FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 7 Dealing with construction permits: Rwanda increased quality control during construction by introducing risk-based inspections. Registering property: Rwanda made registering property easier by implementing online services to facilitate the registration of property transfers. Protecting minority investors: Rwanda strengthened minority investor protections by making it easier to sue directors, clarifying ownership and control structures and requiring greater corporate transparency. Paying taxes: Rwanda made paying taxes easier by establishing an online system for filing and paying taxes. Enforcing contracts: Rwanda made enforcing contracts easier by making judgments rendered at all levels in commercial cases available to the general public on the judiciary’s website. Table 1.1: Top six African countries. Country Ranking 2017 Ranking 2018 Change in rank Mauritius 49 25 24 Rwanda 56 41 15 Morocco 68 69 1 Kenya 92 80 12 Botswana 71 81 1 South Africa 74 82 1 Source: World Bank Group, Doing Business Report, 2018 Table 1. 2: East African countries in doing business ranking 2018 Country Rank in 2016 Rank in 2017 Change in rank Rwanda 56 41 15 Kenya 92 80 12 Tanzania 132 137 5 Uganda 115 122 7 Burundi 157 164 7 Source: World Bank Group, Doing Business Report, 2018
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 8 A majority of East African economies did not make significant reforms to create an easier environment to do business from the previous doing business report to the current. Only Rwanda and Kenya made notable changes to improve doing business in the region, moving twelve and ten places up globally, respectively while Tanzania dropped 5 places, against 7 drops for Uganda and Burundi each.
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 9 CHAPTER TWO METHODOLOGY AND GENERAL FINDINGS 2.0 Introduction This chapter discusses the methodology that was used in conducting the Foreign Private Capital census 2017 which collected information for the year 2016. It covers the activities undertaken during the census as well as the organization of the census, data processing, data quality and adherence to the international standards. 2.1 Organization of the Census 2.1.1 Institutional Framework In conducting foreign private capital censuses, four institutions are involved namely; the National Bank of Rwanda, National Institute of Statistics of Rwanda, Rwanda Development Board and the Private Sector Federation. 2.1.2 Scope The census involved collection of data for the year 2016 from companies with foreign investments in Rwanda covering industrial activities as defined by the UN International Standard for Industrial Classification (ISIC 4). It covered companies located in both Kigali and out of Kigali. 2.1.3 Compilation of Investors’ Register Prior to the fieldwork, the investors’ register was updated to cover all the foreign private investments. The register provides a comprehensive list of companies with foreign private investments. It contains company investments pledges, main activities, value and status of investment. Information about companies that were either rehabilitated, expanded, relocated, merged or had their business names changed was updated. The census frame of 240 companies was established with the objective of covering all enterprises in Rwanda with foreign direct investment, portfolio investments and foreign borrowing in 2016. During the field work, 218 companies were interviewed. 22 companies could not be located as they had relocated, closed, put under receivership or have not started operation by the census period. After compilation of enterprise register, all the companies in the register were considered in the census.
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 10 2.1.4 Perception Index computation In this census, we followed the method used in the Investor Perception Index done by Ministry of trade and Industry (MINICOM) in 2012. The perception was part of the questionnaire and targeted FPC companies. This index helps to measure the responses of firms given in relation to eight broad themes pertaining to the investment climate they operate in. In this framework, selected investors responded to a number of questions within each theme which was asking the respondent to rate these sub-theme issues on a scale of 1 to 7, where 1 indicates the issue being very problematic and 7 indicates that the issue is not a problem at all. These sub-themes were given an equal weighting, and their scores were aggregated into a rating for the theme as a whole. Each theme then had a weighting of one eighth, and were further aggregated to form the overall rating. The rating was then converted from the 1 to 7 format into a percentage score using the following formula: Score * 100
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This was also done at the theme level, providing a theme-specific index value for investor perceptions. The aggregated Index value is that which is used in the Common Performance Assessment Framework (CPAF). 2.1.5 Questionnaire The questionnaire for the FPC census 2017 was designed in conformity with International Monetary Fund’s (IMF) sixth edition of balance of payments and international investment position manual. It was designed to capture information on company particulars, industrial classification, equity, non-equity and income on investments. In addition to the main questions on foreign assets and liabilities, trade in goods and services, the questions on investor’s perception were added to capture qualitative information on the investment climate in Rwanda. 2.2. Field work and Data quality 2.2.1 Training of technical team A training of technical team was conducted prior to the commencement of the survey. The objective of the training was to equip technical staff with the background, the purpose of the activity, understanding private investment components of the Balance of Payments (BoP) and International Investment Position (IIP) in the context of the sixth edition of Balance of Payments and International Investment Position Manual ,understanding the survey questionnaire; familiarization with
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 11 investor perception questions and related issues; practical training on how to extract information from financial statements to complete the census forms and how to check for consistency in the data provided by the respondents and discuss the census logistics. 2.2.2 Fieldwork In order to have a smooth monitoring and evaluation of census activities, the fieldwork was implemented in two phases. The first phase involved distribution and collection of questionnaires in Kigali city where most of the companies have their headquarters while phase two covered the distribution and collection of questionnaires in other provinces. In Kigali city, questionnaires were distributed to companies and given two weeks to complete them. After that period, the technical team assisted most of the companies in filling the questionnaires. Before the questionnaire collection, the technical staff would discuss with each respondent to clarify on any issue that was not clear to the respondents and thereafter collect the completed form. The collected information was verified against financial statements to ensure that the collected data is reliable before data entry and processing. 2.2.3 Response Rate A total of 218 questionnaires were administered to enterprises during the field activities and 201 companies responded, equivalent to 92.2 percent response rate. The distribution and response rate by sector of investments are shown in Table 2.3. Table 2.3: Distribution and response rate per sector in 2016 Sector Distribution Collection R. rate Agriculture 16 15 93.8 Construction 12 10 83.3 Education 6 6 100.0 Electricity 5 4 80.0 Finance 38 38 100.0 Human health and social work 4 4 100.0 ICT 17 15 88.2 Legal and Profession activities 9 9 100.0 Manufacturing 40 38 95.0
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 12 Mining 12 10 83.3 Real estate 6 5 83.3 Tourism 17 15 88.2 Transportation 8 7 87.5 Water supply 2 1 50.0 Wholesale 26 24 92.3 Grand Total 218 201 92.2 Source: Foreign Private capital 2017 2.2.4 Data Processing Data entry and processing was done using a MEFMI Private Capital Monitoring System for FAL questions and CSPro for Trade in goods and service and perception. In order to ensure data quality, completed questionnaires were reviewed by the technical team and the team leader to ensure data completeness, consistency and reliability. 2.2.5 Data quality and estimation for non-response The Census was conducted in accordance with the international standards, classifying economic activities based on International Sectorial Industrial Classification (ISIC) Revision 4. The data quality was directly related to the quality of field enumeration and supervision; form design and inbuilt checks; respondents’ understanding of the concept, classification and census questions; respondents’ willingness to complete the questionnaire; technical editing and validation skills by field staff and team leader; the availability of other instruments to compare the data with such as financial statements and previous census returns. All the quality indicators were rated high. In addition, comparisons of collected data were made with the information provided in the previous censuses at enterprise level for consistency check. 2.2.6 Timeliness The census findings were disseminated in less than 6 months after completion of fieldwork. This was to meet the timeliness criteria for data dissemination as guided by IMF’s framework in the Special Data Dissemination Standard (SDDS), which is within six months after fieldwork. Sector Distribution Collection R. rate
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 13 2.3 General findings In addition to collection of data on assets and liabilities transactions and stocks, the census collected data on other transactions performed by the same companies. This part presents the aggregate findings on companies’ turnover, trade, levels of employment, compensation of employees and corporate social responsibility. 2.3.1 Entity turnover The FPC turnovers increased from $ 1,554.5 million in 2015 to $ 2,129.1 million in 2016, representing 37.0 percent increase. The FPC turnovers accounted for 36.8 percent of the country’s total turnover of $ 5,789.2 million in 2016. The FPC turnovers were dominated by finance and insurance services, ICT and manufacturing accounting for 41.8 percent of FPC companies’ turnovers. Table 2.4: Entity turnovers by sectors in 2014-2016 ($ million) Sector 2014 2015 2016 Agriculture 43.0 67.9 135.8 Education 5.6 6.3 9.3 Construction 114.0 68.4 37.8 Financial & Insurance 445.3 441.4 450.0 ICT 155.7 195.1 376.0 Manufacturing 414.5 286.2 290.7 Mining 151.3 62.3 64.7 Tourism 26.7 34.3 55.9 Transportation 109.1 37.9 64.2 Wholesale 321.3 334.8 251.6 Other sectors 17.8 26.1 398.0 Total 1,798.8 1,554.5 2,129.1 Source: Foreign Private Capital 2017 2.3.2 Contribution on external trade The census findings show that the FPC companies are net importers with $ 277 million in 2016, resulting from $ 289 million of exports and $ 566 million of imports. External trade in mining and finance products recorded trade surplus of $ 55.2 million and $ 10.5 million respectively. The mining products are dominated by tin, coltan and wolfram exported by major mining exporting companies in Rwanda.
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2017 14 On the other side, imports are driven by manufacturing and wholesale and retail trade sectors with a lion’s share of 71.2 percent of total imports, recording $ 277.1 million and $ 125.9 million respectively in 2016. Wholesale and retail trade sector is mainly made up of petrol stations and supermarkets while the manufactured exports are generally maize and wheat flour. It is important to note that the ratio of Exports/Imports for FPC companies is 51.1 percent which shows that the FPC companies have higher export coverage than the country’s formal Export/ Imports cover of 26.6 percent. Table 2. 5: Exports-Imports in 2016 ($ million) Sector Imports Exports Net Exports Agriculture 34.9 24.9 (10.0) Construction 13.9 1.1 (12.8) Finance and Insurance 6.9 17.4 10.5 ICT 53.2 9.0 (44.2) Manufacturing 277.1 136.2 (140.9) Mining 1.5 56.7 55.2 Transportation 4.7 1.8 (2.9) Wholesale and retail trade 125.9 32.6 (93.3) Other sectors 47.9 9.3 (38.6) Grand Total 566.0 289.0 (277.0) Source: Foreign Private Capital 2017 2.3.3 Employment The results of the 2017 FPC census indicate that employment grew by 42.8 percent from 41,192 in 2015 to 58,828 in 2016. In terms of nationality of employees, Rwandans were 96.1 percent against 3.9 percent of foreigners. The number of short-term foreign employees was 178 which are equivalents to 0.3 percent of the total. According to the category of employment, managerial positions are occupied by 2,821 staff (4.8 percent), administrative 11,978 staff (20.4 percent); skilled 9,490 staff (16.1 percent) and casual 34,539 staff (58.7 percent). Details are provided in table 2.6.