Kenya has opened up its lead as the biggest East African investor in Rwanda with its expanding ventures in education, retail and services.

Its investment, estimated at $100 million in 2011, is spread across all sectors of the economy and business executives believe it has crossed the $150 million mark. Recently, a delegation of 75 representatives from Kenyan businesses was in Rwanda to explore investment opportunities in the country.

“Rwanda is business friendly. It has a stable economy and the economic outlook is positive,” Kenya’s ambassador to Rwanda, John Mwangemi, told The EastAfrican.  

The diplomat however said some Kenyan investors had expressed concerns over contract enforcement in the country.

“In case of a dispute, the speed of resolving it is quite slow.”

It has taken KCB Rwanda more than two years to recover some Rwf3 billion ($6.25 million) that it lent to a Kenyan-owned real estate company in Rwanda, DN International, which is in liquidation, through the commercial courts.

A recent bid by KCB Rwanda to auction its debtor’s assets was challenged by the company’s other creditors, who insist that the bank should compromise and drop accumulated interest on the loan to make it possible for them to be paid. KCB Rwanda insists it has principal rights over the property as provided for by the country’s mortgage law. 

Meanwhile, Uchumi Supermarkets is set to open at least three branches in Kigali and other towns early next year following its recent cross-listing on the local bourse.

Cross-listing on the Rwanda Stock Exchange (RSE) is dominated by Kenyan firms — Kenya Commercial Bank (KCB), Nation Media Group (NMG) and now Uchumi. 

Good potential in market

Uchumi CEO Dr Jonathan Ciano said the retail chain’s board was motivated by the conviction that there is great potential in the Rwandan market and that the country’s leadership is keen to see the emergence of regional institutions that support East African economic integration.

“As our drive towards regional growth gains momentum… it is timely that as we plan to set up Uchumi branches in this market we also empower investors here to stake a claim to the ownership of Uchumi, and all our East African citizens should pride themselves on owing a piece of the supermarkets,” he said at the cross-listing ceremony.

The retailer is expected to face stiff competition from supermarkets such as Nakumatt Holdings, the first Kenyan retail chain to set foot in Rwanda; Simba, which belongs to a local investor; and the Chinese-owned T-2000.

While the Kenyan expansion has been led by banks — KCB, Equity Bank, Fina Bank and, most recently, the acquisition of a majority shareholding in the Commercial Bank of Rwanda (BCR) by Kenya’s I&M Bank the latest major investments are in the education sector.

Private Kenyan institutions of higher learning — Mount Kenya University and Jomo Kenyatta University — have opened branches in Rwanda, with the former’s enrolment estimated at 4,000 in three campuses across Kigali.

According to the 2011 Foreign Private Investment  Report published by  the National Bank of Rwanda  (BNR), Kenya brought in the highest foreign inflows ($66.7 million), or 55.6 per cent of total foreign private investment, followed by Switzerland ($47.1 million), South Africa ($46.4 million) and  Mauritius ($36.7 million).

But although Rwanda’s improving business climate and a relatively less corrupt environment have made it a magnet for regional investors, its relatively high cost of doing business owing to high energy costs and shortage of a critical mass of skilled labour continues to present challenges. 

High transport costs, estimated at $3,275 to ferry a container from the Mombasa port, also make imported goods and services dear.

Professional development

“Labour costs are very expensive — the few who are skilled become very competitive because you have to pay them a lot of money to retain them and, if not, reinvest in training,” said Maurice Toroitich, the managing director of KCB Rwanda, adding that professional development across finance, audit, legal practice and engineering was still below the required levels. 

Low purchasing power is also affecting business turnover.

Deacons Kenya, which came to Rwanda in December 2011 with an investment of $1.4 million in two shops — namely, Mr Price and Mr Price Home — is considering closing the latter after it failed to attract enough buyers for its home products.

Other Kenyan companies with operations in Rwanda are shoe maker Bata and Unilever.

Instructively, Rwanda’s investment promotion agency, Rwanda Development Board, is targeting $1.3 billion in investments this year.