1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Over the past decade, the government has undertaken a series of pro-investment policy reforms intended to improve the investment climate, wean Rwanda’s economy off foreign assistance, and increase levels of foreign direct investment. While most senior Rwandan officials acknowledge that attracting and retaining foreign investment will be a key economic driver, implementation can sometimes be uneven.
Rwanda enjoys strong economic growth averaging over seven percent annually from 2010 to 2017, high rankings in the World Bank’s Doing Business report (41 out of 190 economies in the 2017 report, second best in Africa), and a reputation for low corruption. The Rwandan economy grew 6.1 percent in 2017 as higher global prices for traditional exports helped the country to recover from drought and a cyclical downturn in 2016. Potential and current investors cite a number of hurdles and constraints, including Rwanda’s landlocked geography and resulting high freight transport costs, a small domestic market, limited access to affordable financing, payment delays with government contracts, and frequently inconsistent application of tax, investment, and immigration rules.
The Rwanda Development Board (RDB) was established in 2006 to fast track investment projects by integrating all government agencies responsible for the entire investor experience under one roof. This includes key agencies responsible for business registration, investment promotion, environmental compliance clearances, and other necessary approvals. New investors can register online at the RDB’s website and receive a certificate in as fast as six hours, and the agency’s one-stop shop helps investors secure required approvals, certificates, and work permits. RDB took steps to enhance investor after-care in 2017, launching a weekly Investor Open House and quarterly investor dialogues.
Despite the RDB’s investment facilitation role, some foreign investors complain that while registration is easy, implementation can be less smooth due to delays in government payments for services or goods delivered, changes in memorandum of understanding (MoU) conditions during or after contract negotiations, and/or additional tax assessments. Investors also face difficulty in obtaining or renewing work visas due to the government’s demonstrated preference for hiring local or EAC residents over third country nationals. Rwanda’s Directorate General of Immigration and Emigration does not always honor the employment and immigration commitments of investment certificates and deals, according to a number of investors.
Investors often cite tax incentives included in deals signed by the RDB that are not honored by the Rwanda Revenue Authority (RRA), Rwanda’s tax authority, as a serious problem. Investors further cite the inconsistent application of tax incentives and import duties as a significant challenge to doing business in Rwanda. Under Rwandan law, foreign firms should receive equal treatment with regard to taxes, as well as access to licenses, approvals, and procurement. Foreign firms should receive VAT tax rebates within 15 days of receipt by the RRA, but firms complain that the process for reimbursement can take months and even years in some cases, and often involves lengthy audits by the RRA. RRA aggressively enforces tax requirements on firms and individuals and imposes very punitive fines for errors – deliberate or not – in tax payments.
Based on Article 15 of Law No. 76/2013 of 11/09/2013, the Office of the Ombudsman has the authority to request the Supreme Court to reconsider and review judgments rendered at the last instance by ordinary, commercial, and military courts, if there is any persistence of injustice. More information on the review process can be found at .
Limits on Foreign Control and Right to Private Ownership and Establishment
Rwanda has neither statutory limits on foreign ownership or control nor any official economic or industrial strategy that discriminates against foreign investors. Local and foreign investors have the right to own and establish business enterprises in all forms of remunerative activity. The Rwandan constitution stipulates that every person has the right to private property, whether personal or in association with others. The government cannot violate the right to private ownership except in the public interest and only then after following procedures that are determined by law and subject to fair compensation.
The law also allows private entities to acquire and dispose of interests in business enterprises. Foreign nationals may hold shares in locally incorporated companies. The government has continued to privatize state holdings though the government, ruling party, and military continue to play a dominant role in Rwanda’s private sector. Foreign investors can acquire real estate, though there is a general limit on land ownership. While local investors can acquire land through leasehold agreements that extend to a maximum of 99 years, foreign investors are restricted to leases up to a maximum of 49 years with the possibility of renewal. In May 2015, the government published a new Investment Code aimed at providing tax breaks and other incentives to boost foreign investment. The Investment Code includes equal treatment for foreigners and nationals with regard to certain operations, free transfer of funds, and compensation against expropriation.
Other Investment Policy Reviews
The World Trade Organization (WTO) published a Trade Policy Review in 2013 covering all of the East African Community (Burundi, Kenya, Rwanda, Tanzania, and Uganda). The main areas for improvement revolve around implementation of the common external tariff (CET) and harmonization of trade, export, and tax policies. The report can be found here:
Rwanda promotes women and gender equality in all walks of life and pioneered a number of projects to promote women entrepreneurs, including the creation of the Chamber of Women Entrepreneurs within the Rwanda Private Sector Federation. Both men and women have equal access to investment facilitation and protections. The Rwandan government supports women-owned businesses and women entrepreneurs through the “Duterimbere Private IMF” microfinance program.
The government does not have a formal program to provide incentives for domestic firms seeking to invest abroad, but there are no restrictions in place limiting such investment.
2. Bilateral Investment Agreements and Taxation Treaties
Rwanda is a member of the World Trade Organization, East African Community (EAC), Economic Community of the Great Lakes (CEPGL), the Economic Community of Central African states (ECCAS), and the Common Market for Eastern and Southern Africa (COMESA). Rwanda signed the African Continental Free Trade Area (AfCFTA) agreement on March 21, 2018. While the EAC now has a Customs Union and Common Market, the slow pace of regulatory reform, lack of harmonization, non-tariff barriers, and bureaucratic inefficiencies still hamper the free movement of goods, capital, and people. Rwanda takes part in EAC negotiations with other trading partners. The United States and Rwanda signed a Trade and Investment Framework Agreement (TIFA) in 2006, and a Bilateral Investment Treaty (BIT) in 2008. Rwanda does not have a bilateral taxation treaty with the United States. Rwanda has signed bilateral investment treaties with Switzerland (1963), Germany (1967), Belgium-Luxemburg Economic Union (1985) and the Republic of Korea (2013). Rwanda signed bilateral investment treaties with Mauritius (2001), South Africa (2000), Turkey (2016), Morocco (2016) and the United Arab Emirates (2016) but these treaties have yet to enter into force.
After Rwanda implemented new higher tariffs on imports of second hand clothing and footwear in 2016, the U.S. government announced its intent to partially suspend African Growth and Opportunities Act (AGOA) benefits for apparel products from Rwanda, that would become effective in May 2018.