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Rwanda country of opportunities Positioning

Cases, ready for investment Murakoze !

RCF: Folkert Castelein

July 2012

www.rwandachamber.org


RCF services & RwandaTrust activities RCF: (non-profit) Managing feasibility studies Finding local counterparts Contacting Rwandan governmental instances Investigation for financing

Helping designing the business case

- Secretarial support - Administration services - Payroll services

- Legal advice - Office support -Telephone Services

Rwanda Trust: (for profit) Like RDH, Paritax

- VAT services

- Business Development, projects

-Tax Advice

- Creating local companies, JV’s

- Accounting

- Management (director) of local companies

- Bookkeeping


Be aware: D.R.Congo is big as Europe , Sudan is bigger. From Rwanda to Mombassa (South of Kenya, is 1400 km. Dar-esSalaam (Tanzania) is 1600 km. Matadi (Congo) is 2200 km.

Mombassa

Dar-Es-Salaam EAC common market: 130 million people Rwanda, Kenia, Tanzania, Burundi, Uganda Duty free access COMESA: Eastern- and South Africa. 19 member states, 500 million people.


One stop border post 4507 m

Universities Climate change: More rain

Less rain Rain between 300 – 1600 mm (NL 650)

Nile 2006

10.5 mln. people, 75% of The Netherlands. Only 52% is usable

Karisimbi, vulcano Rwanda's highest point at 4,507 m.(14,787 ft).This western section of the country, which lies within the Albertine Rift montane forests ecoregion has an average elevation of 1,500 metres (4,921 ft) to 2,500 metres (8,202 ft).The centre of the country is predominantly rolling hills, while the eastern border region consists of savanna, plains and swamps. Source of the river Nile in Nyungwe Forest.


Facts & Figures President since 2000 is Paul Kagame ((Gitarama, 23 oktober 1957) . Next elections 2017 Land area: 9,633 sq mi (24,949 sq km); total area: 10,169 sq mi (26,338 sq km, 75% The Netherlands) However, out of a surface area of 26,338 km2 52% only is usable. Capital and largest city: Kigali, 900,000 p. on 1450 meters above sea level Ethnicity/race: Hutu 84%, Tutsi 15%, Twa (Pygmoid) 1% ďƒ  The Unity of The Republic of Rwanda ! Religion: 56,5% catholic, 26% protestant 11,1% adventist ,and 4,6% moslim(2001) Languages: English, French, Kinyarwanda Important institutions are RDB Rwanda Development Board PSF Private Sector Federation Biggest challenges are: Energy, low cost housing, small scale agriculture, hardly horticulture, quality standards for export, access to finance for the private sector, healthcare in rural areas


Attractive climate to invest

ďƒ 

Economic ranking out f 183 countries (Worldbank)


Rwanda economic indicators

Stabile currency, well developed financial sector, stock marget, low inflation compared with others.

Corporate tax is 30%, on dividend 15%, VAT 18%, however, all kind of incentives for FDI: License to import agricultural inputs is free of charge. Same for livestock. Investment incentives: - An investment enterprise benefits from a flat fee of 5% of the CIF value of building and finishing materials - long list of tax exemptions for imports of specific goods like machinery, specialized vehicles, equipment for tourism and hospitality industry, etc.

RRA website: http://www.rra.gov.rw/rra_article280.html


Tax regulations: many rules to support FDI

Free economic zones / International company with headquarters in Rwanda: -Is entitled to import machinery, equipment, raw materials for he industrial purposes and other goods free of duty - is exempted from corporate income tax - is exempted from withholding tax on payments - is exempted form tax on repatriation of profits abroad - there is a discount on export earnings - a discount for creating employment - incentives for construction projects If the determination of business profit results in a loss in a tax period, the loss may be deducted from the business profit in the next five (5) tax periods, earlier losses being deducted before later losses.

Employment income Tax: 0 - $600 = 0 %; - $2000 = 20%, more is 30%


Income overview RWF 100,000 = $ 165 = â‚Ź 130 (25 June 2012). Household size 4,7

Quintile

Q1

Q2

Q3

Q4

Q5

Segment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Monthly Salary Range in RwF From < 100.001 200.001 300.001 400.001 500.001 600.001 700.001 800.001 900.001 1.000.001 1.100.001 1.500.001 2.000.001 2.500.001

To 100.000 200.000 300.000 400.000 500.000 600.000 700.000 800.000 900.000 1.000.000 1.100.000 1.500.000 2.000.000 2.500.000 <

Annual Salary Range in RwF From < 1.200.001 2.400.001 3.600.001 4.800.001 6.000.001 7.200.001 8.400.001 9.600.001 10.800.001 12.000.001 13.200.001 18.000.001 24.000.001 30.000.001

To 1.200.000 2.400.000 3.600.000 4.800.000 6.000.000 7.200.000 8.400.000 9.600.000 10.800.000 12.000.000 13.200.000 18.000.000 24.000.000 30.000.000 <

Estimated % of HH Cumulative 60,89% 60,89% 13,51% 74,40% 7,43% 81,83% 4,88% 86,72% 3,25% 89,97% 2,32% 92,29% 1,88% 94,17% 1,35% 95,52% 0,94% 96,46% 0,68% 97,13% 0,53% 97,67% 1,20% 98,87% 0,52% 99,39% 0,23% 99,62% 0,38% 100,00%


Monthly HH Income RwF Quintile

Q1

Q2

Q3

Q4

Q5

From To 1< 2 100.001 3 200.001 4 300.001 5 400.001 6 500.001 7 600.001 8 700.001 9 800.001 10 900.001 11 1.000.001 12 1.100.001 13 1.500.001 14 2.000.001 15 2.500.001 <

Year

Segment

100.000 200.000 300.000 400.000 500.000 600.000 700.000 800.000 900.000 1.000.000 1.100.000 1.500.000 2.000.000 2.500.000 TOTAL DU

2012 15.212 3.375 1.857 1.220 813 579 470 338 234 169 133 301 129 58 95 24.982

2013 15.147 4.047 2.001 1.298 865 613 495 357 248 179 140 306 142 63 102 26.003

2014 15.083 4.710 2.195 1.387 922 651 521 379 264 190 147 311 155 70 109 27.093

2015 15.019 5.363 2.437 1.490 985 693 550 402 281 201 156 317 169 77 117 28.257

2016 14.955 6.007 2.726 1.610 1.056 739 582 428 299 215 165 323 183 86 127 29.500

2017 14.892 6.642 3.061 1.751 1.135 790 618 455 320 229 176 330 197 95 138 30.828

2018 14.829 7.267 3.441 1.915 1.224 847 656 485 342 245 187 338 212 106 151 32.245

2019 14.767 7.883 3.865 2.108 1.324 910 699 518 367 262 199 346 227 117 164 33.757

2020 14.705 8.491 4.332 2.330 1.439 980 747 553 394 281 213 355 243 130 179 35.371

2021 14.644 9.089 4.842 2.586 1.569 1.058 799 592 423 302 228 366 259 143 198 37.097

Estimation of Housing Demand 2012-2022 / Kigali

2022 14.583 9.678 5.392 2.878 1.717 1.146 856 635 455 325 244 377 276 158 217 38.937

Total DU per TOTAL DU Quintile Proportion 163.838 72.553 36.149 272.540 79% 20.572 13.048 9.005 42.624 12% 6.994 5.142 3.626 15.762 5% 2.599 1.987 3.669 8.254 2% 2.193 1.103 1.596 4.891 1% 344.071

Q4; 2% Q5; 1% Q3; 5% ;

; ;

;

100,000 RWF = $ 169 Q2; 12%

Europe Aid/127054/C/SER/ multi HOUSING MARKET DEMAND, HOUSING FINANCE AND HOUSING PREFERNCES FOR THE CITY OF KIGALI PLANET CONSORTIUM Ars Progetti

257,406 DU ( 79%) of demand concentrates in Q1, of which 163,838 DU (47%) is demand constituted by HH with income of Rwf 100,000/month and less.

;

Q1; 79%


Worldbank figures Economic ranking out of 183 economies

2nd global reformer 20062012 (World Bank)


Republic of Rwanda facts: The Government of Rwanda has sought to privatize several key firms. Since 2007, the telecom and mining sectors have been largely privatized, and the government has sold off several government-owned tea estates and made great strides in completing privatization of the banking sector. RECO, the utility monopoly, remains to be privatized, as do several other parastatals. Huge program in land registration (Kadaster) up to 12 mln registered ownerships of land.

There is an open trade policy, a favorable investment climate, cheap and abundant labor, tax incentives to businesses, stable internal security, and crime rates that are comparatively low. Investment insurance also is available through the Africa Trade Insurance Agency, the Overseas Private Investment Corporation, and the World Bank's Multilateral Investment Guarantee Agency (MIGA) The implementation of a value added tax of 18% and improved tax collections are having a positive impact on government revenues and thereby on government services rendered. Banking reform and low corruption also are favorable current trends. Today, 95 of children goes to school.There are about 20 institutions of higher learning in Rwanda. Between 1963-1993, Rwandan university graduates numbered roughly 1,900; today, Rwandan university graduates exceed 55,000.


Agriculture, export & import GDP growth 2011 was 7%. GDP $6 billion: Agriculture 33.6%, industry 14.1%, services 52.3% Cultivated land is 46%, 1.8m ha.. Fertilizer us 16 kg / ha.

52% of cultivated land is in use for families only. The size in average is < 0,4 Ha

Export 2011, $300 million. Kenya 36.6%, Democratic Republic of the Congo 14.7%, China 9.1%, Swaziland 5.9%, US 5.3%, Pakistan 4.6% Imports 2011, $1,307 billion. foodstuffs, machinery and equipment, steel, petroleum products, cement and construction material

x1000


Products--coffee, tea, pyrethrum (insecticide made from chrysanthemums), bananas, beans, sorghum, potatoes, livestock and nuts. Coffee and tea account for 50% of all export, (minirals like tin, tungsten, wolfram, chromium, etc. 40%, manufactured products 5%, orther agriculture & livestock 5%)

Wheat milling industry is the third sector ($50m). The livestock sector contributed US$60m to GDP in 2011, the fishery sector $11.5 m. (consumption is 1 kg pp / year. But Rwanda has 24 large lakes.)


Initiated Investment projects in Rwanda Scaling the Poultry chain: feed – hatchery – rearing

layers - eggs

broilers - slaughtering – processing – distribution - export

Animal feed: Maize Mill factory 5 MT / hour $600,000; dosing $180,000; pelleting $300,000; Soybeanprocessing 2 MT / hour $600,000. ROI > 10% Parent-stock (10,000), 2 buildings, & hatchery (1 building, 35,000 chicks / week) $435,000. ROI 20% Pulletfarm (100,000 18-week chicks/year) $600,000 Broiler farmhouse (10,000) $160,000. 35,000 x 2.2 kg broiler / y. Layer farmhouse (5000) $60,000. 1.5 million eggs / year Egg-tray factory $ 150,000. Profit $75,000 / year Slaughterhouse & meat processing plant 15 MT/day $4 million


Buildings (storages, factories) & affordable housing

Mobile factory for local production of bricks: $ 150,000

Mobile factory for local production of steelframes: $ 750,000


Energy, an interesting challenge


Energy Current installed generation capacity is 93.27 MW, generated from hydropower (57MW, 59%), thermal energy (40MW, 40%), and PV (0.25 MW%). To be added: methane, peat, waste, and wind. Many projects waiting for investors. Solar power: 10 KW turn-key off grid system $55,000. Tariff from the grid is $0.225 / KWh. Gasoline & fuel is $ 1.65 Microfinance refrigerators & battery & ledlight chargers on solar panels. Standâ&#x20AC;?alone 50W system $195 (CIF) Powerplant or CHP on methane gas. 3.3 MWe is $2.2 million delivering also 3.4MWh and CO2, usable for greenhouses . Income 3300 x 8000 hour x $0,156 = $4,118,400 / year. Cost of CH4: 850 x 8000 x $0.45 = $3,060,000 / year. Exploitation, maintenance & depreciation $400,000 / year. EBIT $650,000 ./ year Off-shore plant for winning CH4 in lake KIVU plus 5 MW powerplant, infrastructure: $15 million. Hydragas, KIVUgas, Worldbank $7 million. Search for $8 million


Greenhouse tomatoes 5 ha investment turn-key $8.5 million. Revenue 2.5 million kg tomatoes / year = $ 2.5 million. EBIT about $900,000 . With 20 ha over 10% of synergy

Agriculture & processing BIO-oil: Ikirezi Natural Products produces quality organic geranium oil. Ikirezi currently has approximately 30 Ha of current land under cultivation and distillation capacity to produce over 2.5 MT of geranium oil annually. The five year plan targets an expansion to 400 Ha of geranium and patchouli producing 6MT and 9MT respectively, with an annual turnover of approximately two million USD/yr.

Investment: GoR grant support (via IFAD) of ~700K $ over the next five years. $1million in new equity (FDI), 250K USD in debt. Projected Investor / Shareholder ROI greater than 30% and IRR of 22%


Beans: Rwanda Agri-Business Industries Limited (RABI) is engaged in the business of processing agricultural commodities (mainly beans) into precooked and packaged food products for sale inRwanda and also in the regional market. The opportunity to invest $8Mâ&#x20AC;&#x201C;$10M into a common beans processing and canning business will yield an expected IRR of 30%â&#x20AC;&#x201C;35%, with net income of ~$3M (by year five of business) Fruitprocessing: SONAFRUITS has made its primary business in the processing of fruit, into concentrate and ready-to-drink (RTD) fruit juice for subsequent sale to the local Rwandan market. Primarily focused on the passion fruit market. Investment required $ 490,000 in new equity. Projected Investor / Shareholder ROI greater than 13%.

Avocado: Avocado exports from Rwanda and Revenues are projected to be 4,000MT and $7.8M respectively by year five. The initial investment will require $2.9M for sourcing and packaging. Project IRR is forecast to be 38%, with Net Income of $1M by 2017


Fertilizers: import & distribution .  The Government of Rwanda’s strategy to increase agricultural productivity through increased fertilizer usage has grown the fertilizer market to 32,000 MT over the last 6 years  The Government now plans to privatize the market and encourage the entrance of more private sector players to increase market efficiencies, fertilizer utilization and technical agro-capabilities  With privatization and the planned market building initiatives, Rwanda’s fertilizer market has the potential to reach 48,000 MT in volume and over $46M in revenue over the next 5‒7 years

Utexrwa, textile factory. 565 employees. Investment Required: New equity investment of $960,000 and New debt of $975,000 with preferential terms. Projected Investor / Shareholder return on equity of 41% and payback by year three.


Wheat: SOTIRU plays an important role in establishing the wheat value chain, developing wheat farmers. New equity investment of $325,000. Plus $730,000 in commercial loans. And $400,000 in MINAGI directed farmer support. Projected Investor / Shareholder ROI up to 17% with an annualized return on equity of 5% by year 3; IRR of 12% over 5 years. Seeds: The Government of Rwanda currently provides seeds for free for crops such as maize and wheat through the Rwanda Agricultural Board (RAB), which buys certified seed through the Crop Intensification Program (CIP). Agrotech and Africhem are small local private importers. The Rwandan climate is perfect for seeds. There are a lot of possibilities to start production in seeds for export of forage seeds, legume, flower, grass.

Dairy processing: Rubilizi (1952). A 5 year plan is in place to increase production capacity from its current 2,000 L / day to a still modest production capacity of 8,000 L /day across pasteurized milk, fermented milk and yoghurt. Investment Required: $400,000 in new commercial loans and $250,000 in new Equity. Projected $2.16M by 2016; 25% Gross Margin; 10% Net Margin.


Leather: Rucep is the only leather company and producer of wet blue skins in Rwanda. In 2005, Rwanda exported 5 million USD in leather goods and by 2012, leather exports are projected to reach 12.6 million USD. Investment Required: FDI $350,000. Projected Gross Margin of 38% and 2016 Revenues of $2.1M. Projected Investor / Shareholder ROI more than 30% and payback within 1 year. Return to farmers (agricultural laborer incomes total $2.7 million over 5 years) Soybeans. There is a high, unsatisfied demand for soy-based cooking oil, which is currently imported. Also high demand for protein in animal feed. The scale of the opportunity is confirmed by Soycoâ&#x20AC;&#x2122;s $15m investment in this sector, aimed at producing soybeans for local consumption and processing oil and animal feed. Mushrooms: growing on the residues of rice, maize, sorghum, a.o., in 30 cooperatives (1000 growers). The national demand of over1600 mt doubles the supply. Market price is high, $3.25 / kg. In March 2012 a new seeds production factory was launched by Minagri, to produce 20,000 seeds / day. Challenge is the costly production methods from today.


Tourism

Number of hotel nights is growing 50,000 / year !


Kigali, 1,000.000 residents


Rwanda.Investments