Latest Rwanda developments in March 2010: Business environment, political risk, transactions, data releases, regulatory and legal changes, industry and regional news.
BUSINESS ENVIRONMENT
The Rwandan Parliament ratified four bills this month that will push energy projects forward: one to release a USD60m credit line from the Exim Bank of India for the much needed 27.5 MW Nyabarongo hydropower project; and others to ratify another USD75m in power project agreements with the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD), both of the World Bank Group. Nyabarongo is expected to be complete in 2013, although importation of goods and services from India has slightly slowed progress. Rwanda suffered severe power outages in 2004 and continues to battle high tariffs and low connectivity. However, coordinated plans are now in place to double the current national capacity of 69 MW in the next two to three years, and extend grid coverage.
Rwanda’s School of Finance and Banking announced early this month that the government will pay for professional courses for students in an effort to make graduates more competitive in local and regional markets. Rwanda’s workforce remains relatively inexperienced and unskilled, although the government is working to support vocational training and English language skills as the country integrates with the East African Community. The Rwanda Development Board announced in March that it trained 3,000 people in customer care skills in 2009. The National University of Rwanda (NUR) graduated 1,216 students in mid-March from a range of programmes, including first class degrees in civil engineering, electrical and power engineering, and biology. The university also recently launched a seven-week e-entrepreneurship course, in video conference partnership with Binghamton University in New York.
POLITICAL RISK
More grenade blasts in Rwanda caught international news coverage this month. Coming on the heels of two deaths caused by grenade attacks in February, 16 people were injured when coordinated explosions went off in Kigali in early March. Observers continue to link the violence to oppression by the ruling party heading into this year’s general election. The government has accused former top army chief Faustin Kayumba Nyamwasa of orchestrating February’s attacks. Nyamwasa, who was most recently Rwanda’s ambassador to India, fled in late February to South Africa where he has sought asylum and denied the charges. President Kagame subsequently came out in a strongly worded press conference, confronting speculations that the attacks are a sign of potentially volatile dissent within the ruling party. He said: "Nobody, absolutely nobody, not even Kayumba, can carry out a coup here. Think about it and you'll come to the conclusion no one can carry out a coup".
Full destabilisation of the country will not come in this election cycle. However, continued low-level violence may be a risk. If that is the case, international news coverage like that seen this month could deliver a blow to the tourism industry, still struggling to recover from global crisis fallout. This month, French officials also arrested the wife of former Rwandan President Juvenal Habyarimana – whose death when his plane was shot down in 1994 triggered the genocide – on genocide charges, prompting predictions that more high-profile prosecutions could be on the way in an effort to consolidate the Kagame administration’s power.
DATA
- A monetary policy statement released by the central bank this month shows the country’s banking sector still struggling under high rates of non-performing loans. The real net bad debt position stood at 11% for 2009, missing the central bank’s target of 7%. The ratio of non-performing loans to gross total loan portfolio also rose slightly from year end 2008 to 2009. Net profits in the banking sector plummeted to RWF4.2bn for 2009, from RWF12bn in 2008. Poor economic performance in 2009 is partly to blame, but deeper problems exist in a lack of best practice by banks and low financial literacy throughout Rwandan society. A lack of qualified staff for loan departments is also a challenge. However, economic recovery, as well as the recent opening of Rwanda’s first credit reference bureau, are expected to decrease bad debt rates for 2010.
REGULATORY AND LEGAL CHANGES
The Rwanda Bureau of Standards (RBS) announced plans this month to step up anti-dumping measures. Officials will instigate pre-shipment inspection of goods coming from outside the East African Community (EAC), and increase checks at Rwanda’s borders. RBS also wants to launch an educational awareness campaign targeting traders and processors. However, the standards body says it may not have the budget to implement its wish list and keep counterfeit and sub-standard goods from entering the local market.
And 23 March 2010 was the deadline for all drivers in Rwanda to begin carrying electronic permits. The new licenses are plastic, coded with personal data, and come with a hefty price tag: RWF50,000 (USD87). As of the end of March, only 56% of the country’s 70,000 registered drivers had acquired the new document. Nonetheless, police have begun enforcing the new law.
INDUSTRY NEWS
- Manufacturing: President Kagame presided over the opening of Inyange Industries’ USD37m agro-processing plant this month. The factory has capacity to produce 6,500 litres of water per hour, 5,000 litres of bottled juice per hour, and 5,000 litres of milk per day. Despite its large agricultural sector, Rwanda continued to import many even basic processed foods from its EAC neighbours. Access to cross-border markets will ensure demand as has been the case for similar producers in neighboring Uganda. However, high production costs will challenge expansion plans.
- Meanwhile, residents have accused local government officials of deliberately ignoring pollution from the Kigali Cement Company in Nyabugogo. They say the factory expels lime dust and waste that have caused respiratory and skin problems and poisoned their water source.
- Insurance: According to a recent financial and management audit conducted by the central bank, the National Bank of Rwanda, the country’s insurance sector is in desperate need of skilled workers and better public relations. The industry, currently made up of eight companies, falls short on separation of short and long-term business, capitalisation, valuation of assets, and corporate governance. Lack of public awareness and demand for services is also blamed for restricting market growth.
- Agribusiness: The Development Bank of Rwanda (BRD) increased its lending to coffee farmers this month for the upcoming season, from RWF4bn to RWF6bn (USD7m to USD10.5m). Observers expect Rwanda’s agricultural sector to recover this year from a relatively poor performance in 2009.
DEVELOPMENT FINANCE
According to a statement released in March by the National Bank of Rwanda, the country’s direct budget support from donors is expected to increase by 26.7% to USD519m for the 2010/11 fiscal year. The hike comes along with increased government spending last year to stimulate the economy. But it also shows that Kigali is not acting in line with its stated objective of decreasing dependence on foreign aid.
Belgium has donated 36 cars and 82 motorcycles, valued at roughly RWF600m, to the Rwandan National Police force. The assistance comes as part of the four-year, RWF3bn bilateral “Project to Support Crime Investigation for Fair Administration of Justice and Good Governance”. The Korea International Cooperation Agency also committed USD2.5m this month to support technical vocational skills training in Rwanda.
REGIONAL NEWS
Rwanda held a series of workshops this month on harmonizing industrialisation policy throughout the EAC. The government wants to see Rwandan producers and workers become more competitive in the regional market, as well as the reduction of non-tariff barriers, increasingly aligned standards, and more intra-regional trade. Rwanda’s workforce skills and industrial base are highly underdeveloped, although both have grown recently with government support. Embracing industrial integration could help bring skill transfers from Kenya, but also competition for investment. And resistance to the principle will continue to come from Uganda and Tanzania, where manufacturers are threatened by Kenya’s dominance.
Meanwhile, grumblings continued this month regarding stalled trade negotiations between the EAC and EU under the Economic Partnership Agreements (EPA). The negotiations, which have dragged on interminably past their original December 2007 deadline, made progress in early March when the EU agreed to extend development support to EAC states. However, hope that a final agreement would be signed by the end of 2010 may be optimistic, as officials have noted that upcoming elections will bring new trade ministers and a number of persistently divisive issues such as the Most Favoured Nation clause have yet to be ironed out. This may increase uncertainty for traders exporting to the EU, although a full increase in tariffs on EAC goods is not likely in the near term as the two blocks continue to trade under an interim agreement.
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