NATIONAL BANK OF RWANDA BANKI NKURU Y’U RWANDA National Institute of Statistics of Rwanda FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2017
FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2017 NATIONAL BANK OF RWANDA BANKI NKURU Y’U RWANDA
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 i FOREWORD The Rwanda Foreign Private Capital 2017 Report, is the eighth in a series of annual censuses jointly conducted by the National Bank of Rwanda, the Rwanda Development Board, the National Institute of Statistics of Rwanda and the Private Sector Federation. The Census collected data on foreign direct investment, portfolio and foreign borrowing in resident enterprises and other variables pertaining to private sector investment. The report presents the findings of foreign private capital census that was conducted in 2017 collecting data for the year 2016. The census covered 218 companies comprised of newly registered companies as foreign direct investments by Rwanda Development Board in 2016 and the existing companies interviewed in the previous censuses. This annual foreign private investment census would not have been successful without the involvement and cooperation of key stakeholders. We wish to extend our special appreciation to our valued respondents, for the cooperation in providing the information. The National Bank of Rwanda also acknowledges and appreciates the technical and financial support of partner institutions that made this exercise a success. The Foreign Private Investments census is an important activity for the Government of Rwanda in its efforts to attract and retain foreign private capital in the country to complement domestic resources. The information generated is used in the compilation of the country’s Balance of Payments and International Investment Position statistics and shall also contribute to the improvement of private investment policies. RWANGOMBWA John Governor, National Bank of Rwanda
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 ii LIST OF ACRONYMS BNR
National Bank of Rwanda BOP
Balance of Payments BV
Book Value COMESA Common Market for Eastern and Southern Africa EAC
East African Community FAL
Foreign Assets and Liabilities FDEI
Foreign Direct Equity Investment FDI
Foreign Direct Investment FPC
Foreign Private Capital GDP
Gross Domestic Product GF
Grossing-up Factor LDCs
Least Developed Countries LLDCs Landlocked Developing Countries MEFMI Macroeconomic and Financial Management Institute NISR
National Institute of Statistics of Rwanda OC
Other Changes OECD Organization for Economic Co-operation and Development PCMS
Private Capital Monitoring System PFA
Private foreign asset PSED
Private Sector External Debt PSF
Private Sector Federation PTA
Preferential Trade Area RDB
Rwanda Development Board RIEPA
Rwanda Investment and Export Promotion Agency RWF
Rwandan Franc RWG
Rwanda Working Group (on Private Capital Monitoring) SADC
Southern African Development Community SIDCS Small Islands Developing States TNC
Transnational Corporations UNCTAD United Nations for Commerce Trade and Development WEF
World Bank Economic Forum WIR
World Investment Report
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 iii TABLE OF CONTENTS FOREWORD .......................................................................................................... i LIST OF ACRONYMS ......................................................................................... ii LIST OF TABLES ............................................................................................... vi LIST OF FIGURES ..............................................................................................vii EXECUTIVE SUMMARY ................................................................................... ix CHAPTER ONE .................................................................................................. 1 INTRODUCTION .......................................................................................... 1 1.0 Introduction ................................................................................ 1 1.1 Global Foreign Direct Investment trends .................................... 1 1.2 Africa FDI trend and prospects ................................................... 3 1.3 Monitoring foreign investment in Rwanda ................................. 5 1.4 Doing Business in Rwanda .......................................................... 6 CHAPTER TWO. ................................................................................................. 9 METHODOLOGY AND GENERAL FINDINGS ................................................... 9 2.0 Introduction ................................................................................ 9 2.1 Organization of the Census ......................................................... 9 2.1.1 Institutional Framework ............................................................. 9 2.1.2 Scope .......................................................................................... 9 2.1.3 Compilation of Investors’ Register .............................................. 9 2.1.5 Questionnaire ........................................................................... 10 2.2. Field work and Data quality ........................................................ 10 2.2.1 Training of technical team ........................................................ 10 2.2.2 Fieldwork ................................................................................. 11 2.2.4 Data Processing ........................................................................ 12 2.2.5 Data quality and estimation for non-response ........................ 12 2.2.6 Timeliness ................................................................................ 12 2.3 General findings ........................................................................ 13
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 iv 2.3.1 Entity turnover ......................................................................... 13 2.3.2 Contribution on external trade ................................................ 13 2.3.3 Employment ............................................................................. 14 2.3.4 Compensations of employees ................................................... 16 2.3.5 Corporate social responsibility ................................................. 17 CHAPTER THREE ........................................................................................... 19 FOREIGN PRIVATE INVESTMENTS IN RWANDA ...................................... 19 3.0 Introduction .............................................................................. 19 3.1 Foreign Private Capital attraction in Rwanda ........................... 19 3.2 Foreign Private Investment in Rwanda ..................................... 20 3.2.1 Foreign Private Investment by sector of economic activity ...... 22 3.2.2 Foreign Private Investment by country of origin ...................... 23 3.3. Foreign Direct Investment ......................................................... 24 3.3.1. Foreign Direct Investment inflows and stock .......................... 24 3.3.2 Foreign Direct Investment Inflows and Stock by sector ......... 25 3.3.3 Foreign Direct Investment Flows and Stocks by origin ........... 26 3.4. Foreign Portfolio Investment .................................................... 26 3.5. Other investments ..................................................................... 27 3.5.1 Other investment inflows and stocks by Sector ....................... 27 3.5.2 Other Investments Inflows and Stock by Source in 2016 ....... 27 3.6. Income on investments ............................................................. 28 3.6.1 Income on investment distribution by sector ........................... 28 3.7. Return on equity by sectors in 2016 ........................................ 29 3.8. Private Sector External Debt ..................................................... 31 CHAPTER FOUR ............................................................................................. 33 INVESTOR PERCEPTION ................................................................................ 33 4.2. Results by Theme ........................................................................ 34
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 v 4.2.1 Legal Framework ...................................................................... 34 4.2.2 Governance .............................................................................. 34 4.2.3 Tax and Investment framework ............................................... 35 4.2.4 Infrastructure ........................................................................... 36 4.2.5 Economic and financial factors ............................................... 36 4.2.6 Domestic Resources ................................................................. 37 4.2.7 Support Services ...................................................................... 37 4.2.8 Trading Across Borders ............................................................ 38 CONCLUSION .................................................................................................. 39 REFERENCES ................................................................................................. 41 ANNEXES ......................................................................................................... 42
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 vi LIST OF TABLES Table 1.1: Top six African countries ............................................................... 7 Table 1. 2: East African countries in doing business ranking 2018 ............... 7 Table 2.3: Distribution and response rate per sector in 2016 ...................... 11 Table 2.4: Entity turnovers by sectors in 2014-2016 ($ million) .................. 13 Table 2. 5: Exports-Imports in 2016 ($ million) ............................................ 14 Table 2.6: Employment by Category in 2016 ............................................... 15 Table 2.7: Distribution of employment by sector 2014-2016 ....................... 16 Table 2.8: Compensation of Employees 2014- 2016 ($ million) ................... 17 Table 2.9: Corporate Social Responsibility by
Sector 2014- 2016 ($ million) ...................................................... 18 Table 3.10: New Foreign Private Investments registered (2014 – 2016)...........20 Table 3. 11: Foreign Private Investments Inflows by
Category 2010-2016 ($ million) ................................................... 21 Table 3. 12 : Foreign Private Investments flows 2016 ($ million) ..................... 22 Table3.13: Inflows and Stocks by Origin in 2016 ($ million) ........................ 23 Table3.14: Foreign Private Investment Stock & Inflows
by Region in 2016 ($ m) ............................................................... 24 Table3.15: Inflows and Stocks of FDI by type 2013-2016 ($ million) ........... 25 Table 3.16: Top ten Foreign Direct Investment Flows
and Stocks by origin in 2016($ million) ....................................... 26 Table 3.17: Other Investments Inflows and Stock by Source,
2016 ($ million) ............................................................................ 28 Table 3.18: Income on investment 2014 - 2016 ($ million) ............................ 28 Table 3.19: Income on investment distribution by sector
in 2016 ($ million) ........................................................................ 29 Table 3.20: Foreign Direct Investment Return on Equity
2014 - 2016(%) ............................................................................. 30 Table 3.21: Inward Return on FDI Equity 2013-2016 (percent) .................... 31 Table 3. 22: Foreign Private Sector Debt2014 – 2016 ($ million) ................... 32
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 vii LIST OF FIGURES Figure 1: Global Foreign Direct Investments trends in
2014-2016 ($ Billion) ..................................................................... 3 Figure 2: Foreign Private Direct Investment, in Africa,
2015-2016 ($ billion) ...................................................................... 5 Figure 3: Distribution of employment by gender in 2016 ........................... 15 Figure 4: Corporate social responsibility by type of recipient in
2016 ($million) ............................................................................. 18 Figure.5: Foreign Private Investment Inflows and Stock by
2016 ($ Million) ............................................................................ 21 Figure 6: Foreign Private Investment Inflows and Stocks by Sector
($ million), in 2016 ....................................................................... 22 Figure 7: FDI Inflows and Stocks by Sector in
2016 ($ million) ............................................................................ 25 Figure 8: Other investments inflows and stocks by sector in
2016 ($ million) ............................................................................ 27 Figure 9: Perception Index .......................................................................... 33 Figure 10: Legal Framework .......................................................................... 34 Figure 11: Governance .................................................................................. 35 Figure 12: Tax and Investment Framework .................................................. 35 Figure 13: Infrastructure ............................................................................... 36 Figure 14: Access to finance .......................................................................... 37 Figure 15: Domestic Resources ..................................................................... 37
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 viii Figure 16: Support Services .......................................................................... 38 Figure 17: Trading Across Borders ............................................................... 38
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 1 EXECUTIVE SUMMARY The Government of Rwanda continues to promote private sector led economy, aiming at fostering both local and foreign investment by undertaking reforms with the objective of making the country a favorable place for investment and ensure sustainable economic growth and development. The Foreign Private Capital Census (FPC) 2017 is the eighth in a series of annual censuses conducted jointly by the National Bank of Rwanda in collaboration with National Institute of Statistics of Rwanda, Rwanda Development Board and Private Sector Federation. The main objective of the census was to collect information required for the compilation of Rwanda’s Balance of Payments, International Investment Position statements and determine the magnitude and trends of Foreign Private Capital in Rwanda. It provides data for macroeconomic analysis to inform policy decisions, specifically policies and strategies aimed at improving country’s investment climate and ultimately attracting more foreign private investments. The 2017 FPC census provides actual flows and stock of foreign private capital statistics in Rwanda for the year 2016. A total of 218 questionnaires were administered during the census from which 201 enterprises responded, representing a response rate of 92.2 percent. Overall, all the enterprises declared total turnover of $ 2,129.1 million during 2016 compared to $ 1,554.5 million registered in 2015, representing 36.8 percent of the country’s total turnover. The findings indicated that total employment generated was 58,827 employees as at the end of 2016 from 41,192 employees in 2015, an increase of 43.0 percent. Profits made increased from $ 65.0 million in 2015 to $ 131.4 million recorded for 2016 coming mostly from finance and insurance services and Electricity and gas generation sectors. FPC inflows registered an increase of 13.6 percent from $ 476.3 million in 2015 to $ 541.2 million in 2016. The census results show that foreign direct investment inflows declined by 9.9 percent from $ 379.8 million recorded in 2015 to $ 342.3 million in 2015 due to lower inflows of new equity on the account of the slowdown in the global economy and uncertainty associated with elections period. Foreign Portfolio investment inflows increased from $ 2.5 million in 2015 to $ 3.0 million in 2016. The inflows of other investments composed of debt from foreign non- affiliates increased by 108.7 percent from $93.9 million in 2015 to $ 195.9 million in 2016. The equity capital and loans from affiliate components of FDI declined by 21.1 percent and 35.0 percent respectively in 2016 from their levels in 2015, whereas the retaining earnings doubled from $58.5 million to $131.1 million in 2016. ix
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 2 The inflows of other investments, mainly loans, from foreign non-affiliates doubled from the level of 2015. This increase came from the borrowing of well established companies from international development agencies such as International Finance Corporation (IFC) and Preferential Trade Area (PTA) Bank. Other investments represent 62.7 percent of total external loans disbursements in 2016. In terms of country of origin, most of the FPC flows came from Mauritius ($ 167.2 million) followed by IFC ($ 66.7 million) and PTA ($ 41.3 million) accounting for 50.5 percent of total FPC flows in 2016 and investing mostly in finance and insurance, ICT and manufacturing sectors accounting for 69.0 percent of total inflows. The census indicates that the stock of foreign private capital increased from $ 2,077.9 in 2015 to $ 2,527.9 million in 2016. The stock of foreign investment in ICT amounted to $ 698.5 million followed by finance & insurance services with $ 631.3 million and manufacturing with $ 384.1 million. The stock of Private Sector External Debt (PSED) as at end 2016 stood at $ 1,563.4 increasing by 20.0 percent from $ 1,302.8 million recorded in 2015. In addition, the retained earnings to profits made stood at 71.0 percent in 2016 and the FDI equity rate of return of 12.8 percent which was above the global rate of return of 6.0 percent. This gives an indication of the country’s investment profitability. The prospects for 2017 are for higher flows, as we expect a rise in the next year’s FDI inflow owing to the fact that 2017 new investment projects attraction was growing to over $ 1.1 billion worth of foreign private investment projects registered in that year, with some new companies expected to start making profits. There is therefore the need to continue consolidating efforts geared towards improving the investment climate so that investors can gain higher returns and reinvest. x