Rwanda Country Brief: October 2010
Friday, 12 November 2010
Latest updates on the business environment, regulatory changes, key deals, and sector news.

BUSINESS ENVIRONMENT
Speaking on behalf of the Rwandan government, Prime Minister Bernard Makuza announced an ambitious seven-year economic plan, which includes plans to increase:
  • access to electricity by 30%,
  • use of clean water by 100%,
  • energy production in Rwanda from 70 to 1,000MW.
  • access to microfinance institutions to 80% of the population, making private sector credit responsible for 27% of GDP.
The plan also intends to promote industrial development by 12% annually, spurring a 20% increase in GDP and ultimately lowering the number of Rwandans who earn a dollar a day to under 30% of the population. However, the PM gave no clear indication as to how the plan is to be financed.

Airline KLM has extended its service to Kigali this winter season, with five weekly flights aboard an Airbus A330-200 seating 243 passengers (30 in World Business Class and 213 in Economy Class). Regionally, Air France and KLM will be operating in partnership to offer over 200 flights a week to 43 African destinations over the European winter months, and KLM will also be increasing its co-operation with partner Kenya Airways (KQ).

Following its 2008 investment in Sogem, a company that manufactures paper bags, GroFin, a specialist SME finance and development institution, will extend its funding to the private sector, by financing Soimex, an environmentally-conscious company which specialises in the recycling and manufacture of plastic products. With GroFin’s continued investment, Sogem hopes to increase its production of paper bags to meet 50% rather than the current 10% of demand, helping to end Rwanda’s reliance on imports of the product after the 2006 ban on thin plastic bags.

DATA
  • Rwanda this year shows an encouraging recovery from the impacts of the global financial crisis, with GDP expanding by 6.2% in fiscal year 2009/2010
  • Rwanda’s economy expanded 9.4% in the second quarter of 2010, compared to the same period in the previous year. This expansion was driven by the 15% growth in services.
  • The service sector now accounts for 46.2% of GDP, pushing agriculture into second place at 33.7% of GDP. A 5.9% growth in the agriculture sector this year was driven by a 7% increase in food crop production, where as the 7.6% growth in services this year was encouraged by a 10% growth in public administration, and a 13% growth in business.
  • Government consumption has grown by 7%, whereas the private sector’s consumption has increased by 12%
  • GDP per capita for this financial year comes in at RWF307,941 or USD541. Rwanda targets USD900 per capita for 2020.
  • Economic growth for this year is forecast at 7.0%.
  • However, the formal sector’s share of GDP (including taxes) has fallen back to 22%, and the industrial sector experienced disappointing growth of under 1%.

KEY DEALS
Indian link-up to boost Rwandan industry and trade:
The Rwanda Private Sector Federation signed memoranda of understanding (MoU), designed to promote business linkages to India, with three Karnataka-based business associations this month. The Federation of Karnataka Chamber of Commerce and Industry (FKCCI) intends to encourage Indian investors and entrepreneurs to explore business and trade opportunities in Rwanda, as well as setting up joint ventures and partnerships with Rwanda’s private sector. The Karnataka Small Scale Industries Association (KASSIA) has agreed to provide vocational training and skill development to Rwandan workers employed by SMEs, while the All India Granites and Stone Association (AIGSA) has pledged to help Rwanda’s private sector to develop a granite and stone industry, through collaboration and partnerships as well as joint exploration, prospecting and mining activity.

REGULATORY AND LEGAL CHANGES
Business laws to be updated: T
he Director General in Charge of Investment Climate and Intellectual Property in the Ministry of Trade and Industry, Kaliza Karuretwa, announced this month that Rwanda’s outdated business laws –issuing from the 1950s and 60s – are to be updated in order to encourage transparency and accountability in the private sector. The new laws include regulations on, electronic messages, signatures and transactions, intellectual property, and the organisation and registration of condominiums. The legal reforms also provide for the establishment and organisation of the property valuation profession, and establish rules to govern Rwanda’s credit information system.

INDUSTRY NEWS
Agriculture:

  •  Drought lowers coffee production forecast: The Rwandan Coffee Development Authority announced that August’s coffee production forecast had been lowered by 23%, after a drought hit growing areas in Rwanda’s southern and eastern provinces. 16,000 tonnes of the commodity have been produced this year so far, earning USD46m from sales, but as a result of the drought expectations for total annual output have dropped to 20,000 metric tonnes from 26,000.
  • BRD finance dairy industry: The Rwanda Development Bank (BRD) has committed RWF60m for capacity building at 21 milk collection centres. BRD advisory services have supervised the construction of the centres, installed equipment and provided technical assistance for a year, though the construction was financed by equity, debt and stakeholders and is under the ownership of stakeholders. BRD’s activity in the field falls in line with the Government of Rwanda’s programme to develop the dairy industry, a policy which has already resulted in significantly increased output.

Energy
  • Electricity project comes to a close: The Urgent Electricity Rehabilitation Project (UERP), which began in 2005, officially ended early this month, as Permanent Secretary of the Ministry of Infrastructure Marie Claire Mukasine hailed it as having fulfilled its objectives of ending Rwanda’s severe energy shortages. The project cost an estimated USD50m, and last year completed construction of a 20MW power plant in Gasabo district, as well as five transmission stations throughout the country. Mukasine urged the Rwanda Electricity Corporation and Rwanda Water and Sanitation Company (RECO-RWASCO) to maintain UERP equipment to help deliver sustainable electricity for Rwanda.

Banking
  • Rwanda starts producing ATM cards: SIMTEL, Rwanda’s interbank switch operator, has begun producing chip-based ATM cards, and currently has the capacity to manufacture 10-15,000 cards each month. Plans to increase quadruple this capacity in coming months have already been laid. Local production means the lag-time between orders and delivery of ATM cards will be reduced from three months to between two and five days. The total cost of producing each card ranges from USD5.50 and USD8, dependent on the order volume issued by a given bank, and the government has committed to a subsidy of USD4 per card. Bank of Rwanda Governor Francois Kanimba has announced that the government plans to have a minimum of 500,000 ATM cards in use by 2012, a significant increase from the current 35,000 cards in the system. Banks are currently installing 11 new ATMS which accept international cards, in addition to the 86 already in place in Rwanda.
  • KCB to launch mobile banking: Kenya Commercial Bank (KCB) is set to roll out mobile banking technology by the end of the year, as competition between commercial banks heats up in Rwanda. Banque Populaire de Rwanda (BPR) initiated its own mobile banking service months ago. KCB plans to integrate with all mobile operators, and representatives announced that the pilot project is already underway. KCB is also investing on branch extension, planning to open a new branch each year in addition to the 9 branches it already has in Rwanda, and plans to focus on providing mortgage opportunities to customers looking to acquire homes.
  • Cooperatives growing in Rwanda: The number of registered co-operatives is on the rise in Rwanda, currently standing between 3,500 and 4000, their share capital having grown to USD12.6m as of September. Increased registry of co-operatives is a hopeful sign in a country where there have been problems with con-artist ‘ghost’ co-ops.

Telecommunications
  • Price, promotion competition intensifies in the mobile sector: The promotion, which requires customers only to pay for the first three minutes of their call between midnight and 6pm, is expected to further fuel competition between Rwanda’s mobile operators. The launch of Tigo’s ‘Talk for Free’ follows MTN’s 80% cut on MTN-to-MTN calls last September, to which Tigo responded with a RWF10/minute tariff – an 89% on Tigo-to-Tigo calls. Before that, MTN Rwanda had launched a series of promotions to celebrate its 12th anniversary, and Rwandtel had offered a RWF3/minute on-net promo tariff. As the East African price wars rage on, Rwandan regulator RURA is considering cutting interconnect fees.
  • Mobile market expands: Falling communication costs during Rwanda’s price wars have stimulated the nation’s mobile market to grow 14% during the third quarter of this year. RURA statistics indicate that between January and September this year, the market grew from 2,497,170 users to 3,615,467. The Rwandan government hopes that this number will have increased to 6m by 2012. MTN Rwanda is solid market leader with a 2.3m-strong customer base, followed by Tigo Rwanda, whose customer base grew by over 450% over the last nine months, to 685,000 subscribers. Partly state-owned Rwandatel is in third place wtih 536,000 users, but leads the data and internet market with a 70% market share.

DEVELOPMENT FINANCE
  • USD30m AFDB loan for new cement factory: The African Development Bank (AFDB) has approved a USD30m loan to allow CIMERWA, Rwanda’s only cement factory, to construct a second, more energy-efficient plant with a 600,000 tonne capacity. The government, which has a 10% stake in CIMERWA, hopes that the new factory will help reduce the trade deficit, boost the construction sector, reduce cement prices, and even allow Rwanda to begin exporting cement. The plant will create 285 jobs.
  • Credit for Farmers: Duterimbere Microfinance, with its partners Umutara Community Resource and Infrastructure Development Project (UCRIDP) and Rwanda Development Organisation (RDO) have allocated RWF120m to be disbursed as loans to farmers in Nyagatare District, where the scheme is already underway, as well as Gatsibo and Kayonza districts. Only the less perishable harvests of maize, rice and soybean crops are accepted as guarantees by the scheme, which are stored in a warehouse for six months until the loan is repaid. Meantime, the partners help locate markets for the farmers to sell their produce. Loans to farmer cooperatives will not exceed RWF20m, whereas loans to individuals will not exceed half that sum.


REGIONAL NEWS
Finland supports East African Community: Finland has committed EUR2m over two years to the EAC’s partnership fund. The European country has been a major funder of EAC programmes.



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