Rwanda reaps fruits of economic reform

Rwanda at 55! Economic reforms are bearing fruit as the country continues to see strong economic growth. 


Rwanda’s accession to the Commonwealth in November 2009 marked another step in the landlocked African nation engaging with the outside world.

The group of mostly former British colonies brings together industrialised and developing nations, espouses democracy and good governance, and is a consensus-seeking forum on issues like economic policy, trade and climate change. Rwanda’s accession is a recognition of its rehabilitation since the genocide in 1994, said Rwanda’s Foreign Minister Louise Mushikiwabo at an audience with journalists in London.

“The genocide and discrimination was, in some ways, due to a paranoia and fear of opening up. Our government now has a deliberate policy to open up. The more Rwandans come and go, the more they will benefit, and Rwanda joining the Commonwealth is part of this policy to open doors.”

Rwanda’s joining the Commonwealth is just the latest in a stream of initiatives to engage with the outside world that is starting to entice investment into the country. Despite the chill of last year’s global economic downturn, foreign investment jumped 40% to $1.1bn in 2009 and is expected to rise 20% this year.

Rwanda recently became the World Bank’s biggest business reformer according to its Ease of Doing Business Index, rising to 67th position overall, with starting up a business, registering property, paying taxes and enforcing contracts all getting easier. The Rwanda Development Board says it will simplify the issuance of land and building permits and promises to work with the East African Community trade bloc to address red tape and non-tariff barriers. “It now takes a Rwandan entrepreneur just two procedures and three days to start a business,” said the World Bank.

Rwanda’s drive for private sector investment to transform its smallholder agricultural economy into a regional hub for financial services, ICT and tourism is finally starting to bear fruit. Investment is moving into the banking sector as groups seek to tap Rwanda’s unbanked population.

Kenya Commercial Bank set up in Rwanda in 2008 and has expanded its branch network to nine; it is the only company that is quoted on the Rwanda bourse following its cross listing in 2009. Nigeria’s Access Bank has a 75% stake in Rwanda’s fourth-largest bank, Bancor SA, and is anchoring its East Africa push out of Kigali. “Access Bank’s presence in Rwanda is vital for our reaching the vast East African market,” said Access Bank’s Deputy Managing Director Herbert Wigwe.

Dutch group Rabobank has a stake in Banque Populaire du Rwanda; and ShoreCap International and Germany’s African Development Corporation – which also has a controlling stake in Simtel, the national electronic payment transactions provider – are also on the ground. Tourism, the country’s biggest foreign exchange earner, is growing. In 2007, tourists spent $209m and in 2008, visitor numbers to resorts like Virunga National Park and Lake Kivu jumped 50%.

Commentators highlight investor opportunities in high-end resorts. “There are 187 hotels in Rwanda and only seven are upper range,” says the Rwanda Development Board (RDB). Rwanda was among the countries hit by the fallout from the collapse of the Dubai sovereign wealth fund in 2009. A $230m venture with Dubai World to build six tourism projects collapsed, leaving just two – the Nyungwe Forest Lodge and Gorilla’s Nest Hotel – worth around $25m.

Plethora of investments

In Rwanda’s biggest foreign investment to date, New York-based ContoursGlobal, a privately owned renewable power developer, is ploughing $325m to harness methane gas to boost electricity generation compressed under the waters of Lake Kivu, one of Africa’s great lakes, which lies on the border of Rwanda and the DR Congo.

The company plans the first 25MW of the project to connect to the grid by October this year and says it will total 100MW on completion in 2012. Most of Rwanda’s current 69MW power output comes from oil generators and hydropower. Elsewhere, South Africa’s Industrial Development Group is conducting a feasibility study to build a gas-to-liquid plant on Lake Kivu that would convert methane gas into products such as diesel, petrol and liquid petroleum gas.

Canadian group Vangold Resources, which discovered signs of oil under Lake Kivu in aerial surveys, is also preparing an oil survey under a Special Hydrocarbon Exploration Licence. Vangold holds exclusive exploration rights to a 1,631sq km block. The government, which says it is targeting 90% of its electricity from renewable sources, has also signed biodiesel deals with Britishbased Eco Positive and US-based Eco-Fuel Global, together worth around $250m. 

The company aims to meet up to 20% of domestic diesel demand from Jatropha-derived biofuels. Telecom companies have also jumped in. Sweden’s Millicom International Cellular has just started operations following a $120m investment after winning Rwanda’s third mobile licence in 2008. Trading under the brand name Tigo, the operator joins South Africa’s MTN and Libyan-owned Rwandatel in providing mobile phone services. At the moment, MTN and Rwandatel have just two million subscribers, representing 20% market penetration. “We are here to compete. We want to increase penetration and accessibility to telephone services that are affordable,” says Tigo chief executive Alex Camara.

Rwanda’s ITC ambitions, outlined as a ‘Priority Sector’ in the government’s Vision 2020 have also got a boost from the newly laid fibre-optic cable between Kigali and Mombasa. The submarine cable means the government’s regulatory reform, infrastructure investment and education initiatives will finally start to bear fruit. Operators and the government are currently negotiating to acquire bandwidth from the cable, which will cut the price of accessing the Internet to as little as $100/mbps from current astronomical levels that range between $1,500-$5,000/mbps on costly and unreliable satellite connections.

Patrick Nyirishema at the RDB says, “Companies set to benefit most are ICT operators and service providers and we expect an explosion in broadband service subscriptions with cheaper international bandwidth. The only constraint is affordable access devices, but the operators and government are devising ways to overcome this. Affordable Internet will greatly impact academia, business, government and society in general.” China is funding a $200m conference centre in the capital Kigali, representing another major part of Rwanda’s ambition to become a regional information and communications hub. 

Privatisation plans

Rwanda’s mineral sector is its secondlargest foreign-exchange earner after tourism. Ore exports, processed to extract tin, coltan and tungsten used in consumer electronics, brought in $91.3m in 2008, according to Central Bank statistics. Mineral re-exports from neighbouring countries rose to $43.9m, amounting to 17% of total exports, up from $30.3m in 2007. Rwanda acts as a major conduit for mineral re-export from the DR Congo, where China holds a $6bn infrastructure for-minerals contract.

The government hopes to lure investments with results of a national mining survey to identify mineral deposits. It is also putting together ‘a strong investor-friendly legal and policy framework’, according to the RDB, which highlights particular opportunities in processing ores. The government promises to overhaul crumbling infrastructure with massive investment in the pipeline including a $4bn investment in Isaka Railway due to start in 2014, $300m in Bugesera Airport and a $12m investment in Kigali’s Industrial Park.

Funding might be raised from government sell-offs including the government’s recent announcement to privatise its 30% stake in brewer Bralirwa. The government has said it will sell 25% of its stake to the public and 5% to Dutch brewer Heineken, which already has a 70% stake in the company. The 50-year-old brewer, Rwanda’s largest, also bottles Coca Cola products.

Sarah Rundell

Want to continue reading? Subscribe today.

You've read all your free articles for this month! Subscribe now to enjoy full access to our content.

Digital Monthly

£8.00 / month

Receive full unlimited access to our articles, opinions, podcasts and more.

Digital Yearly

£70.00 / year

Our best value offer - save £26 and gain access to all of our digital content for an entire year!