The Government recently announced the second phase of the Manufacture and Build to Recover Programme, aimed at fast-tracking private sector investments in key priority sectors to boost economic recovery from Covid-19 effects. The programme initiated in 2020 sought to extend tax breaks and tax credits to businesses with an aim of reducing cost of investment for new manufacturers as well as those seeking to expand existing operations. The New Times’ Alice Kagina spoke to Richard Tusabe, Minister of State in charge of the National Treasury, on the impact of the first phase of the programme and the expected outcome of its extension. Below are excerpts Can you give a brief overview of the first phase of the programme; what was the uptake and its impact? The program was initiated as a measure to drive economic recovery from the effects of Covid-19, by focusing on key priority sectors including manufacturing agro-processing, and construction because the pandemic exposed the gap in our self-sufficiency as a country. Despite global economic disruptions such as inflation, the first phase was successful where we saw investments exceeding the expected $1 billion to around $1.8 billion by end of 2022 and 36000 jobs created, more than the anticipated 25,000 jobs. ALSO READ: Manufacturing incentives attract $1.7billion in investments We received 123 companies that applied through the programme, 106 of them were approved and are operational while the remaining 17 firms are undergoing assessment. What’s the reason behind the extension of this programme? As I mentioned, there were global economic and trade hurdles, things were not as smooth as we planned. For instance, the time it took for a container of goods from European countries to reach Rwanda almost doubled and this delayed the implementation of projects. So, it’s within that context that we decided to extend, by two years, the timeline for projects in the first phase and also to accommodate more who are wishing to invest in these three sectors. How much would you estimate that the government will forego in tax revenue considering the incentives of tax breaks and credits? Truly, there is no loss for the government by offering such tax incentives to attract more investors and those expanding their business operations because we wouldn’t have gained them otherwise. This is a short-term measure which will create long-term benefits such as creating jobs for the next 5, 10 years or more of operation in the country. While you can do numbers and attach a monetary value to exemptions given, you can come up with a figure like Rwf8 billion foregone in these incentives but it is technically not a loss to the government. What value of investment do you expect from this second phase? We expect to double the investments made in the first phase and see about $2.5 billion (Approx Rwf2.6 trillion) in the next two years. You may question whether there has been any tangible impact but it takes time to see return on investment. We believe that in the next two to three years, we see this policy yielding results. For construction, we require one to have a project valued at a minimum of $10 million, and if one is setting up a new manufacturing industry/plant, the threshold is to invest at least $1 million. In agro-processing, one is required $100,000 which we intentionally minimized to attract a bigger number of investors to attain food security. If you are an existing manufacturer and have plans of expanding operations, the programme has a threshold of at least 20 per cent of your total investment or at least $1 million. How can investors be assured to venture into these sectors in the face of current cost of money due to measures taken to curb inflation? What we did is to reduce the cost of investment with an approach of removing Value-Added Tax (18 per cent) on imported goods and removal of customs duties on goods imported from African countries outside EAC, as well as tax credits. So when you put in place such incentives, in addition to ones accessed under the Economic Recovery Fund, they all reduce the cost of investment by close to 40 per cent, and it helps the person to invest without any fear. There are concerns over the gov’t prioritizing big businesses over SMEs in terms of incentives given to boost the economy, how do you respond to this? These big businesses don’t work alone, there are a number of SMEs along the value chain. For instance, a factory that produces juices will need a small company that is into packaging or if you are going to construct a commercial building, there is a whole chain of companies involved in supplying materials. But, it would be a great idea to come up with a specific programme targeting the SMEs in the country, in addition to the access to finance they get under the Economic Recovery Fund.