Rwanda

Executive Summary

Rwanda enjoys strong economic growth, high rankings in the World Bank’s Ease of Doing Business Index, and a reputation for low corruption.  The Government of Rwanda (GOR) has undertaken a series of policy reforms intended to improve Rwanda’s investment climate and increase foreign direct investment (FDI).  In 2018, the GOR implemented additional reforms to decrease bureaucracy in construction permitting, improve the timely provision of electricity, and reduce customs processing times for exporters.  The GOR also introduced online certification processes for certificates of origin and phytosanitary approvals. The country presents a number of FDI opportunities, including: manufacturing, infrastructure, energy distribution and transmission, off-grid energy, agriculture and agro-processing, low cost housing, tourism, services, and information and communications technology (ICT).  The Investment Code includes equal treatment between foreigners and nationals with regard to certain operations, free transfer of funds, and compensation against expropriation; this treatment is reinforced in the 2008 U.S.-Rwanda Bilateral Investment Treaty (BIT). .

According to the National Bank of Rwanda (BNR), the country’s Central Bank, Rwanda attracted USD 342.2 million in FDI inflows in 2016 (the most recent data available), representing 4 percent of gross domestic product (GDP).  Rwanda had a total USD 1.68 billion of FDI stock in 2016, the latest year data is available. In 2018, the Rwanda Development Board (RDB) reported registering more than USD 2 billion in new investment commitments, mainly in manufacturing, mining, agriculture, and agro-processing, 47 percent of which were FDI.  In pursuit of Rwanda’s goal to become a regional hub for tourism, services, and logistics, the GOR has plans for a number of high-profile infrastructure projects, including Kigali Innovation City in Kigali’s Special Economic Zone (SEZ), which will accommodate technological universities and companies working in the tech sector.  Construction of Kigali Innovation City is ongoing, with the new campus of Carnegie Mellon University Africa set to open in 2019. Construction of Bugesera International Airport began in 2017, with completion of the first phase planned for 2021, although delays are probable. The GOR is also discussing a rail line to connect with Tanzania.

In February 2019, Standard and Poor’s affirmed Rwanda’s “B/B-” long and short-term foreign and sovereign credit ratings.  The GOR has developed an export promotion program called “Made in Rwanda.”  This campaign seeks to diversify exports, ease exchange rate pressure, and reduce the country’s trade deficit.  Government public debt has rapidly increased over the past few years to more than 50 percent of GDP, but most of these loans are on highly concessionary terms.  A 2017-2018 investor perception survey by the International Finance Corporation (IFC) found that the majority of existing large companies in Rwanda have plans to invest further in the country.  According to the same survey, the most frequently perceived obstacles for current company growth are: access to working capital, shortage of qualified labor, tax levels, tax predictability, and lack of reliable electricity and water (particularly for mining and manufacturing).  In the same report, investors suggested that RDB should focus more on after-care services and improving coordination among government institutions. 

Many companies report that although it is easy to start a business in Rwanda, it can be difficult to operate a profitable or sustainable business due to a variety of hurdles and constraints.  These include the country’s landlocked geography and resulting high freight transport costs, a small domestic market, limited access to affordable financing, payment delays with government contracts, and inconsistent enforcement of laws and regulations.  Government interventions designed to support overall economic growth can significantly impact investors, with some expressing frustration that they were not consulted prior to the abrupt implementation of government policies and regulations that affected their business.  A number of investors have said that tax incentives included in deals signed by RDB are not honored by the lead tax agency, the Rwanda Revenue Authority (RRA). Similarly, some investors stated that Rwanda’s immigration authority does not always honor the employment and immigration commitments of investment certificates and deals.  Some investors reported difficulties in registering patents and having rules against infringement of their property rights enforced in a timely manner.  There are neither statutory limits on foreign ownership or control, nor any official policies that discriminate against foreign investors, though some complain about competition from state-owned enterprises (SOEs) and ruling party-aligned businesses.

General labor is available, but Rwanda suffers from a shortage of skilled workers, including accountants, lawyers, electricians, and technicians.  Higher institutes of technology, private universities, and vocational institutes are improving. The establishment of Carnegie Mellon University Africa and the opening of a regional Andela office could boost the supply of qualified software developers in the coming years.  While electricity and water supply have improved, businesses may continue to experience intermittent outages, especially during peak times, due to distribution challenges. Some investors report difficulties in obtaining foreign exchange from time-to-time, which may be caused by the country running a persistent trade deficit. 

Rwanda promotes women and gender equality in all walks of life.  Rwanda pioneered a number of projects to promote women entrepreneurs.  Both men and women have equal access to investment facilitation and protections. 

Table 1: Key Metrics and Rankings

Note: 

• According to the National Institute for Statistics for Rwanda (NISR), GDP per head in current USD was USD 787 in 2018
• According to BNR, stock of U.S. FDI in the country stood at USD 87.4 million in 2016, however many American investments are via subsidiaries from third countries