The National Bank of Rwanda Foreign Private Investment in Rwanda 2011 5 Table 1: Top Ten Countries in Doing Business in Sub-Saharan Africa Economy Ease of Doing Business Rank Starting a Business Dealing with Construction Permits Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Closing a Business Mauritius 19 2 8 4 9 2 1 1 8 3 South Africa 39 6 1 10 1 1 4 10 13 9 Rwanda 52 1 15 5 4 3 3 32 3 37 Botswana 59 11 27 3 9 5 5 24 11 1 Ghana 64 14 40 2 4 5 11 7 5 18 Seychelles 74 16 6 7 39 9 2 2 14 4 Namibia 87 25 5 40 7 13 18 20 4 2 Zambia 94 7 36 14 2 13 7 30 15 13 Uganda 120 28 22 21 7 24 12 33 19 5 Kenya 121 23 3 37 2 16 33 25 30 14 Source: World Bank Doing Business Report 2012 During the period under review, Rwanda eased access to construction permits by passing new building regulations and implementing new time limits for the issuance of various permits. Access to credit was enhanced by allowing banks the right to inspect borrowers, credit situation and mandating that loans of all sizes be reported to the central bank’s public credit registry. In addition, Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with Uganda and other neighbors, leading to an improvement in the trade logistics. Starting business in Rwanda was eased to 6 hours. The National Bank of Rwanda 6 Foreign Private Investment in Rwanda 2011 Table 2: Rwanda’s Doing Business Performance by Category 2012and 2013 Doing Business 2013 Rank Doing Business 2012 Rank Change in Rank 52 48 -4 Topic Rankings DB 2013 Rank DB 2012 Rank Change in Rank Starting a Business 8 8 0 Dealing with Con- struction Permits 98 90 -8 Registering Property 63 62 -1 Getting Credit 23 23 0 Protecting Investors 32 29 -3 Paying Taxes 25 29 4 Trading Across Borders 158 159 1 Enforcing Contracts 39 40 1 Closing a Business 167 168 +1 Source: World Bank Doing Business Report 2013 1.4 Methodology 1.4.1 Objective of the census After the assessment made by World Bank on Rwanda business environment, participating institutions to Foreign Private Capital flows decided to collect data every year to assist Government assess the impact of efforts made in attracting and facilitating foreign investments. This requires creation, maintenance and reinforcement of national capacity in collecting information, analyzing the situation and making recommendations. Information on investment plans has been systematically collected during the last decade but the actual level of investments was not monitored. Most of information available was related to inward investment (foreign liabilities). No data was provided on Rwandan investments abroad (foreign assets). The census on foreign capital flows deals with these issues. Besides, it helps to establish a strong and performing framework of regular and complete system of FPC flows to improve the balance of payment compilation in line with international standards following the IMF Balance of Payments manual. Gathering information on private capital flows improve also the situation of the country’s International Investment Position. The results of the Census are used to create a friendly working environment between public and private sector that enhances the sharing of information leading to improvements of business conditions. The output is also used to create an exhaustive database on investments for strong policy analysis and recommendations aiming at reconsidering and improving the foreign investment climate. The Census of foreign investment is an important source of information that can be useful for the country of investment and the investor himself. It helps to capture information on how the investors assess the country’s investment environment and thus assist the country taking appropriate decisions. On the investors’ side, the foreign private capital Census is also a source of information especially for green field options available for new investments. Therefore, the Census results facilitate adequate decision making for both public and private sector. Note also that the foreign private capital data capturing is becoming an important requirement from international organizations that are compiling comparable investment data. The same output is used to enrich and update the national database with actual information on private entities to
The National Bank of Rwanda
Foreign Private Investment in Rwanda 2011
7
guide planning and policy making by disseminating high quality data
on time for easy access to users.
1.4.2 Scope of the Census
This third private capital census in Rwanda aimed at capturing
information on FPC for the year 2011. All new companies registered
as foreign direct investments by Rwanda Development Board in
2011 and the ones which declared Foreign Assets and Liability in the
previous census were included in the current census.
One hundred and thirty companies (140) were surveyed. One hundred
and twenty (128) responded; a response rate of 91percent. Among the
respondents, 6 companies have no foreign assets and liabilities (FAL).
The Census was designed to capture mainly general information of the
company, shareholding structure, capital flows and stocks especially for
the year 2011.
1.4.3 Sensitization
The sensitization was made via an awareness campaign directed to
Managing Directors, Chief Executive Officers and Finance managers of
companies. It was done together with the dissemination of the second
round results covering the year 2010. The objective was to maximize
the chance of reporting reliable data.
1.4.4 Census frame
The census frame was made of new companies registered as foreign
direct investments by Rwanda Development Board in 2011 and the ones
which declared Foreign Assets and Liability (FAL) in the previous census
covering the year 2010. The identified companies operate in Agriculture,
Construction, Energy, Financial services, Food processing, Fuel, Hotel, ICT,
Insurance, Manufacturing, Mining, Real Estates, Restaurant, Retail and
Wholesale trade, Tourism, Transport sectors etc.
1.4.5 Questionnaire
The data collection was done using a questionnaire composed with
5 parts:
•
Part 1 captures general information on the company: Name,
shareholding structure, relationship with fellow enterprises
abroad, company turnover, company’s industrial classification and
main activity, employment structure and compensation of employees,
imports from and/ or exports to abroad, actual investments and
corporate social responsibilities.
•
Part 2 captures information on foreign equity investments (equity,
retained earnings and reserves) by country of origin and by percentage
of shareholding.
•
Part 3 captures information on non-equity such as long term or
short term borrowing, as well as other liabilities as specified in the
questionnaire.
•
Part 4 captures information on investment abroad such as the
company’s shareholding abroad and other assets held abroad.
•
Part 5 captures information on other investments abroad such as the
company’s loans (Long term and Short term), trade credits to foreign
companies, and other kind of non-equity held abroad.
Every company’s response to the questionnaire was backed by the
company’s financial statements and related notes that companies were
also strongly requested to provide.
1.4.6 Training and field work activities
Before the census started, a 4 days pre-census training was organized in June
2012. The training involved representatives from National Bank of Rwanda
and Rwanda Development Board. The main objective of the training was to
ease the understanding of foreign private capital (FPC) concepts, learning
fieldwork techniques, introduction to using a PCMS II-software developed
by MEFMI and strategizing on how to obtain high response rate.
1.4.7 Questionnaire Administration
The census targeted 140 private entities of which 128 have responded
representing 91percent. The table below gives more details about the rate
of responses.
The National Bank of Rwanda 8 Foreign Private Investment in Rwanda 2011 Table 3: Response rate per sector in 2011. Sector Collection Distribution Response rate Tourism 6 6 100 Administrative and support service activities 5 5 100 Agriculture, forestry and fishing 5 5 100 Construction of buildings 2 2 100 Electricity, gas, steam and air condi- tioning supply 3 3 100 Financial and insurance activities 22 24 92 Information and communication 13 15 87 Manufacturing 21 25 84 Mining and quarrying 11 11 100 Postal and courier activities 1 1 100 Professional, scientific and technical activities 6 6 100 Real estate activities 3 3 100 Transportation and storage 9 9 100 Water supply; sewerage, waste man- agement and remediation activities 1 1 100 Wholesale and retail trade; repair of motor vehicles and motorcycles 20 24 83 Total 128 140 91 Source: Foreign Private investment 2011 Most of the companies are located in Kigali city and those out of Kigali city generally have their head offices or representation offices in Kigali city. 1.4.8 Data processing Data entry and processing were performed using a PCMS II –software developed by MEFMI for its member countries. The system has many facilities including analysis and reporting.
The National Bank of Rwanda Foreign Private Investment in Rwanda 2011 9 CHAPTER II. RECENT MACRO ECONOMIC DEVELOPMENT AND GLOBAL TRENDS IN FOREIGN PRIVATE INVESTMENTS As other economic activities, foreign private capital evolves in an international and national macro-economic environment. 2.1 Global and Regional Perspective The global economy expanded successively for four years up to 2007 as Gross Domestic Product (GDP) rose to an average of 5.0 percent, owing to a broad-based surge in the emerging and developing economies as mentioned in World Economic Reports. However, the global economy slowed down markedly to 0.2 percent in 2008 following shocks in the mature financial markets. In 2009, the global economy entered into a severe recession owing to massive financial crisis and acute loss of confidence. After an increase of 5.2 percent in 2010, global economic growth decelerated to 3.8 percent in 2011 due to mixed adverse developments across countries including Tsunami and earthquake in Japan, renewed concerns about debt crisis in Europe and unrest in Arab countries which effect dampened oil supply. According to the IMF, real GDP growth in developed countries was 1.6 percent in 2011 after 3.2 percent in 2010. In USA, it reduced to 1.8 percent on the lessening of policy stimulus effect after 3.0 percent in 2010. In the Euro Area, real GDP dropped back to 1.6 percent against 1.9 percent in 2010 as some countries took rigorous fiscal consolidation and austerity measures. In Japan, due to a sharp appreciation of the yen and following the earthquake, the economy declined by 0.9 percent in 2011 after an increase of 4.4 percent in 2010. In the emerging and developing economies, real GDP growth dropped to 6.2 percent in 2011 after 7.3 percent recorded in 2010. This slowdown was due to capacity constraints, policy tightening and slowing foreign demand. In developing Asia, economic activity remained solid, boosted by strong growth in China and India. China‘s real GDP growth decelerated to 9.2 percent in 2011 after 10.4 percent in 2010 due to the tightening monetary policy and lower contribution from net exports. For African continent, economic growth was 5 percent in 2011 up from 4.7 percent recorded in 2010. In line with this trend, economic growth in Sub- Saharan Africa was 4.9 percent in 2011 from 5.3 percent in 2010.
The National Bank of Rwanda 10 Foreign Private Investment in Rwanda 2011 Table 4: Global macro-economic developments (real GDP growth percent) 2.2 Global Trends in Foreign Direct Investment (FDI) On international level, according to the World Investment Report 2011, global FDI inflows in 2011 reached an estimated amount of $1,524 billion (figure I.1); an increase of 16 percent from $ 1,309 billion in 2010 despite turmoil in the global economy. However, they still remained below their 2007 peak by 23 percent. FDI inflows increased across all major economic groupings in 2011. Flows to developed countries increased by 21 per cent, to $748 billion. In developing countries FDI increased by 11 percent, reaching a record of $684 billion. FDI increased by 25 percent to $ 92 billion in transition economies. Developing and transition economies respectively accounted for 45 percent and 6 percent of global FDI in 2011. UNCTAD projections for the medium term based on macroeconomic fundamentals continue to show FDI flows increasing at a moderate but steady pace, reaching $1.8 trillion and $1.9 trillion in 2013 and 2014, respectively, barring any macroeconomic shocks. Figure 1: Recent global trend in foreign direct investment, 2006-2011 Source: World Investment Report 2012 FDI flows to developed countries significantly grew by 21 percent in 2011; reaching $748 billion. Nevertheless, the level of their inflows was still a quarter below the level of the pre-crisis three-year average. FDI from developed countries rose sharply in 2011, by 25 per cent, to reach $1.24 trillion. While all three major developed-economy investor blocs: the European Union (EU), North America and Japan contributed to this increase and the types of investment differed. FDI from the USA were mainly reinvested earnings (82 percent of total FDI outflows), in part driven by transnational corporations (TNCs) building up their foreign cash holdings. The rise of FDI outflows from the EU was mainly through cross-border Mergers and Acquisitions (M&A). An appreciating yen improved the purchasing power of Japanese TNCs, resulting in a doubling of their FDI outflows, with net M&A purchases in North America and Europe rising to 132 percent. By region, FDI inflows to Africa as a whole declined for the third successive year, to $42.7 billion caused largely by reduced investments in North Africa countries; in particular, inflows to Egypt and Libya, which had been major recipients of FDI, came to a halt owing to their protracted political instability. In contrast, inflows to Sub-Saharan Africa recovered from $29 billion in 2010 to $37 billion in 2011, a level comparable with the peak recorded in 2008. The continuing rise in commodity prices and a relatively positive economic outlook for Sub-Saharan Africa are among the factors contributing to the turnaround. In addition to traditional patterns of FDI to the extractive
1463 1976 1791 1198 1309 1524 0 500 1000 1500 2000 2500 2006 2007 2008 2009 2010 2011 FDI Trend ($ billion) FDI TREND Source: IMF, World Economic Outlook. January 2012