26 November 2012

Rwanda: Investment Code Under Review to Boost Tourism Sector

Rwanda Development Board is in the process of reviewing the investment code for hospitality sector, a move tipped to spur infrastructure development and increase revenue from tourism.

RDB head of tourism and conservation, Rica Rwigamba, said players in the hospitality sector will have their say so that their aspirations can be captured in the new code.

During a meeting with hoteliers and restaurants owners recently, dozens of investors turned up to discuss among others what issues they would like to be addressed and included in the new investment code.

Hotels and restaurant businesses play a big role in the tourism industry--a major source of revenue for the country. The sector has attracted $241.6 million worth of investment--46% higher that the 2012 target of $165 million.

A favorable investment code, RDB reckons, will spur growth of the sector that aims to contribute 15% of GDP by 2020. In order to achieve this, the sector must grow by at least 15% per annum, according to Joel Rudasingwa, a researcher at RDB.

Rwanda's hotels, motels and lodges have a combined total of 6,700 rooms but the target is at least 10, 000 rooms by 2019.

The current investment code came into force in 2005 and after the country joined the EAC, a lot of modifications have been made and the current review is aimed at accommodating views of local investors to ensure they play well with regional competition.

The service sector needs new incentives to not only consolidate the current growth but also encourage future growth.

The current code has it that for someone to obtain an investor certificate, the investment project should be worth $100,000 for local, EAC and COMESA investors and $250,000 for foreigners.

In addition, for an investor to have their headquarters in Rwanda, they should have fixed assets worth $2million in addition to providing employment and training to Rwandans. They must also spend at least $1 million per year locally as well as have the capacity to make international financial transactions of at least $5,000,000 a year through a local commercial bank.

Currently, when an investor invests at least $100,000, the code recommends free initial work permit and visa for investors and foreign workers with a maximum of three expatriates.

There are also tax relief options for investors who export goods worth $3-$5 million to claim a tax discount of 3%.

Investors in the tourism transport sub-sector are also currently benefiting from the code's declaration that enables firms to import into the country duty free aero-planes and tourist travel cars as long as they are engraved with the official registered name of the project.

A recent survey done by the RDB on the state of restaurants in the country indicated that besides the huge problem of poor customer care, most local restaurants don't have professional kitchens and that the state of hygiene too, was lacking.

The current investment code allows hotels and restaurant owners to import duty free kitchen ware such as cookers, fridges and freezers. Other tax exempt items include air conditioning system, cutlery, televisions sets, carpets, furniture, curtains and gymnasium.

According Daniel Karera, the chairman of the Rwanda hotels and restaurants' owners associations, the code review is a welcome development which will help members improve and modernize their facilities to international standards.

However, he noted that the conditions one is supposed to fulfill before enjoying benefits in the investment code such as special orders for engraved goods was still making it hard for many of his members to enjoy the benefits.

"Very few of our members can order specially engraved goods from manufacturers as it is very expensive and limits chance of many to enjoy the benefits," he said.

In his proposal that was backed by some and doubted by others present during last week's meeting with RDB, Karera wants government to indentify local importers and give them special license to import in the exempted items and allow members to buy them from the special importers locally at reduced prices.

"That way, many members can be sure to benefit from the code in its current or future forms," he said.

Investors also want government to make future negotiations strictly with the hotels and restaurant's association and ensure that it's made a condition that however wishes to enjoy special investor benefits must identify themselves as members of the association.

"Benefits must be for members that are fully subscribing to PSF through our association and we want government to stop giving contracts to investors who have refused to register with the association in a bid to promote a single voice for the good of the sector," Karera said.

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