/ 16 August 2019

Rwanda’s gingerbread house

Cost of profit: Rwanda’s fortunes have turned around since President Paul Kagame took office in 2000. But his government has been criticised for being authoritarian and limiting democracy.
Cost of profit: Rwanda’s fortunes have turned around since President Paul Kagame took office in 2000. But his government has been criticised for being authoritarian and limiting democracy. (Jean Bizimana/Reuters)



Early last Thursday morning, a group of South Africans landed at Kigali airport in Rwanda. The land of a thousand hills and mountains covered in lustrous vegetation was cloudy, yet hot and humid, but the 22 visitors were not there for pleasure; they meant business.

The group was made up of representatives from established South African companies in various sectors such as mining, communication, education, medicine, manufacturing and engineering.

Other South African companies have already set up shop in Rwanda such as South African mobile telecommunications corporate MTN and petroleum company Engen.

Rwanda has established a special economic zone designed to address some of the country’s private sector constraints, such as availability of industrial and commercial land. The zone is home to American telecommunication’s company Motorola, Rwanda’s Mara Group which manufactures the Maraphone and has set up a factory near Durban, and German multinational Volkswagen.

Outside of the special zone are MTN, transnational consumer goods company Unilever, Engen, New York fashion company Kate Spade New York and multinational telecommunications giant Ericsson.

Rwanda sells itself as an investment destination for mining, manufacturing, energy infrastructure, real estate, construction and tourism.

The Golden Business Forum is a business platform that brings investors from around the world and facilitates partnership deals.

The country also makes establishing a business easy through the Rwanda Development Board, a government department responsible for the attraction, retention and facilitation of investments in the national economy. Remarkably, it takes a maximum of only six hours to register a business — at no cost.

According to Trading Economics, which provides economic data, Rwanda’s foreign direct investment averaged $232-million from 2009 to 2017, reaching an all-time high of $315-million in 2014 and a record low of $118.67-million in 2009.

Part of business’s fascination with Rwanda is it was a country in ruins and has turned itself around. The 1994 genocide lasted for 100 days and by the time it was over the smell of death hung in the air after about 800 000 people had been killed. Since 2000 President Paul Kagame has managed to turn the country away from its tragic past into a prosperous economy, all the while shrugging off criticism of his authoritarian and undemocratic leadership style. The country is now the second-fastest growing economy in Africa after Ethiopia.

The South African visitors said they were “inspired by the [Rwandans’] do it for yourself attitude” — so much so that of them some even registered their businesses in Rwanda.

Sipho Makaula, the co-founder of Makaula and Associates, a firm of engineering, safety, health and environmental consultants, said he had done so because “Rwanda reminds me of Singapore and Hong Kong. I see a hub for business.”

Lisa Sebogodi, founder of Batsumi Travel, said Rwanda had so much to offer. “The country is amazing. It’s clean, no crime.” She also registered her business during the visit because she saw a gap in the tourism market for large groups attending conferences, meetings or exhibitions.

Hussein Khen, a national sales manager at Novus Print, which has printing and manufacturing plants servicing customers across Africa, holds the same view. He said Rwanda has positioned itself to be the East African hub for trade, even though it was landlocked. “It’s a country that has embraced change and transformation.”

Khen was also impressed by the efficiency of the Rwandan Development Board.

But Willy Mukiny Yav, co-founder of the Pan African Investment Group, whose business extends from South Africa to countries such as Rwanda, the Democratic Republic of Congo and Equatorial Guinea, cautioned against companies venturing abroad before they had built a solid base in their own country. “You have to already have a good base in your country of origin — I do not think you just go there and wander around in the Congo and start a business if you do not have the muscles.”

He advised that companies should take only a portion of their business to invest in other countries and have the “ability to understand and adapt, and be humble”.

Philip Lucky, head of investment marketing at the Rwanda Development Board, said the organisation had made it easy to do business by implementing policy reforms that include reducing the costs and time to obtain a construction permit. It has also made it easy to trade across borders by scrapping some documentation and easing access to other documents.

He said Rwanda, which has a population of 12.1-million, wants to attract investors from other countries, while giving Rwandans the necessary skills in fields such as technology and engineering so that they are equipped to take up job opportunities as a result of these investment coming in to the country.

The country’s small market should not worry investors, according to Lucky. “The advantage here is that when you come to visit us, you should not look at Rwanda as just a single market. We are a very big market if you look at the East African community. The community has six countries including Rwanda. So when you set up shop here, it will be easy for you to access those markets.”

The country’s gross domestic product has averaged 7.5% growth annually since 2007 and it has a stable currency. And the World Bank said on its website that the country has been able to improve literacy, primary school enrolment and spending on healthcare.

But last week the Financial Times reported that Rwanda’s success story can, in part, be attributed to “misinterpretation” of poverty data by both the government and the World Bank.

The newspaper said its analysis of government statistics has discovered that the data have been “misrepresented on at least one occasion, casting doubt on both the strength of the proclaimed economic miracle and the integrity of Rwanda’s relationship with its biggest donor [the World Bank]”.

The government said it has progressively decreased poverty since 2001, but the Financial Times disputed this. It surveyed more than 14 000 data points and included interviews with academics, showing that rising prices for Rwandan families meant poverty probably increased between 2010 and 2014.

Steven Gruzd, of the South African Institute of International Affairs, said the Financial Times report is disturbing and needs to be scrutinsed.

“The article makes some serious claims and has evidence to back it up, despite Rwandan government and World Bank denials. The atmosphere of authoritarianism might well have made people in the system produce statistics to please the president, which may not have been an accurate reflection of the growth and poverty rates. This is requires greater investigation.”

Tshegofatso Mathe is an Adamela Trust business reporter at the M&G. She was a guest of Kaya FM, which worked with infrastructure development company Mazo Group