There are a number of good reasons to consider investment in Rwanda in 2023 and in this article we explore five of them. They include: strong projected growth; sound and stable governance; market access; ease to do business; and investor friendly climate and incentives.
(1) Strong projected growth
Rwanda’s GDP growth was 6.9% in 2022 and projected to be 7.9% in 2023 which is on the back of Rwanda’s year-on-year real GDP growth rate of around 8% from 2007-2011;
GDP growth rate one of the highest among African economies with Rwanda the 2nd fastest growing economy in Africa (7.5% p.a. since 2007);
The Post COVID recovery is well underway with government support to small and medium enterprises and high ongoing levels of international interest in Rwanda;
Current account and fiscal deficits are expected to narrow on the back of increased domestic savings from envisaged fiscal consolidation, reforms in commercial agriculture, and the digitization of some services;
Rwanda has a young and growing working population (~70% of population under 30);
Numerous infrastructure projects are planned or underway that will underpin Rwandan economic growth. These include the likes of the Green city project, Rusizi Hydropower Plant, Bugesera International Airport, Kigali Central Sewerage, Lake Kivu Methane Gas Project, and Base Rukomo Nyagatare Road project.
(2) Sound and stable governance
Rwanda is recognised as having a stable, forward-looking government that is supportive of inwards foreign investment. Examples of how Rwanda continues to advance through sound governance include:
The political stability achieved under President Paul Kagame who has been in power for over 23 years and who has the possibility of further re-election. Kagame is credited with guiding the country out of the trauma of the 1994 genocide and into the period of rapid growth now witnessed;
Partnership with global institutions. The World Bank Group’s (WBG) Country Partnership Framework (CPF) FY21–FY26 is focused on five areas: Improved Human Capital; Improved Conditions for Private Sector Development; Expanded Access to Infrastructure and the Digital Economy; Increased Agricultural Productivity and Commercialization, and Intensified Urban Agglomeration. World Bank progress report in 2023 notes that there are 21 national and regional projects with a net commitment of $2.83 billion.
Rwanda’s has a low debt ratio of around 69 % when compared to the region;
The reasonably stable credit ratings with Standard & Poor's credit rating for Rwanda at B+ with stable outlook, Moody's at B2 with negative outlook, and Fitch's at B+ with negative outlook;
Government initiatives to increase the level of domestic savings, reforms in commercial agriculture and the digitization of services;
Rwanda’s aspiration to Middle Income Country status by 2035 and High-Income Country status by 2050. It is seeking to achieve this through rolling seven-year National Strategies for Transformation (NST1);
Recognition as one of the ‘Most improved nations in human development in the world’. The World Bank’s Human Capital Index (HCI) scored Rwanda at 0.38, which is higher than average for low-income countries;
An UNDP assessment in 2021, the ‘National Human Development Report reviewed Rwanda’s solutions that have been in implementation for over a decade. They include the social protection Umurenge program; community-based health insurance; Imihigo; the Girinka program; and Umuganda for community work. The UNDP report concludes that these initiatives have contributed to inclusive human development, reduced vulnerability, created social cohesion, and enhancing participatory and accountable governance. It is also noted that they have helped families access health care, improve diets, raise educational levels, and reduce poverty;
Strong support for the education system with over 3,172 classrooms constructed through the Umuganda program that have contributed an estimated $127 million (from 2007 to 2016) to the Rwandan economy;
Government support for small and medium sized businesses (as evidenced most recently during the COVID-19 pandemic);
Representative government with ‘most women in Parliament’ and in a gender-balanced Cabinet in the world (respectively 61% and 50%);
Housing provided for vulnerable persons – no recent figures are available however from 2017 to 2018 over 3,400 houses were constructed;
Ongoing focus on safety and security with Rwanda assessed as one of the safest places in Africa and the ‘fifth safest country to walk at night’ worldwide;
The Rwandan Franc has been assessed as a relatively stable currency.
(3) Market access
Rwanda is a small but growing country in central Africa with plans to become a middle income country by 2030. A key advantage Rwanda offers is its location and access to bigger regional and continental markets.
In 2023, Rwanda had a population of 13,881,675 people with growing purchasing power;
Rwanda has good regional market access including around +162 million people in EAC (East African Community); +430 million people in COMESA (Common Market for Eastern & Southern Africa), and +90 million people in the CEPEGL (Economic Community of Great Lakes Countries);
Rwanda is emerging as a hub for an increasingly integrated East Africa with its central location bordering three countries in East Africa, part of EAC Common Market and Customers Union;
There is strong African hub potential with the good growth and connectivity of Rwand Air;
Rwanda is ranked second overall in Africa for MICE (Meetings, Incentives, Conferences & Exhibitions) capacity and has +19 rankings in 4 years;
Rwanda currently has a duty-free/quota-free market access for goods entering the European Union (EU) and separate access to the American market via the through the American ‘growth and opportunity act’ agreement;
Rwanda has signed bilateral investment agreements with a number of countries including the US, South Korea, Congo and more are anticipated;
There are also Double taxation agreements with the partner states of the East African Community, Mauritius, South Africa, and Government of Jersey.
(4) Ease to do business
Rwanda has established a number of initiatives that have raised the profile of the country in terms of the ‘ease to do business’.
Rwanda is currently ranked second for doing business in Africa and number one for Government transparency;
In terms of digital infrastructure, Rwanda is ranked first in the EAC for network readiness with 95% 4G LTE network coverage and over 7,000km of fibre;
Rwanda has a rapidly growing educated and multilingual workforce (with over 50k tertiary graduates per year); English is being promoted as a key language for international business;
Fast online government registration process is available for business and investment related activity;
Assistance is provided for tax-related services and application for exemptions;
Assistance is also available for a number of other elements including: access utilities (water and electricity) and obtaining visas and work permits;
There is a ‘One stop centre’ for the provision of notary services, and the provision of aftercare services to support project implementation.
(5) Investor friendly climate and incentives
Rwanda has sought to create an attractive investment environment and in 2021 approved a new investment law (Law no. 006/2021). This law seeks to facilitate investment in the country and position the Rwanda as a gateway. Rwanda has also adopted a variety of incentives for investment in key priority sectors. These include:
Low corporate income tax at 15% for strategic sectors (including energy, transport, housing, digital, and financial services);
0% corporate income tax for companies who relocate headquarters or regional offices to Rwanda for a fixed period;
A 7 year corporate income tax holiday for priority sectors (i.e. manufacturing, energy, ICT, health services and export related investment projects);
Accelerated depreciation of 50% for key priority sectors (including tourism, construction, manufacturing and agro-processing);
Exemption of capital gains tax within defined categories and repatriation of capital and assets;
For companies based in Rwanda there is a 3% rate for collective investment schemes or investment SPVs; internationally operating trading companies; foreign sourced royalties for Rwanda based IP companies; 15% for sectors, such as energy, transport, ICT, tourism, affordable housing and financial services; 15-25% for companies exporting goods and services;
Preferential withholding tax of 0% on interest, dividends and royalties for investors benefitting from the 3% and 15% preferential corporate income tax rate.
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GJC notes this report is provided for general informational purposes and is subject to change and investors should seek further updated information from the Rwandan government as required.
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Last updated: May 2023
George James Consulting.
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