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Wednesday, May 30, 2018

THE ARSENAL DEAL AND RWANDAIR

Last week Rwanda was in the news with their breakthrough shirtsleeve sponsorship of English Premier League’s Arsenal Football Club.

The “Visit Rwanda” logo on the left sleeves of Arsenal players will be viewed by more than 30 million people on match days.

Clearly this deal is to supplement Rwanda’s efforts to promote itself as a top tourist destination. Other components of this strategy are Rwanda’s improving hospitality and conferencing infrastructure, its cleverly packaged tours and events and its airline. More about the airline later.

About twenty years ago a UNDP sponsored consultant, I forgot his name, did a study on where Uganda can maximise its potential in order to make a great leap forward in its development.

"He highlighted eight areas – agro-processing, health, education and financial services, tourism, ICT, mining and electricity generation. While he got paid, he might weep when presented with the little progress we have made on all this fronts...

But seeing how Rwanda is progressing on the tourism, health and ICT fronts, I sometimes wonder whether they are not using that same presentation for their own purposes.

The way they have focused on tourism is probably their highest visibility effort. They have zeroed in on making Rwanda not only a leisure tour destination but are also focussed on MICE (Meetings, Incentives, Conferences and Exhibitions).

In recent months with the completion of the Kigali Convention Center in 2016 – a five star hotel, conference hall and information technology park, they have hosted several high profile conferences. The Gorilla Naming ceremony, an annual event gaining in popularity also keeps the visitors coming as do their hiking trails.

And they have developed this systematically, over the last two decades to the point that the small east African country has seen their visitor numbers almost reach two million from zero.

Which brings us nicely around to their national airline. In order to boost their tourism they needed a regular transport in and out of the country, seeing as for a long time the only airline servicing them was Sabena Airlines, which became SN Brussels.

So in 2002 – coincidentally barely five years since the UNDP consultant was in Kampala, they launched Rwanda Express, which became RwandAir in 2009.

According to recent reports the airline is yet to make a profit and were it not for government support would have gone bankrupt by now. One may argue about how long the government can continue to support the airline, which has swallowed more than $150m in government handouts in the three years to 2016 and whose losses have eaten into the airlines capital to the point that its technically insolvent.

"But I think it stands to reason that without RwandAir their MICE strategy would have no legs.
Clearly they have a long term strategy. And for them clearly, a long term strategy is longer than the near 20 years of the airlines existence...

But they also recognise that people do not come to your country just because you have an airline. Think about it, you haven’t been to Moroto or Arua or even Garuga, just outside Kampala, because there is a road that leads to it.

You travel for a reason, because there is something to do or see where you are going. Hence their deliberate effort to package their natural endowments and create new reasons to fly to Rwanda.

The business plan for the revival of Uganda Airlines is being held close to the works’ ministry’s chest. For good reason. They don’t want people poking holes through their plan before government has released a cent.

But the outer outlines of the plan are in the public domain. The justification for the airline can be distilled down to these three points that, visitors by air to Uganda have increased fivefold since the collapse of the old airline – 1.5 million from about 300,000 in 2000, so a national airline is now viable; more visitors will come to Uganda once you have an airline and the clincher, that it need not be profitable because it is like a road, whose benefits are the spinoffs in increased tourism and exports, I saw a figure like an economic return of  30 percent being hazarded by the promoters...

With that last one, they hope with one stroke, to silence all the naysayers and remove the necessity of a business case for the airline.

What that means is that the managers will be under no pressure to make the airline self-sustaining, like Ethiopian Airlines for example. In fact Ethiopian Airlines is the spoiler, as all other airlines on the continent are loss makers our national carrier promoters can point to in justifying the revival of our own.

The promoters are putting out some low ball figures -- $400m (sh1.5trillion) to get it up and running, and once government commits the first few millions of dollars, they will have to continue to shell out the hundreds of millions of dollars more over the next few decades to keep it afloat.

It reminds me of the builder many years ago who gave us a low quote for building the foundation of our home. The figure grew day by day, by the time I worked out what was happening it was too late and we just had to bite the bullet and go all the way.

It’s doubtful if we knew the full extent of the financial commitment we would have started building then.

So while we look to RwandAir’s “success” at driving numbers to its shores, we need to deconstruct the underlying strategy.

Years ago we reportedly paid a million dollars to get some mentions on CNN, whose impact on the news network’s viewers was questionable, Rwanda is reported to have shelled out about $40m on the Arsenal sponsorship over three years.

It may not see tourists bashing down the door to enter Rwanda but you can bet the awareness of a country called Rwanda will rise significantly in the next three years.


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