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Rwanda Country Brief: April 2010 Print E-mail
Wednesday, 12 May 2010
Latest Rwanda developments in April 2010: Business environment, political risk, transactions, data releases, regulatory and legal changes, industry and regional news.

BUSINESS ENVIRONMENT
Local trade union SENJOUSMEL called on the government this month to raise the average daily minimum wage to RWF3000 (USD5), and up to RWF5000 for workers in Kigali. Current daily wages in the formal agriculture sector average from RWF500 to 750, and RWF1000 to 1500 in the construction industry. SENJOUSMEL says workers deserve more due to the rising cost of living.
 
Following complaints from the Private Sector Federation (PSF), the minister of finance and economic planning has announced that the government will introduce a “Smartgov” online financial management system in order to process state payments more quickly. Government suppliers say it currently takes months for their payments to come through, which throws off their cash flow and loan repayment cycles. 
 
Kenyan officials say a transport strike at Mombasa port that began in late April will not have a large effect on Rwandan cargo, 80% of which is transported via road in and out of Mombasa. International courier companies are on standby to clear goods while the port negotiates with local transporters over parking fees. However, traders said if the dispute was not resolved soon, it would begin to affect business.
 
POLITICAL RISK

6 April 2010 marked the 16th anniversary of the assassination of former Rwandan President Juvenal Habyarimana, which instigated the 1994 genocide. Commemorations noting how far the country has come were overshadowed this year by rising complaints of political oppression leading up to the August 2010 presidential election: Two local language newspapers were slapped with six month suspensions in April on charges of threatening state security, effectively barring them from covering the election period. Editors of both papers are wanted by the Rwandan police and face lengthy jail sentences. In late April, a Human Rights Watch researcher was expelled from the country. Two generals were arrested on charges of abuse of office. Opposition candidate Victoire Ingabire was arrested and later released on bail.
 
Commentators have noted a rising tension in the country and possible fissures within the ruling party. Many have compared President Kagame’s mounting repression tactics to Yoweri Museveni’s regime in neighboring Uganda. Both leaders have military backgrounds and have gained respect for rebuilding their war-torn countries. Museveni’s administration has become increasingly corrupt, oppressive and chaotic over more than two decades in power. Likewise, Kagame’s heavy handed approach may pose a threat to business much further down the line.
 
KEY DEALS
India’s Jayshree Tea & Industries has acquired a 60% stake in two Rwandan tea estates through an investment made by a joint venture between Jayshree Tea and Rwanda Mountain Tea –SARL. Jayshree is part of one of India’s leading industrial houses and tea producers, B. K. Birla Group. The company is hoping to establish a foothold in African markets, where tea is a main export crop. Jayshree also purchased a tea estate in Uganda this month.
 
DATA
  • Inflation fell to 2.05% year on year in March, from 2.46% in February, according to statistics released this month by the National Institute of Statistics of Rwanda. Officials say increased agricultural production has helped improve Rwanda’s inflation outlook by slowly bringing food prices down.
  • The central bank also announced this month that if inflation remains low, it may increase the money supply in an effort to spur Rwanda’s recovery from the global crisis.
 
REGULATORY AND LEGAL CHANGES
The Rwanda Revenue Authority (RRA) decried increased cases of tax fraud this month, even as the body recorded collections in March of nearly double the same period last year. The RRA bombarded taxpayers with text messages, threatened fines of up to 40% of any unpaid taxes, and opened new bank accounts in an effort to raise compliance by the 31 March deadline. However, only RWF7bn (USD12m) out of RWF13.9bn (USD24m) presumed owed for the 2010 fiscal year has been paid thus far. Officials say they have discovered increasing numbers of forged trade documents, false accounting statements and cases of VAT evasion. The RRA has since stepped up compliance investigations.

Meanwhile, the Private Sector Foundation (PSF) has been lobbying the RRA to simplify the tax system to encourage more compliance by SMEs. The PSF also says importers are suffering from unclear withholding taxes, and insurers are paying VAT on insurance premiums unlike in neighbouring EAC states, making them less competitive in the regional market.

INDUSTRY NEWS
  • Energy: Canada’s Vanoil will launch a USD600,000 2D seismic survey in search of oil in Lake Kivu in June 2010. The company says because Kivu shares a common origin with Uganda’s oil-rich Lake Albert, there is reason to believe Rwanda may have significant oil reserves as well. Vanoil will strike a production sharing agreement with the Rwandan government in six months, following the survey.
  • Investment: Rwanda launched a RWF2.5bn (USD4.3m), three-year treasury bond in late April. It was the fifth government bond to be listed on the country’s young over the counter (OTC) market. Officials say they want to encourage local investment – which has been patchy since Rwanda’s OTC market began trading in 2008 – and raise funds for development. The Rwanda Investment Group has announced plans to invest RWF113m (USD195,000) in Rwanda this year. The high-powered consortium of local investors will expand current investments in manufacturing and energy, as well as establish an alternative energy peat producing plant.
  • Banking: Rwanda Commercial Bank (BCR) introduced a new “paradise banking” product this month for large corporate and institutional customers. The one-stop shop service has already attracted a significant number of clients. The Bank of Kigali hopes to reduce its non-performing loan portfolio in 2010 from 7.2% to 5% by improving credit risk management through more extensive staff training. Rwanda’s banking industry has been suffering from high rates of bad debt due to low financial literacy rates, lack of best practice and qualified loan staff, and fallout from the global crisis.
  • Agribusiness: Rwandan tea exports were up 51% for the first quarter of 2010, with earnings of USD17.4m surpassing the tea authority’s set target of USD14m. Officials attribute the high output to fertiliser use and a favorable climate. One of Rwanda’s largest manufacturers, beverage producer Inyange Industries, has announced it will spend RWF15m (USD26,000) this year to source more raw materials from local outgrowers and increase its production capacity. The company has signed supply contracts with 12 farmer cooperatives in the country.
 
DEVELOPMENT FINANCE

Donors zeroed in on agricultural projects in Rwanda this month. The Food and Agriculture Organization (FAO) partnered with the Kigali City Council to revive the 100 hectare Kajevuba swamp in Gasabo district, where farmers have traditionally grown bumper crops of vegetables, fruits and cereals. Nestle Equatorial Africa is working with the East Africa Dairy Development with funding from the Gates Foundation to boost milk production in Rwanda, Kenya and Uganda by promoting market access, introducing powder processing techniques and training farmers on international standards. The World Food Program kicked off its Purchase for Progress project in Rwanda’s Eastern Province, which will promote market access.
 
Meanwhile, members of both chambers of the Rwandan Parliament met with UN officials in late April to discuss the state of the country’s agricultural sector. The Rwandan government says its efforts to develop the sector through fertilizer subsidies, land consolidation, and tractor provision have begun to pay off. And finally, CHF International launched a USD63m programme in April to offer 72,000 Rwandan families access to health and social services as well as economic, nutritional and educational support.
 
REGIONAL NEWS
The third East African Community Investment Conference was held in Kampala in late April in hopes of promoting the EAC market as a single destination. A USD74bn joint investment programme to upgrade transport systems and boost power generation was presented at the conference. It remains unclear as to where the funding will come from to diffuse these infrastructural bottlenecks, although EAC officials continue to promote public-private partnerships.
 
Other efforts are underway to increase regional integration as the full launch of the common market approaches in July 2010. The EAC Secretariat commissioned a study this month on how to facilitate sharing of customs duties and other public revenues such as visa fees once goods and people entering the region will only have to pay at one entry point. This has been regarded warily by most members. However, the East African Business Council recently lauded efforts by member state revenue authorities to implement best practice customs union policies and improve border clearance times. The executive director of Rwanda's Capital Markets Advisory Council also spoke in April about the need to harmonise the region’s stock exchanges, although this advancement remains a long way off.



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