BUSINESS ENVIRONMENT
The Rwandan Development Board (RDB) is looking at a possible E-payments law to facilitate electronic transactions such as online tax payments and registration, in an effort to reduce red tape for businesses in the country. A technical and vocational training programme was also launched in late October – an important step toward improving skills in the local workforce. Improvements would benefit businesses now struggling to recruit qualified employees amidst an environment that discourages foreign hires.
The Rwandan government has announced it is upbeat about fully implementing the EAC customs union by January 2010. Investors say customs officials are growing more efficient at processing imports – the Rwanda Revenue Authority (RRA) also procured a new IT system this month that will speed the entry of goods into the country. That should make builders and manufacturers who suffer from high input costs in the landlocked economy happy. Another positive development this month was the government’s stated intention to reduce the USD1,000 accreditation fee for foreign journalists to USD300. The fee was seen as a form of media censorship. Improved international news coverage of Rwanda would benefit investors looking for less biased information sources on the country. Still, President Kagame will continue to attempt to prevent whatever bad news he can from escaping, and the Rwandan government’s PR machinery is formidable.
KEY DEALS: TELECOMS
- MTN Rwanda has announced plans to launch a mobile money transfer service by 2010: the service will benefit farmers and businesses in remote areas, as has been the case with mPesa in Kenya. Plans to go international would also boost remittances. This should spur GDP growth and encourage more development in Rwanda’s neglected rural areas. Rwanda’s National Bank says it is watching the process closely.
- Wavion Ltd. and Balton Uganda were selected this month by MTN Rwanda to roll out a broadband Wi-Fi network throughout Kigali serving residences and SMEs. MTN is also in talks with TEAMS regarding connection to the company’s fibre optic cable landing soon off the Kenyan coast.
POLITICAL RISK
Rwanda has rejected its governance score of 48.5/100, ranking it 32 out of 53 Africa countries and fourth out of five countries in the EAC, delivered by the Mo Ibrahim Index this month. Rwanda argues that the revised inclusion of rule of law under the safety category (which also contains transparency and corruption) distorted its score. The change follows a break this year by the Ibrahim Foundation from its partnership with Harvard in an effort to “Africanize” the index. While the Rwandan government has a habit of rejecting any unfavorable metric, it is fair to say that the new Ibrahim methodology undercuts significant progress in Rwanda on corruption, gender equality and safety. E.g. Uganda scores marginally better with Ibrahim than Rwanda on safety, rule of law, security and corruption; as well as 13 points more on participation and human rights – neither of which is anecdotally defensible.
DATA: NISR REVISION
- GDP grew by an average of 9% in the first two quarters of 2009, according to numbers released by the National Institute of Statistics of Rwanda (NISR) on 14 October 2009.
- Per capita incomes grew from USD492 in 2008, to over USD500 in the first half of 2009.
- These statistics are based on revisions from the GDP Benchmarking and Rebasing Project for 2008-2009 , launched by NISR on 14 October 2009. According to media reports, GDP statistics that were previously benchmarked from 2001 are now based on 2006 levels, which have also been revised upward based on household income and enterprise surveys conducted between 2005 and 2006, as well as changes in prices and production and consumption patterns that reflect an original understatement of 9.7%. NISR will now report GDP quarterly based on the revised method.
- The IMF projected in August 2009 that strong GDP growth from fiscal year 2008-09 would slow to 5.5% in 2009-10, reflecting a liquidity shortage and slowdown of non-agricultural growth.
- Inflation was 5.7% as of September, compared to 22% at the beginning of 2009, according to a new Consumer Price Index also released by NISR that calculates from a February 2009 base rather than the previously used 2003 base.
REGULATORY AND LEGAL CHANGES
On 6 October 2009, the Rwandan government tabled a bill before parliament that would establish the Kigali International Arbitration Centre. Rwanda’s commercial courts suffer a long backlog and investors have expressed the need for a dependable alternative. On 29 October 2009, the Capital Markets Advisory Committee (CMAC) called for new legislation to reduce corporate income tax, capital gains tax and withholding tax. CMAC wants to encourage Rwandan companies to list on the stock exchange to be launched by the end of 2009, which will require disclosure of corporate accounts in Rwanda for the first time. Without widespread corporate disclosure, tax collection in Rwanda remains inefficient and uneven. Clearer tax regulations and public listing will help, but a shift in collection methods by the RRA will need to follow.
An Urban Planning Bill up for debate this month in parliament would regulate Rwanda’s rapidly growing construction industry and provide more certainty to builders and investors. Parliamentarians have questioned whether the draft carries too many penalties. Legislation is desperately needed to accompany the ambitious Kigali Master Plan.
INDUSTRY NEWS
- Infrastructure: Work at the Ministry of Infrastructure (Mininfra) has reportedly come to a near standstill as Permanent Secretary Claire Mukasine attends court daily under a fraud investigation for which she faces five years imprisonment. Mukasine’s predecessor is already in jail on related charges. Local press reports question the extent of the secretary’s involvement in the fraud, but in the meantime, government suppliers say no one is processing their pay. Rwanda’s top down style of governance makes it difficult for government bodies to function well without leadership. Projects key to supporting the country’s ambitious development plans could suffer delays.
- Agribusiness: The RDB set its sights this month on exporting coffee, tea, fruits and beans to Middle Eastern markets. The next step is to add value to these products in country. That could be difficult because of Rwanda’s high operating costs. But one promising area is the roasting and rebranding of Rwanda’s extremely high quality coffee. Local company, Bourbon Coffee is attempting to do this. Potential remains high for similar ventures.
- Manufacturing: Bralirwa S.A. lost its monopoly on the Rwandan beer market this month with the licensing of Brasserie des Mille Collines and East African Breweries Limited (EABL). Like many large Kenyan-based manufacturers, EABL would like to conquer the wider regional market – to include Rwanda, Burundi and the eastern DRC – by setting up strategically located plants throughout the EAC. Its quest will be bolstered by the full implementation of the EAC customs union and common market in January 2010.
- Extractive Industries: A dozen workers were rescued in late October 2009 from a collapsed wolfram mine near Kigali just one week after three others were crushed to death in a cassiterite/coltan mine. Mining in Rwanda remains largely artisanal and unsafe. There is great need to modernize working conditions and establish facilities for processing minerals in the country.
- Construction: The construction industry attracted the most investment and created the most jobs in Rwanda’s third quarter of 2009. Projects were split between local and foreign investors. Despite liquidity obstacles, demand and government promotion continue to drive growth in this sector.
DEVELOPMENT FINANCE
The African Development Bank has signed a USD23m grant to finance the Bugesera Natural Regional Rural Infrastructure Project in Rwanda. Rwanda remains a largely agrarian economy, but has struggled to extend the investment and growth in Kigali to rural areas. This project should help supplement government efforts to boost performance through crop intensification, land consolidation, and fertilizer and seed supply. If farmers’ profits go up, it will do much to boost per capita GDP growth.
REGIONAL NEWS: SECURITY
US Deputy Assistant Secretary of Defence for Africa, Vicki Huddleston, was in Rwanda this month to discuss regional security. The US has praised Rwanda for sending troops to quell the FDLR insurgency in eastern DRC. MONUC says that while the conflict persists, it is now optimistic that the situation may improve, citing large-scale repatriation of combatants and a recent string of high profile arrests of former genocide masterminds.
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