The Chronicles

Serving Your Right to Know the Truth

Category: Business

  • Rwanda Targets US$800m investment in 2012

    RWANDA Development Board’s Chief Operating Officer (COO), Clare Akamanzi (pictured) says the interests of investors attracted to do business in Rwanda should not compromise the government’s vision.

    Instead, according to her, investors have an interest in supporting the vision. The Chronicles’ David Kezio-Musoke and Magnus Mazimpaka talked to her about a wide-range of issues including this year’s investments targets. Below are the excerpts.

    The Chronicles: Let us talk about investments in general. Did you achieve your targets in 2011? Clare Akamanzi: The year 2011 was satisfactory. In 2010, we attracted US$390 million. In 2011 we targeted investments worth US$550 million. However by the end of the year, we had registered US$626 million. These were investment deals closed over that period. We passed our target by US$76 million. Our biggest attraction was from tourism, Information Communication Technology (ICT) followed by energy and then agriculture in that order. ICT was on top mainly because of the entrance of BhartiAirtel. Energy was also top because of a deal with a Danish company to produce energy. Last year, we also attracted some pretty good investments from agriculture. We registered a project from a Canadian company to grow Stevia, which is a plant used to process a sweetener like sugar. Stevia is for export and this project is in Rulindo.

    When you give these figures, are they investments attracted or investments that actually kicked off? These are investment deals that were closed. Actually in 2012, we want to make sure that when investors register and promise a certain kind of investment, they can actually deliver on their promises. However, within the course of this year, we shall be able to sit with the National Bank of Rwanda and National Institute of Statistics to track the actual investments that kicked off.

    What about forecast for 2012, what is your target for this year? We are revising our 2012 target upwards because we exceeded the 2011 target. We think we can reach US$800 million this year but will announce the figures once we have finalised.

    To some people, this figure seems unrealistic. What parameters do you use to come up with these estimates? First and foremost, we want investments to be 30 percent of GDP by 2020. Today, investments attract about 22 percent of GDP and since in 2005 it was just 16 percent that is growth. We look at all national targets, like say EDPRS, and we work backwards on what we need to achieve for each year. We know where we want to go and we know where we come from and we see what is realistic.

    There is a feeling that you concentrate on attracting foreign investments and ignore attracting local ones. I think that is an assumption. For us at RDB, local investments are equally as important as foreign investment. They both bring something on board. Last year in 2011, about 56 percent of the 139 projects registered were Rwandan investments. The strength is that we get to have more Rwandan projects. Foreign projects bring in higher value because they have access to more capital. Last year alone, foreign projects accounted for 68 percent of the value. We attracted US$626 million in 2011 of which US$372 million was the value of foreign investments (excluding EAC) and US$199 million was value of Rwandan investments.

    With a struggling global economy, you still managed to surpass your 2011 target by US$76 million. What was the magic? At global level, the economy is not healthy. So, because of this, investors are looking to enter new markets and Africa offers that. In Africa, there are more opportunities because our economies are still growing and are not as exhaustive. In other African countries, IMF expects exponential growth. And this is not growth you will witness in other parts of the world. So Africa is becoming more attractive. Rwanda’s continuous work to have a more attractive outlook makes us a preferred destination for investors. Look at our investment climate and our sovereign rating, the latest from ‘Standard and Poors’, Rwanda was rated with a ‘B’ but with a more positive outlook. This shows a high level of optimism about investing in a country like Rwanda.

    What is RDB doing to make sure this kind growth is sustained, more especially on the side of investments? We have developed a rapid economic growth strategy. We have re-aligned the way we work with Singapore, a country we want to pick lessons from. During the course of 2011, our senior management visited Singapore with the purpose of learning from them. They also visited Rwanda. With the economic growth strategy, every department in RDB promotes investments. It is no longer one single department doing investment promotions. For example, ICT promotes investments in ICT and so does the tourism department. This increases the effort of investment promotion. We have also developed a systematic way of attracting investments called the cluster approach. With this approach, each department identifies four key projects and concentrates on these. For example, ICT has chosen mobile phone applications, cloud computing, ICT education and ICT security. So, this department will ask pertinent questions like; Do we have the right infrastructure in place for applications? Do we have the right equipment for cloud computing? And if we don’t, we procure it. For ICT security, we look at which country does this best. So if this is country like India, we target it. We also look at Business Process Outsourcing (BPO). If we know a country like Philippines is good at this, we visit it.This is a systematic approach that is very successful in countries like Singapore. It is very measurable. This year, we are adding more focus on ‘after care’. When an investor registers our departments, we make a follow-up to make sure their needs are attended to.

    Talking about ICTs, what happened to the Kigali Wibro and National Data centre? Both are actually operational. We created a company called Broadband Systems Corporation that runs all government ICT projects and they include those two and National Backbone (fibre optics). Sometimes, government invests in such projects for services to be available and accessible for all Rwandans, in all the 30 districts. It’s not easy for a private company to invest in ICT infrastructure that covers the whole country; so government comes forward. Our expectation is that once these companies are up and running smoothly we can then be able to privatize them.

    How does RDB draw the line between the interests of the country and those of the investor? First of all, there is no contradiction between what government wants and what the investor wants. We shouldn’t make assumptions on this. Rwanda’s vision is to drive economic growth through the private sector. This is top priority and facilitating private sector to achieve it is important. This means we do business reforms, cut red tape look at how taxes are filled and ease this as well. But in doing our part, investors’ presence should not be at the expense of policies like, for example, environmental regulations. Some of these policies and regulations are created to make Rwanda a better place for Rwandans and even investors themselves.

    Let us talk about the case of LAP Green, particularly Hotel Umubano and Rwandatel. Don’t you think the interests of government came in at the expense of investors? LAP Green’s license was revoked by the regulator (Rwanda Utilities and Regulatory Agency) simply because they failed to do what they were required to do. They had obligations in their license requirements which they didn’t probably fulfill. A license is a contract between government and the telecom. Sometimes we don’t simply attract an investor for the sake of having an investor. Investors have to deliver on their license obligations. If you have the mentality that government should ignore its vision at the expense of the interests of the investor, then you risk assuming that government and the investor don’t have a common interest. The interest of government and the investor are aligned.

    What are the challenges you have encountered in this whole process of attracting investors and investments? One of the biggest obstacles is availability of infrastructure to produce energy. Despite the fact that investments in energy were top attraction in 2011, it is still a priority for us in 2012 because without energy, the manufacturing industry can’t grow. Right now, we are negotiating with several companies that produce energy including a Turkish one. We are also talking with Orascom from Egypt, we have a memorandum of understanding with them, and they are already carrying out a feasibility study which should be finished in the first quarter of this year. The other pertinent issue is availability of finance. If one wants to finance a US$30million project, there must be funds, but this can be a challenge.

    But this is being addressed, we are attracting investors in the financial sector as well and there is positivity. Recently, Kenya Commercial Bankk entered the market and now Equity Bank is here. We have many projects that need to be financed like say the Bugesera Airport, which is worth about US$600million; we have a railway project coming up as well and many others. Though there is an improvement in acquiring skilled human capacity, it is a challenge. We are encouraging companies to train and equip their human resource with skills. We also have some top notch institutions like Carnegie Mellon University, a top world computer institution, which is soon setting up in Rwanda.

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  • 3billion calls made, Rwf72.6billion earned in 2011

    A report published by Rwanda’s telecom regulator says that Rwandans made over 3 billion telephone calls last year. According to the report, about 20 percent of the calls were international hile the rest were within Rwanda.

    The report that illustrates telecom tariff statistics from January to September 2011 also reveals that despite earning a staggering Rwf72.6 billion during that period, telecom players including MTN Rwanda, Tigo Rwanda and Rwandatel only invested about 23 percent of that money.

    With BhartiAirtel set to start operations this year, investments in the industry are set to double by the end of 2012 as incumbent players are introduced to new competition. Airtel announced that it would invest US$100 million (Rwf60 billion) over the next three years, making it the largest ever investment by an Indian company in the country.

    Airtel is already operating in 19 countries across Asia and Africa. However the argument is whether by coming to Rwanda, it is only interested in expanding its footprint across the African continent or to engage in actual competitive business.

    With the defunct Rwandatel assets up for grabs and a new player joining the industry, RURA might consider revising interconnection fees and new figures could destabilise the already existing tariff structure of the industry.

    The report says that despite the tariffs for mobile telephone calls remaining stable from January to September 2011, Tigo was the cheapest in terms of both regional and international calls.

    “Though Tigo-to-Tigo (on-net) call tariff is twice higher than that applied by MTN, Tigo’s continuous promotional tariff for Tigo-to-Tigo calls makes it appear as the cheapest. If the normal tariff was to be applied by both operators, MTN could be twice cheaper in terms of on-net calls,” the report says.

    Currently Tigo-to-Tigo promotional tariff is Rwf18 per minute while the normal Tigo tariff to any number out of Tigo network is Rwf90 per minute. In November, MTN cut local off-net rates by 30 percent from Rwf90 to Rwf60 and calls to regional partners (including Safaricom of Kenya, MTN Uganda, Vodacom of Tanzania and Leo of Burundi) by 50 percent from Rwf128 to Rwf60.

    On-net calls are the ones made within the same network while off-net cross over to another network.

    The difference between on-net and off-net tariffs is an issue that is hotly debated between operators and regulators. Small operators contend that their competitors’ high off-net prices are anticompetitive forcing them to face aggressive on-net strategies to drive market penetration at a cost of significantly increasing on-net versus off-net price differentials.

    However, experts believe that Airtel as a new entrant in Rwanda’s mobile market might face challenges due to the structure of prices charged by incumbent networks like MTN. In particular, on-net versus off-net price differentials create tariff-mediated network externalities which make larger networks more attractive to consumers than smaller networks.

    While the report is published by Rwanda Utilities Regulatory Agency (RURA)’s website, efforts to get RURA’s boss Regis Gatarayihato comment on these issues were fruitless as he never picked his phone and never answered emails.

    MTN and Tigo officials contacted to comment on the same issues also did not respond to the queries posed by The Chronicles.

    RURA also added that despite slow growth, active mobile subscribers as of November 2011 had risen to 4.4 million. While MTN still has the geographical coverage of over 90 percent, it is also still the leading in mobile subscribers with over 60 percent of the market share with 2.9 million subscribers.

    “By September 2011 Tigo had already acquired 55 percent market share in terms of on-net calls due to the continuous on-net promotional tariff. The company had also acquired over 50 percent of the off-net traffic market by the same period,” the report says.

    “Tigo is the cheapest in terms of international calls, but figures indicate that MTN is still dominant in terms of international calls volumes with 86 percent traffic market share. This is definitely due to the bigger number of MTN subscribers,” it adds.

    Rwanda targets at least six million subscribers by the end of 2012. RURA said that the target for mobile telephony by the end of 2011 was 3.7 million subscribers. That figure was already exceeded by 15 percent as of September 2011.

    The report also says that despite the growth in mobile subscriptions, fixed lines remained stagnant at 43,095 subscribers. Rwandatel is the most active fixed line telecom operator while MTN remains with a few. Tigo Rwanda could not confirm whether the company has any subscribers on fixed lines on not. However, Rwandatel is 33 percent cheaper than MTN in terms of fixed on-net calls.

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  • Cross Border Trade Facing Continuous Barriers

    RWANDA'S Trade with other countries continues to face unnecessary barriers placed on the two major routes in East Africa that most of the country’s goods pass through. The so-called Non Tariff Barriers (NTBs) are placed on the roads to Mombasa, Kenya from Kigali and Dar es Salaam in Tanzania from Kigali. These are the two major routes Rwanda’s exports and imports pass through.

    Studies show that the Tanzanian corridor has the most NTBs while the route to Mombasa via Uganda has the least barriers. In the Tanzanian route, traders as well as transporters decry the numerous police roadblocks, bribery, weighbridges, and insecurity along the way especially during the night and lengthy customs procedures.

    On the Kenyan side via Uganda, barriers that exist include cargo theft, weighbridges and stringent limits of heavy loads that trucks should not exceed while on the Kenyan roads. All of these contribute negatively to Rwanda’s trade where the cost of doing business becomes extremely high thus reducing the nation’s competitiveness.

    Vincent Safari, the former Director of Trade and Advocacy at the Rwanda Private Sector Federation(PSF) who is currently the Coordinator of National Monitoring Committee(NMC) on elimination of NTBs under the Ministry of Trade and Industry recently showed that NTBs in the East African Community(EAC) include lack of implementation of EAC harmonised documents which delays trade, lack of harmonised procedures manual which impedes on clearing of imports and delays in transit bonds cancellation which increases the cost of transit.

    He also said that there are numerous institutions involved in testing goods and this increases time on the road, which delays delivery of goods. He said that on the Tanzanian route or the so-called Central Corridor, a survey conducted by the Private Sector Federation and the Ministry found that weighbridges on the road had increased from five in 2008 to eight in 2010 while on the Kenya-Uganda side which is known as the Northern Corridor, there were seven weighbridges on the Kenyan roads and three on the Ugandan side.

    Safari said that there were an estimated 30 police roadblocks between Kigali and Dar es Salaam and 36 between Mombasa and Kigali. These cause delays in transport and result into cases of bribery. Kenya and Uganda also have seven procedures for issuing work permits and this affects businesses. A business takes between one to five months to acquire work permits for workers sourced from other EAC countries. Lack of interface within the customs systems in the revenue authorities of the partner states is also seen as a challenge as it delays clearance of goods under customs control and it increases the cost of doing business and loss of market opportunities.

    Traders also decry of port charges and customs working hours that are not harmonised across the EAC states. They say there is n inadequate police escort mechanism and this results into loss of business/cargo. The infrastructure such as roads and accommodation facilities are also still a challenge especially to frequent travellers like truck drivers.

    All of the above threats increase the cost of doing business in the region. Trade Mark East Africa, a not-for-profit organisation that supports regional integration says that exporting a container of goods from Rwanda costs US$3,275 while importing it costs US$4,990. It says if all the potential threats are put aside, Rwanda could be saving US$42.1 million a year based on 2010 calculations. If the cost of imports and exports goes down by 20 percent, the country could save US$51 million every year.

    The increased cost of doing business in Rwanda has prompted the Government and the PSF to move faster and establish the National Monitoring Committee (NMC) on the elimination of NTBs. The committee, which has been in place for quite some time, however, has not been performing as expected because of lack of strategy, resources and organisation.

    The NMC is being revived but it could have less impact again. This is because most of the NTBs are not in Rwanda but in the neighbouring countries. The committee does not have legal powers to hold these countriesb that do not eliminate barriers accountable. What the committee will be doing is to list and monitor the NTBs but it does not have the powers to order their removal.

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