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Investing in Rwanda – An Overview November 2009

Investing in Rwanda – An Overview November 2009. Rwanda – land of a thousand hills, home to a thousand opportunities. Reasons for investing in Rwanda. Sustained high growth. A clear vision for growth through private investment set out by President Kagame (Vision 2020)

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Investing in Rwanda – An Overview November 2009

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  1. Investing in Rwanda – An OverviewNovember 2009 Rwanda – land of a thousand hills, home to a thousand opportunities

  2. Reasons for investing in Rwanda Sustained high growth • A clear vision for growth through private investment set out by President Kagame (Vision 2020) • Politically stable with well functioning institutions, rule of law and zero tolerance for corruption • 8.8% average year-on-year GDP growth since 2004, stable inflation and exchange rate • GDP growth rate in 2008 of 11.2%, highest among East African countries • Potential opportunities for investment abound, particularly in the following sectors: • Infrastructure: Opportunities in rail, air transportation to further develop Rwanda as an EAC hub • Agriculture: Backbone of economy, potential for growth through productivity and value addition • Energy: Power generation, off grid generation and significant methane gas opportunities • Tourism: Unique assets creating booming sector; growth potential in birding and convention • Information and Communication Technology: Priority sector for achieving Vision 2020 • Other attractive sectors include Real estate and construction , Financial services, and Mining • Most densely populated country in Africa with ~10M people, majority below the age of 20 • A hub for rapidly integrating East Africa: located centrally bordering 3 countries in East Africa which has an existing Customs Union and forming a Common Market in 2010 for 125M people • Fastest global reformer of business regulations based on World Bank Doing Business Survey • Simple taxation, development of industrial parks and free trade zone, and creation of stock exchange • Increasingly attractive destination for FDI – $103M in 2008 represents 10x increase from 2005 • Rwanda Development Board, an independent agency, created as a ‘one-stop centre’ for investors Robust governance Investor friendly climate Access to markets Untapped investment opportunities Source: RDB

  3. A country of sustained growth and opportunity Sustained Real GDP growth Outperforming the region on Real GDP growth RWF (billions) 8.8% annual growth ‘08 Share of total ‘04-’08 growth rate 7% 7.6% 9% 15.0% 36% 5.1% 48% 11.0% Source: Rwanda MINECOFIN, 2009; % of GDP minus adjustments (import duties), IMF World Economic Outlook 2009 *Industry – Non Manufacturing is mostly construction with a little mining and electricity and gas

  4. A favourable and stable macro- economic environment Single digit inflation 5 years of stable exchange rate (RWF to 1 USD) Global food and fuel price increase caused temporary spike, now under control Government revenues growing steadily * Constant exchange rate Source: 2004-2007 NISR, 2008 MINECOFIN Projection, BNR, RDB analysis

  5. A country which is safe, secure and an easy place to live A country rebuilt and on the rise More stable than most emerging markets • Rwanda has been rebuilt since the traumatic events of 1994 and is a thriving, safe country • Kigali representative of this turnaround • A clean and green city, with the lowest crime of any capital city in the region • Winner of UN Habitat Award (2008) the highest award for an urban area World Bank Governance Indicator: Political stability (Higher is better) Robust governance creates long term stability • Republic with elected President, Parliament of two houses (with most members elected from local bodies) • The judiciary system includes Supreme, High, District as well as Commercial courts Source: World Bank ‘Governance Indicators’ 2007, UN, press search, RDB

  6. Strong leadership has created a pro-business, near zero corruption country A President who understands business A bastion of near zero corruption • President Kagame, recognized as a ‘CEO President’, understands the need for private sector investment • Advised by a team of international business leaders World Bank Governance Indicator: Control of Corruption (Higher is better) A country with a clear vision • Vision 2020: “The major aspiration of Vision 2020 is to transform Rwanda’s economy into a middle income country...this will not be achieved unless we transform from a subsistence agriculture economy to a knowledge-based society, with high levels of savings and private investment.” Respected by the business community • “A mecca for venture capitalists” - CNN Money: Business 2.0 • “Rwanda is the most undervalued stock on the continent and maybe in the world” - Fortune Magazine Source: World Bank Governance Indicators, Rwanda ‘Vision 2020’, RDB

  7. A government committed to making it easier to do business Fastest reforming country in World Bank’s Doing Business 2010 rankings Business regulations now easier in Rwanda than the average economy in Eastern Europe, Asia, Middle East, Latin America and Africa • Rose record 76 places in World Bank’s global survey • 4 major commercial laws passed in 2009 in addition to administrative changes that make it easier to start a business, employ workers, register property, get credit and be protected as an investor • Rwanda #11 in world for ease of starting business • 2 steps in less than 3 days to register a company Source: World Bank ‘Doing Business’ Rankings 2010

  8. A taxation system and infrastructure projects supporting growth in FDI Simple business taxation for investors Specialized infrastructure for industry and trade • As an EAC custom union member, Rwanda has: • Duty free importation for products produced within EAC • Common external tariff: 0% on Raw materials and Capital Equipment; 15% on intermediate goods; 25% on finished goods • Constitutionally protected free repatriation of capital and profits • 100% write off of R&D costs • Additional fiscal incentives in strategic sectors • Continuing work to simplify the taxation system • Kigali Industrial Park and Free Trade Zone under construction (completion end ‘09): • Sites to have reliable infrastructure and commercial services • Easy access to the planned new Bugesera International Airport • Stock exchange established in January 2008 with OTC transactions in bonds and equities • Global and Pan-African investors include Actis, Aga Khan hotels, MTN S. Africa, Starbucks, TiGO, Dubai World, Contour Global, Ecobank As a result of all these factors, FDI investment growing fast Building robust capital markets Source: RDB, BNR and MINECOFIN

  9. The Rwanda Development Board is proof that Rwanda is open for business Investor focused • One stop centre for all investors • Created by consolidating all key agencies in government responsible for business registration, investment promotion, environmental clearances, privatization and specialist agencies which support the priority sectors of ICT and tourism as well as SMEs and human capacity development Independent and influential • Reports directly to the President • Guided by a Board composed of all the key Ministers (e.g., finance, commerce, infrastructure, agriculture) Built with global expertise • Modelled on international best practices such as Singapore EDB • Advisory and hands-on support from global entrepreneurs and experts from Singapore Development Board, World Bank, IFC and the Office of Tony Blair Source: RDB

  10. A hub for investors to access the rapidly integrating East African market A large market EAC: Taking real strides towards integration • Established a Customs Union (2005) • Working towards a Common Market in 2010, a Monetary Union by 2012 and, ultimately, a Political Federation • Functioning political and legal organs • Regional infrastructure projects are being financed and implemented and regional trade has increased • Efforts to combine the East African Community, the Common Market for Eastern and Southern Africa, and the Southern Africa Development Community underway, putting 600M people into a single market. • Existing bilateral trade agreements with the US and initiatives with the European Union (EU) and others in advanced stages Rwanda: A gateway to Africa and the world • EAC comprised of 125 million people with a combined GDP of over USD 70 billion Source: Data from IMF World Economic Outlook

  11. Opportunities for investment • Priority investment sectors: • Infrastructure • Agriculture • Energy • Tourism • Information and Communications Technology • Real estate and construction • Financial services • Mining Source: RDB

  12. Sector profile: InfrastructureRail, air, logistics investment opportunities abound to develop Rwanda as an EAC hub Roads • Roadsrepresent 90% of transportation in the country • Over 14,000 km (8,700 miles) of roads, ~20% of which is paved • Regional hub for road transport as it connects important regional players, from the east coast of Africa to the west coast Rail Air • There are no railroad systems available, but a new railway line is in the pipeline: • 2 branches of the railway line are: • Isaka-Kigali railway project to link to the port of Dar Es Salaam • Rwanda-Burundi via Congo to link the southern Africa Cape Gauge railway network • Cost of $4B and is currently fundraising • The Kigali International Airport has an annual capacity of 4.4M passengers • Rwandair is the national air carrier with flights to number of regional destinations (Arusha, Entebbe, Nairobi and Johannesburg) • Other international airlines include Kenya Airways, Ethiopian Airlines, Brussels Airlines, China Postal Airlines, and African Star Airways • A new airport planned 40 km outside of Kigali, for estimated construction cost of $300M for Phase 1 Source: RDB

  13. Sector Profile: AgricultureWorld class exports but many opportunities for regional export expansion Agriculture is the bedrock of the economy National strategy driving productivity, quality • Government and development partners have focused on improving quality through fertiliser distribution and farmer training programmes • This resulted in 15% growth in the agricultural sector in 2008 and rising prices for coffee • Around 87% of the population is engaged in agricultural activities Exports led by tea, coffee but many options • Coffee– world class and winner of a number of international awards; main agricultural export with buyers including Starbucks and Sainsbury’s • Tea – relatively underdeveloped but high potential with 6% increase in volume creating 29% additional value to sector in 2008; buyers include Mark’s & Spencer’s in the UK • Many other opportunities – Dairy, fruits (many exotic varieties for juice), fresh cut flowers, silk and food crops for export to region Value addition is a major opportunity • Privatization of tea plantations and factories has begun in 2009 and is ongoing • Further opportunities in coffee washing and roasting as the premium harvest grows • Also in distribution, markets and cold chain infrastructure for export products Source: MINECOFIN, OCIR Cafe, RDB

  14. Sector profile: EnergyNew generation and methane gas can open access beyond Rwanda to neighbouring markets Overview Generation • 80% of energy from wood combustion and electricity coverage levels low at 6% • 60-69MW of electricity generation (50% hydro-electric, 50% diesel) today • Recognising the strategic importance of the sector, the GoR has ambitious plans to more than double generation capacity to 130MW through methane gas, hydro (macro and micro) and 1 heavy fuel oil plant • For instance, in micro-hydro, 333 potential sites identified (50KW-1MW) by 2008, 2 constructed, 21 under construction and 10 scheduled Power grid • Power grid coverage is planned to expand to 67% of the region by 2012 through a $311M capital budget roll-out plan • Transmission and distribution networks to expand from 3,300km to 5,000km by 2012 Methane Gas • 50-55 billion m3 of methane gas in Lake Kivu: • 1st Gas Concession and Power Purchase Agreement signed with Contour Global – 100MW KivuWatt power plant under construction expected to produce 4MW/hour for ~$324M • Further opportunities such as a 2nd concession at Lake Kivu and conversion of gas to liquid and gas to fertilizer Renewable energy • Targeting 90% electricity from renewable source • 246,000 ha of forests for carbon credit potential • Example: recent agreement with US/ UK based company funded by leading UK PE firm to produce biodiesel by planting 10,000 ha of Jatropha plants ($35M investment in 2 years) to address 15-20% of domestic diesel demand Source: RDB, Ministry of Finance 14

  15. Sector profile: TourismTourism sector booming, but significant opportunities remain Rwanda has unique natural assets Visitor numbers have been booming • In 2007, leisure tourists spent $209M, making the tourism industry the country’s largest foreign exchange earner • Virunga National Park: natural habitat for 600 of the 800 rare mountain gorillas made famous by the work of Diane Fossey. Park includes a mountain lodge in the ‘Condé Nast Hot List’ • The rainforests of Nyungwe National Park: home to rare chimpanzees, birds and elephants • Lake Kivu: surrounded bystunning beaches and dormant volcanoes covered by lush vegetation. A 4 star Serena resort is one of several hotels • Akagera National Park: offers the potential to be one of East Africa’s great safari destinations • Birding tourism: Rwanda has over 1/3 of Africa’s bird species, the highest concentration in Africa with 260 species in Nyungwe forest alone • In 2008, leisure visitors increased 50% • 26% increase in business/conference visitors – a priority area of significant potential • There are 187 hotels and 4102 hotel rooms in Rwanda of which only 7 are upper range • The average room occupancy rate for upper range hotels was 70% in 2008 with foreign tourists accounting for 97% of bed nights sold Source: ORTPN, KPS, RDB

  16. Sector profile: ICTICT – Information and Communication Technology – top priority for 2020 Overview of ICT Major players in telecom • MTN Rwanda and Rwandatel are the dominant players ,offering fixed telephones, mobile telephones, and internet services. TiGO, the 3rd operator, is set to begin operation by end of ‘09 • Between the two companies, there are approximately 2M mobile subscribers, representing 20% penetration • A sizeable private sector is growing around the networking and software development sectors, with Rwandan companies exporting services to Burundi and Eastern DRC • Rwanda is participating in a $24M World Bank project to connect its national backbone to submarine cable: • There are three optic Service Providers Seacom, Teams and Eassy, at the East Coast to link various African countries to the global network. • Attracted ~$500M in investment over the last three years by both private and public sector • The government has invested in building the ICT infrastructure through: • a 2,500km optic fiber that covers Kigali city and the entire country, with a total of 7 regional links to the neighboring countries • Kigali City Wireless Broadband due to be commissioned early next year • ICT park set up for investors in pilot phase • ICT in Rwanda currently encompasses, in varying degrees: • Wireline telephones • VoIP • Dial-up internet, ISDN based internet, broadband internet • Computer software use and development, • Computer hardware, assembly, and repair Source: RDB

  17. Sector profile: Real estate & constructionGrowth creating boom in demand for commercial and residential real estate development Real estate is booming Residential real estate • In 2007, Rwanda’s development and public works sectors experienced a 10% growth creating a shortage of fully functional office space and residential housing • From 2003-2008,investment in the construction sector grew from $100M to $350M. In 2008, revenues from the general construction sector increased by 51% driven by: • Population growth of 2.8% combined with urban growth currently at 4% per annum • Growth of the middle class • Diaspora returning to Rwanda • As a result, there is also a shortage in construction material. • Rwanda imported $64.6M of construction materials in 2007 and $140M in 2008 • This includes 100% of steel and a majority of other construction materials • GoR projects that by 2020 approximately 30% of the population will live in urban areas. To date, only about 5% of residents in Kigali own modern-style houses. • In Kigali alone, demand for housing is 8,000- 10,000 units per annum. The combined demand for housing countrywide is estimated to be ~25,000 units per annum Commercial real estate • 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 50-200% Source: RDB

  18. Sector profile: Financial servicesThe banking sector remains relatively underpenetrated Overview Key players • ~ $200M of equity capital supporting ~$1B in total assets • Estimated 12% of the population had a bank account in 2007 • 20% sector growth rate in 5 years driven by: • GoR enforcement of banks meeting international banking standards • The “Financial Sector Development Program” which increased the minimum capital requirement from $2M to $8M and requires banks to prove they are qualified before receiving a charter • Policy, strategy and incentives in place to develop capital markets • The banking sector is comprised of eight commercial banks, one primary microfinance bank, one discount house, one development bank and one mortgage bank • Commercial banks represent 76% of the economy’s total financing while micro finance institutions serve 88% of depositors and 90% of borrowers • The microfinance sub sector consists of more than 50 relatively small institutions where ~ 11% of Rwandan assets and ~ 3.5% of the population hold accounts • The 3 largest local banks are: • Banque de Kigali (100% govt. owned) • BPR (98% private, including Actis) • BCR (80% private) • Ecobank, Access Bank and KCB are among the international banks with a presence in Rwanda Interest rates in line with the region Source: RDB, Ministry of Finance

  19. Sector profile: MiningUnexploited opportunities in ores, processing and diversification abound Mineral exports have room for growth Work is being done to develop the sector • A national mining survey is being conducted to identify mineral deposits • A strong, investor friendly legal and policy framework being put in place • Rwanda’s main mineral exports are ores processed to extract tin, coltan and tungsten • Only 25% of ~$ 200M potential output currently exploited • Significant opportunity to increase productivity through industrial mining Opportunities in diversification and processing • Significant opportunities in processing ores • Diversification opportunities in quarries (for construction materials) and precious stones (gold, diamond, beryl, topaz, rubies, sapphires, gamets and other unexploited deposits 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 Share of production volume by source, 2007 Source: MINIRENA, RDB

  20. Summary of selected potential investment opportunities Source: GoR

  21. Key contacts • www.rwandainvest.com • Bertha NIBATETE, Director of International Linkages and Initiatives • bnibatete@rwandainvest.com • ipd@rwandainvest.com • +250 78875 8922 Source: RDB

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