Why you should invest in Rwanda in 2021

By Alice Muigai

After the genocide of 1994, Rwanda’s economy plummeted as the war brought more than half a million casualties. It led to the impoverishment of its population, devastating Rwanda’s already fragile economy, which shrank by 50% within the year of the genocide, and the Per capita income dropped to $80 a year.

Since then, Rwanda has made significant progress and development in the economy, as indicated by the Gross Domestic Product (GDP) annual growth rates. According to The Ministry of finance and economic planning, Rwanda had a growth rate of 7.6 in 2012, 7.4 in 2013, and 7.8 in 2014. Exports of coffee and strong tea and a successful government policy were the main contributions to the growth.

Here’s everything you need to know about investing in Rwanda.

Investment Regulations in Rwanda

The government of Rwanda has implemented successful regulatory reforms since 2008. The reforms include new intellectual property law, a law establishing the Kigali international centre, a law on arbitration and conciliation in commercial matters, and a new company law adopted in 2009.

Therefore, these laws have reduced bureaucratic barriers, creating a conducive environment for both domestic and foreign investors.

Rankings

The investment reforms made by the government of Rwanda have made the World Bank Group rank Rwanda among the top business climate reformers in 2011 and 2012.

As a result of these reforms, Rwanda was ranked 46 out of 189 economies in the World Bank Doing Business report 2015, in terms of convenience of doing business. It ranked 3 in sub-Saharan Africa, which includes fast-developing countries like Kenya and Tanzania.

Consequently, Rwanda has made notable annual reports progress in the 2014 economic freedom index. It is ranked 4 out of 46 countries in Sub-Saharan Africa. Rwanda has made significant improvements in 3 out of the ten economic freedoms.

Bilateral and Multilateral treaties

Rwanda has made several bilateral and multilateral treaties with foreign investors for business transactions, and they include bilateral investments with Germany, Belgium, and the United States. Rwanda has Trade agreements with the USA, Germany, Netherlands, and Switzerland.

The country has also made Tax treaties to avoid double taxation, with Mauritius, South Africa, and Belgium, which means companies operating in Rwanda are not subject to double taxation.

Rwanda is a member of the East African Community, the Common Markets for Eastern and Southern Africa (COMESA), the African Union, the Africa Trade and Insurance Agency, and the World Trade Organization.

Rwanda is a part of the World Intellectual Property Organization and the Paris Convention on Intellectual property. It has enhanced Foreign direct investment.

Investment Promotion

Rwanda’s Development Board, which we established in 2008 to facilitate new investment projects. As a result of the investment law of 2006.RDB has consolidated various government agencies previously involved in promoting investments. The agencies now work as a group and act as an information centre for investors to obtain the required approval certificates land, work permit, and tax incentives.

The RDB also evaluates the business plans for potential investors to allocate investment incentives better and record income from investments. The board targets investments in the energy, tourism, and Information Communication and Technology sector.

The government of Rwanda invites all Foreign investment in all sectors with no restrictions on equity or ownership.

Investment Incentives

With the recently approved investment laws, Rwanda has several investment incentives for investors.

Fiscal Incentives

These include zero corporate income tax, 15% corporate income tax for priority sectors, and exemptions from capital gain tax.

Non-fiscal incentives

These include incentives related to accessing and obtaining crucial documents and service inquiries like visas and work permits. Investors registered with the RDB can obtain certificates that make them eligible to reduce corporate income tax payable, value-added tax freedoms on all imported vehicles for investors and their foreign employers.

Other privileges include duty exemption on plant, machinery, and equipment.

Additionally, Rwanda’s government offers an investment allowance of 40% of the amount invested in new or used assets.

Investors with investments that demonstrate the capacity to add value and invest in priority sectors such as ICT and energy enjoy more generous incentives. Investors who promote rural areas have granted Speed access credit.

Tax

In Rwanda, the tax policy ensures every resident individual must pay income tax on all of Rwanda’s income. None resident individual is subject to income tax on the revenues sourced from Rwanda, including employment income, at a withholding tax rate of 15%.

For foreign corporations to be considered a resident, Rwanda law has to be established or establish its Headquarters in Rwanda.

Income from foreign sources is subject to corporate tax. Corporates are charged at a rate of 30% on a company’s earnings after deducting expenses from the total revenue.

A non-resident company dividend and profits are subjected to a 15% withholding tax unless the countries involved operate under a tax treaty. Interest paid is also subjected to the 15% Withholding tax and a tax on royalties.

Capital gains are taxed at 30%, while capital gains on secondary market transactions are exempt from taxation. Value-added tax is on any sale of goods and services. The standard VAR rate in Rwanda is 18%. With the above information discussed broadly, the perspective here is some of Rwanda’s specific investment opportunities.

Investment Opportunities in Rwanda.

Agriculture Sector

Agriculture is the primary economic sector for the people of Rwanda. It employs 90% of the workforce and contributes 35.9% of the GDP. The sector is a success since manual labour is readily available in Rwanda. But skilled professionals are limited due to the county’s recent tragic genocide, although the government has made considerable investments in the education sector.

In this sector, coffee and tea make up Rwanda’s significant exports, accounting for a substantial part of the foreign exchange earnings. The major markets for coffee exports being the US and Europe, while the primary market for tea export being the middle east and Pakistan. The sector also meets the national food needs.

Investment opportunities exist in Rwanda’s following agricultural sectors: Dairy, Poultry, farming, aquaculture, mechanization, crop sourcing, block chain, agro-tourism, manufacturing of agriculture equipment, and cold chain logistics.

Energy sector

The energy sector in Rwanda is still developing. Over 80% of its energy is always sourced from wood or in its processed form: Charcoal.

This form of energy is used mainly by households. The high use and demand of it have led to the deficit of wood for domestic life and economic activities. Rwanda, for now, faces substantial electricity problems, therefore, providing you with investment opportunities in the Rwandan energy sector.

A sustainable energy source’s high need pushed the government to create investment opportunities in the energy sector, including installing standalone solar systems for households and Mini-grid systems’ structures from various resources, solar, hydropower, and biomass.

Banking and finance sector.

Investments in Rwanda’s banking and financial sector are small since less than 20% of the country’s adult population has access to financial services or has a bank account. Nevertheless, the industry has made great strides towards modernizing its services.

The industry is stable, well-capitalized, profitable, and liquid. The sub-sector consists of the Central bank, commercial banks, and the Development Bank of Rwanda.

The major obstacle you will face as an investor in the banking sector is the limited access to credit, the high-interest rates on loans and most loans are short-term.

The following are the investment opportunities in the banking sector;

Agriculture financing

In this sector, you can introduce innovations or products to improve value chains with the agriculture sector.

Real estate investment trust

The real estate investment trust presents an opportunity for Rwanda.

Market, especially financing and supply options for affordable housing, hotels, shopping malls, and offices.

SME financing

Small and Medium Enterprises are the leaders of job creation and economic development in Rwanda. If these enterprises’ business environment is improved, they can become more profitable, increase in size, and tap into regional and global markets.

This untapped potential offers investment opportunities to the Financial institutions experienced in SME financings such as private equity and venture capital funds to increase finance access for this enterprise category.

International bank representative office

International banks can establish a representative office in Rwanda by adopting a low-risk amplification route into the Rwanda market. An International bank represented in Rwanda will support large projects initiated by both government and private sectors. Then, present opportunities that range from Trade Finance, investment management, corporate structuring, corporate finance, Treasury and Pension Fund Management, and asset finance for the representative bank office to introduce to the broader bank group.

Telecommunication and ICT sector

The government of Rwanda has made ICT a high priority sector and has granted licenses to foreign investors such as MTN and Tigo Rwanda. The investors have been instrumental in the government strategy to develop a knowledge of the economy to facilitate business in general.

Rwanda’s ambition to become a regional hub in capacity building in ICT has made the government invest in developing ICT infrastructure to enable service delivery.

Investment opportunities in the ICT sector include software development, software R&D, cloud computing, E-governance, ICT education and training, business process outsourcing, ICT business financing, and IT consulting.

Mining sector

Rwanda’s mining sector recently increased, and export earnings reached US$225 in 2014. The essential minerals mined are Tin stone, tantalite (Colten), wolfram, and small reserves of gold. The leading players in the mining industry are private sectors and small-scale artisanal miners.

The Government of Rwanda recognizes the private sector as a leader in economic development and wealth creation. Therefore, privatization is one of the critical factors in the government’s economic reform and reconstruction efforts. The government’s decision to privatize mineral concessions has also seen the entry of several prominent players, mostly from international companies, into the mining sector, both in exploration and exploitation.

The exploration opportunity was made possible by the government of Rwanda investment in exploration works in prospective target areas to generate valuable geology data to be used by mineral exploration companies. The companies carry on intensive, up to date and detailed mineral exploration. The exploration purpose is to allow the delineation and quantification of the mineral resources.

According to Rwanda mining Laws, the opportunity to exploit the minerals is not limited to companies but extended to capable individuals with proven technical expertise and financial capacity. The law grants the right to use three mines; artisanal, small scale, and large-scale mines. Holders of mining and mineral trading licenses and owners of smelting and screening companies trade the exploited mineral substances.

The good news is that trading in minerals such as Niobium and tantalite must contain at least 30% value-added. Precious minerals such as gemstones are explored and exploited at low levels. Consequently, this creates opportunities to set up cutting and polishing rocks.

Tourism sector

The tourism sector in Rwanda operates under a developed strategy that focuses on high-end eco-tourism. The industry proposed projects to enhance their tourism experience by creating high-value and low environmental impact experience for eco-travellers, explorers, and business travellers.

The projects include cultural tourism infrastructure projects, vacation villages, hotels, eco-lodges, and resorts. The projects provide an investment opportunity, and Rwanda invites private investments into developing the sector.

Why You Should Invest in Rwanda

The investment-friendly climate in Rwanda backed by laws that favour investors is one of the reasons to invest in Rwanda. Its robust governance and Anti-corruption system of government offer investors security for their investment.

Rwanda is a hub for rapidly integrating East Africa and offers investors access to markets with over 10 million people. The sustained high economic growth with an average annual GDP growth rate highly favours domestic and foreign investors with a stable inflation and exchange rate.

In Rwanda, there are numerous untapped investment opportunities with the potential for investments. They offer you a diverse investment platform in many sectors.

Are You Looking to Invest in Rwanda?

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