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1.3 Monitoring foreign investment in Rwanda
With the objective of complementing internal resources, Rwanda has actively attracted FDI by creating and sust aining a high conducive investment climate through important reforms which make it easier for businesses to get starte d, get loans, pay taxes, etc. A whole package for investment promotion in general can be found within Rwanda Development Board. The packag e for investment promotion 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 pro tection of investments, settlement of disputes, transfer o f funds, special economic zone facilitations, public private partnership (PPP) where RDB is chief negotiator between public and private sector.
Rwanda improved its world ranking to 46nd position in the world, up from 48th last year (World Bank doing business, 2015-2016). In Africa, Rwanda retained 3 rd position and number one in the East African Community . This improvement comes particularly from market efficiency and institutions pillars where Rwa nda ranked 9 th and 18th in the world respectively. In 2014-2015, areas where Rwanda is among the top 10 in th e world include, among others: starting a business (2nd), government spending (4th). Foreign Direct Investment rules (5th), procurement of advanced technology (5th) and burden of government regulations and least cost of crime and violence (both 6th).
The economic implementation of Rwanda
Moving up four places from 66 th to 62nd position (WIR, 2015) means that Rwanda has become
even more competitiv e and that the business and investment environment of the country is
improving.
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Table1.2: Top Ten Countries in Doing Business in Sub-Saharan Africa 2015-2016 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 28 3 26 1 14 3 2 1 1 2 2 South Africa 43 7 4 27 13 5 1 2 5 4 1 Rwanda 46 15 5 4 1 1 18 3 33 9 13 Ghana 70 12 23 6 2 3 3 13 11 16 35 Botswana 74 26 17 11 5 7 14 6 26 8 3 Seychelles 85 18 7 16 9 40 3 4 2 18 4 Namibia 88 28 1 5 41 7 8 10 17 7 7 Swaziland 110 25 8 22 23 7 16 7 13 41 6 Zambia 111 8 21 14 31 2 7 9 41 17 10 Cabo Verde 122 9 25 18 6 10 43 11 6 1 39 Source: World Bank Doing Business Report 2015-2016
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 her neighbors, leading to an improvement in the trade logistics.
Table1.3: Rwanda’s Doing Business Performance by Category 2014 and 2015
DB 2015 DB 2014 Change in rank Rwanda Ranking 46 48 2 Starting a Business 112 74 -40 Dealing with construction permits 34 93 59
Getting Electricity 62 79 17
Registering property 15 13 -2 Getting credit 4 10 6 Protecting Investors 117 115 -2
6
Paying Taxes
27
26
-1
Trading Across Borders
164
157
-7
Enforcing Contracts
62
50
10
Resolving Insolvency
101
99
-2
Source: World Bank Doing Business Report 2015-2016
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 and distinction between current, capital and financial accounts transactions. Therefore, a census based approach of compiling statistics on FPC was adopted in 2009 by BNR jointly with the Rwanda Investment and Export Promotion Agency (RIEPA), now RDB. The census provides information that contribute to improve the formulation of national investment policies and to assess the impact of all efforts made in facilitating foreign investments.
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) under 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 Private Sector Federation
(PSF).
The mandate of this working group includes among others, collecting and producing good
quality statistics, compliant with international data reporting standards and meeting the needs of
various policy makers and users. BNR and NISR collect this information for Balance of
Payments and National Account compilation while RDB and PSF need it for monitoring
purposes.
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1.4 Reasons for investing in Rwanda
Indicator Reasons
Sustained
High Growth
8% average year –on-year growth, stable inflation and exchange rate.
Sound macroeconomic management and robust fiscal discipline.
Robust
Governance
A clear vision for growth through private investment led by Presi dent Paul Kagame (Vision
2020).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
Top Gl obal consistent reformer since 2008 (World Bank Doing Business report). Most
competitive place to do business in East Africa and 3 rd in Africa (WEF Global competitiveness
index report 2014-2015.
New special Economic Zone developed and operational in Kigali . More industrial zones
planned for other districts.
Access to
markets
Rwanda is a Market of around 11 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 Rwanda 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
ICT: 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 stronger countries in Europe and
America
Excellent
Business
Environment
Rwanda has the third strongest regulatory framework in Sub -Saharan Africa, only slightly
behind Sou th Africa and is ranked 8 th globally by the World Bank doing business report in
starting a business
Source: RDB, 2015
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CHAPTER TWO. METHODOLOGY AND GENERAL FINDINGS
2.0. Introduction
This chapter presents a description of the census f rame 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 2 24 companies was set with the objective of covering all enterprises in Rwanda with foreign direct investment, portfolio investmen ts and foreign borrowing in 2014 . During questionnaire distribution, among 224 companies in the frame only 200 were located.
A total of 200 questionnaires distributed during the field activities and only 189 responded.
Among the respondents , 151 companies responded and submit ted their financial statements
while 38 companies responded with no financial 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 o f investments are
shown in Table 2.4.
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Table2.4: Distribution and response rate per sector in 2014
Distribution
Collection
Response Rate
Agriculture
21
20
95.2
Construction
6
5
83.3
Education
5
5
100.0
Electricity
7
5
71.4
Financial services
43
43
100.0
ICT
16
15
93.8
Legal and accounting activities
6
5
83.3
Manufacturing
37
35
94.6
Mining
9
8
88.9
Real estate
5
4
80.0
Tourism
13
13
100.0
Transport
13
12
92.3
Whole sale and retail
19
19
100.0
Total
200
189
94.5
Source: Foreign Private investment 2013
2.2 Data quality and estimation for non-response
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 above the average.
After assessing the quality of the data and coverage, the general steps has been taken to remedy technical errors and up-rate the data to enable comparison of results obtained from previous censuses. Those steps included, the use of the financial statements covering 2013 and 2014 for editing and producing best statistics, use of additional information supplied by the respondents, use of past response to cross check the change, using of additional sources (e.g listed companies share prices to estimate MV) and use of international best practices.
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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 2014 compared to 2014 rising from US$ 4,076.1 million to US$ 4,611.8 million. The total turnover of the companies considered in the FPC increased by 14.9 percent from US$ 1,565.0 million in 2013 to US$ 1,798.8 million in 2014; contributing 39.0 percent of the country’s total turnovers in 2014, dominated by finance and insurance services, manufacturing and wholesale and retail trade accounting for 65.7 percent of census companies’ turnover.
Table2.5: Entity turnovers by sectors in 2011-2014 (US$ million) Sector 2011 2012 2013 2014 Manufacturing 229.8 246.8 365.9 414.5 Wholesale 222.3 223.4 277.5 321.3 ICT 182.5 185.7 134.4 155.7 Mining 86.5 59.5 133.6 151.3 Agriculture 36.0 38.4 38.0 43.0 Tourism 22.8 18.4 23.0 26.7 Transportation 7.4 8.6 94.2 109.1 Financial & Insurance 187.6 192.3 384.5 445.3 Construction 11.4 3.7 98.5 114.0 Others 8.4 96.5 15.3 17.8 Total 994.6 1,073.4 1,565.0 1,798.8 Source: Foreign Private investment 2015
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2.3.2 Contribution on external trade
In 2014, the census findings showed globally a net import of US$ 57.6 million resulting from US$ 237.4 million of exports and US$ 295.4 million of imports made by the majority owned Foreign Companies. External trade in mining and agriculture products recorded trade surplus of US$ 99.4 million and US$ 44.7 million respectively. The mining products are dominated by tin, coltan and wolfram exported by major mining exporting companies in Rwanda.
Wholesale and retail trade, manufacturing sectors dominated the import side as shown in the
table 2.6. Whole sale and retail trade sector is mainly made by petrol stations and supermarkets.
Manufacturing exports are mainly maize and wheat flour. The trade deficit of manufacturing
sector shows the importance of raw material imports and may call up on the checking of local
potential of their production and availability. Exports from wholesale and retail trade are
dominated by re-export of fuel.
It is important to note that the ratio Export/Imports for majority foreign owned companies is 80.5 percent which shows the contribution of FPC in the country’s exports.
Table2. 6: Exports-Imports in 2014 (US$ million) Sectors Imports Exports Balance Agriculture 4.7 52.4 47.7 Construction 5.8
(5.8) Electricity 0.0
(0.0) Financial services 2.8 1.4 (1.4) ICT 0.0
(0.0) Manufacturing 31.6 22.8 (8.8) Tourism 3.2 9.9 6.7 Mining 2.7 102.1 99.4 Transport and storage 1.3
(1.3) Wholesale and retail trade 243.3 49.3 (194.1) Total 295.4 237.9 (57.6) Source: Foreign Private investment 2015