Kenya is emerging as the biggest East African investor in Rwanda, with significant ventures in the banking sector, retail stores, and education.

The expansion has been led by banks, the latest major investment being the recent completion of acquisition of a majority shareholding in the Commercial Bank of Rwanda (BCR) by Kenya’s I&M Bank.

Three Kenyan banks — Kenya Commercial Bank (KCB), Equity Bank and Fina Bank — already have a presence in the country’s financial sector.

Business sources say Diamond Trust Bank is also seeking a licence to start operations in Rwanda.

Investment analysts say businesses across the region are increasingly venturing into new markets due to growing competition as a result of regional integration.

“The region is now a single market, so you would expect that businesses will follow their clients. Regional expansion also has to do with the size of the market — as we continue to integrate, more businesses will move because there are opportunities for them,” said Eric Rutabana, the chief investment officer at Business Partners International Rwanda.

Analysts also say Kenyan companies have been setting up operations in other countries because of the high cost of doing business locally, with oil marketers in particular complaining of inefficiencies in government infrastructure.

But Kenya’s regional expansion has also been linked to the greater emphasis placed on EAC integration, which has facilitated easy movement of personnel, goods and services over a wider market.

Key Kenyan investments in Rwanda include regional retail chain Nakumatt Holdings, which recently opened its second local outlet with a total investment of over $8 million, and Deacons Kenya, which late last year invested $1.4 million in two shops, Mr Price and Mr Price Home.

This year, Rwanda is targeting investments worth $835 million, up from the $626 million registered last year.

Ablanus M. Mumo of the Kenya Export Promotion Council who attended Rwanda’s international trade fair last week said, “Rwanda is a secure market for Kenyan services and goods.”

Shoe manufacturer Bata and Unilever, a consumer goods company, are the latest Kenyan retailers to open branches in Rwanda.
“We want to exploit the market further by opening wholesale shops in Kigali,” said Monica Githige, export, business development manager of the Bata Shoe Company Kenya.
However, though Rwanda’s improving business climate and less corrupt environment have made it a magnet for investors, its relatively high cost of doing business poses challenges.

For instance, despite heavy government subsidies, Rwanda’s electricity charges remain the highest in East Africa currently at Rwf134 per unit, ($0.22) on average, compared with $0.008-$0.10 in the rest of the region.

Higher transport costs also make goods and services imported into Rwanda expensive.

Of the three landlocked countries in East Africa, Rwandan exporters continue to incur the highest costs, with an exporter spending $3,275 on average to transport a cargo container to the port of Mombasa, compared with $2,880 paid by a Ugandan exporter and $2,965 paid by a Burundian, according to the 2012 Doing Business in East Africa report.

Additional reporting by Kabona Esiara.