5
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.
Table 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
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 FPI was adopted in 2007 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
6
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 P SF need 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 8.1 percent between 2007 – 2012, 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 visio n for growth through private investment support and development Investor friendly climate World Bank Doing Business Report 2013 ranked Rwanda the 2nd top global reformer for six consecutive years and 3 rd easiest place to do business in Africa. It is among the best competitive place to do business in Africa and 1st 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 in 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
- 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 stronger 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, 2013
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CHAPTER II. CENSUS FINDINGS
2.0. Introduction
As mentioned, Foreign Private Investment is composed of Foreign Direct Investment (FDI), other investments and Portfolio investment. FDI are made of investments of non-residents in resident companies with a shareholding of at least 10% of the compan y’s total capital and debt from fellow (related) enterprises but excludes debt among related financial intermediaries. Portfolio investment are tradable instruments and other investments which are borrowing from outside as well as non-tradable shareholding of less that 10% to total capital of the company . All these categories are analyzed by type of liability or instrument, relationship, sector of investment, and source country . They are of t wo main categories which are liabilities made of inward investment flows and stocks as well as assets made of outwards investments flows and stocks.
The fourth private investment (FPI) census in Rwanda aimed at capturing information on FP I for the year 2012 where o ne hundred and sixty three (163) companies made of a ll new companies registered as foreign direct investments by Rwanda Development Board in 2012 and the ones which declared Foreign Assets and Liabilit ies in the previous census. These companies operate in different sectors such as Agriculture, Construction, Energy, Financial services, Food processing, Fuel, Hotel, ICT, Insurance, Manuf acturing, Min ing, Real Estates , Retail and Wholesale trade, Tourism, Transport, etc.
One hundred and fifty three (153) responded to the questionnaire used in the census (annex 4); a response rate of 93.9 percent. This good rate of response was due to awareness campa ign directed to Managing Directors, Chief Executive Officers and Finance managers of companies. It was done together with the dissemination of the third round results of the year 2011. The objective was to maximize the chance of reporting complete and reliable data.
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Table 4: Response rate per sector in 2012.
Sector
Distribution
Collection
Response rate
Tourism
10
9
90.0
Administrative and support service activities
5
5
100.0
Agriculture, forestry and fishing
10
10
100.0
Construction of buildings
4
3
75.0
Electricity, gas, steam and air conditioning supply
3
3
100.0
Financial and insurance activities
24
24
100.0
Information and communication
16
14
87.5
Manufacturing
23
22
95.7
Mining and quarrying
15
14
93.3
Postal and courier activities
1
1
100.0
Professional, scientific and technical activities
8
7
87.5
Real estate activities
6
6
100.0
Transportation and storage
10
9
90.0
Water supply; sewerage, waste management
1
1
100.0
Wholesale and retail trade
27
25
92.6
Total
163
153
93.9
Source: Foreign Private investment 2012
Looking at the performances in terms of investment attraction and registration, for the last five years (2008-2012), a total of 260 investments projects fully owned by foreign investors or in joint ventures with local investment has been registered with pledged investment value of $ 2,285.98 million and planning to create 34,318 new jobs. Of 260 pledged projects, 131 are operational, 69 are in implementation phase, 22 have closed or stopped, while 38 are still committed to start their activities. The following table presents the pledged investments in value, number of projects and annual planned new jobs for the period of 2008-2012.
Table 5: Foreign Private Investments pledges (2008 – 2012)
2008 2009 2010 2011 2012 Total Number 39 46 41 60 74 260 Value($ million) 564.24 531.32 201.37 398.89 590.15
2,285.98
Jobs
3,548
3,748
3,971
5,553
17,498
34,318
Source: Rwanda Development Board, 2013.
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Foreign Private Investments in Rwanda have been increasing overtime. In 2012, FPC inflows to Rwanda increased by 14.8 percent to $ 409.3 million compared to $356.6 million recorded in 2011. They were dominated by FDI, amounting to $ 255.0 million, and accounting for 62.3 percent of total inflows, followed by other investments at $ 153.3 million, accounting for 37.5 percent and portfolio investments of $ 1.0 million. In 2011 with the starting of Rwanda Stock exchange, portfolio investments flows were particularly high ($ 87.3 USD) compared to other years.
Table 6: Foreign private investments inflows by category 2008-2012($ million)
Years
2008
2009
2010
2011
2012
FDI
66.9
103.3
250.5
119.1
255.0
Portfolio
1.1
0.7
1.5
87.3
1.0
Other investment
77.9
35.7
91.0
150.2
153.3
Total
145.9
139.7
343.1
356.6
409.3
Source: Foreign Private investment 2012
In terms of stock, total foreign private investment increased by 24.5 percent reaching $ 1,109.0 million in 2012 from $ 831.3 million recorded in 2011 of which FDI amounting to $ 715.5 million followed by other investments of $ 305.0 million and portfolio investments of $ 87.8 million.
Figure 1: Foreign Private Investment Stocks 2010-2012 ($ million)
Source: Foreign Private investment 2012
200.0 400.0 600.0 800.0 2010 2011 2012 FDI PORTFOLIO OTHER INVESTMENT
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2.1. Foreign Private Investment by sector of economic activity
Considering foreign liabilities by recipient sectors, 41.4 percent of total FPI in 2012 were channeled to ICT, followed by mining with 13.8 percent, tourism with 12.3 percent, manufacturing with 10.8 percent and other sectors had 21.7 percent The stock of foreign investment in ICT amounted to $ 444.0 million followed by finance and insurance with $ 221.6 million and manufacturing with 161.5 million. The investment in agriculture is directed to sub sect ors of support activities to agriculture such as post -harvest crop activities, support activity for crop production, etc. with 38.0 percent farming with 19.0 percent dominated by growing of tea with 12.6 percent growing of coffee with 6.0 percent and the remaining part to others.
Figure 2: Foreign Private Investment Inflows and Stocks by sector ($ million), in 2012.
Source: Foreign Private investment 2012
2.2. Foreign Private Investment by country of origin
Most of the flows were mainly from Mauritius ($ 143.6 million) followed by United States ($ 55.2 million), Switzerland ($ 54.1 million) and Luxembourg ($ 43.2 million) accounting for 72.3 percent of total FPI in 2012. Flows from Mauritius were mainly to ICT, manufacturing and finance and insurance services sectors, while investments from USA were directed to agriculture and manufacturing sectors. Funds from Switzerland were invested in mining sectors while those from Luxembourg were mostly invested in finance, insurance and ICT activities.
50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 500.0 Inflow Stock
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In terms of stocks, Mauritius, South Africa, Kenya, Luxembourg, United Kingdom and USA were leading accounting for 51.6 percent of the total stock. Mauritius is the largest investor as hosting many holding companies even though the ultimate controlling companies are from different parts of the world. The census took into consideration only the immediate relationship (immediate investor). Beside countries of origin, loan from financial institutions such as Exim bank and PTA bank were important with more than $ 23 million in 2012 against $ 10.2 million and $ 9.3 million in 2010 and 2011 respectively. Sectors such as tourism, finance and insurance borrowed from these institutions.
Table 7: Inflows and stocks by origin in 2012 ($ million)
Source
2012
Inflow
Stock
Amount ($ m)
% Share
Amount ($ m)
% Share
Mauritius
143.6
35.5
181.0
16.4
USA
55.2
13.7
75.1
6.8
Switzerland
54.1
13.4
22.1
2.0
Luxembourg
43.2
10.7
82.3
7.5
United Kingdom
14.7
3.6
63.2
5.7
Kenya
14.5
3.6
113.4
10.3
Netherlands
14.5
3.6
64.8
5.9
PTA
13.6
3.4
32.6
3.0
EXIM
10.5
2.6
23.4
2.1
Other
45.4
10.0
451.0
40.4
Total
409.3
100.0
1,109.0
100.0
Source: Foreign Private investment 2012
With regard to foreign private capital stock by regional economic grouping, the European Union (EU) countries held the highest stock amounting to $ 318.8 million (28.9 percent) up from $ 266.3 million recorded in 2011 and dominated by investments from Luxembourg and Netherlands, COMESA (Non- EAC) accounted for $ 240.0 million (21.8 percent) increasing from $ 117.4 million in 2011 dominated by investments from Mauritius while EAC had $ 139.7 million (12.7 percent) up from $ 121.7 million in 2011coming mostly from Kenya. SADC (Non EAC & COMESA) had $ 117.5 million (11.0 percent) up from $ 110.8 million in 2011 and dominated by investments from South Africa. OECD (Non-EU) had $ 135.9 million