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(13.0 percent) up from $ 76.8 million in 2011. Stock of investment from i nternational and regional organizations was $ 67.4 million (6 percent). Asia accounted for $ 43.8 million (4 .1 percent) increasing from $ 41.6 million in 2011. O ther countries had $46.5 (4. Percent) million from $ 37.1 million in 2011.
Figure 3: Foreign Private Investment stocks & inflows by Region in 2012 ($ million)
Source: Foreign Private investment 2012
Figure 4: Foreign Private Investment inflows 2010-2012 ($ million)
Source: Foreign Private investment 2012
50.0 100.0 150.0 200.0 250.0 300.0 350.0 Inflow Stock
50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 2010 2011 2012 OTHER INVESTMENT PORTFOLIO FDI
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Figure 5: Foreign Private Investment Stocks 2010-2012 ($ million)
Source: Foreign Private investment 2012
2.3. Foreign Direct Investment
2.3.1. Foreign Direct Investment inflows and stock
Foreign direct investments are made of three categories: equity capital which is new investment in a company, loan from affiliates or from shareholders and retained earnings. In 2012, the FDI inflows increased from $ 119.1 million in 2011 to $255.0, dominated by loans from shareholders representing 58.1 percent and equity capital accounting for 33.3 percent while retained earnings were 8.6 percent.
Out of the profit of $ 59.9 million made in 2012, r einvested earnings were $ 2 2.0 million, an increase of 95.4 percent from $1.3 million registered in 2011, mostly in manufacturing, financial and insurance as well as wholesale and retail trade sectors, denoting a good investor’s confidence in Rwandan economy. Borrowing from affiliates increased to $145.2 million from $91.6 m illion in 2011, and equity capital also increased from $ 26.3 in 2011 to $ 87.4 million registered in 2012. FDI stock increased from $ 495.1 million in 2011 to $ 715.9 million in 2012.
200.0 400.0 600.0 800.0 2010 2011 2012 FDI PORTFOLIO OTHER INVESTMENT
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Table 8: Inflows and Stocks of FDI by type ($ million) 2010 2011 2012 Inflows Stock Inflows Stock Inflows Stock Equity capital 133.1
26.3
316.7
87.4
236.6
Loans
165.2
91.6 196.8 145.6 365.5 Retained earnings (47.7)
1.2 31.9 22.0 53.8 Other changes NA
NA -50.3 NA 60.0 Total 250.54 422.1 119.1 495.1 255.0 715.5 Source: Foreign Private investment 2012
2.3.2 Foreign Direct Investment Inflows and Stock by sector
In 2012, most of the Foreign Direct inflows were directed to ICT with $ 167.3 million, followed by Manufacturing sector with $ 37.9 million and Finance & Insurance sector with $ 22.2 million. In terms of stocks, the same sectors also dominate where ICT has $ 329.1 million, Finance and Insurance $ 125.1 million and manufacturing $ 90.8 million.
Figure 6: Foreign Direct Investment Inflows and Stocks by Sector in 2012 ($ million)
Source: Foreign Private investment 2012
0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 Inflows Stock
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2.3.3. Foreign Direct Investment Flows and Stocks by origin
Considering the origin of FDI, Mauritius, Luxembourg, United Kingdom and Netherlands are the major source of FDI inflows, collectively accounting for 84.3 percent of total inflows in 2012.followed by South Africa, Togo, France and Nigeria.
Table 9: Foreign Direct Investment Flows and Stocks by origin ($ million)
Source
2012
Inflow
Stock
Mauritius
143.5
177.3
Luxembourg
43.2
74.8
United Kingdom
14.7
12.1
Netherlands
13.4
49.2
South Africa
6.3
116.1
Togo
4.8
19.6
France
4.1
9.3
Nigeria
3.6
22.9
Other
21.3
234.6
Total
255.0
715.9
Source: Foreign Private investment 2012
2.4. Foreign Portfolio Investment
Portfolio investment which involves the purchase of stocks, bonds, commodities, or money market instruments by non-residents, remain the lowest component of foreign investment in Rwanda mainly due to the low level of financial market development. Portfolio stock increased from $ 86.8 million in 2011 to $ 87.8 million in 2012 and account for 0.3 percent of the total liabilities inflows in 2012.
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This small increase compared to the previous year was due to lack of new listed companies on Rwandan Stock Exchange as the portfolio inflows amounted to only $1 million in 2012 compared to $ to 87.3 million in 2011.
2.5. Other investments
Other investments accounting for 37.9 percent of the overall liability inflows are long term and short term loans from unrelated sources. In 2012, a total of $ 153.3 million of loans inflows were reported of which $ 88.7 million (57.8 percent) were long term (more than 1 year), $ 62.9 million (41.0 percent) in form of trade credits and others with $ 1.3 million (1.0 percent).
2.5.1. Other investment inflows and stocks by Sector
The sectorial distribution of other foreign investment inflows show that they were mainly concentrated in the mining sector at $ 53.9 million followed by t ourism $ 48.0 million and finance and insurance $ 19.9 million. The ICT sector, even if characterized by low unrelated borrowing in 2012 have the highest stock in 2012 due mainly to inflows of 2010 ($ 46.3million) and 2011($ 49.2 million).
Figure 7: Other investments inflows and stocks by sector in 2012 ($ million)
Source: Foreign Private investment 2012
53.9 48.0
19.9 12.9 10.0 8.5 -
20.0 40.0 60.0 80.0 100.0 120.0 140.0 Inflows Stock
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2.5.2. Other Investments Inflows and Stock by Source
In 2012, Switzerland was the major source of other investment inflows with $ 53.9 million, followed by the Preferential Trade Area (PTA) with $ 52.2 million, and UK, $ 12.8 million. Inflows from Kenya and Canada were $ 11.2 million and $ 5.8 million, respectively. In terms of stock, UK was the major source, with $ 56.8 followed by the PTA $ 27.5 million, and the Netherlands, with $14.1 million, Switzerland $ 13.6 million and EXIM Bank $ 12.9 million. Many companies contracted loans from Netherlands and UK financial institutions while Switzerland was mainly the source of trade credits.
Table 10: Other Investments Inflows and Stock by Source ($ million)
Country
2012
Inflow
Stock
Switzerland
53.9
13.6
United States of America
52.2
1.2
Preferential Trade Area (PTA)
13.6
27.5
United Kingdom
12.8
56.8
Kenya
11.8
1.4
Export Import Bank (EXIM)
10.5
12.9
Canada
5.8
Belgium
3.5
3.4
Netherlands
1.1
14.1
Other
84.8
174.0
Total
250.1
305.0
Source: Foreign Private investment 2012
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2.6. Income on Equity
Comparing the 2012 to 2011, the overall net profit increased to $ 59.9 million in 2012 from $ 21.8 million in 2011 reflecting globally higher positive results of foreign investment. The ratio of dividends declared to net profit was 63.3 percent and the ratio of retained earnings to net profit was 36.7 percent. This shows a slight difference in profit remitted and reinvestments. The ratio of reinvested earnings to net profit increases from the level of 5.9 % in 2011 to 36.7 % in 2012.
Table 11: Income on equity ($ million) Item Amount ($ m) 2010 2011 2012 Net Profit/Loss (34.0) 21.8 59.9 Dividends Declared 15.1 21.0 37.9 Dividends Paid 14.2 14.8 22.9 Retained Earnings/Loss (49.1) 1.3 22.0 Source: Foreign Private investment 2012
2.6.1. Income on equity distribution by sector
The sectorial distribution of income on equity in 2012 shows that all the sectors that have made profits reinvest a portion of 36.7 % on average. The big sectors are the ones with huge profits distributed. As it is seen in table 12, there is an indication that the more the company make profits, the more shareholders benefit from their investments. It is also seen that many sectors are not yet making profits due to the new investments in them. The ratio of dividends declared to net profit was 63.3 percent.
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Table 12: Income on equity distribution by sector in 2012 ($ million)
Sector
Net
Profit/Loss
(After Tax)
Dividends
declared
Dividends
paid
(Profit
remitted)
Reinvested
Earnings/Loss
Agriculture, forestry and fishing
4.9
2.0
1.3
2.9
Mining and quarrying
1.1
1.1 Manufacturing 33.1 11.5 11.4 21.6 Electricity, gas, steam and air conditioning supply 0.2 0.0 0.1 0.2 Construction 1.5 0.5 0.4 1.0 Wholesale and retail trade 3.5 0.1 0.1 3.4 Transportation and storage 0.5
0.5 Tourism 1.7 0.1
1.7 Information and communication (5.4) 7.5 5.8 (12.9) Financial and insurance activities 6.4 3.4 3.9 3.0 Other sectors (0.4) 12.8
(0.4) Total 59.9 37.9 22.9 22.0 Source: Foreign Private investment 2012
Manufacturing sector dominated by activities such as manufacturing of food products and beverages has 65% of the total income, followed by Finance and Insurance with 22% and agriculture, dominated by support activities to agriculture, growing of coffee and tea with 8%. ICT sector registered a loss equivalent to 9% of net income due to new important investments. The sector is expected to show positive return in the future.
Dividends paid to foreign shareholders increased from $ 14.8 million in 2011 to $ 29.8 million in 2012 of which 50% from manufacturing sector, followed by ICT 25% distributed by old companies in the sector and Financial and insurance sector 17%.The ratio of dividends declared to net profit was 63.3 percent, mostly from manufacturing sector 27% followed by ICT 13% and Finance and Insurance 10%.
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2.7. Return on equity by sectors in 2012
Return on equity is the amount of net income returned as a percentage of shareholders equity. It measures company’s profitability by revealing how much profit a company generates with the money shareholders have invested. Net income is for the full fiscal year (before dividends paid to common stock holders but after dividends to preferred stock.) Shareholder ’s equity d oes not include preferred shares which are Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a company bankruptcy, preferred stock shareholders have a right to be paid company assets firs t. Preference shares typically pay a fixed dividend, whereas common stocks do not. And unlike common shareholders, preference share shareholders usually do not have voting rights. ROE is useful for comparing the profitability of a company to that of other firms in the same industry.
During the period under review , the overall return on equity attributable to for eign direct investments was 20.6 percent increasing from 19.5% in 2011 . The following table shows the profitability of some sectors (2011-2012).
The net profit is the net income made for the fiscal year, in our case we use the calendar year (31 December 2011-31 December 2012) before dividends paid to common stock holders , whereas FDI Stock includes accumulated equity capital and accumulated retained earnings as presented in table 8.
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Table 13: FDI profitability of some sectors (2011-2012) (percent)
SECTOR
2012
2011
Net Profit/
Loss (FDI)
Av. Stock
FDI
ROE
Net Profit/
Loss (FDI)
Av. Stock
FDI
ROE
Agriculture
4.8
17.2
28.2
5.7
27.0
20.9
Mining
1.1
2.0
54.0
(3.3)
4.2
(78.5)
Manufacturing
38.8
96.7
40.1
23.6
50.2
47.0
Construction
1.5
8.1
18.5
1.7
3.3
50.3
Wholesale and retail trade
3.5
26.4
13.4
4.0
26.4
15.3
Transportation and storage
0.5
0.4
130.6
0.2
1.7
14.2
Tourism
1.7
7.2
24.2
(0.2)
19.3
(1.0)
ICT
(5.4)
35.9
(15.0)
(13.3)
83.2
(16.0)
Financial and insurance activities
13.6
95.4
14.3
3.7
107.6
3.4
Real estate activities
(0.8)
(1.1)
0.1
0.9
14.2
Administrative and support service
0.3
0.5
73.5
0.2
0.1
170.7
Other sectors
0.8
(2.0)
(0.3)
2.7
(2.1)
(1.3)
Total
59.9
290.4
30.3 348.6
Weighted average
20.6
19.5 Source: Foreign Private investment 2012
Looking at sectors with more than $ 10 million average FDI stock, except for ICT sector which registered new big investments in the recent past years others registered positive returns on equity.
2.8. Private Sector External Debt (PSED) 2012
Private Sector External Debt is the amount of current and not contingent liabilities that require payment (s) of interest and/or principal by the debtor at some point(s) in the future and owed to non-residents by private residents of an economy (IMF Debt Guide, 2009). Private sector external debt flows and stocks are made of borrowing from affiliates included in FDI and from non-affiliates included in other investments as well as debt securities.