Nothing yet from incentives
Saturday October 10 2015
Rwanda Development Board’s new investment code that outlines generous incentives is yet to attract foreign investors, four months after its launch.
The code was passed by parliament to attract potential foreign investors to set up in Rwanda and also facilitate the local investors to take advantage of available investment opportunities.
READ: Incentives to draw foreign investors to Rwanda
According to sources in the government, no major investment had been registered by the end of last week.
Rwanda Today could not independently verify this information from RDB as chief executive Francis Gatare and Yvette Umutoni, head of investments promotion were not available for comments.
However, analysts believe it is too early to evaluate the success of the new code. In addition, Rwanda Today is informed that there has been significant inquiries from potential investors about the benefits of the new investment code.
Benefit local companies
Rwanda Private Sector Federation (PSF) said although it is yet to see a member joining the federation as a result of the incentives. The new code will mostly benefit local companies and investors.
“From the PSF side, we have not seen any investment but I think we need a period of one year at least to measure the impact of this code,” said Antoine Manzi, director of advocacy, communication and labour relations at PSF.
Mr Manzi added that local investors have benefited from the new code through easy facilitation of tax payment and easy access to raw materials.
Some of the major incentives include a preferential corporate income tax at 15 per cent, which will be accorded to a registered investor exporting at least 50 per cent of turnover of goods and services produced in Rwanda, including business processing outsourcing.
However, this incentive excludes unprocessed minerals, tea and coffee without value addition.
Another incentive is where an international company, which has its headquarters or regional office in Rwanda will be entitled to a preferential corporate income tax of zero per cent if it invests an equivalent of at least Rwf7.3 billion ($10 million) in both tangible and intangible assets in Rwanda.
Too early to tell
“Incentives were a good move for bringing in investors but it is still too early to expect investment as a result of these incentives,” Angello Musinguzi, a tax expert with KPMG. “But, going forward, after investors have understood the code we shall see significant inflows of FDIs.”
Rwanda wants to improve its investment environment in order to attract FDIs to be at par with its regional counterparts.
For example, last year Rwanda’s actual FDIs were Rwf197 billion ($268 million) compared with Rwf189.4 billion ($258 million) in 2013 while projections for this year’s are about Rwf206.3 billion ($281 million).
Although investments in Rwanda are increasing, investors and businesses still face challenges including cost of transportation and electricity, and the relatively small size of the market.
The transport costs for Rwandan investors come mainly because the country is landlocked and there are many non-tariff barriers along the trade routes.
However, the business community says that there is reduced NTBs because transporting goods from Kigali to Dar es Salaam or Mombasa has dropped to Rwf1.6 million ($2,250) from Rwf2.9 million ($4,000).