According to the Rwanda Foreign Private Capital 2015 report, FDI inflows into Rwanda were at $476.3 million and $54 billion in Africa for the year 2015, and China contributed $23.5 million in foreign private capital inflows.
Foreign direct investments from China into Africa have hit more than $66.4 billion over the past decade, an EY report for 2016 indicates. Imports from China to Rwanda stood at $358.5 million in 2016 compared to $13.4 million Rwanda earned from its exports to China over the same period. The Asian country has been strengthening trade relations with African countries and the Chinese market provides the continent huge opportunities.
Locally, the Chinese have interests in manufacturing, construction, mining sectors and supports the education and healthcare sectors, among others, with combined investments worth billions. Rwanda’s private sector says it has been working on plans to tap opportunities the over one billion people market offers.
Business Times Stephen Nuwagira caught up with the country’s Private Sector Federation (PSF) chief executive officer Stephen Ruzibiza on Friday September 22 to find out more on this issues as well as market entry challenges local firms face in China, and areas where Chinese firms can invest in Rwanda.
The governments of Rwanda and China committed to strengthen trade relations early this year when President Paul Kagame visited China. A number of agreements aimed at supporting this resolve were signed besides those signed earlier. How is the Private Sector Federation (PSF) and members working to take advantage of these agreements and the growing trade relations between the two countries?
We have ongoing sensitisation campaigns that aim at educating members to improve product quality and also ensure sustainable supply given that the Chinese market is huge.
I believe the agreements will ensure observation of rules of origin, hence making it easier for businesses to establish supply chains with flexible country of origin restrictions, and waiver of certain duties, elimination of tariffs as well as import quotas.
How is the private sector positioning itself to take advantage of the huge China market and help increase the country’s export volumes and value, going forward?
As I mentioned earlier, we are encouraging our members to sustainably increase the exportable products. In addition, the government has introduced the principle of market recapturing strategy, where the focus is to produce locally most of the products that are currently being imported. So, we believe the Made-in-Rwanda initiative will help increase quality and Rwanda’s exports to China and the rest of the world.
Apart from crafts and traditional exports, like coffee, what else can Rwanda export to China?
Rwanda is located in the region whose underneath soils compose various minerals such as cassitarite, wolfram and coltan. Research has shown that there could be gold deposits in the Lake Kivu belt. With exploitation of these minerals, we can export good quantities of mineral to China market.
What are some of the market entry challenges that local business people face while trading with China?
Transport and logistics are still big challenges as the cost of freight to and from China is high. However, with RwandAir planning to start flying to China soon, we believe this issue will be solved to a large extent.
There are also stringent requirements for food and beverages to enter the China market.
The problem is exacerbated by the fact that China does not recognise Rwanda’s standards mark of quality. The issue of dumping of counterfeit products from China by unscrupulous business people affects local firms.
To address these problems, there is need to subsidise transport cost for the Rwandan exporters; China should also ensure mutual recognition of standards to ensure intra-trade between both countries. Rwanda Standards Board should tighten surveillance to ensure only products that meet standards enter the local market.
China is one of the two top countries for FDIs into Africa. However, the question is; why more firms from China should invest in Rwanda?
Rwanda being one of the world’s enterprising and top reformed economies currently, everyone would like to invest in this country. But to be specific to the question, various reasons have led to increased Chinese investment in Rwanda.
These include abundance of affordable and skilled labour force; duty free importation of machinery and equipment, and raw materials, and on investment allowance, where an investor is allowed an accelerated depreciation (40 per cent in Kigali and 50 per cent outside of Kigali).
Others are access to a market of 150 million people in the East African Community (EAC) bloc; lack of restriction on repatriation of capital and profits; work permits: 3 automatic and free work permits for 3 expatriates, and duty free importation for EAC products thanks to the EAC Common external tariff policy, as well as personal vehicles: duty free importation of one personal vehicle, and additional fiscal incentives in strategic sectors, including energy, and ICT. Rwanda is also renowned for its zero tolerance to corruption, good governance and security of persons and investments, among others.
And as mentioned, Rwanda is a top reformer. In that regard, the country has put out priority areas of investment, which benefit from a range of incentives. So, given the capacity of China as a developed economy, we recommend Chinese businesses to invest in the following sectors; manufacturing, tourism, real estate and construction, logistics, railway infrastructure and energy.
There are other investment opportunities in agriculture, ICT, financial and mining sectors, among others.
Millions of China people travel the world annually, generating billions of dollars for many countries. What’s being done to tap this huge tourism potential China presents countries like Rwanda?
We are encouraging the hospitality and tourism sector players to improve and expand product offerings to tap markets like China. Besides, there are ongoing projects geared at developing different tourism sites across the country. Various hotels and other facilities have come up and cater for both high-end and budget visitors.
The government also ensures safety of people and property because without security and safety of people and property, we cannot have such influx of investors or visitors.
This has, therefore, increased the confidence of both sector investors to do business in Rwanda, thanks to its non-discriminatory policy. The country has created an environment where both foreign and local investors are treated equally. This therefore will continue to attract many other investors including the Chinese companies.
We encourage our members to always learn from major trading partners such as China, and devise means to help Rwanda reduce its import bill.