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1.2 Monitoring foreign investment in Rwanda
With the objective of complementing internal resources, Rwanda has actively attracted FDI by creating and sustaining a high conducive investment climate through important reforms which make it easier for businesses to get started, get loans, pay taxes, etc. A whole package for investment promotion in general can be found within Rwanda Development Board. It includes among others: regulatory framework, registration facilities and requirements, change of registered businesses, closing of businesses, disclosure requirements, and other facilities such as working permit, government’s protection of investments, settlement of disputes, transfer of funds, special economic zone facilitations, public private partnership (PPP).
The World Economic Forum’s Global Competitiveness Report 2013- 2014 ranked Rwanda the 2nd easiest place to do business in Africa. The table1.2 below shows the Rwanda rank across 11 indicators of doing business compared to some other African countries for the Year 2013-2014.
Table1.2: Top Ten Countries in Doing Business in Sub-Saharan Africa 2013-2014 Economy Ease of Doing Business Rank Starting a Business Dealing with Construction Permits Getting Electricity Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Resolving Insolvency Mauritius 20 2 22 1 7 7 2 1 1 7 2 Rwanda 32 1 14 2 1 1 3 3 31 2 22 South Africa 41 7 1 27 15 5 1 4 7 12 8 Botswana 56 12 11 13 2 11 7 6 23 14 1 Ghana 67 20 37 6 4 5 5 9 8 4 16 Seychelles 80 16 10 25 9 40 9 2 2 13 3 Zambia 83 6 7 29 17 1 12 9 32 20 5 Namibia 98 23 2 4 43 9 12 18 20 10 9 Cape Verde 121 8 28 28 6 14 24 11 4 1 38 Swaziland 123 39 5 34 24 9 21 7 13 41 4 Source: World Bank Doing Business Report 2013-2014
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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 loans are reported to the central bank’s credit reference bureau.
In addition, Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with her neighbors, leading to an improvement in the trade logistics.
Table1.3: Rwanda’s Doing Business Performance by Category 2013 and 2014
DB 2013
DB 2014
Change in rank
Rwanda Ranking
52nd
32nd
20
Starting a Business
8
9
-1
Dealing with construction permits
98
85
13
Getting Electricity
49
53
-4
Registering property
63
8
55
Getting credit
23
13
10
Protecting Investors
32
22
10
Paying Taxes
25
22
3
Trading Across Borders
158
162
-4
Enforcing Contracts
39
40
-1
Resolving Insolvency
167
137
30
Source: World Bank Doing Business Report 2013-2014
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In the past, data on foreign capital flows were estimated using information provided by banks. However, it was not possible to capture non-cash types of investment such as investment in form of equipment, expertize and reinvested earnings. Therefore, a census based approach of compiling statistics o n FPC was adopted in 2007 by BNR jointly with the Rwanda I nvestment and Export Promotion Agency (RIEPA), now Rwanda Development Board (RDB). The census provides information that contribute to improve the national investment policies and to assess the impact of all efforts made in facilitating foreign investments.
In 2010, an Inter-Institutional Agreement for monitoring and analyzing the foreign assets and liabilities, corporate social responsibility and related data in Rwanda was initiated. This agreement led to the establishment of Rwanda Working Group (RWG) un der the memorandum of understanding signed between the National Bank of Rwanda (BNR), the National Institute of Statistics of Rwanda (NISR), the Rwanda Development Board (RDB) and the Pr ivate Sector Federation (PSF). The mandate of this working group inclu des among others, collecting and producing good quality statistics, compliant with international data reporting standards and meeting the needs of policy makers and users. BNR and NISR use this information for Balance of Payments and National Account compi lation while RDB and PSF ne ed it for monitoring purposes.
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1.4 Reasons for investing in Rwanda
Indicator Reasons
Good macroeconomic
environment
Rwanda enjoyed a year -on-year average real GDP growth rate of 7.6 percent between 2007 –
2013, among the highest in major African economies and neighboring countries, a moderate
inflation of one digit and stable exchange rate.
Good governance The country is politically stable with well -functioning institutions, rule of law and zero
tolerance for corruption, clear vision for growth through private investment support and
development
Investor friendly climate World Bank Doing Business Report 2014 ranked Rwanda the 2nd top global reformer for six
consecutive years and 2 nd easiest place to do business in Africa. It is among the best
competitive place to do business in Africa and 1 st in East African Community. On credit
ranking by Fitch in 2012 -2013, Rwanda was upgraded to B. Rwanda is among top 4 African
countries in terms of internet connectivity according to Oracle in 2012.
Access to markets Rwanda is a Market of 10.5 million people with a rapidly growing middle class. It is located
centrally bordering with 3 countries of East Africa and the huge market of Democratic
Republic of Congo. The country adhered to EAC Common Market and Customs Union with
market potential of over 125 million people with all trade facilities the EAC bloc offers.
Untapped investments
opportunities
Potential investment opportunities abound, particularly in the following sectors:
- Infrastructure: Opportunities in rail, air , water transportation to further develop Rwa nda as an EAC hub;
- Agriculture: Potential for agriculture productivity growth and value addition;
- Energy: Power generation, off grid generation and significant methane gas opportunities;
- Tourism: Unique assets creating booming sector, growth potential in birding & business/conference tourism
- Information and Communication Technology: Priority sector for Vision 2020; new ICT Park to be developed.
- Other attractive sectors include real estate and construction, financial services and mining.
Rwanda is Highly Competitive Rwanda is now the third most competitive country in Sub -Saharan Africa after Mauritius and South Africa Globally, Rwanda is in the upper half of the WEF’s Global Competitiveness Index after jumping 10 places, ahead of many historically stro nger countries in Europe and America Excellent Business Environment Rwanda has the third strongest regulatory framework in Sub -Saharan Africa, only slightly behind South Africa and is ranked 8 th globally by the World Bank doing business report in starting a business Source: RDB, 2014
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CHAPTER TWO. METHODOLOGY AND GENERAL FINDINGS
2.0. Introduction
This chapter presents a description of the census frame and the results relating to the general characteristics of the enterprises in the census. Also included is an assessment of the interviewed enterprises’ contribution to the economy’s turnover , external trade, employment and corporate social responsibility.
2.1. Census frame and response rate
The census frame of 206 companies was set with the objective of covering all enterprises in Rwanda with foreign direct investment, portfolio investments and foreign borrowing in 2013. Among 206 companies in the frame, 156 responded with foreign liabilities, 14 found to be purely local and 23 were not located. Among companies with foreign liabilities, some enterprises were with only foreign direct investment (29 companies), others had only foreign borrowing (3 companies) but many of them were with both (137 companies).
A total of 183 questionnaires were administered to enterprises during the field activities only 170 companies responded, 127 companies responded and submitted their financial statements, and 14 had no foreign liabilities or assets while 29 companies responded with no financi al statements attached. In addition, comparisons of collected data were made with the information provided in the previous censuses at enterprise level for consistency check. The distribution and response rate by sector of investments are shown in Table 2.4 below.
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Table2.4: Distribution and response rate per sector in 2013
Sector
Distribution
Collection
Response rate
Tourism
12
11
91.7
Administrative and support service activities
5
5
100.0
Agriculture, forestry and fishing
12
11
91.7
Construction of buildings
9
8
88.9
Electricity, gas, steam and air conditioning supply
2
2
100.0
Financial and insurance activities
26
25
96.2
Information and communication
16
15
93.8
Manufacturing
25
24
96.0
Mining and quarrying
14
13
92.9
Postal and courier activities
1
1
100.0
Professional, scientific and technical activities
9
9
100.0
Real estate activities
6
5
83.3
Transportation and storage
10
9
90.0
Water supply; sewerage, waste management
1
1
100.0
Education
3
2
66.7
Wholesale and retail trade
32
29
90.6
Total
183
170
92.9
Source: Foreign Private investment 2013
2.2 Up rating methodology
The up-rating approach was used to ensure comprehensive coverage of enterprises with foreign direct investment and borrowing as well as to ensure consistency with previous censuses frame. The approach was also to enable comparison of results obtained from previous censuses. The up- rating methodology is used to cater for non-response in the census. Financial statements covering 2012 and 2013 were used for editing and producing best estimates for enterprises that provided them. The methodology consisted of estimation for non-responding enterprises that had responded to previous censuses but did not respond in 2014. The office estimates were based on previous census responses to derive the beginning of period stocks and sector growth factor derived from responding enterprises within the same sector to derive transactions during the year. Then the closing stock for 2013 was calculated by adding up the opening stock with the estimated transactions.
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2.3 General findings
Beside the information directly showing inwards and outwards transaction of companies in the census, it is also necessary to show 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 country’s declared total turnover increased by 13.1 percent in 2013 compared to 2012 rising from US$ 3,604.3 million to US$ 4,076.1 million. The total turnover of the companies considered in the FPC increased by 45.7 percent from US$ 1,073.4 million in 2012 to US$ 1,565.0 million in 2013; contributing for 38.4 percent of the country’s total turnovers in 2013, dominated by financial insurance, manufacturing and wholesale and retail trade accounting for 65.7 percent of census companies’ turnover.
Table2.5: Entity turnovers by sectors in 2011-2013 (US$ million) Sector 2011 2012 2013 Financial & Insurance 187.6 192.3 384.5 Manufacturing 229.8 246.8 365.9 Wholesale 222.3 223.4 277.5 ICT 182.5 185.7 134.4 Mining 86.5 59.5 133.6 Construction 11.4 3.7 98.5 Transportation 7.4 8.6 94.2 Agriculture 36.0 38.4 38.0 Tourism 22.8 18.4 23.0 Others 8.4 96.5 15.3 Total 994.6 1,073.4 1,565.0 Source: Foreign Private investment 2013
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The double increase of turnover in finance and insurance sector was from new players in the sector like UAP and BRITAM insurance companies and banks like CRANE bank and AB Bank. In manufacturing sector, companies like CIMERWA, FRESCHO Macadamia and Bakhresa grain milling contributed a lot.
2.3.2 Exports-Imports
In 2013, the census findings showed globally a net import of US $ 90 million resulting from US$ 214 million of exports and US$ 304 million of imports made by the majority owned Foreign Companies. External trade in mining and agriculture products recorded trade surplus of US$ 95.4 million and US$ 22.7 million respectively. The mining products are dominated by tin, coltan and wolfram.
Manufacturing, whole sale and retail trade sectors were dominating the import side as shown in the table 2.6. Manufacture exports are mainly maize and wheat flour. The trade deficit of manufacture sector shows the importance of raw material imports and may call up on the checking of local potential of their production and availability. It would be also interesting to make a deep and detailed analysis of locally traded volume of the manufactu re products and items in trade sectors. Exports from whole sale and retails trade are dominated by re -export of fuel.
ICT sector dominated in both exports and imports. Related exports services are mainly roaming and other transfers received by local fore ign owned telecommunication companies from non - residents companies for communication facilities between residents and nonresidents households. Most of imports in finance and insurance sector were services to the tune of US$ 11 million as new banks and insurance companies were setting in.
The important imports electricity sector was the electricity materials to be sold in the country. We note also high level of manufacturing sector imports that may be linked to local availability of raw material. Mining and agriculture show interesting trade surplus.
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Table2.6 Exports-Imports in 2013 (US$ million) Sector Imports Exports Balance Manufacturing 117.9 60.2 (57.7) Wholesale and retail trade 74.0 5.6 (68.4) ICT 17.7 19.0 1.2 Mining 0.7 96.1 95.4 Agriculture 10.2 31.5 21.3 Transportation and storage 1.7 1.2 (0.5) Financial and Insurance 15.1 0.3 (14.8) Others 8.5 0.2 (8.3) Construction 20.8
(20.8) Electricity 37.7
(37.7) Total 304.4 214.1 (90.3) Source: Foreign Private investment 2013
2.3.3 Employment
The results of the FPC 2013 show that employment grew by 3.9 percent from 32.834 in 2012 to 34,114 in 2013. In terms of nationality of employees, Rwandans were 96.0 percent against 4.0 percent of foreigners. The number of short-term foreign employees was 387 which is equivalents to 1.1 percent of the total. According to category of employment, managerial positions are occupied by 1077 staff (3.2 percent), administrative 2,558 staff (7.5 percent); skilled 7,335 staff (20.9 percent) and casual 23,114 staff (68.4 percent). Details are provided in table 2.7 and figure2.1.
Table2.7: Employment by residence in 2013 Category Local Foreign Total Resident ST LT Managerial 810 21 246 1,077 Administrative 2,448 25 85 2,558 Skilled technicians 6,561 341 463 7,365 Casual 23,090
24 23,114 Total 32,909 387 818 34,114 Source: Foreign Private investment 2013