Rwanda Country Brief: March 2011
Thursday, 21 April 2011
Updates on the business environment, data releases and sector news.


BUSINESS ENVIRONMENT
  • Rwanda’s treasury push banks to increase lending to SMEs: Rwanda’s banks are still giving lending preference to large corporates, shying away from smaller business perceived as riskier. Lending rates for smaller businesses are also considerably higher at 16% to 20%, whereas large corporate groups can borrow at 11% to 12%. Credit to the private sector expanded by 12.7% last year, falling short of the central bank’s target of 20%, despite the bank’s reductions of its key repo rate. This year, the repo rate has remained steady at 6%, and the credit growth target has been raised to 22.4%. At present, mortgage industries and restaurants and hotels account for 60.4% of total loans to the private sector between 2007 and 2010.
  • Rwanda and Kenya sign MoU for co-operatives development: The two nations have signed an agreement to share an agreement to share technical expertise in various fields and build capacity for the co-operatives sector. Rwandan Minister of Trade and Industry Monique Nsanzabaganwa said her ministry is seeking to build a co-operative college as well as restructuring the sector, which includes over 300 registered co-operatives.

DATA
  • Inflation: Rwanda’s year-on-year inflation rose from 0.91% in January to 2.56% in February 2011. The increase was spurred on chiefly by housing and transport prices rising. The National Institute of Statistics of Rwanda (NISR) further announced that the underlying inflation rate - excluding fresh food and energy - increased by 0.91% through February. Transport prices rose by 3.99%, education by 18.17% which also contributed to overall inflation dynamics.

INDUSTRY NEWS
Real Estate:
  • KCBR launches mortgage product to help ease Rwanda’s housing shortage: The Kenya Commercial Bank Rwanda (KCBR) is launching a mortgage financing product worth RWF17bn. The product will offer home ownership with a minimum 10% deposit for first time home-owners, 20% for homes under construction, and 30% for non residential commercial premises. John Rwangombwa, Minister of Finance and Economic Planning, announced that the mortgage scheme will “go a long way” to bridging the gap between availability and Rwanda’s very high housing demand.

Banking
  • Kenya’s NIC plans move into Rwandan market: The National Industrial Credit (NIC) Bank, one of Kenya’s smaller banks, hopes to replicate its profitable entry into Tanzania as it plans its entry into the Rwandan banking sector. NIC made profits of USD31.75m in 2010 and is looking to expand through the region to take advantage of opportunities arising from the EAC common market and diversify its operations: over 80% of last year’s revenues were generated in Kenya. The bank hopes to enter through the purchase of an existing operator, though it is likely that the National Bank of Rwanda would favour a standalone entry to the market in order to enhance competition. Kenyan Fina Bank and KCB already have operations in Rwanda.

Energy
  • Rwanda to invest USD935m in development of geothermal power services: Rwanda has announced a commitment to spend USD935m on the development of a 310MW geothermal electricity project over the next seven years. The sources identified lie between Gisenyi and Karisimbi Volcano and Bugarama. USD30.2m will go towards digging three exploration wells and preparing the sites, including the development of infrastructure. Currently only 14% of the Rwandan population has access to electricity. As of 2009, Rwanda only had a 69MW capacity, which should have increased to 130 MW by the end of 2012. The ultimate goal is to reach 1,000MW by 2017 through the development of hydropower, methane gas, solar, biogas and peat.
  • Fuel prices rise by 5%: Prices for petrol have risen 5% to RWF1,015 per liter, and prices for diesel have risen 6% to reach the same prices. The Ministry of Trade and Industry agreed to hike prices after a meeting with local dealers in reaction to rising global barrel prices. Unrest in Libya and the Middle East have driven oil prices up from USD114 per barrel in February to USD117in March. However, the minister was hopeful in her statement that prices would dip again, and that the current hike would not adversely affect transport prices, which were adjusted in February. However, given that Rwanda is landlocked and imports from Mombasa seaport are by road, the oil price developments will necessarily affect the price of imported goods.
  • Energy Authority to take responsibility for electricity generation: The Energy, Water and Sanitation Authority (EWASA) will take over electricity generation in Rwanda, as part of a renewed drive to fulfill electricity targets. The Ministry will continue to oversee EWASA’s implementation.

Telecommunications:
  • Rwandatel contractual row with RURA might go to court: RURA, the regulatory agency, might take Rwandatel to court over allegations of the company’s failure to honour contractual obligations. The company’s leadership insists the allegations are false, and has appealed against RURA’s unjust decision to issue enforcement notices threatening the Rwandatel with a loss of license. RURA claims that Rwandatel has failed to invest even 40% of the USD177.9m it pledged to, but the telecom operator insists that USD72m were spent on network upgrading, and USD35m on share capital. According to RURA, Rwandatel is currently the third-largest operator on the Rwandan mobile market.
  • Mobile penetration deepens: Rwanda’s Utilities Regulatory Agency (RURA) announced that 1.2m new subscribers entered the mobile market over the course of 2010. By January 2011, the number of mobile subscribers in Rwanda had risen to 3.6m, with an expected penetration of 6m subscribers by 2015. RURA is also working to reduce the price of handsets to between RWF2,000 and RWF8,000. RURA intends to contribute 50% of the total handset cost, with the given operator contributing 30% and the final 20% left to the user.
  • MTN launches new top up service: MTN Rwanda has released ‘MTN Mobile Money “Cash Power” service to pay for electricity through their mobile phones instead of queuing at Electrogaz outlets to purchase vouchers.

Agriculture:
  • Banque Populaire de Rwanda (BPR) commits USD2.1m to agriculture development through credit to farmers, co-operatives and other agriculture-related businesses. The project is financed jointly by the bank and the Agriculture Financing Support Facility, a World Bank project funded by the Bill and Melinda Gates Foundation. BPR’s CEO Herman Klaassen referred to his institutions successes in similar areas. Farmers’ lack of access to credit has been a hindrance to Rwanda’s agricultural development.

Mining:
  • Rwanda Mining Authority asks for deadline extension on mineral export tagging: In a recent letter to the Electronics Industry Citizenship Coalition Extractives Work Group and the Global e-Sustainability Initiative, Rwanda’s Geology and Mines Authority (OGMR) requested an extra year to complete its mineral export tagging. Tagging is a condition for companies which trade cassiterite, coltan, wolframite and gold (i.e. potential conflict minerals), in order to be listed on the New York Stock Exchange. The tags confirm that the minerals do not issue from rebel-controlled areas within the DRC. However, Rwanda has announced its unpreparedness for the 1 April 2011 deadline.
  • This could have significant repercussions on Rwanda’s balance of payments and revenue collection, and could curb - even choke - the impressive growth of the mining industry. In 2010, mining sector output grew by 34%, which generated USD96.4m. Since December 2010, Rwanda is using an internationally recognized tagging method, according to the ITRI Tin Supply Chain Initiative (iTSCi). But Director of OGMR says that, realistically, countries like Rwanda will need at least until the end of 2012 to firmly establish the mineral tracing processes.

DEVELOPMENT FINANCE
  • Japan commits USD30m in grants to Rwanda’s infrastructure: The three grants, totaling USD30m, which will go towards a feasibility study of Rusumo Bridge’s rehabilitation and One Stop Border Post facilities, power substations, power distribution networks and a food security initiative for underprivileged farmers, were signed by the Japanese Ambassador to Rwanda and by the Rwandan Minister of Foreign Affairs late in March. The grant extended to the food security initiative will go towards the purchase of fertilizer that will, in turn, be sold at a subsidized rate to poor farmers to increase agricultural efficiency. The money that will support power substations and distribution will focus on Kigali and other urban areas.
  • UK gives Rwanda GBP330m in financial support for next four years: Rwanda numbers among 27 countries globally that will receive British aid. The money laid aside for Rwanda is a grant, with portions of it funneled into each sector support, budget support and programme funding. UK aid to Rwanda has steadily increased over the last few years. Rwanda will receive GBP60m in 2010-11, and GBP90m in 2014-2015. This makes the UK Rwanda’s leading donor. DfID Rwanda’s head commented on the strides Rwanda has made, but also pointed the way towards future improvement in wealth creation, health and education.

REGIONAL NEWS
  • EAC in need of USD4.1bn for Transport Infrastructure: East African Community (EAC) Deputy Secretary General in charge of Planning and Infrastructure Alloys Mutabingwa announced that the required USD4.1bn will be used to develop the northern and central corridors running through the region. The Northern Corridor docks at Mombasa, whereas the Central Corridor docks at Dar Es Salaam - both are vital for regional and international trade. Further to the development of the corridors, Mutabingwa announed that the infrastructure funding would also go towards upgrading major ports and building international one-stop border posts.




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