FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 16 3.2 Foreign Private Investment in Rwanda Foreign Private Capital in Rwanda has been increasing since 2011 up to 2014 with downturn in 2015. Foreign Private Inflows to Rwanda were US$ 476.3 from $ 560.8 million recorded in 2014. The census results show a decline of 15.1 percent in 2015 compared to the level of inflows was that was recorded for 2014. The decline was due to slowdown in the global economy and the sale of non-resident shares to local owners in some companies. 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. Foreign direct investments include three categories: equity capital, loan from affiliates (shareholders, parent or fellow companies) and retained earnings. In 2015, the FDI inflows reduced by 17.2 percent, from US$ 458.9 million in 2014 to US$ 379.8 million in 2015. The decline in FDI was mainly on account of lower inflows of new equity and loans compared to 2014. 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 investors opted for intercompany borrowings (part of FDI) to the detriment of non-affiliate borrowings (other investments) which leads to the decline in other investments. The intercompany borrowings represent 69.3 percent against 31.7 percent of other investment in total foreign private external debt disbursements in 2015. The stock of Private Sector External Debt (PSED) as at end 2015 stood at US$ 1,302.8 million increasing 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 stood at 11.8 percent above the global rate of return of 6.0 which gives an indication of the country’s investment profitability.
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 17 Figure.5: Foreign Private Investment Inflows and Stock by 2015 (US$ Million) Source: Foreign Private Capital 2015 The flows of foreign private investments have been increasing over the years as presented in the table 3.9 Table 3. 9: Foreign Private Investments Inflows by Category 2008- 2015(US$ million) YEARS 2008 2009 2010 2011 2012 2013 2014 2015 FDI 66.9 103.3 250.5 119.1 255 257.6 458.9 379.8 PORTFOLIO 1.1 0.7 1.5 87.3 1 1.7 5.6 2.5 OTHER INVESTMENT 77.9 35.7 91 150.2 153.3 168.4 96.3 93.8 TOTAL 145.9 139.7 343.1 356.6 409.3 427.7 560.8 476.3 Source: Foreign Private Capital 2015 In the year 2015, total inflows amounted to US$ 476.3 million, outflows stood at US$ 178.3 million giving the net flows of US$ 298.0 million.
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 18 Table 3.10 : Foreign Private Investments flows 2015 (US$ million) Components 2014 2015 Stock Inflows Outflows Net flows Other changes Stock FDI 1,152.4 379.8 156.5 223.3 26.1 1,401.8 PORTFOLIO 94.9 2.5
2.5
97.4 OTHER INVESTMENT 504.7 93.9 21.8 72.1 1.8 578.6 TOTAL 1,752.0 476.3 178.3 298.0 27.9 2,077.9 Source: Foreign Private Capital 2015 3.2.1 Foreign Private Investment by sector of economic activity Considering foreign inflows by recipient sectors, 23.8 percent of total FPC in 2015 was channeled to finance and insurance, followed by electricity-gas-steam with 18.7 percent, ICT with 16.8 percent, and tourism with 14.7 percent, manufacturing 6.6 percent, wholesale and retail trade 5.7 percent and other sectors with 13.6 percent. The stock of foreign investment in ICT (28.7 percent or US$ 592.2 million) followed by finance and insurance (24.2 percent or US$ 499.4 million) and manufacturing (15 percent or US$ 308.7 million). Figure 6: Foreign Private Investment Inflows and Stocks by Sector (US$ million), in 2015. Source: Foreign Private Capital 2015
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 19 3.2.2 Foreign Private Investment by country of origin Most of the inflows were mainly from Mauritius (US$ 155.6 million, representing 32.7 percent) followed by United States of America (US$ 70.1 million, representing 14.7 percent), Kenya (US$ 51.5 million, representing 10.8 percent), and China (US$ 23 million), all with a combined share of 63 percent of total FPC inflows in 2015. In terms of stocks, Mauritius, Kenya, South Africa, USA, Netherlands, and United Kingdom were leading with a share of 51.4 percent of the total stock. Considering the immediate parent company, Mauritius is the largest investor as a host of many holding companies although the ultimate controlling companies are from different parts of the world. Table3.11: Inflows and Stocks by Origin in 2015 (US$ million) Country Inflows % Share Country Stock % Share Mauritius 155.6 32.7 Mauritius 361.8 17.4 US 70.1 14.7 Kenya 198.7 9.6 Kenya 51.5 10.8 South Africa 167.1 8.0 China 23 4.8 US 146.3 7.0 Luxembourg 19.2 4.0 Netherlands 122.2 5.9 Switzerland 14.2 3.0 United Kingdom 71.9 3.5 EXIM-Export– Imports Bank 13.5 2.8 Zambia 68.4 3.3 IFC 13.4 2.8 PTA-Preferential Trade Area 75.6 3.6 Belgium 11.7 2.5 Malaysia 62.1 3.0 India 10.8 2.3 Libya 59.9 2.9 Others 93.2 19.6 Others 744.0 35.8 Total 476.3 100.0 Total 2,077.9 100 Source: Foreign Private Capital 2015 With regard to foreign private capital stock by regional economic grouping, the COMESA (Non-EAC) held the highest stock amounting to US $425.8 (20.6 Percent) dominated by investment from Mauritius. The European Union (EU) countries held US$ 363.4 million (17.6 percent) dominated by investments from Netherlands and United Kingdom directed mostly in finance & insurance and in ICT sectors. While OECD-Non EU had US$ 273.5 million (13.2 percent) coming mostly from USA, Israel and Switzerland. SADC (Non EAC & COMESA) had US$
FOREIGN PRIVATE CAPITAL IN RWANDA
Year 2015
20
252 million (12.2 percent) and EAC had US$ 228.5 million (11.0 percent) were
especially from Kenya. Asia accounted for US$ 227 million (10.9 percent). Stock
of investment from international and regional organizations stood at US$ 155.0
million (7.5 percent). Other countries classified elsewhere had US$ 123.4 million
(7.4 percent)
Table 3.12: Foreign Private Investment Stock & Inflows by Region in 2015
($ m)
Region
Stock
Inflows
OECD
363.4
46.2
OECD-Non EU
273.5
84.4
EAC
228.4
60.5
COMESA-(Non-EAC)
425.8
159.5
SADC-(Non EAC & COMESA)
252.0
10.7
Asia
227.0
58.2
Other
152.8
12.6
I.Org.
155.0
44.2
Total
2,077.9
476.3
Source: Foreign Private Capital 2015
3.3. Foreign Direct Investment
3.3.1. Foreign Direct Investment inflows and stock
Foreign direct investments include three categories: equity capital, loan from
affiliates (shareholders, parent or fellow companies) and retained earnings. In
2015, the FDI inflows declined by 17.2 percent, from US$ 458.9 million in 2014
to US$ 379.8 million. The decline in FDI was on the account of lower inflows of
new equity and loans compared to 2014. The big chunk of FDI inflows were loans
from affiliates which amounted to US$ 210.9 million representing 55 percent,
equity capital of US$ 110.0 million accounting for 29 percent while retained
earnings were US$ 58.9 million accounting for 16 percent. Both equity capital
and borrowing from affiliates inflows decreased by 15.5 percent and 32.6 percent
in 2015, respectively compared to level of 2014, while retained earnings increased
by 235.3 percent from US$ 17.5 million in 2014 to US$ 58.7 million in 2015.
In terms of stock, FDI grew by 21.7 percent to US$ 1,401.9 million in 2015 from
US$1,152.3 million in 2014, driven by 37.3 percent increase in loans and 20.7
percent increase in equity capital despite a decrease of 49.1 percent in Retained
Earnings (R.E) in 2015 compared to 2014.
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 21 Table 3.13: Inflows and Stocks of FDI by type 2013-2015 (US$ million) 2013 2014 2015 Inflows Stock Inflows Stock Inflows Stock Equity 74.2 373.6 129.6 503.2 110.0 607.4 Loans 144.4 337.3 311.8 504.9 210.9 693.1 RE 39 126.7 17.5 144.2 58.9 73.4 Changes 0 0 0 0 0 27.9 Total 257.6 837.7 458.9 1,152.3 379.8 1,401.8 Source: Foreign Private Capital 2015 3.3.2 Foreign Direct Investment Inflows and Stock by sector The four first recipients of the Foreign Direct investment inflows in 2015 were ICT sector with US$ 76.7 million, electricity, gas and steam with US$ 76.1 million, tourism with US$ 66.9 million, and financial and insurance activities with US$ 57.9 million. Regarding stock, only four sectors represented 77 percent of all FDI stock in 2015. ICT took the lead with US$ 435.6 million, followed by finance and insurance (US$ 281.4 million), manufacturing (US$ 186.7 million) and tourism (US$ 173.3 million). The stock in these sectors increased by 31 percent, 20 percent, 13 percent, and 12 percent, respectively. Figure 7: Foreign Direct Investment Inflows and Stocks by Sector in 2015 (US$ million) Source: Foreign Private Capital 2015
FOREIGN PRIVATE CAPITAL IN RWANDA Year 2015 22 3.3.3 Foreign Direct Investment Flows and Stocks by origin By country of origin, Mauritius, USA, China, Kenya, Luxembourg and Switzerland were the major source of FDI inflows, totaling 79 percent of total inflows in 2015. The big chunk of stock is from Mauritius, South Africa and Kenya. Table 3.14: Top ten Foreign Direct Investment Flows and Stocks by origin in 2015 (US$ million) Country Inflows % Share Country Stock % Share Mauritius 155.6 41.0 Mauritius 233.8 16.7 USA 67.8 17.8 South Africa 160.9 11.5 China (mainland only) 23.1 6.1 Kenya 125.3 8.9 Kenya 22.2 5.8 Panama 92.6 6.6 Luxembourg 17.3 4.5 US 21.1 1.5 Switzerland 14.2 3.7 Ghana 67.3 4.8 Belgium 10.9 2.9 Libya 66.6 4.7 India 10.9 2.9 Norway 53.0 3.8 Tanzania 9.5 2.5 Luxembourg 74.0 5.3 Senegal 6.8 1.8 Nigeria 27.5 2.0 Others 41.6 10.9 Others 479.6 34.2 Total 379.8 100.0 Total 1401.8 100.0 Source: Foreign Private Capital 2015 3.4. Foreign Portfolio Investment Portfolio investment which involves the purchase of stocks, bonds, commodities, or money market instruments by non-residents, remains the lowest component of foreign investment in Rwanda mainly due to the low level of financial market development. Its stock increased to US$ 97.5 million in 2015, equivalent to 4.7 percent from US$ 94.9 million recorded in 2014. The significant amount of foreign portfolio inflows was recorded in 2011 when for the first time shares were listed on Rwanda Stock exchange, there after we see a stable and low inflows below 6 percent. In 2015, Rwanda recorded foreign portfolio inflows of US$ 2.5 million compared