Organisation and management

Contracts with service providers

With regard to managing the third level, all project implementation activities concerned with crop development, with farmer organizations, with introduction of new marketing strategies and channels, and with training of cooperatives, associations and SMEs will be outsourced by the PCU to service providers. The service providers envisaged include: OCIR-Café and OCIR-Thé, MINAGRI (on behalf of the central office for activities under the new cash and export crop component, and of the Gikongoro Provincial DALFs for the Mushubi tea component), the RDB, ISAR, TWIN, the Rwandese Federation of Private Sector, other national private sector operators and NGOs.

The experiences of the Umutara and of other IFAD projects in Rwanda and elsewhere in the Region suggests that implementation can be seriously delayed by slow and cumbersome procedures in contracting service providers, inadequate attention to all the costs involved in delivering services, and failure to pre-qualify those who are invited to tender. Under the project SOF, IFAD will provide funds to draft pro-forma contracts, to assess the procedures for contracting, train the PCU accordingly, prepare pro-forma budgets for the contracts to ensure that recognised costs will be in accordance with the project estimates, particularly with respect to the service providers’ overheads. The internationally recruited Senior Technical Advisor will assist the Coordinator in drawing up tender documents and in negotiating the contracts.

In addition to the contracts with TWIN and with the RDB, the following contracts are envisaged:

The contract with TWIN. TWIN, a co-financier of the project, will intervene as the project Fair Trade Technical Partner under a special contract with the PCU. The contract will cover two categories of services: (a) those related to services provided directly by TWIN; and (b) those services which TWIN will procure from third parties in Rwanda and abroad, subcontracting them on behalf of the PCU. The contract will fund the following activities:

Services to be provided directly by TWIN. These will include the establishment of a TWIN office in Rwanda for a period of 5 years. The office would include: a senior Regional Advisor responsible for the entire TWIN operation, who will be resident in Rwanda for at least six-seven months each year, one TWIN project national coordinator on a full time basis, a national general manager of the CPMCC, a financial controller, an accountant, one secretary, and two drivers. The TOR of the TWIN office include:

• Participation with OCIR Café and the PCU in the selection of the coffee growing areas of project intervention;
• selection of participating grower organizations/primary cooperative societies at Nshili and in the selected coffee growing areas;
• recruitment and supervision of national NGOs to carry out cooperative formation, animation, and training, in the selected coffee growing areas and at Nshili;
• training of the national organizations, including the staff of OCIR-Café, and OCIR-Thé recruited by the PCU to provide technical assistance to growers in coffee and tea production according to top quality market requirements;
• contracting for the production of related training material;
• providing the general management of the coffee processing and marketing companies, including arrangements for the construction of the coffee processing plants, contracting suppliers and supervision of suppliers delivery and installation, and training cooperative members to take over management in due course;
• establishment of appropriate linkages with FT trading organizations;
• supply of market information to the primary societies of growers, ensuring that such information is actually received and understood by the membership of the primary societies;
• quality control of the products of the CPMCC and of the NTC and arrangements for FLO certification of the products that meet FLO standards;
• marketing the products of the companies supported by the project, with special attention to Channeling products through the FT organizations as much as possible;
• support to improving product marketing abroad and access to special markets, including participation in Trade Fairs with representatives of Rwanda partners, design and production of material and supplies for the Fairs;
• attendance to meetings of the Project Policy Steering Committee, and to annual Project Component Participatory Performance Evaluation Workshops; and
• production of quarterly and annual financial and progress reports.

Services sub-contracted by TWIN to third parties. The following will be contracted out by TWIN using project funds:

• specific consultancies on technical and agronomic aspects, including preparation of feasibility studies for organic coffee and tea production, related action plans and initial certification if organic conversion proves feasible, and training Rwanda technicians in organic conversions; and
• coffee and tea growers cooperative formation, animation, training, operation monitoring and support, by national NGOs;
• cooperative training in smallholder loan making and supervision, by national NGOs;
• preparation of training materials for above;
• product promotion in world markets, including design of marketing promotions materials, and
• specific design and construction supervision of coffee processing facilities.

The contract will be for five years, subject to good performance verified annually by the local partners’ organizations, the PCU M&E officer, and the IFAD supervision missions. Thereafter, it is envisaged that the services of TWIN will continue, and, as in the case of other TWIN initiatives elsewhere in the world, they will be funded by the project beneficiaries (processing companies and primary cooperative societies) themselves.

Contracts with the financial institutions. These will concern contracts with the RDB and with other Rwanda financial institutions interested in participating in project implementation.

Contract with the RDB. The PCU will negotiate a contract with the RDB, under which the RDB will play a pro-active role for the establishment of the CPMCC and of the NTC. Whereas the NTC as described in Chapter VIII is the only scenario that the project will implement for coffee processing and marketing, the possibility of other options will be explored without deviating from the project policy and approach to secure control of the enterprises by the primary societies of smallholders, and to avoid all potential future conflicts between owners of interests in processing and marketing and producers of raw crops for processing.

Within the framework of the coffee diversification component and of the Nshili integrated smallholder tea development sub-component, the RDB will:

• coordinate the activities of the PCU, TWIN, OCIR-Café, OCIR-Thé, and the Privatisation Secretariat of the ministry of Finance, for the establishment of the CPMCC and of NTC, or of any other commercial organization that might be established under the project in the coffee sub- sector (this function includes promotional activities, including identification and assessment of potential private partners among FT organizations, contracting feasibility studies of crop processing operations, appraisal of the viability of the growers primary societies, negotiations, contracting legal advise, facilitating the quantity of legal personality to the primary societies, etc.);
• prepare draft Articles of Agreement, Statutes, and Operation Manuals for the private companies, for discussion and approval by the Board of Directors of the commercial enterprises funded by the project when established;
• handle the equity investment fund of the project that pre-finances the primary societies shares in the commercial enterprises funded by the project;
• hold in trust the shares of the cooperatives, collect the dividends payable on those shares until such a time when all the shares are paid for through dividends, establishing a separate deposit account to hold such payments as reserve until the cooperatives take over the control of the enterprises;
• act as representative of the shareholders in the Board of Directors of such enterprises;
• grant and administer the long term loans required by the CPMCC and by NTC, using funds made available by the project;
• arrange for the necessary overdraft facilities to be extended to the enterprises by the RDB and/or other commercial banks interested in participating and co-financing the lending operations;
• supervise the procurement procedures of the CPMCC and of NTC in accordance with established RDB practices, ensuring that IFAD requirements on procurement are taken into account;
• monitor the financial situation of each enterprise supported by the project on a quarterly basis, and report to the PCU and IFAD;
• cooperate with the PCU that will arrange for external audit of the enterprises’ accounts;
• transmit the quarterly and annual reports of the enterprises financed with project funds to the PCU and IFAD; and
• submit quarterly and annual reports on its own activities to the PCU.

Other contracts with Local Banks. These will concern the smallholder tea and coffee guaranteed scheme and the funding of new cash crop projects of SMEs and farmers associations. The contracts will be negotiated with any interested Rwanda financial institutions, including the RDB.

Under the smallholder coffee and tea growers credit guaranteed component, the financial institution will:

• Negotiate with the processing and marketing enterprises the procedures for guaranteeing loans made by the primary societies to their members under the project funded smallholder guaranteed scheme;
• Assess the capacity of the primary societies to handle a loan from RDB under such scheme;
• Establish a fund to finance the loans extended to the primary societies under the scheme, and make arrangements with local commercial banks for handling the accounts;
• Report on the progress made in implementing the scheme, and on the financial position of the related accounts;
• Contract external audit of the accounts of the primary societies, including reconciliation with the commercial banks and the processing companies accounts; and
• Submit quarterly and annual reports on its own activities to the PCU.

Under the new cash and export crop component, the participating financial institutions will fund financially viable projects related to the development of new cash and export crops. Such projects would be submitted by private entrepreneurs and private enterprises (SMEs), farmer associations sponsored by the MINAGRI project preparation unit, or by other supporting agents (other IFAD projects, NGOs, etc…). Irrespective of which institution will participate, individual projects will be appraised in accordance with the standard procedures and investment criteria as currently applied by the RDB.