NATIONAL BANK OF RWANDA BANKI NKURU Y’U RWANDA National Institute of Statistics of Rwanda FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2015
FOREIGN PRIVATE CAPITAL IN RWANDA YEAR 2015 NATIONAL BANK OF RWANDA BANKI NKURU Y’U RWANDA
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 i FOREWORD T he Rwanda Foreign Private Capital 2015 Report, is the seventh in a series of annual censuses jointly conducted by the National Bank of Rwanda, the Rwanda Development Board, the National Institute of Statistics of Rwanda and the Private Sector Federation. The Census collected data on foreign direct investment, portfolio and foreign borrowing in resident enterprises and other variables pertaining to private sector investment. The report presents the findings of foreign private capital census done in 2016 collecting data for the year 2015. The census covered 209 companies comprised of newly registered companies as foreign direct investments by Rwanda Development Board in 2015 and the existing companies interviewed in the previous censuses. This annual foreign private investment census would not have been successful without the involvement and cooperation of key stakeholders: the enterprises, government agencies and technical staff. The National Bank of Rwanda acknowledges and appreciates their valuable contribution. The Foreign Private Investments census is an important activity for the Government of Rwanda in its efforts to attract and retain foreign private capital in the country to complement domestic resources. The information generated is used in the compilation of the country’s Balance of Payments and International Investment Position statistics and shall contribute to improve private investment policies. RWANGOMBWA John Governor, National Bank of Rwanda
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 ii LIST OF ACRONYMS BNR
National Bank of Rwanda BOP
Balance of Payments BV
Book Value 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 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 RWF
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 2015 iii TABLE OF CONTENTS FOREWORD .................................................................................................i LIST OF ACRONYMS ........................................................................................ii LIST OF TABLES ..............................................................................................v LIST OF FIGURES ............................................................................................vi EXECUTIVE SUMMARY ...................................................................................vii CHAPTER ONE .................................................................................................1 INTRODUCTION................................................................................................1 1.0 Introduction ...............................................................................1 1.1 Global Foreign Direct Investment trends ..................................1 1.2 Regional investment trends ......................................................2 1.3 Monitoring foreign investment in Rwanda ................................3 1.4 Doing Business in Rwanda .........................................................4 1.5 Summary of some recent reforms done in Rwanda ..................5 CHAPTER TWO. ................................................................................................7 METHODOLOGY AND GENERAL FINDINGS .................................................7 2.0 Introduction ...............................................................................7 2.1 Organization of the Census .......................................................7 2.1.1 Institutional Framework ..........................................................7 2.1.2 Scope ........................................................................................7 2.1.3 Compilation of Investors’ Register ............................................7 2.1.4 Questionnaire ..........................................................................8 2.2. Field work and Data quality .......................................................8 2.2.1 Training of technical team .......................................................8 2.2.2 Fieldwork..................................................................................8 2.2.3 Response Rate ..........................................................................8 2.2.4 Data Processing .......................................................................9 2.2.5 Data quality and estimation for non-response ........................9 2.2.6 Timeliness ................................................................................10 FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 iv 2.3 General findings .........................................................................10 2.3.1 Entity turnover .........................................................................10 2.3.2 Contribution on external trade ................................................11 2.3.3 Employment .............................................................................12 2.3.4 Compensations of employees ...................................................13 2.3.5 Corporate social responsibility .................................................13 CHAPTER THREE ............................................................................................15 FOREIGN PRIVATE INVESTMENTS IN RWANDA .........................................15 3.0 Introduction ....................................................................................15 3.1 Foreign Private Capital attraction in Rwanda ...........................15 3.2 Foreign Private Investment in Rwanda .....................................16 3.2.1 Foreign Private Investment by sector of economic activity ......18 3.2.2 Foreign Private Investment by country of origin ......................19 3.3. Foreign Direct Investment ..........................................................20 3.3.1. Foreign Direct Investment inflows and stock .........................20 3.3.2 Foreign Direct Investment Inflows and Stock by sector .........21 3.3.3 Foreign Direct Investment Flows and Stocks by origin ...........22 3.4. Foreign Portfolio Investment .....................................................22 3.5. Other investments .....................................................................23 3.5.1 Other investment inflows and stocks by Sector ......................23 3.5.2 Other Investments Inflows and Stock by Source in 2015 .......23 3.6. Income on investments .............................................................24 3.6.1 Income on investment distribution by sector ..........................25 3.7. Return on equity by sectors in 2015 .........................................26 3.8. Private Sector External Debt .....................................................28 CONCLUSION .................................................................................................30 REFERENCES .................................................................................................31 ANNEXES .................................................................................................32 FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 v LIST OF TABLES Table 2.1: Distribution and response rate per sector in 2015......................9 Table 2.2: Entity turnovers by sectors in 2011-2015 (US$ million).............10 Table 2. 3: Exports-Imports in 2015 (US$ million)........................................11 Table 2.4: Employment by Category in 2015...............................................12 Table 2.5: Distribution of employment by sector 2011-2015.......................12 Table 2.6: Compensation of Employees 2011- 2015 (US$ million)..............13 Table 2.7: Corporate Social Responsibility by Sector 2011- 2015
(US$ million).................................................................................14 Table 3.8: New Foreign Private Investments registered (2009 – 2015).........15 Table 3.9: Foreign Private Investments Inflows by Category 2008-2015
(US$ million).................................................................................17 Table 3.10: Foreign Private Investments flows 2015 (US$ million)................18 Table 3.11: Inflows and Stocks by Origin in 2015 (US$ million)....................19 Table 3.12: Foreign Private Investment Stock & Inflows by Region in
2015 ($ m)....................................................................................20 Table 3.13: Inflows and Stocks of FDI by type 2013-2015 (US$ million).......21 Table 3.14: Top ten Foreign Direct Investment Flows and Stocks by origin
in 2015 (US$ million)...................................................................22 Table 3.15: Other Investments Inflows and Stock by Source (US$ million)...24 Table 3.16: Income on investment (US$ million)............................................24 Table 3.17: Income on investment distribution by sector in 2015
(US$ million).................................................................................25 Table 3.18: Foreign Direct Investment Return on Equity (Percentage)..........27 Table 3.19: Inward Return on FDI Equity 2013-2015 (percent)....................27 Table 3.20: Foreign Private Sector Debt (US$ million)....................................28 Table 3.21: Private Sector External Debts Disbursements in 2015 by
sector (US$ million)......................................................................29
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 vi LIST OF FIGURES Figure 1: Global Foreign Direct Investments trends in 2015...........................2 Figure 2: Foreign Private Direct Investment, by region, 2013-2015
(Billions of US$).................................................................................3 Figure 3: Rwanda and comparator economies rank on the ease of
doing business..................................................................................5 Figure 4: Corporate social responsibility by type of recipient in 2015
(US$ thousands)................................................................................14 Figure 5: Foreign Private Investment Inflows and Stock by 2015
(US$ Million)......................................................................................17 Figure 6: Foreign Private Investment Inflows and Stocks by Sector
(US$ million), in 2015.......................................................................18 Figure 7: Foreign Direct Investment Inflows and Stocks by Sector in
2015 (US$ million).............................................................................21 Figure 8: Other investments inflows and stocks by sector in 2015
(US$ million)......................................................................................23 Figure 9: Private Sector External Debt Disbursements in 2015 by
origin (US$ million)............................................................................29
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 vii EXECUTIVE SUMMARY T he Government of Rwanda continues to promote private sector led economy, aiming at fostering both local and foreign investment by undertaking reforms with the objective of making the country a favorable place for investment and ensure sustainable economic growth and development. The Foreign Private Capital Census (FPC) 2016 is the seventh in a series of annual censuses conducted jointly by the National Bank of Rwanda in collaboration with National Institute of Statistics of Rwanda, Rwanda Development Board and Private Sector Federation. The main objective of the census is to collect information required for the compilation of Rwanda’s Balance of Payments, International Investment Position statements and determine the magnitude and trends of Foreign Private Capital in Rwanda. It provides data for macroeconomic analysis to inform policy decisions, specifically policies and strategies aimed at improving country’s investment climate and ultimately attract more foreign private investments. The 2016 FPC census provides actual flows and stock of foreign private capital statistics in Rwanda for the year 2015. A total of 209 questionnaires were administered during the census from which 191 enterprises responded, representing a response rate of 91.4 percent. Overall, all the enterprises declared total turnover of US$ 1,554.5 million during 2015 compared to US$ 1798.8 million registered in 2014, representing 27.5 percent of the country’s total turnover. The findings indicated that total employment was 41,192 employees as at the end of 2015 from 37,120 employees in 2014, an increase of 11.4 percent. Compensation of employees rose from US$ 320.7 million in 2014 to US$ 331.4 million in 2015. Profits made increased from US$ 46.5 million in 2014 to US$ 65.0 million recorded for 2015 coming mostly from finance and insurance services and Electricity and gas generation sectors. FPC inflows registered a decline of 15.1 percent from US$ 560.8 million in 2014 to US$ 476.3 million in 2015. All the FPC components declined, FDI, the major component decreased by 17.2, portfolio by 55.4 and other investments by 2.5%. This decline is consistent with Africa’s performance in FDI which declined by 7 percent from US$ 58 billion in 2014 to US$ 54 billion in 2015 as a result in the slowdown in the global economy. FDI include three categories: equity capital, loan from affiliates (shareholders, parent or fellow companies) and retained earnings. In 2015, the FDI inflows shrunk by 17.2 percent, from US$ 458.9 million in 2014 to US$ 379.8 million in 2015. This decline in FDI is on account of lower inflows of new equity and loans compared to 2014.
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 viii Foreign Portfolio investment inflows also decreased from US$ 5.6 million in 2014 to US$ 2.5 million in 2015. The inflows of other investments, mainly loans, from foreign non-affiliates slightly declined by 2.5 percent from US$ 96.3 million in 2014 to US$ 93.9 million in 2015. The decline in other investments is to the benefit of intercompany borrowing as FDI loans represent 69.3 percent against 31.7 percent of other investment in total foreign private external debt disbursements in 2015. In terms of country of origin, most of the FPC flows came from Mauritius (US$ 155.6 million) followed by United States of America (US$ 70.1 million), Kenya (US$ 51.5 million) and China (US$ 23.5 million) accounting for 63.1 percent of total FPC flows in 2015 and investing mostly in finance and insurance, manufacturing and ICT sectors accounting for 56.8 percent of total inflows. The census indicates that the stock of foreign private capital increased from US$ 1,752.0 in 2014 to US$ 2,077.9 million in 2015. Stock of foreign investment in ICT amounted to US$ 592.2 million followed by finance & insurance services with US$ 472.3 million and manufacturing with US$ 328.8 million. The stock of Private Sector External Debt (PSED) as at end 2015 increased to US$ 1,302.8 million from US$ 1,009.6 million in 2014, mainly driven by intercompany debts with share of 55.4 percent. In addition, the retained earnings to profits made stood at 84.3 percent in 2015 and the FDI rate of return of 11.8 percent which is well above the global rate of return of 6.1 percent, which gives an indication of the country’s investment profitability. The prospects for 2016 are for higher flows, as we expect a rise in the next year’s FDI inflow owing to the fact that 2015 new investment projects attraction was at its best with over 800 million US$ worth of foreign private investment projects registered in that year, with some new big projects especially in Services sector as well as Energy and Water sector and ICT. There is therefore the need to continue consolidating efforts geared towards improving the investment climate so that investors can gain higher returns and reinvest.