Despite
disadvantages of being a small and landlocked economy, more foreigners are
choosing to invest in Rwanda because the country is perceived to be less
corrupt compared to regional neighbors.
Findings of
a survey on foreign private capital census by the National Institute of
Statistics, the National Bank of Rwanda, Rwanda
Development Board (RDB) and the private Sector Federation (PSF)
sites less red tape as another factor pulling investors to Rwanda.
The study
was done to ascertain Rwanda's Foreign
Direct Investment (FDI). It quotes a 2011 Foreign Investor Perception
Index which says low level of corruption at the centre is the most enticement
for investors.
In investors
also say that the ease of acquiring licenses, permits and registering a company
are the other reasons. However, cross-borders constraints such as
transport--whether by air road-remain.
Government
targets to have foreign investments account for at least 23% of GDP by the year
2020 and this survey is to check progress. The report reveals that the stock of
private sector external debt as at end 2010 stood at Frw 190.5 billion, having
increased from Frw 132.0 billion in 2009. The increase is mainly attributed to
long term concessional loans from affiliated companies. However, return on
equity dropped to 3.5% in 2010 from 9% in 2009 due to losses in ICT and mining
sectors.
However,
returns on equity excluding mining and ICT was recorded at 13.4% in 2010 with
manufacturing and agriculture at the top with 46.7% and 28.1%, respectively. According
to the survey, 2010 was not a good year for shareholders as total dividends
paid during that year amounted to only Frw 8.7 billion--a decline of more than
half from Frw 132 billion of 2009.
This
revelation might give a hint at how much the global economic downturn, which
was at its peak in 2010, might have affected investments globally. Though the
survey concludes that foreign private investments in Rwanda has continued to
grow hence providing a basis for sustained economic growth over the years, the
government is alerted to the need to continue accurately and consistently
capturing and monitoring these investment flows to assess the impact of
policies on attracting investments and improving business environment.
The report
also calls for sustained macroeconomic and political stability--major
attractions of foreign investments. In 2010, the country received Frw 364.4
billion ($ 613.0 million) in foreign capital up from Frw 213.0 billion in 2009.
The increase was attributed to diverse sources of investment.
About half
of it was from COMESA region, 16.7% from the European, 13.5% from East African
Community while 9.4% was from Southern Africa Development Community. Telecom,
finance and insurance continue to lead with the two sectors claiming 60% of
FDI. Mauritius, Luxembourg and Kenya were the main sources.
Sectors
which attracted highest flows were ICT (46.3%), mining (18.1%), wholesale and
retail trade (12.7%) and manufacturing at 8.2%. Clare Akamanzi, the new CEO of
RDB noted that the report shows little difference between the number of
investments registered and those that actually invest attributing the trend to
'after care service' offered by RDB aimed at transforming planned into actual
investment.
Hannington
Namara
of PSF emphasized on the
need for the government to note the key challenges submitted by investors as
reasons for their limited investment in a bid to further improve the doing
business environment of the country.
Claver
Gatete, Rwanda's Central Governor observed that efforts need to be put on
trying to make results timely to ensure their usefulness and relevance to the
public.
Rwanda Focus
Rwanda Focus