations were done and with whom, as ‘consultation’ is a big part of “agenda setting’ which is one of the step in policy formulation. Were all the stakeholders consulted and was a feasible study done on the implication of this directive?  In my view,  the City leadership  should  , reconsider this directive and conduct more consultations and dialogue with relevant stakeholders to ensure a win-win deal. Alternatively, the City administration should negotiate with the owners of those commercial buildings to set affordable rent prices to avoid  business operate in residential facilities.

And finally, is the City of Kigali willing to listen to the inputs of the people, as emphasized by His Excellency in his New Year address.

[1] The New Times No.4197 on http://www.newtimes.co.rw/section/article/2017-01-05/206842/ accessed on 5/1/2017

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Categories: kigali, Paul Kagame, rwanda

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2 replies »

  1. Very valid reasoning Joseph. I think the entrance of CoK in rental business has to be calculated for sure. There should be willingness to let the market determine this shift otherwise we could risk crippling the growing businesses at the expense of the big businesses. I have also noticed that, its not obvious that all businesses should operate in high level buildings, actually, the choice is determined by the target market not the availability of space.

    This is my quick suggestion to the solutions.

    Take stock of who needs to operate in these kind of buildings and plan a phase by phase approach to this shift. This gives rooms for investors to lower their space rates, do a marketing campaign and also identify the need for their target. Being a high level building does not necessarily fit my business purpose.

    Secondly, dialogue should be done with all concerned parties. I think here it should be Private sector led PSF,RDB should lead this conversation and let the users (investors and tenants) agree on terms. Price, space needs, conditions etc should be discussed.

    Do we know the available space vis aviz the used home space. If everyone moved out of the homes, would they get space in Heights and Chic and any other office space? does location fit their respect business purposes?

    I guess the best option is let the concerned talk and an amicable agreement be reached before setting timelines.

    The contributor is a business development Specialist

  2. I think only one reason should have advanced. The fact that master plan should be followed but as you said be done in organic way. The other reasons are just emotional and I will say may have been discussed internally based on what you said as promise to big investors. I agree that all business should be located in business settings whether NGOs or retails business. On another side nothing was said about NGOS who are currently owing housing and using them as office. Are they gonna be reallocated as well. Who will rent their own house? City need more consultations and put together a plan to ensure none is hurt

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