Rwanda will be the permanent home to the Fund for Export Development Fund in Africa (FEDA), thanks to the agreements signed over the weekend between the government and the African Export-Import Bank (Afreximbank).
On Sunday, November 22, the two parties entered three agreements that will see Kigali host the Fund's headquarters whose ultimate aim is to provide equity capital to export and trade-oriented businesses in Africa.
"Rwanda is glad to host FEDA as we work together to achieve the dreams of the African Continental Free Trade Area (AfCFTA) on the continent," Alfred Kalisa, Rwanda's envoy to Egypt noted as he signed the agreements on behalf of the government.
The two parties entered three key agreements - the Establishment Agreement, a Headquarters Agreement, and a Memorandum of Understanding - in Egypt's capital Cairo.
The Establishment Agreement is a sort of multilateral treaty that each member state will sign, while the Headquarters Agreement is a bilateral agreement that enables FEDA to have its offices in Rwanda.
The MoU, on the other hand, is an agreement that sets out specific commitments by the government of Rwanda towards FEDA.
Rwanda committed to offering certain benefits to FEDA including offering free rental to the Fund for the next two years, officials said.
What's in for Rwanda?
Rwanda aspires to become a leading regional financial hub, and Clare Akamanzi, the chief executive at Rwanda Development Board, said that this will enable the country to attract private investments to drive growth.
"The establishment of FEDA in Rwanda is a strong boost to these efforts, and will enable Rwandan and African businesses, especially SMEs to compete favourably in export markets in Africa and beyond," she said in a statement.
Akamanzi also believes that will create more jobs and lower the continent's trade deficit.
The location of FEDA in Kigali, officials say, will attract other major financial institutions in the capital and enable Rwanda to realize its vision of becoming a financial hub in the region.
"FEDA's establishment will enhance the profile of Rwanda as an international financial center," Nick Barigye, the Chief Executive Officer of Rwanda Finance Limited, said.
He also sees the move as helping Rwanda increase the potential of attracting equity capital funds and expand the scope and contributions of the financial services sector to the economy.
The Fund will provide seed capital to companies in agri-business, manufacturing, consumer and retail, technology businesses, travel and tourism, and financial services.
Other sectors that stand to benefit from the scheme include businesses in transport and logistics, as well as industrial parks operating across Africa.
Need to strategise
Benjamin Gasamagera, a local businessman sees the presence of the fund in Rwanda as a massive achievement for the country, but insists it will take much more for businesses to reap from it.
"We can gain hugely from the presence of the fund in Rwanda, but we need to strategise as business people," he said. "If you are a soccer player who wants to score a goal you position yourself."
The same analogy, he noted, should be applied if the private sector is to fully benefit from the fund, which would mean looking for information about how the fund works, the eligibility criteria and tactics to penetrate any complex process.
Gasamagera whose company exports sanitary products to DR Congo indicates the fund comes at a time the continent is moving towards one single market, an opportunity to do more business.
"Currently we have a weakness of not being diversified, yet there is a lot to gain from intra-African markets," the chief executive officer of Safari Centre, a local firm, noted.
The businessman highlighted that the fund comes at a time the government has invested in promotion of Made in Rwanda, placed focus on manufacturing, as well as promotion of industrial parks.
"This means that Rwanda is on track to produce competitively," he says, adding that increased capital and investments would enable exporters to get new markets and expand production units elsewhere.
The Fund, initially targeted at $500 million, is expected to grow to over $1 billion within the next few years, offficials said.
Afreximbank has already committed $350 million towards the fund.