How Rwanda has strategically positioned itself as an Investment Hub
By Rolex Owino
Rwanda is banking on its political stability, good governance and well-functioning institutions to keep on attracting new investments into the country.
The East Africa state is on an aggressive global charm-offensive to lure new investors, while enticing existing financiers to re-invest in the landlocked country, which has proven to be an increasingly strong economic powerhouse in the region.
The country, which is this year (2018) celebrating 24-years since the dreaded “1994 Genocide”, has taken back the reigns to redefine itself as the preferred investment and tourism destination in the continent.
Currently, the country’s annual average Gross Domestic Product (GDP) growth rate is approximately 8%. The country is riding on its success to implement varied incentives that have made it become among the best performing economies in Africa, as regards the ease of doing business.
Rwanda was ranked the most competitive place to do business in the East Africa region, and second in Africa by the World Economic Forum’s 2017-2018 Global Competitiveness report.
It was also ranked second after Mauritius in the World Bank Ease of Doing Business Index released late last year (2018), and the top destination in East Africa.
According to pundits, efficient markets and a stable political environment – are among the top key pillars that have boosted the country’s competitiveness.
The country is boasting as being among the few in the continent where investors can register their business within the shortest time possible, with a strong legal-regulatory framework that is committed to foreign ownership rights and economic freedom for investors.
“You can register your business within six hours,” Rwandese High Commissioner to Kenya James Kimonyo told journalists in Nairobi.
“We are open for investors and one thing I can assure you is that return on investment is very high. The government has ensured the environment for investment is very conducive,” Kimonyo added.
With a new investment law, Rwanda has put in place an array of incentives for investors putting their money in key priority sectors, as it seeks to deepen Foreign Direct Investments (FDI’s). These are fiscal and non-fiscal incentives.
They include zero corporate income taxes for companies planning to relocate their headquarters to Rwanda, and a 15% preferential corporate income tax for strategic sectors such as energy, transport, affordable housing, ICT and financial services.
Investors who meet government requirements are exempted from capital gains tax, while also allowed to repatriate capital and asset gains.
It also has a seven-year corporate income tax holiday for large projects in strategic sectors of the economy, such as energy, exports, tourism, health, manufacturing and ICT.
Non-fiscal incentives include quick business and investment online registration, assistance with tax-related services and exemptions, assistance to access utilities (water and electricity) and obtaining visas and work permits.
Investors can also access information at a One Stop Centre created by the government and are assured of aftercare services to fast track project implementation.
Sectors fronted for investment include Manufacturing, Tourism, ICT, Agriculture, Energy, Mining, Real Estate & Construction, Financial Services, Health Services, Infrastructure and Education.
Though the country’s manufacturing sector is relatively young, it has been recording year-on-year growth, at an annual rate of 7%. Rwanda targets to increase industrial contribution to GDP to 26% by 2020.
“Several policies and strategies such as the National Industry Policy and the National Export Strategy have been developed to accelerate industrial and export growth,” the Rwanda Development Board notes.
It targets to increase the value of exports to US$1.5 billion by 2020, and increase the number of jobs to 1.5 million by 2024.
To boost local domestic and foreign supply of manufactured goods, the government has put in place a Special Economic Zone and industrial parks in Bugesera, Huye, Nyabihu, Rusizi, Rwamagana and Musanze, which come with developed infrastructure and streamlined business regulations to facilitate savvy investors.
Opportunities in the country’s manufacturing sector include in the textile, apparel and leather sector, wood and wood products, float glass manufacturing and packaging.
It enjoys a number of trade incentives including duty-free quota-free market access for goods entering the European Union Market and the US through the American Growth and Opportunity Act (AGOA). Rwanda also enjoys an array of bilateral investment and tax treaties.
Rwanda has opened its doors for international hotel brands. Tourism remains the largest source of foreign exchange earnings for the country. For instance, the sector generated $404 million in 2016.
In ICT, the government has invested heavily in developing relevant infrastructure to enable service delivery.
The country has over 5,000 kilometres of Fibre optic broadband laid across the country, connecting all 30 districts with nine regional links to neighbouring countries. It has opportunities in tech innovation, Information Technology and Smart Cities solutions, among other areas.
The agricultural sector offers investors an opportunity to invest in food processing, value addition, mechanisation, distribution and cold chain installations, large-scale poultry farming, floriculture, beef farming targeting export markets, milk and milk products processing and irrigation for production of high value crops.
In the energy sector, opportunities are mainly in power generation with solar being a key focus for the government. High importance is placed on the Solar Home Systems market, driven by the private sector to provide electricity to about 1.2 million households.
Rwanda enjoys a growing off-grid standalone systems market, with about 24 companies supplying Solar Home Systems through both government programmes and independent initiatives.
The country exempts small isolated grids (50kW and below) from licenses.
The mining sector is the second largest export earner in the Rwandan economy. For instance, In 2016, government data shows that the sector generated US$166.5 million, employing over 30,000 people.
Rwanda’s main mineral exports are ores processed to extract tin, tantalum and tungsten. It also has some gold and gemstones.
“Exploration works to identify and delineate more mineral deposits are underway and Rwanda possesses a mining law with supporting Ministerial orders and has a mining policy in place,” RDB (Rwanda Development Board) notes.
Representative investment opportunities include industrial mining, value addition, partnerships (with local mining companies) and trade in mineral substances.
Investment in the Real Estate sector has grown from US$100 million to over US$600 million in the last 15 years, driven by population growth, a growing middle class, increased diaspora investment in the property market and government investment in infrastructure.
The country has vast opportunities in the real-estate sector – spanning from large commercial property, office space to residential properties.
Rwanda has a high demand for affordable housing to match the needs of the growing middle class in the country.
Opportunities are available for the development of warehousing facilities, commercial complexes, office buildings and shopping malls.
This also necessitates the production of construction material, offering a further investment opportunity.
Kenya Commercial Bank (KCB Group) is among the biggest investors in Rwanda’s real-estate sector with a portfolio of about US$115 million. The lender is currently developing four key projects namely: Vision City – the largest real estate project in the country, Century Park, The Residence and Izuba City, which is being developed in partnership with Rwandese developers.
“Investing in Rwanda, you are assured and guaranteed of returns,” says Beatrice Chege, Head of Mortgages, KCB Rwanda.
Rwanda has recorded growth in its financial sector with institutions such as banks, micro-finance, savings and credit cooperatives, insurance companies and pension funds thriving.
The country’s commodity exchange and capital market is also growing fast.
The banking sector continues to dominate the financial system with 66.9%, followed by pension, insurance and microfinance at 17.1%, 9.7% and 6.3%, respectively.
At least six commodities are traded on the exchange. Investment opportunities include agricultural financing and Small & Medium Enterprises (SME) financing.
The health sector offers opportunities in the manufacturing of health products and equipment, provision of advanced health care services and investment in medical schools.
Rwanda has been keen to expand its infrastructure, mainly – road, rail and air transport.
The country is keen to play its part in the development of the Dar-es-Salaam-Isaka-Kigali railway project, which will connect Kigali (Rwanda) from Isaka to the Tanzanian port of Dar es Salaam.
The project is estimated to cost US$5 billion once completed.
President Paul Kagame’s government has also expressed commitment in the development of the Mombasa-Nairobi-Kampala-South Sudan-Kigali Standard Gauge Railway (SGR).
Kenya has already implemented the Mombasa-Nairobi stretch (currently operational), and works on Nairobi towards Western Kenya are underway.
Recently, Kenya’s President Uhuru Kenyatta said SGR Phase 2A from Nairobi to Narok is now 57% complete.
The project, which is part of East Africa’s Northern Corridor Integration, is expected to reach the Kenya-Uganda border with Uganda taking the mantle to connect to its neighbours.
Rwanda has fronted investment opportunities in the Mombasa-Kampala-Kigali railway line in her country. The value of the Rwandan section of the project is US$1.5 billion.
It is also open to continued investments in its road transport system, both roads and supporting infrastructure – mainly in the public transport sector.
In the education sector, the country is offering investment opportunities in Technical and Vocational Education and Training (TVET), ICT in education and Higher Education and Research.
Kenya is among the top investors in Rwanda, with a consolidated investment of more than US$500 million.
“Kenya as a top Foreign Direct Investor in Rwanda shows Rwanda’s trust in Kenya as a neighbour,” Kenya’s Foreign Affairs Principal Secretary, Ambassador Macharia Kamau, said at a recent event, further noting that the country has been attracting FDI’s from companies that would have rather invested in Kenya.
This, however he said was good for regional growth, with Rwanda’s growth creating an export market for Kenya.
Rwanda is hence, a force to reckon with in the region as an investment destination and with the current trends within the country, which is a member of the East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA) and the Economic Community of the Great Lakes Countries (ECGLC) – the country is arguably destined for greater heights.
Source: African Strategic-Ventures (ASV) & The Exchange.