The Independent (Kampala)

Rwanda Investment Rebounds

RDB in record investments, targets US$1.3 billion in 2013

Investments into the Rwandan economy are set to continue surging in 2013 after a record of over US$1.1billion in 2012 as more foreign investors continue to flock the East Africa's fastest growing economy for opportunities.

The Rwanda Development Board (RDB), a public institution charged with fast-tracking the country's development hopes that this year, investors could commit to inject an estimated US$1.3 billion in new projects in the country, creating thousands of jobs for the local population.

Tony Nsanganira, the Acting Chief Operating Officer at RDB says that Rwanda will continue to attract investment mainly because of a combination of good governance, friendly business climate and attractive investment opportunities especially in the areas of energy, hospitality, high-value agriculture, Information Communication Technology (ICT) and construction and real estate.

"We hope that with reforms in place and investor facilitation, we will be able to attract a number of investments," Mr. Nsanganira told The Independent in Kigali recently.

During 2012, Rwanda, which is ranked by the World Bank's Doing Business Survey as the third easiest African economy to do business in, after Mauritius and South Africa on the first and second position respectively, again returned to over a billion dollar worth of new investment projects.

The last time that RDB crossed the one billion dollar mark in new investments was in 2009 when investors committed US$1.34 billion. But in 2010, investments significantly reduced to US$397 million owing to the global financial crisis. Investments rebounded in 2011 reaching US$626 million, against a target of US$550 million.

Nsanganira termed 2012 as a year of record investments for Rwanda amid of hardships in the western economies, which are mainly the source of Foreign Direct Investments (FDIs) for African continent.

"Despite all these challenges that we were finding in all parts of the world, we have been able to get private players to commit their resources into our economy," he said.

At the end of last year, three more projects worth over US$50 million were in the process of registering which could increase the total value of new investments passed the reported US$1.1 billion, RDB said.

According to RDB's statistics, the increase in investment value in 2012 was mainly driven by investments committed in the sectors of tourism, energy and water, construction and real estate, manufacturing, agriculture, mining, services, ICT and education respectively.

Tourism attracted the highest number of investments worth US$327 million followed by energy and water which recorded US$165 million. Agriculture which employs a record number of Rwanda's working population and supports at least a third of the Gross Domestic Product (GDP), attracted US$137million. Education attracted the least investments worth of US$2million.

Out of the total value of US$1.1 billion new investments, local investments accounted for 49% of the value but in terms of numbers, out of 181 projects, those from within Rwanda accounted for 61%, clearly showing that foreign investors still dominate the high-value investment opportunities in the country while the local investments turn up in many numbers but still remain outpaced in terms of value.

Joint ventures between local and foreign investors represented 51% of the total value of the registered investments.

According to RDB, the top three investment projects include a US$162 million hotel project that will be constructed by a joint venture between Chinese and Rwandan investors, a US$146 million energy project that seeks to generate 10 megawatts of hydropower and a US$99 million cement manufacturing project.

New Companies

As new investments increased, even the number of companies that registered in 2012 increased significantly.

RDB says that as of Dec. 19, 2012, it registered 9,031 new companies, which indicates an increase of 42% from the number of companies registered in 2011.

This represents about 35 companies each working day, compared to 24 companies in 2011 and 2 per day in the last 10 years.

Company registration in Rwanda is one of the most hailed procedures globally by investors as it takes only six hours to register a company with the office of the registrar general of companies at RDB.

Investors can also choose to register their companies online at no charges or physically at the registrar's office and pay US$24 (Rwf15, 000).

RDB has two offices for investor registration---one for small enterprises mainly local and a one-stop-center to handle registration of big investors; mainly foreign ones who bring in capital of US$250,000 and above.

Note: Numbers to highlight

US$1.3 billion: An Estimated value of investments Rwanda targets in 2013

US$1.1 billion: The value of new investment projects recorded in 2012

US$626: The value of new investment projects recorded in 2011

181: The number of new investment projects registered in 2012

20,578: The Number of Jobs to be created

9,031: The number of new companies registered in 2012

Top three Sectors that attracted highest investments

Tourism: US$327 million

Energy and Water: US$165 million

Construction and Real Estate: US165.5 million

Top Three Companies that promise highest investment

Eagle On The Lake Ltd: US$162 million Hotel Project

Ngali Energy( Digitech): US$146 million to generate 10 megawatts of hydropower

Cimerwa Ltd: US$99 million for cement manufacturing

Jobs

The 181 new investment projects are expected to create over 20,578 new jobs, meaning that last year's projects will create 11,522 more jobs compared to the projects registered in 2011.

Investments in the mining industry are expected to create the highest number of jobs---6,261--followed by ICT with 4,034 jobs.

The services industry is expected to generate 3,898 jobs, tourism with 2,042 jobs, manufacturing with 2,021 jobs, and agriculture with 1,461 jobs respectively.

Investment projects in construction and real estate promise to create jobs for 759 persons while education sector will avail 75 jobs followed by energy and water which is expected to provide 27 jobs.

Meanwhile, the promised number of jobs, RDB explained, is captured in the project's five year business plan, which the owner or promoter submits to RDB during registration. This means that the jobs can't be guaranteed until the project kicks off.

After care

RDB says that it does not only register investment projects but it also makes sure that the projects are implemented and start creating wealth and jobs. The organization's after care unit, says RDB's Chief Executive Officer, Clare Akamanzi, follows up every project from the initial stage of registration to the stage where it is operational.

All the registered projects are assigned key account managers who interact with the investor regularly from the initial stage of setting up operations to track the progress made on implementing the project.

According to Vivian Kaitesi, the Head of Investment Promotion and Implementation Unit at RDB, over 80% of the projects registered in 2010 and 2011 had been converted to implementation stage as of Dec. 19, 2012. At least over 55% of them were under operational phase.

Investment code review

Rwanda is currently reviewing its investment code that was put in place in 2005 in order to abolish some unwanted tax incentives. The move was announced by Finance Minister John Rwangombwa when presenting the 2012/2013 budget to the Parliament mid last year.

Akamanzi says a team put in place to review the code is working on a draft that should be ready this year for consideration.

She says that a lot of work has already been done; the technical review is complete and is ready to go through consultations at different institutional levels. She, however, shies away from disclosing the areas that are set to be reviewed saying that they are still in consultations.

"Whatever we are trying to do is to make it [Investment code] better for the investors in Rwanda. We are going to be looking at how we balance all that we have to balance to make sure that we achieve a more attractive investment environment for Rwanda," says Akamanzi.

"We hope to finalise it and have it completed and passed hopefully in 2013. But at least we have a draft that we can share with the public."

Rwanda is considered the most generous member state of the East African Community (EAC) because of various tax incentives it grants the investors, according to a study conducted by the Institute of Policy Analysis and Research (IPAR) in Rwanda on the funding from Actionaid.

Most of these incentives such as different levels of investment allowance in priority sectors are granted by the investment code.

The study which was released in August 2011 pins Rwanda for losing unknown but significant amounts of money in generous tax incentives to investors. It noted that the government lost US$159 million in 2008 and US$237.5 million in 2009 through tax incentives to investors.

The loss was equivalent to 34% and 38% of the government total tax revenues in 2008 and 2009 respectively. Foregone taxes also accounted for 3.6% of GDP in 2008 and 4.7% in 2009.

The study recommended the government to carry out a cost-benefit analysis to ascertain if the government was doing the right thing or it needed to review the investment code in order to scrap or modify some tax incentives.

Nsanganira says that Rwanda will continue to reform the business legislations in order to create a more favorable investment climate in 2013.

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