Wednesday, March 10, 2010

Rwanda Country Brief: February 2010

Latest Rwanda developments in February 2010: Business environment, political risk, transactions, data releases, regulatory and legal changes, industry and regional news.

Fuel prices hit a record high in early February, up 3.5% to RWF918 per litre from January’s RWF887. Local authorities attribute the hike to a 4% increase since last month in international oil prices. Transport and food costs are expected to rise. In its ongoing quest to build much needed city infrastructure, the Kigali City Council (KCC) has completed plans for a large sewage treatment plant to be constructed near Kigali. KCC will now begin raising funds for the project. Works have already begun on a central water treatment plant for the central business district. But for now, commercial property developers are still expected to construct their own sewage systems. The African Development Bank (AfDB) is also expected to contribute RWF1bn to upgrade water pipelines throughout the greater Kigali area.

Experts from Iceland, Kenya and Germany met this month to discuss how to exploit Rwanda’s geothermal energy potential. Kenya’s KenGen was contracted last year to locate potential drilling sites. Kenya has thus far failed to exploit much of its own vast geothermal reserves. Geothermal development is extremely costly and difficult, and this month’s meeting in Rwanda raised more questions than answers.

The Rwanda Development Board (RDB) announced plans this month to transfer income-generating projects to the private sector. Akagera National Park was handed over to South Africa’s African Parks Networks (APN) in January 2010, while Korea Telecom has been brought on to build internet networks. The Volcanoes and Nyungwe national parks could present profitable opportunities for private investors. Meanwhile, the government has begrudgingly extended a December 2009 deadline to complete basic ground works on a new free trade zone to March 2010. Officials are keen to see construction start on a USD27m industrial facility there that is expected to create 5,000 jobs.

Kenya’s Credit Reference Bureau Africa was granted a license this month by Rwanda’s Central Bank to provide credit information sharing services. CRB Africa plans to invest at least RWF300m (USD525,000) over the next year to set up an office and call centre in the country. Financiers say the bureau will help banks increase credit access and lower interest rates for good return customers, however this may be delayed by the time required to build up credit histories in a country with such low financial services penetration.


* Simultaneous grenade attacks in Kigali this month killed at least two people. Some say the attackers were Hutu militiamen connected to the 1994 genocide. Human Rights Watch has expressed concern about increasing violence and intimidation against opposition party members and candidates going into the August 2010 election.
* In early February, controversial opposition candidate Victoire Ingabire was attacked by a mob in Kinyinya. Ingabire escaped unscathed while her assistant was badly beaten and later arrested on genocide charges. The government has threatened to arrest Ingabire for breaking a genocide ideology law that Amnesty International says is vague and used to silence political opposition. A deluge of editorials written by the state-controlled New Times newspaper this month have lobbed caustic criticism against Ingabire.
* Meanwhile, the Media High Council has been tasked with imposing new regulations that could further limit press freedom. This is all a reminder that while President Kagame intends to maintain tight control over the country straight through this year’s poll, animosities continue to bubble under the surface and could pose problems during the next election cycle as the question of presidential succession becomes more pronounced.
* Despite President Kagame’s much lauded anti-corruption efforts, the 2008 Auditor General’s report out this month depicts a government still dogged by low-level graft and debt. Districts across the country are in debt, while the Kigali City Council has defaulted on nearly USD2m in loans. RWF4.3bn (USD7.5m, about 1% of the state budget) in public funds were lost in 2008 to fraud and inefficiency. This remains a far cry from the culture of corruption that persists in neighbors like Kenya and Tanzania, but does indicate bureaucratic challenges and suggest that Rwanda’s aid dependence will not end anytime soon.


* Rwanda’s trade deficit widened by 20% in 2009, according to data released by the Ministry of Finance and Economic planning, due to drops in coffee, tea and mineral exports and rising consumer good and fuel imports.
* Government statistics put inflation down to 4.5% for January, driven by falling food prices. The Central Bank expects inflation to remain low for 2010 with help from agricultural recovery.

The Rwanda Bureau of Standards is in the midst of expanding its capacity to include testing of chemical materials by the end of 2010. RBS is also attempting to improve domestic quality standards on products for export. Unlike in neighboring Tanzania, where standards have been used mostly as non-tariff barriers, capacity building at RBS should be good for trade. The Private Sector Federation through its Business Development Services arm has accused district officials of illegally raising the cost of a Patenté trading license from RWF20,000 to RWF40,000. The Rwanda Revenue Authority says the move is within the law, but BDS argues the two-fold hike cannot be justified.

Insurance companies weighed in this month on a 2008 law that requires companies to split their business between long- and short-term activities, with separate two-year licenses to be issued for each. Companies say the law formalises best practice in the industry, but have expressed concern about high capital requirements also written into the legislation.


* Tourism: The international Rezidor Hotel Group has announced plans to develop a 292-room Radisson Blu Hotel and Convention Centre in Kigali, to be opened in 2012. Rezidor will also open hotels this year in South Africa, Nigeria, Ethiopia, Mozambique and Zambia. Following its 2008 purchase of a 35% stake in Rwanda’s leading insurance company, Sonarwa, Nigerian insurance giant Industrial and General Insurance (IGI) announced this month that it will invest USD10m to build a new hotel in Kigali. In an effort to diversify the country’s tourism offerings, the RDB has with help from the UN developed a 202-kilometer Congo-Nile tourist trail that winds along Lake Kivu. Better infrastructure still needs to be developed to promote access to the route. The RDB is also creating birding routes and training bird guides this year to boost bird tourism.
* Air travel: RwandAir launched a direct flight from Kigali to Dar es Salaam this month, with a return stop in Bujumbura. The route will help promote tourism links and attract business from cross-border traders. Flights are available three times a week, on Tuesday, Friday and Sunday.
* Agribusiness: Rwandan tea authority, Ocir-Thé announced plans this month to increase the land area in Rwanda dedicated to tea plantations from 12,000 to 21,000 hectares by 2012. While relatively strong, Rwandan tea production has fallen short of targets. The government is pushing to privatise more of the sector to encourage higher output. Coffee production is expected to rise by 26 tonnes in 2010. International coffee prices are up and the sector has begun recovering from a poor performance in 2009. Rwandan farmers have begun planting climbing beans rather than bush beans, in recognition of the variety’s resilience, high yields and export potential. New disease-resistant seeds suited to rain and high altitudes are available, and the beans grow vertically, which is helpful given Rwanda’s land scarcity. Finally, the government opened a tractor assembly plant in Rwanda this month, which is expected to make farming equipment available more cheaply to local farmers.
* Retail: Supermarkets Nakumatt and Simba have been hit by many shoplifters in recent months. Nakumatt is reporting up to 30 cases per month, although this is down from a previous average of 50. The stores say authorities have failed to prosecute perpetrators to prevent further incidents. A Simba cashier was also arrested in late January for allegedly stealing RWF6.2m (USD11,000) from the company.
* Banking: Kenya’s KCB began trading its shares on the Rwanda stock exchange in February. The bank says cross-listing is part of its regional expansion and integration strategy. The move should help boost Rwanda’s tiny but growing bourse. The government says it will launch a feasibility study this year for the introduction of mandatory deposit insurance, following the collapse two years ago of several microfinance institutions in the country. Fina Bank Rwanda has announced after tax profits of RWF770m (USD1.35m) for 2009, up from RWF570m (USD1m) in 2008. The bank attributes its success to branch expansion and technology upgrades, and has set a RWF1bn (USD1.75m) goal for 2010 profits.
* ICT: MTN Rwanda said in early February that it plans to cut its annual investment for 2010 to USD45m, down from USD100m in 2009. The company says it has already built the necessary capacity and intends to spend this year attracting more customers. The company also launched its anticipated mobile money product this month.

The Private Sector Foundation of Rwanda plans to carry out two studies this year to inform advocacy efforts by gauging sentiment on issues of interest to the country’s business community. Bureaucracy, taxes, vocational training and skills gaps are on the list. The organisation is likely attempting to rally support following criticism and funding shortfalls. The PSF is also working with the Rwanda Revenue Authority to train SMEs on producing annual financial statements. The RRA would like to see more SMEs filing credible tax returns.

French President Nicolas Sarkozy was in Rwanda this month, acknowledging France’s role in the 1994 genocide, even if he shied away from a full apology. Sarkozy said France had made “mistakes” and “serious errors of judgment”, and admitted that France’s UN-mandated intervention had been “too late, and probably too little”. The mea culpa came up a bit short in most human rights activists’ books, but is a significant step in the two countries’ ongoing bid to rebuild relations.

Rwanda signed six agreements with the World Bank in February, worth USD120m. Over half of the money will go towards upgrading the national electricity transmission and distribution network in an effort to increase access. Less than 10% of Rwandans have access to electricity. The rest of the funds will go toward government programs in agriculture, energy and demobilization of armed groups. Germany also signed a EUR38.5m grant for Rwanda this month, for development programmes. And in a slightly bizarre form of development assistance, Japan gave state-owned Rwanda Television (RTV) a USD500,000 grant this month on condition that over 400 Japanese TV programmes be broadcast in English on the network. The cash won’t likely offer much in the way of support for more local programming.

President Kagame has called on the Rwanda Revenue Authority to better support trade across the Rwanda-DRC border. The president accuses local leaders of impeding the free flow of goods and people between the two countries, which are attempting to rebuild relations. Kenya jumped further onto the regional integration bandwagon this month by removing work permit requirements for Rwandans working in Kenya. Rwanda had already abolished the need for Kenyans to acquire a work permit in Rwanda. Uganda announced this month that it will be hosting this year’s annual East African Community Investment Conference from 26 to 29 April. It is good news that the conference will not be held in Kenya, where security concerns have recently threatened to derail other high-level fora. EAC officials have warned that upcoming elections in Rwanda and Burundi may slow down integration activities such as the implementation of a single tourist visa, and statistics database work, which require presidential commitments. Some activities may have to be rescheduled to 2011, but most technical work will go forward. President Kagame is also assured reelection and his push for integration will continue uninterrupted.

No comments:

Post a Comment