Investment Climate
PEACE AND STABILITY; predictability of political leadership; firm commitment to democracy and good governance as well as faith in private sector development these are the defining pillars of Rwanda’s investment climate.
Rwanda has fully embraced the principles of free market economy. Since 1994, the government embarked on a comprehensive liberalisation of its economy, initiated appropriate legislative reforms, promoted free trade and pursued regional integration targets as set out under the Cross-Border Initiative (CBI) and the Common Market for Eastern and Southern Africa (COMESA).
Apart from its COMESA membership, Rwanda has also been invited to join the East African Community (EAC). The EAC, which is a customs union allowing for free movement of goods and services among member states, comprises of Kenya, Uganda, Tanzania, Rwanda and Burundi. The EAC has a population of 120 million people and a combined GDP of $41 billion USD. President Paul Kagame is the current Chairman of the EAC.
In keeping with its regional integration commitments, Rwanda has reduced its tariff rates and eliminated all export taxes and other no-tariff barriers.
As a developing country, Rwanda also has duty and quota free access into the USA and EU markets in line with provisions of the African Growth Opportunity Act (AGOA) and the Cotonou Arrangement, respectively. AGOA opens the lucrative USA market to over 6,500 products from deserving African countries, Rwanda among them.
The combination of political commitment to free market economy, the privatisation programme, good governance, an attractive investment code and appropriate institutional reforms to support private sector development make Rwanda’s investment environment the equal of any in the region and continent. And the rest of the world is taking notice: A recent World Bank Doing Business survey ranked Rwanda as the best country in Africa in terms of economic reforms and the 11th in the whole world. Similarly, a study by the same institution estimates that it takes only 21 days to open a business in Rwanda, well ahead of a first world economy like Japan at 32 days. A 2004 IMF business survey ranked Rwanda as one of the top“three lion cubs” in Africa on account of its strong economic growth measured by steady and robust GDP growth rate.
According to the September 2005 edition of the IMF World Economic Outlook Database, over the last five years Rwanda also registered the third highest Purchasing Power Parity in Africa at 27% after Botswana and Mauritius. Equally, a 2003 report by the World Bank ranked Rwanda as one of Africa’s top performers in terms of good governance and least levels of corruption. On the ground, the country’s investment promotion agency, RIEPA, runs a One-Stop-Center that provides efficient immigration, customs, labour and company incorporation facilitation services to investors.
Investment Opportunities
Rwanda offers opportunities in just about every field, many focused on the local market and some on markets abroad. Its strategic location which provides access to the East African Community (EAC) with a population of about 120 million and the Common Market for Eastern & Southern Africa (COMESA) home to 400 million inhabitants.
Why Rwanda?
● An investor-friendly attitude
Starting a business is much easier and faster in Rwanda, according to the World Bank, than it is in any of its neighbors. So is registering property. There are no sectors that are barred to foreign investors and no restrictions on the percentage of equity they might hold. The Constitution of 2003 also guarantees investors against expropriation, except in the public interest and with fair and prior compensation, which may be repatriated.
● Varied opportunities
Rwanda offers investment opportunities in just about every field, many focused on the local market and some on markets abroad. There are opportunities in manufacturing, for each type of investors targeting the local market, and the regional one, to which Rwanda’s strategic location provides good access.
There are opportunities in agriculture: in the processing and export of coffee and tea, as well as in the virtually unexploited potential in horticulture and herbal products, where the terrain and climate are strong advantages. Then there is tourism, where the great asset is the mountain gorillas in Virunga but there is also a great diversity of fauna and flora and Lake Kivu in the west. Finally, the Government has made information and communication technology (ICT) a high priority and is in the process of developing a TechnoPark near Kigali to facilitate investment in this area. Huge potential also exists in the Mining sector.
Rwanda’s mineral resources have hardly been exploited. Natural resources known to exist in exploitable quantities in Rwanda include cassiterite (tin), wolfram, tungsten, colombo-tantalite (coltan), iron, gold, precious stones and methane gas in Lake Kivu.
● Investor Safeguards
The Rwandan government is unflinching in its commitment to safeguard private property rights, including investments in the country, whether local or foreign. Property rights are firmly enshrined in the country’s constitution.
Equally, the new investment code, clearly provides government guarantees with regard to:
- The protection of investment
- The settlement of disputes between the investors and the agency or the government
- The externalisation of funds (including capital, dividends, and royalties)
Other safeguards available are in the form of:
- Risk coverage by local insurance companies for financial as well as fire and life-associated risks
- Business disputes resolution through Government-funded arbitration services
- Strict observance of the 1965 convention on settlement of disputes between states and nationals from other member states as concluded under the aegis of the International Bank of Reconstruction and Development and ratified by the Government of Rwanda on 16 July 1979
- Rwanda is member of African Trade Insurance (ATI) which offers risk coverage against expropriation, cancellation of licences, restriction of import and export, inconvertibility, and inability to transfer of local currency to hard currency, as well as coverage against risks associated with war and civil disturbance.
Rwanda’s Investment Incentives Regime
The flagship of Rwanda’s incentives regime is the Kigali Free Trade Zone (FTZ), which provides an almost tax-free environment for export-oriented manufacturing or re-export trade driven enterprises.
The following business enterprises qualify for registration to operate in the free economic zones:
(a) Heavy/light manufacturing enterprises that export at least 80% of their production outside Rwanda;
(b) Merchandise trade enterprises that export at least 80% of their stock outside Rwanda;
(c) Professional, financial and technical service enterprises engaged in the export of services outside Rwanda.
Investors operating outside the FTZ, but registered with the Rwanda Development Board also benefit from significant duty and tax concessions such as Duty-free imports of machinery, plants, equipment, and raw materials.
Benefits under common incentives provisions include:
- An investment allowance of 30% of the value of invested capital during the first year of operations
- Additional deduction from taxable income of 50% of training, research and product development costs
- The right to fully expend cost of providing infrastructure of the site of the business operations
- Duty draw back for all duties and taxes paid on imported raw materials for an exporter who is operating outside the Free Trade Zone
- Facilitation by the agency to have access to foreign markets, training, promotion, and trade exhibitions
- Tax-free export operations, and
- The Government may approve other benefits not provided under the law on recommendation by the Rwanda Development Board.
Additional Incentives
In addition to the incentives set forth herein above, an investor operating in a free export economic zone is entitled to:
- Pay company income tax rate of 10% within a period of ten years from the coming into force of the investment code
- Importation of plant, machinery, equipment, building materials and inputs free of duty and value added tax
- Exemption from all the other taxes normally levied on a business enterprise operating in the country
- One-stop centre facilitation services by the agency at the start of his operation until he winds business in the country
- Tax-free externalisation of funds
- Flexible work permits allowance to enable the investors to hire expatriate staff
- Exemption from withholding tax and taxes on dividends
- The right to purchase locally produced goods and services free of duty and value added tax as inputs in its production process
THE GOVERNMENT’S ZERO tolerance on corruption, its commitment to democratic governance and sound macro-economic management has inspired increasing investor confidence and strong investment flows into the Rwandan economy. The Country welcomes partners that add value to its purpose and pursuits.
Investment Opportunities
AGRICULTURE
Fertile land and temperate climate make agro-investment an attractive proposition.
AGRICULTURE IS THE backbone of the Rwandan economy. While the Government has initiated plans for agriculture transformation and diversification, the mainstay of the country’s agriculture remains coffee and tea－both of them are of world class quality and appeal.
COFFEE
Even Giant Starbucks places Rwandan coffee on a pedestal.
THE GOVERNMENT IS now driving an agenda for economic diversification and value addition, particularly, on the country’s premium coffee. Rwanda Coffee is exclusively Arabica, with the best bourbon varieties. A commitment to producing quality beans has earned Rwandan coffee the prestigious Cup of Excellence award, which is the most esteemed award given out to top coffees. These awards come from a strict competition that selects the very best coffee chosen by a select group of national and international cuppers.
Rwandan Coffee is now gaining mainstream recognition after the American giant, Starbucks, began selling speciality Rwandan coffee in its Blue Bourbon campaign. And America is falling in love with the product. If this is what is possible, then investment opportunities in the coffee sector are numerous and may include:
Investing in expanded commercial production of coffee Investing in over 100 washing stations in partnership with local coffee farmers to produce speciality coffees now craved for by the international market Investing in coffee value-addition operations, including speciality coffee packaging and export operations, coffee roasting and/or instant coffee plants for the local, regional and international markets.
TEA
Rwanda produces one of the best quality teas in the world. Just as in the case of coffee, much of it is exported unprocessed to a global market that craves its higher quality and continues to pay a premium for the unprocessed tea. What
would it pay for added value to the product? Market research suggests, substantial. Clearly, therefore, the need for investment in value addition or processing operations is critical. Investment opportunities in this sector include:
- Large-scale commercial production of tea
- Installation of production systems for various speciality teas, including orthodox tea, to meet different international markets demands; and
- Investment in modern tea packaging facilities
Besides coffee and tea, the country also boasts a temperate climate, fertile soils and a hardworking people, the combination of which makes agricultural production of many known tropical fruits and vegetables, castor oil, tomatoes, essential oil sources such as geranium and patchouli, highland wheat, rice; and the country’s massive marshlands is suitable to plant pyrethrum and floriculture, especially roses and tropical summer flowers are also an attractive proposition.
TOURISM
The Choice of Premium Tourism Gives Rwanda Distinction.
RWANDA IS NOT just the land of thousand hills and a million smiles. It is also a country rich in flora and fauna and a stunning natural beauty manifest in its scenic rolling hills and breathtaking green savannah. The country boasts some rare species of animals like the mountain Gorillas as well as rare birds and smaller primates in the Nyungwe tropical forest. While in the country, tourists also may be treated to the sight of elephants, lions, buffalo, leopards, giraffes and a host of other game animals in the country’s Akagera national park.
Rwanda’s tourism industry is still young and investment opportunities exist both in developing tourism infrastructure and positioning the country in the international marketplace as the new exotic destination on the global tourist circuit.
Information and Communication Technologies
Rwanda’s Vision is based on ICT and Innovation.
WITHIN THE FRAMEWORK of our development vision, Rwanda plans to transform itself into a knowledge-based service economy by 2020. This transformation will, in part, be driven by information and communication technologies (ICTs) which will function as engines for accelerated development and economic growth, national prosperity and global competitiveness. Besides being the source of innovation and value addition, ICT should also be an instrument of empowerment; providing Rwandans with key business, scientific, commercial and marketing information to enhance their capacity to compete globally. Or as they say, the future competitiveness of nations will be a factor of their ability to bridge the digital divide.
For now, Rwanda leads the region in terms of ICT adoption and infrastructure development. But opportunities for investment remain in areas such as software and hardware development, broadband fibre optic infrastructure development, added services such as call centres and back office operations as well as mobile phone assembly and marketing within Rwanda and in the region.
ENERGY
THE DEMAND FOR energy in Rwanda is substantially higher than supply from domestic production. All domestic shortfalls are serviced through imports from neighbouring countries, thus pushing up the cost of energy in the country.
The Government is working hard to mobilise investments into the exploitation of the enormous domestic sources of energy that presently lie unutilized. Some of these include the methane gas in Lake Kivu, large untapped hydro-power potential through construction of dams on rivers Nyabarongo, Rusumo, and Rusizi, or investments in alternative energy sources like solar, biomass, biogas or geothermal. More investment is, however, needed to exploit the methane gas resource and service a captive regional market currently straining under power shortages.
MINING
Mining Creates Wealth.
Exploring and Cashing in on the Hidden Secrets of the Land.
THE COUNTRY’S MINING sector remains largely untapped. Some of the main mineral resources in the country include Cassiterite, Wolframite, Columbo-tantalite, Gold, Ambligonite, Beryl and semi-precious stones such as Topaz, Corundum, Amethyst, Chiastolite, Opal, Agate, Flint and rubies. Mining in the country has predominantly been a small-scale activity. This is, however, set to change with the entry of South African and Australian interests in the mining of coltan or tantalite. Going forward, the mining sector holds investment opportunities in commercial mining or value addition operations, particularly in the country’s Casseterite, Columbo-Tantalite and Gold resources.
FINANCIAL SERVICE SECTOR
RWANDA’S FINIANCIAL SECTOR is composed of six commercial banks and three financial institutions. The sector is controlled by an independent Central Bank. The Bank of Kigali and BCR are the oldest banks in the country, having launched their operations in the early 1960s. Until now, however, most of the commercial banks have focused their operations on trade finance, avoiding the risks associated with long-term debt financing. As a result, productive investment activity has been lacking. There is a need to focus attention on the reform and deepening of the financial sector. This will involve the introduction of more banks, investment funds, capital market and financial products to address increasing demand for reasonably priced project finance. This is critical to the country’s growth agenda.
The sector is still young and opportunities exist for investments in an agricultural bank because Rwanda lacks an institution specialised in agricultural credit. A mortgage (housing) bank is needed to promote greater access to property. The introduction of new financial products such as venture capital and leasing will not only reduce the burden of starting a business, but also its successful operation.
MANUFACTURING
The manufacturing sector in Rwanda is still in its infancy. Despite its level of development, the manufacturing sector has succeeded in diversifying its activities.
The food and agro industry dominate the sector at almost 35% of the total number of local industries. Other sub sectors include a chemical industry; paper and printing; textiles; leather and pneumatic; a building industry; and electricity, water and gas. Niche
