FOREIGN%20PRIVATE%20CAPITAL%20IN%20RWANDA%202019.pdf - Page 1

FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 1 NATIONAL BANK OF RWANDA FOREIGN PRIVATE CAPITAL IN RWANDA

YEAR 2019

FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 2

FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 3 FOREWORD The Rwanda Foreign Private Capital 2019 Census is the tenth in a series of annual censuses, jointly conducted by National Bank of Rwanda, Rwanda Development Board, National Institute of Statistics of Rwanda, and Private Sector Federation. This census collects data on inflows and outflows of foreign investments with the private sector in Rwanda. This report presents 2018 findings on Foreign Private Capital inflows, and the data used was collected on 288 registered private companies from the Rwanda Development Board’s registration of companies.
The Foreign Private Capital Census would not have been successful without the involvement and cooperation of key stakeholders. The National Bank of Rwanda wishes to extend appreciation to our valued respondents for their cooperation in providing information. We also acknowledge and appreciate the technical and financial support provided by partner institutions to bring this exercise to success. The Foreign Private Capital census is an important activity for the Government of Rwanda. It summarizes stocks and flows of foreign investments by sector and origin, and helps set policy measures that attract foreign investments and improve the business climate in Rwanda. In addition, the results from this census are used in the compilation of Rwanda’s Balance of Payments, the International Investment Position, and the National Account Statistics. RWAGOMBWA John Governor, National Bank of Rwanda FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 4 Contents

FOREWORD 3 LIST OF TABLES 6 LIST OF FIGURES 6 LIST OF ACRONYMS 7 EXECUTIVE SUMMARY 8 CHAPTER 1: INTRODUCTION 11 CHAPTER 2: FOREIGN PRIVATE CAPITAL IN RWANDA 13 2.1. RESPONSE RATE 14 2.2. Foreign Private Capital in Rwanda 16 2.2.1. FPC by sector of economic activity 17 2.2.2. FPC by Country of Origin 18 2.3. Foreign Direct Investment in Rwanda 19 2.3.1. FDI inflows and Stock by Sector 20 2.3.2. FDI inflows and Stock by Origin 20 2.4. Portfolio Investment 21 2.5. Other Investments 21 2.5.1. Other Investment Inflows and Stocks by Sector 22 2.5.2. OI Inflows and Stock by origin 22 2.6. Private Sector External Debt 23 2.7 . Income on Investments 24 2.7 .1. Income on Investment Distribution by Sector 24 2.8. Return on Equity by sector 25 CHAPTER 3: OTHER FINDINGS 27 3.1. Entity T urnover 28 3.2. Employment and Compensation of Employees 28 3.3. Contribution on External T rad 30 CHAPTER 4: INVESTOR PERCEPTION 33 CONCLUSION 35 REFERENCES 36 ANNEX 36 FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 6 LIST OF TABLES Table 1: Census’s Distribution and Response Rate per Sector (units except otherwise indicated) 14 Table 2: FPC Inflows by Category ($ Millions) 16 Table 3: FPC Stocks by Category ($ Millions) 17 Table 4: FPC Inflows and Stocks by Origin ($ Millions) 18 Table 5: FPC Inflows and Stocks by region ($ Millions) 19 Table 6: FDI Inflows and Stocks by Category ($ Millions) 19 Table 7: FDI Inflows and Stocks by Sector of Activities ($ Millions) 20 Table 8: FDI Inflows and Stocks by Origin ($ Millions) 20 Table 9: OI Inflows and Stocks by Sector of Activities ($ Millions) 22 Table 10: OI Inflows and Stocks by Origin ($ Millions) 23 Table 11: Foreign Private Sector Debt Inflows and Stocks ($ Millions) 23 Table 12: Income on Investment by Instrument ($ Millions) 24 Table 13: Income on Investment by Sector ($ Millions) 24 Table 14: ROE on FDI by Sector (ratio) 25 Table 15: FPC 2019 Entity Turnovers by Sector ($ Millions except otherwise indicated) 28 Table 16: FPC 2016 Census Employment by Position in 2018 28 Table 17: Compensation of Employees ($ Millions) 29 Table 18: FPC 2019 Census Exports – Imports of Goods and Service in 2018 ($ Millions) 30 LIST OF FIGURES Figure 1: Census’ Distribution and Response 2014 – 2018 15 Figure 2: FPC Inflows and Stocks ($ Millions) 16 Figure 3: FPC Inflows and Stocks by Sector of Activities (Percent Shares) 17 Figure 4: PI Inflows and Stocks ($ Millions) 21 Figure 5: OI Inflows and Stocks ($ Millions) 21 Figure 6: Distribution of Employment by Gender in 2018 29 Figure 7: Investor perception index per theme (percent responses on very good) 34 Figure 8: Governance Indicators 37 Figure 9: Legal Framework Indicators 38 Figure 10: Support Services Indicators 38 Figure 11: Trading Across Borders Indicators 38 Figure 12: Infrastructure Availability Indicators 39 Figure 13: Infrastructure Cost Indicators 39 Figure 14: Tax and Investment Framework Indicators 40 Figure 15: Economic and Financial Indicators 40 Figure 16: Domestic Resources Indicators 40

FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 7 LIST OF ACRONYMS NBR

National Bank of Rwanda BOP

Balance of Payments 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 ICT Information Communication and Technology 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 FRW

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 2019 8 EXECUTIVE SUMMARY The main objective of the census was to collect information required for the compilation of the Rwanda Balance of Payments (BOP), International Investment Position (IIP), and the National Account Statistics. This census provided actual flows and stocks of Foreign Investments in Rwanda for the year 2018. The Foreign Private Capital (FPC) Census 2019 is the tenth in a series of annual censuses jointly conducted by the National Bank of Rwanda (NBR), National Institute of Statistics of Rwanda (NISR), Rwanda Development Board (RDB) and Private Sector Federation (PSF). The main objective of the census was to collect information required for the compilation of the Rwanda Balance of Payments (BOP), International Investment Position (IIP), and the National Account Statistics. This census provided actual flows and stocks of Foreign Investments in Rwanda for the year 2018. The census covered 288 enterprises, of which 266 responded, representing a response rate of 92.4 percent. Findings revealed that FPC inflows increased by 2.4 percent, amounting to $ 463.0 Million in 2018 from $ 452.2 Million in 2017, mainly driven by FDI (+7.1 percent). In terms of FPC composition, the energy sector led with 35.7 percent share of the total FPC inflows, followed by ICT (17.9 percent), financial sector (17.6 percent), and manufacturing sector (13.6 percent). The census shows an increase in the total FPC companies’ turnovers of 17.4 percent, amounting to $2446.5 Million (25.8 percent of GDP) in 2018 from $2,084.3 Million registered in 2017. Net profits of the same companies increased by 1.1 percent, amounting to $ 142.5 Million in 2018 from $141.0 Million in 2017. In addition, the last part of the report summarizes investors’ perceptions about the business environment in Rwanda. These views helped to inform policymakers about the need for improving the domestic investment climate to attract foreign investments into the country. The findings show that Investor Perception Index (IPI) stood at 74.6 percent, with higher scores of government performance (80.5 percent), and legal framework (79.5 percent). These scores highlight the improvement in the business environment made by Rwanda. With this effort, Rwanda was ranked the29th in the Ease of Doing Business in 2019, from the 41st in 2018 as published by the World Bank Group.

FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 9

FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 10

FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 11 INTRODUCTION 1 The Foreign Private Capital (FPC) refers to foreign liabilities (inward investments) owed to non-residents in terms of equity and non-equity, and foreign assets (outward investment) claimed to the rest of the world. The FPC is composed of Foreign Direct Investment (FDI), Portfolio Investment (PI), Financial Derivatives and employee stock options, and Other Investments (OI). The FPC 2019 captures information for the year 2018 from all resident companies that hold foreign equity or borrow abroad. The FPC 2019 census is designed based on the IMF Balance of Payment Manuel Sixth Edition, (2009). The census provides inputs for Balance of Payments (BOP), International Investment Position (IIP) and National Account Statistics compilation. The questionnaire helps to capture information on industrial classification, equity, and non-equity instruments, income on investments, as well as investors’ perceptions about the country’s business investment climate. This report presents the findings of the census conducted in 2019, covering 2018 data collected from 266 companies, distributed in 15 sectors. The rest of the report highlights FPC 2019 census’ results, other findings of the census and investors’ perceptions. FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 12

FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 13 FOREIGN PRIVATE CAPITAL IN RWANDA 2 This chapter discusses FPC 2019 census results in Rwanda. It presents flows and end year stocks of FDI, PI, and OI for the year 2018. The analysis of the census’ results is based on the following characteristics: types of capital by instruments, relationship between investors and recipients, sector and origin of investments, and the income from investment by sector. FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 14 2.1. Response Rate The FPC 2019 census covered 288 private institutions that hold investments from abroad, of which 266 companies responded, representing a 92.4 percent response rate. T able 1 summarizes the distribution and response rate by sector of investment. T able 1: Census’s Distribution and Response Rate per Sector (units except otherwise indicated) SECTOR DISTRIBUTION COLLECTION % R. RATE Agriculture 16 14 8 7. 5 Construction 11 9 81.8 Education 5 4 80.0 Electricity 14 12 85.7 Finance 37 37 100 Human health and social work 8 7 8 7. 5 ICT 20 18 90.0 Legal and Profession activities 12 10 83.3 Manufacturing 73 70 95.9 Mining 15 14 93.3 Real estate 8 7 8 7. 5 T ourism 29 27 93.1 T ransportation 8 7 8 7. 5 Water supply 2 2 100 Wholesale 30 28 93.3 Grand T otal 288 266 92.4 Source: FPC 2019 Census FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2019 15 350 300 250 200 150 100 50 0 95% 94.5% 94% 93.5% 93% 92.5% 92% 91.5% 91% 90.5% 90% 89.5% 94.5% 91.4% 92.2% 92.6% 92.4% 92.6% 2014 2015 2016 2017 2018 Average 5 yrs Source: FPC 2019 Census Distributed Responded Response Rate 2nd Ax At the beginning of an annual FPC census, the technical team meets to review and update the list of private companies with foreign investments taken from the investor’s register. From the last 5 years, the average distribution of companies were 242, of which 224 responded, representing an average response rate of 92.6 percent. Figure 1: Census’ Distribution and Response 2014 – 2018

Page 1 of 4