The National Bank of Rwanda Foreign Private Investment in Rwanda 2011 17 Table 6 : Inflows and stocks by source in 2011 in $ million 2011 COUNTRY Inflow Stock Amount ($ m) percent Share Amount ($ m) percent Share Kenya 66.7 18.7 100.5 12.1 Switzerland 47.1 13.2 17.5 2.1 South Africa 46.4 13.0 110.8 13.3 Mauritius 37.6 10.5 58.8 7.1 Sweden 24.8 6.9 24.7 3.0 Cyprus 23.1 6.5 23.0 2.8 Netherlands 19.0 5.3 50.5 6.1 United Kingdom 18.9 5.3 66.1 7.9 Germany 18.5 5.2 63.7 7.7 Others 54.6 15.3 316.7 38.0 Total 356.65 100 832.3 100 Source: Foreign Private investment 2011 3.2.3 Foreign private investment inflows and stock by regional grouping, 2011 With regard to foreign private capital stocks by regional economic grouping, the census findings show that stocks of foreign private investment from almost all regions increased in 2011. For the total stock of $ 832.3 million in 2011, European Union (EU) countries held the highest stock amounting to $ 266.3 million (32.0 percent) up from $ 174.4 million recorded in 2010, followed by EAC accounted for $ 121.6 million (14.6 percent) increasing from $ 74.7 million in 2010; COMESA Non EAC had $ 117.1 million (14.1 percent) down from $ 210.7 million in 2010; due to reallocation of investments previously reported as Mauritius based. SADC (Non EAC) had $ 110.8 million (13.0 percent) up from $ 5.6 million in 2010, OECD -Non-EU had $ 76.8 million (9.2 percent) up from $ 35.4 million in 2010. Stock of investment from international and regional organizations was $ 61.3 million (7.4percent). Asia accounted for $ 41.6 million (5.0 percent) declining from $ 68.5 million in 2010; this was due to loss declared by Asian originated companies. Others countries had $37.0 million from $ 69.8 million. The inflows of foreign private investment from all regions recorded an increase in 2011. In 2011 total inflows was $ 356.7 million, OECD (Non-EU) countries held the highest inflows accounting for 24.4 percent, European Union (EU) follows with 20.5 percent, followed by EAC with 20.4 percent, SADC (Non EAC & COMESA) with 13.0 percent and COMESA (Non EAC) with 10.0 percent. Figure 10: Foreign Private Investment stocks and inflows by Regional Grouping, in 2011 Source: Foreign Private Investment, 2012 3.3 Income on Equity During the period under consideration, dividends paid to foreign shareholders slightly increased from $ 14.6 million in 2010 to $ 14.8 million in 2011. The ratio of dividends declared to net profit was 94.1 percent while the ratio of retained earnings to net profit was only 5.9 percent; an indication that most of the profit is remitted rather than reinvested.
The National Bank of Rwanda 18 Foreign Private Investment in Rwanda 2011 Table 7: Income on equity in $ million Item Amount ($ m) 2011 2010 Net Profit/Loss 21.80 -34 Dividends Declared 20.95 15.1 Dividends Paid 14.78 14.2 Retained Earnings/Loss 1.29 -49.1 Source: Foreign Private investment 2011 Comparing the year 2011 to the year 2010, the overall net profit increased to $ 21.8 million in 2011 from net loss of $ 34.0 million in 2010. The general increase in income on equity reflects the fact that new investments are starting making profits. 3.4. Return on equity by sectors in 2011 Return on Equity (ROE) is the percentage of net income returned to total shareholders’ equity. Sector ROE measures profitability by revealing how much profit a sector generates with the money shareholders have invested. The ROE is expressed as a percentage and calculated as follows: In the period under review, the overall return on equity attributable to foreign direct investments was 19.5 percent (see table 8). This low level was largely attributed to green field investments increase in mining, ICT and financial sectors which had not yet reached the phase of realizing returns on investment, but yet requiring huge investments. Table 8: Profitability of sectors SECTOR Net profit/ Loss $ m FDI EQUITY $ m ROE (%) Administrative and support service activities 0.21 0.12 170.7 Construction 1.67 3.33 50.26 Manufacturing 23.59 50.23 46.97 Agriculture 5.65 27.04 20.91 Wholesale and retail trade 4.03 26.42 15.26 Transportation and storage 0.24 1.69 14.23 Real estate activities 0.13 0.94 14.21 Financial Sector 3.70 107.64 3.43 Tourism -0.20 19.25 -1.02 Education 0.00 0.08 -6.29 ICT -13.30 83.21 -15.99 Mining and quarrying -3.29 4.19 -78.49 Grand Total 21.67 322.60 19.515 Source: Foreign Private investment 2011 On a sectorial basis, Administrative and support service activities had the highest return on equity of 170.7 percent in 2011, followed by construction (50.3 percent), Manufacturing (47.0 percent), Agriculture (20.9 percent), wholesale and retail (15.3 percent). Compared to 2010, except for manufacturing, other sectors that recorded a high return on equity were not among the important ones. With regard to ICT and Mining sectors, the huge negative return on equity is explained by green field investments in these sectors which at the early stages of investment make big losses. 3.5 Private Sector External Debt (PSED) 2011 Private Sector External Debt is the gross outstanding amount of those current and not contingent liabilities that require payment(s) of interest and/or principal by the debtor at some point(s) in the future and that are owed to non-residents by private residents of an economy (IMF Debt Guide, 2009). Private sector external debt flows and stocks include borrowings from affiliates and non-affiliates and debt securities.
The National Bank of Rwanda
Foreign Private Investment in Rwanda 2011
19
3.5.1 Private Sector External Debt inflows 2011
Disbursements of the PSED in 2011 amounted to $ 241.9 million from
$ 257.9 million in the previous year. Debt from related companies
totaled $ 91.6 million and is included in foreign direct investments .
Debt from unrelated companies was $ 150.3 million in 2011. The
debt from non-affiliates accounts for 62.1 percent of total debt from
abroad. The repayment of principal was 78.7 million in 2011. The
outstanding stock of 2011 was $ 420 million.
Table 9: Private Sector External Debt inflows 2010 & 2011 ($ million)
Type
Matu
rity
Disbursement
Repayment
2011
2010
2011
2010
AFFILIATES
91.59
166.21
11.54
55.18
Loans
LT
81.07
124.32
3.88
14.30
ST
10.52
41.89
7.66
40.88
NON AFFILIATES
150.27
91.68
67.19
64.93
Loans
LT
137.28
48.62
55.22
13.12
ST
0.18
-
0.02
-
Trade
Credits
ST
12.40
41.21
11.94
39.70
Other
LT
0.39
1.85
12.11
TOTAL
241.86
257.89
78.73
120.11
Of which:
LT
218.75
174.79
59.11
39.53
ST
23.11
83.10
19.62
80.58
Source: Foreign Private investment 201
3.5.2 Private Sector External Debt stocks 2011
Table 10 indicates that the stock of private sector external debt was mainly
concessional loans from related companies or shareholders for the share
of 57.9 percent. Table 10 :
Table 10 : Private Sector External Debt stocks 2011 ($ million)
Type
Opening
Closing
AFFILIATES
136.03
176.96
Loans
LT
121.01
160.03
ST
15.01
16.94
NON AFFILIATES
162.11
243.73
Loans
LT
146.57
228.57
ST
0.08
0.24
Trade Credits
LT
15.34
14.40
Other
LT
0.13
0.51
TOTAL
298.14
420.70
Of which:
LT
283.05
403.52
ST
15.09
17.18
Source: Foreign Private investment 2011
3.6 Private Foreign Assets (PFA)
This section provides analysis of the survey findings on the stock of
Private Sector Investments abroad (Foreign Assets). Foreign assets refer
to holding of equity shares or lending to non-residents in form of loans,
debt securities and trade credits or any other acquired assets by a resident
entity in non-resident entities.
The results showed that PFA were in form of foreign direct equity, foreign
portfolio equity and other investments. Foreign investments assets
amounted to $ 71.7 million in 2011. The big share was in form of loans and
trade credits to affiliates for 53.0 percent, other loans and trade credits to
unrelated companies accounted for 45.7 percent and other types of equity
counted for 1.3 percent of all foreign assets in 2011. Sectors with foreign
assets were mining (90.0 percent) as well as wholesale and retail trade (8.
percent). The reported data for the year 2011 is a big improvement in asset
situation reporting. During previous rounds, the size of foreign asset was
The National Bank of Rwanda
20
Foreign Private Investment in Rwanda 2011
quite unknown, only the stock of equity was known due to few companies
reported having any other kind of transactions with the Rest of the World.
Figure 11 : Private foreign assets flow in $ million
Source: Foreign Private investment 2011
3.7 Macro-economic analysis of survey findings
Table 11 shows some key analytical ratios of FAL flows and stocks. In terms
of flows, FDI became increasingly important as a source of investment
funds rising from 12.4 percent of Gross Fixed Capital Formation (GFCF)
in 2009 to 25.9 percent in 2011. The importance of FDI to the economy
is also shown by the increase in the share of FDI stocks to GDP during the
three years, which went up from 7.1 percent in 2009 to 12.7 percent in
2011.
Table 11: Some analytical ratios of FAL flows and stocks (percent)
2009
2010
2011
FDI Inflows/GFCF
12.4
29.6
25.9
FDI Inflows/GDP
2.7
6.2
5.5
FDI stock/GDP
7.1
11.1
12.7
Debt stock/GDP
3.6
5.8
6.5
Debt service / Debt stock
11.1
9.5
8.8
Return on equity of non-residents
9.1
13.4
19.5
Source: Foreign Private investment 2011
The share of debt stock to GDP shows a similar trend to that shown by the
share of FDI stock to GDP. Debt stock as a share of GDP increased from 3.6
percent in 2009 to 6.5 percent in 2011. However, despite the rise in the
share of debt stock to GDP, the ratio of debt service to debt stock fell from
11.1 percent in 2009 to 8.8 percent in 2011. This implies that borrowers
have over the period succeeded in securing cheaper loans.
It is worth noting that investment has taken mainly the form of FDI as
shown by the higher share of FDI to GDP compared to the ratio of Debt to
GDP. This suggests that investors have opted more for equity investments
in the country than debt. A possible explanation, for this development is
suggested by the profitability of investments set up by non-residents. The
high profitability is also confirmed by the ratio of return on equity which is
increasing from 9.0 percent in 2009 to 19.5 percent in 2011.
3.8. Other findings
This chapter presents the aggregate findings on companies’ turnover,
levels of employment, compensation of employees and contribution to
corporate social responsibility.
3.8.1 Entity turnover
The total turnover for the entities increased from $ 655.2 million in 2010 to
$ 995.0 million in 2011, an increase of 51.8 percent. The bulk of registered
turnover were financial and insurance and ICT sectors accounting for 66.3
percent of all sectors’ turnover. The findings corroborate to the fact that
those sectors are the growing ones with huge foreign investments.