Diversity within Rwanda’s stock of foreign investments has shielded its economy from the adverse effects of the global financial crisis, a new report by the Central bank says. This can be viewed via its sources where 56 per cent of total foreign investments for the period 2008-2009 came from countries less affected by the crisis.
The “Foreign Private Investment and Investors Perceptions Report 2010” documents investor perceptions on Rwanda’s investment climate and other related factors that impact on the workings of such investors.
It was published by the Rwanda Working Group on foreign private capital flow that brings together officers from the Central bank, Rwanda Development Board (RDB) and National Statistics.
“This is the first survey in Rwanda aimed at capturing information on foreign private capital for the period 2008-2009.
All companies registered as foreign investments by RDB were included in the survey and thus was combined with a purposive sample of large, medium and small taxpayers captured in the Rwanda Revenue Authority database”, Ambassador Claver Gatete, the governor of Central bank says in the opening statements of the report that covered 152 companies.
He added that its findings shall contribute to the formulation of appropriate foreign private capital policies.
Rwanda’s stock of foreign investment has been growing hence driving sustained economic growth. During the period under review, investments rose from Rwf 208,656 million to Rwf 339,371 million, an increase of 61.5 percent, providing investors with a turnover of 22.8 percent while boosting employment by 29.7 percent.
“This is an indication that Rwanda is a competitive investment destination and the private sector continues to contribute to economic growth”, the report notes, adding that the competitiveness of Rwanda’s economy can be seen by the diversity of its sources where 56.0 percent of total investments came from the southern hemisphere that were mainly less affected by the global financial crisis.
The report considered different variables affecting the private sector growth and how they impact on the business climate in Rwanda.
“The perception part was intended to identify areas where the government needs to put strength to improve the business environment”.
For instance, issues such as inflation, exchange and interest rates, customs duties and corporate taxes are recorded as having a strong negative effect on the reported companies.
They advise the Rwanda Revenue Authority(RRA) to seriously consider making corporate taxes, customs and excise duty more flexible.
The companies pointed out the efficiency of support services that have propelled Rwanda’s economy to scale new heights.
Deep reforms on immigration, telecoms and internet services have been singled out by investors as the most efficient support services that have strongly and positively impacted on their business operations.
Immigration services were ranked highly following improvements in issuance of work permits and visas to foreign investors.
“This can be attributed to government’s efforts to facilitate the private sector thereby enabling more investors to be brought on board”.
However, the report highlighted areas that government needs to work on urgently. Respondents pointed out the costly support services which have a direct impact on their business entities.
Electricity was ranked as the most expensive service that highly impacted on the operational costs of business entities while the second most expensive service is road transport which similarly increases production costs.
The survey highlighted the need for continuous efforts to monitor investments that would help in strengthening data quality and formulating policies aimed at attracting and retaining new investments.