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We Are Wooing Investors Like Dangote to Rwanda

27 Feb 2012

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A team of Nigerian journalists recently visited the East African country of Rwanda globally ranked No 9 as the best country to start business and second best global performing economy by reform pace in the past five years; the most competitive place to do business in East Africa and third in Africa. After emerging from the pogrom of 2002 when over two million Rwandans were victims of ethnic cleansing, Rwanda is a country in a hurry to give its citizens maximum comfort. With President Paul Kagame's proactive approach to governance, and a zero tolerance for corruption, Rwanda has a vision of attaining the Singaporean transformation from the third world to the first on the continent and it is working hard towards that with its Vision 2020 road map.  On his trip to Rwanda, Nduka Nwosu interviewed John Gara, lawyer, technocrat and United Nations alumnus, who worked as a legal adviser for a number of United Nations agencies including the United Nations Centre on Transnational Corporations in New York, the Department of Economic and Social Development at the United Nations Headquarters in New York, and the United Nations Conference on Trade and Development (UNCTAD) in Geneva, Switzerland. Gara is the chief executive officer of the Rwanda Development Board, the corporate engine of the Rwandan revolution.

Give us an overview of the Rwandan Development Board?

The Rwandan Development Board, a merger of a number of other agencies was established by law in 2009 with a mandate to fast track the development of the Rwandan economy with a private sector in focus. In summary, our vision is to transform Rwanda into a dynamic global hub for business, investment and innovation while our mission is to fast forward economic development in Rwanda through private sector growth. The scope of our work includes all aspects related to the development of the private sector. This involves working with and addressing the needs of companies of all sizes - large and the SMEs - and local and foreign investors. The board is designed to be a one stop shop for investors and it is real because when you visit us here or open online communication with us with the intention of doing business in Rwanda, with less than $15, you get all the enabling materials within 24 hours. Our reputation to deliver and get registered as a business or going concern stands.

Give five reasons why any investor should be attracted to Rwanda?

The reasons include sustained high growth, robust governance, an investment-friendly climate, access to markets and a vast degree of un-tapped investment opportunities, with an average year-on-year growth rate from 2005 to 2010, stable inflation and exchange rates. Our GDP growth in the past three years rates highest among major African economies and neighbouring countries. We are politically stable with well functioning institutions, the rule of law, and zero tolerance for corruption. President Paul Kagame's Vision 2020, is a growth path through private investment. The government is committed to make business investment easy in Rwanda and since this crusade began, the World Bank has rated Rwanda as one of the fastest reforming countries in the World Bank Doing Business rankings. We are ranked No. 9 globally in starting a business and the second best global performing economy by reform pace in the last five years. We were also debuted as the most competitive place to do business in East Africa and third in Africa in the World Economic Forum's Global Competitiveness Report for 2011-2012. Our market hub covers over 10 million people with a rapidly growing middle class and a rapidly integrating East African market. We are centrally located bordered by three countries, all in the EAC Common Market and Customs Union with a market potential of over 125 million people.

Can you mention some of your significant potential investment opportunities?

The Isaka-Kigali railway project is one part of a wider project, which will link Isaka (Tanzania) to Kigali (Rwanda) and Keza (Tanzania) to Gitega and Musongati (Burundi). The project entails the construction of two new lines - Kigali to Isaka and Gitenga and Musongati to Isaka. It will involve the rehabilitation of the existing Isaka-Dar Es Salaam line and the acquisition of rolling stock to carry passengers, cargo and ore traffic. The aim is to develop a regional railway system, which further integrates the three countries and connects agriculture, mining, industrial and commercial hubs to the maritime port of Dar Es Salaam in Tanzania through the existing Isaka-Dar Es Salaam railway line. Feasibility studies have been completed in June 2009 by the German rail company Deutsche Bahn with AFdB funding and validated by the Tanzanian, Rwandan and Burundian governments. Subsequently, Burlington Northern Santa Fe Railway (BNSF) conducted a separate feasibility study in 2009 suggesting alternative (AREMA) standards, which are estimated to reduce costs by 5 per cent. Design and engineering studies, development of the financing structure and legal, institutional and regulatory framework, were expected to have beeb completed in 2011. Construction then is expected to take five years. Estimated ERR of 29 per cent on the overall project and 23 per cent on the Rwanda section according to the base case scenario, five years construction and 30 years operating period. Expected cost is $4.7 billion, $3.7 billion for the new lines and $1 billion for the rehabilitation of the Dar Es Salaam-Isaka line. The PPP with BOT project will facilitate economic integration in the region, developing agriculture, mining and industrial areas with lower freight costs.

Can you give us some insight into your new Bugesera International Airport under construction?

It is a project of the Government of Rwanda designed to replace the existing international airport, which has reached its optimum capacity and will improve trade links between Rwanda and the rest of the world. The new international airport will be constructed in Bugesera district, around 40 kilometers from Kigali city centre and with a number of attractive attributes such as a basic plateau running to river valleys located north, east and west of the site, the river valleys are relatively deep about 30 meters, the border with Burundi is located approximately 23 kilometers to the south and there are no large tracts of forest, no major standing water on the site and no major cross wind problems. The airport will be built in three phases and will increase the country's capacity of passenger handling from 400,000 per annum to at least three million by the end of phase one in 2030 and between 10 and 12 million by the end of phase two and 50 to 60 million by the end of phase three. Feasibility studies were completed in June 2011. Second phase detailed technical studies have been completed by UK-based TPS consultants who worked on Heathrow Terminal 5. The government intends to build the airport through a PPP framework, a Design, Build, Finance and Maintain and Operate 25 year concession agreement. PWC has been recruited as the government transaction advisor on this deal. The procurement process started in early September 2011 and the project has already received support from some multilateral development agencies.

And the benefits for Rwanda?

It will serve the needs of Kigali and expand into a gateway airport linking the Great Lakes region of Africa to the world, developing over time into a Central African hub airport. It will facilitate growth of external sectors such as high value agro exports and service sectors through more frequent and lower cost air freight and passenger services. Expectedly, it will create direct and indirect employment generation for skilled as well as unskilled workers.

Your described your agricultural profile in terms of world class and regional exports, why?

Agriculture is the bed rock of Rwanda's economy with a GDP contribution of 34 per cent, with 78 per cent of the population actively engaged in agricultural activities and there are opportunities for investors interested in world class exports, as well as vast opportunities for regional export expansion. Coffee our highest export revenue earner fetched revenues of $50 million; our coffee is a world class and winner of a number of international awards. It is the main agricultural export with buyers including Starbucks and Sainsbury's. Tea comes next as the second largest agricultural export revenue earner in 2010 with $55.7 million and there is a planned expansion of national tea production. Opportunities also exist in the dairy and fruits sector where you have many exotic varieties for juice, fresh cut flowers, silk, and food crops for export to the region. Government and development partners have focused on improving quality through fertiliser distribution and farmer training programmes. This resulted in a 15 per cent growth in the sector in 2010 and higher price realisation for coffee. Currently, the privatisation of four key plantations for the tea plantation is underway with washing and roasting opportunities for coffee as premium harvest grows. With a regional import market of $211 million, there is need for improved infrastructure for export products in the distribution and cold chain.

Your tourism sector seems to have attracted significant patronage from Europeans, why?

Our tourism sector is booming but significant opportunities remain. Our unique assets offer tourists a one of a kind journey home to one third of the world's remaining mountain gorillas, one third of Africa's birds species, several species of primates, volcanoes, games reserve, resorts of Lake Kivu, graceful dancers, and artistic crafts. Here it is safe to get around within short distances to diverse destinations. All major attractions are located along a circuit within 1 to 5 hour drive from the capital, Kigali. In a short vacation, a tourist can reach volcanoes, rainforests, the savannah, islands, lakes and Kigali. We have the potential of becoming the conference tourism hub of East Africa once the Kigali Convention Centre is operational in 2012. Rwanda offers a base to visit East African destinations located in the heart of Central and East Africa with easy access to the bordering countries of Uganda, Tanzania, Burundi and Democratic Republic of Congo as well as to Kenya; Rwanda is an ideal location for travel within the region. The average spend by a visitor is $200 a day and average length of stay is one week with attractive interests and investment of reputable brands such as the Marriott, Radisson, Dubai and Serena Hotels, with 200 hotels and 4,500 hotel rooms in Rwanda. For the upper range, average occupancy rate is 70 per cent with foreigners accounting for 97 per cent of bed nights sold.

And so where lies the investment opportunities?

Hotels in Kigali and other major cities, construction and development of eco lodges in the Nyungwe Forest and Akagera Park, establishment and promotion of zoological and botanical gardens, creation of theme parks, incorporation of a company that deals in sea planes, construction of a cultural centre and a hotel to provide accommodation to tourists visiting the King's palace in Nyanza, development of boating and water sports on Lakes Kivu, Ihema and Muhazi, development of tourism sites and activities around the hot springs in the Southern Province, tourism and hospitality training schools and a financial partner for the Kigali Convention Centre.

How has the financial services sector fared?

The Rwandan banking sector remains relatively under-penetrated even with Access Bank from Nigeria and the sub-regional Ecobank Transnational. The overview includes a $200 million of equity capital investment supporting $1 billion in total assets. An estimated 80 percent of the Rwandan population is still not in the formal financial system with a consolidated balance sheet of the eight major commercial banks showing a 5.5 per cent growth in the second quarter of 2010. The annualised return on average equity increased from 6.4 per cent at June 30 2009 to 10.3 per cent as at June 30 2010. A policy strategy, however, is in place to develop the capital market. The banking sector is comprised of eight commercial banks, primary micro-finance banks, one discount house, one development bank and one mortgage bank. There 96 microfinance institutions of which 83 are Credit and Savings Cooperatives (SACCOs) while 13 are private or public limited companies. The three largest local banks - Banque de Kigali, BPR (65 per cent cooperative members and 35 percent Rabobank); BCR (80% Actis, 20% GoR); Ecobank; Access Bank; and KCB are among the large international banks with a presence in Rwanda.

Where are the investment outlets?

The commercial bank products and services particularly in rural areas, competitive loan facilities, agricultural products and services financing, development banks especially to finance SMEs, microfinance opportunities, mortgage financing and investment banking services, training of financial sector professionals, insurance services especially re-insurance, equity and bonds purchases at Rwanda's capital market.

What's the overview in the ICT sector?

This sector remains our key priority for 2020. It has so far attracted $500 million in investment over the last three years from both the private and public sector. The government has invested in developing ICT infrastructure to enable service delivery of a 2,500 kilometre optic fibre network throughout the country, through all 30 districts and with nine regional links to neighbouring countries. There is also a state of the art Tier 3 Internet Data Center and wireless broadband in Kigali, to be extended to all major towns. ICT Rwanda currently encompasses mobile and fixed telephony, VolP, DSL, VSAT, ISDN, GPRS, broadband internet and software development with hardware assembly and repair. MTN Rwanda and TiGO are the major telecom providers of internet, fixed/mobile telephony. Today there are over 3.6 million mobile telephony subscribers, representing 36 per cent penetration. The internet user rate has grown 8900 per cent since 2008. The ICT private sector is growing, especially in mobile applications, networking and software development, with an increasing number of Rwandan companies producing for the local market as well as exporting products and services to Burundi and Eastern DRC. Rwanda is investing $24 million in regional communications infrastructure to secure connectivity to the global network (linking to the submarine cable on the Kenya East coast). The Government of Rwanda is investing heavily in ICT skills development and has partnered with Carnegie Mellon University to establish a Center for Excellence that should greatly increase ICT skills, with courses beginning in January.

Where lies the opportunities for a Nigerian investor?

There are opportunities in e-waste management, both recycling and disposable, business process outsourcing, technical training institutes for specialised courses, software development including mobile applications and innovative e-payment solutions. There are also opportunities for an internet data center extending to computer cecurity management and disaster recovery planning facilities, a world class technology park, a SMART energy grid development and access network/last mile connectivity (fibre-to-home, curb, etc).

How has the real estate sector fared till date?

There is growth creating a boom in demand for commercial and residential real estate development. In the first of half of 2010, the turnover in construction activity grew by 28.7 per cent from $64 million to $83 million, compared with the first half of 2009. From 2003 to 2008, investment in the construction sector grew from $100 million to $350 million. In 2008, revenues from the general construction sector increased by 51 per cent driven by population growth of 2.8 percent combined with urban growth currently at four per cent per annum. There is the growth of the middle class, the diaspora returning to Rwanda and as a result there is also a shortage in construction materials. Rwanda imported $64.6 million of construction materials in 2007 and $140 million in 2008. This includes 100 per cent of steel and a majority of other construction materials. GoR projects that by 2020 approximately 30 per cent of the population will live in urban areas. To date, only about five per cent of residents in Kigali own modern-style houses. In Kigali alone, demand for housing is 8,000 to 10,000 units per annum. The combined demand for housing country-wide is estimated to be 25,000 units per annum. The recent increase in foreign investments has created a shortage of upper end office space with fully equipped telecommunications, utilities and power. From 2003 to 2006 rent on these buildings increased between 50 to 200 percent.

And where lies the investment opportunities?

We have a need for residential houses for the low and middle income class; we also need a youth sports centre, office blocks in Kigali City, a real estate agency, a brick and tile making factory, manufacturing of construction finishing materials, estate development - high income, commercial complexes and shopping areas - development of entertainment centres as well as tiling and certification of key services including architecture, engineering, plumbing, et al.

Have you had a boom in the sector profile for mining?

Rwanda has unexploited opportunities in ores, with unlimited potentials for processing and diversification There is immense room for growth in the export of minerals where ores are processed to extract tin, coltan and tungsten. Only 25 per cent of the estimated potential output is exploited and there is significant opportunity to increase productivity through industrial mining. We have a strong investor-friendly legal and policy framework with a national survey being conducted to identify mineral deposits. There are diversification in quarries for construction materials and precious stones such as gold, diamond, beryl, topaz, rubies, sapphires, garnets, and other unexploited deposits that have been identified. There are major peat deposits in the southwest of Rwanda, which are only just being exploited and could be used for electricity generation or processed as an alternative to fire wood.

What are other investment opportunities?

We invite investors to explore exploration opportunities, mechanised mining, cement manufacturing for local consumption and for export. Nigerian investors like Aliko Dangote have undertaken a trade visit and we are wooing them to come here and invest even in the food processing sector. We are proud of Access Bank with its Nigerian base and international connections. Investment outlets also exist in tin production, gold and sapphires, columbium and tatalum for the export sector, and the setting up a plant for dimension stones as well as quarry development. 

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