Thursday 5 November 2015

Fwd: [rwanda_revolution] The Market Mogul @Is Rwanda Ready for a Boom?

---------- Forwarded message ----------
From: Jean Bosco Sibomana sibomanaxyz999@gmail.com [rwanda_revolution] <rwanda_revolution@yahoogroups.com>
Date: 4 November 2015 at 21:42
Subject: [rwanda_revolution] The Market Mogul @Is Rwanda Ready for a Boom?
To: Sibomana Jean Bosco <Sibomanaxyz999@gmail.com>

Endowments

Rwanda is a country whose history has seen one of the great man-made atrocities. Its 1994 genocide let its people scarred and economy in ruin. Over a million people were killed and more than 3 million displaced within Rwandan borders and even more fled as refugees to surrounding nations.

Rwanda is not blessed with a multitude of resources. It is landlocked and lacks natural resources. Even though it is one of the most densely populated countries in Africa nearly 90% of the population still relies on subsistence agriculture. In 2006 57% of its population was below the poverty line, in 2011 this had marginally improved to 45%. As of 2012 over 50% of its population was under the age of 20. This illustrates the scars from the 1994 genocide. However literacy rates are high at 70.5% although few have secondary education. Their school life expectancy is 10 years for not just males but also females.

Rwanda relies heavily on exports in coffee, tea and the minerals Cassirerite and Coltan. The crash in global mineral prices is likely to have a significant slowdown effect on the Rwandan economy and GDP growth in 2016.

Infrastructure

A public investment Programme including transport and energy has been prioritized.

One aspect of this is a new rail project set to connect the Kenyan port of Mombasa to the Rwandan capital of Kigali. This would be a significant step for the landlocked country as it is estimated that landlocked countries ay up to 84% more to export their goods than a coastal country. Especially considering only 10% of trade is accounted for by intra-Africa trade. The railway would stretch 2,945km and would lessen the already significant strain on the roads connecting the two cities. It will connect not just Kenya and Rwanda but would also run through the capitals of Niger and Burkina Faso. This is likely to have a huge impact on the currently lacking intra-industry trade. With the majority of the funding coming from China it is hoped production can begin in November.

Funding has been made available for the Mombasa-Nairobi link, however the Rwandan section which will cost $1.5bn is yet to secure financing.

Another project currently underway is the Rusumo falls hydroelectric power project, which will increase the supply of electricity. Financed by the World Bank and the African Devlopment Bank the power station will be built on the Kagera River at an estimated cost of $300 million. Citizens will not only be employed in construction of turbines but also the transmission lines and national grid. It is estimated to increase electricity access rates in Rwanda by 4%.

Politics

Rwanda is currently under the leadership of Paul Kagame who was once called a 'visionary leader' by Tony Blair and 'one of the greatest leaders of out time' by Bill Clinton. A frequent twitter user he is known to engage his critics in fierce debates on the social media site.

He has achieved much during his 25-year reign. He has overseen the swfit punishment of the guilty in democratic courts and his citizens have seen the GDP per capita steadily growing since.

His rule has however been marred with controversy including allegations of torture and imprisonment. Not helped by suspicions arising after the deaths of various government critics. The Economist said of Kagame:

"Although he vigorously pursues his admirers in western democracies, he allows less political space and press freedom at home than Robert Mugabe does in Zimbabwe." tweet

The current constitution currently comprises of a two-term limit of presidential terms. However, Kagame has already started the process to amend the constitution allowing him to seek re-election in 2017. This has now been confirmed and the term limits removed meaning Kagama can rule the country for the next 19 years until 2034.

The government has however instigated numerous reforms since 1994 in an effort to attract FDI and boost business and industry in the economy.

A selection of reforms

Eliminated the need for new companies to open a bank account in order to register for VAT.
Introduced provisions to protect minority investors allowing holders of 10% of a company's shares to call for an extraordinary meeting of shareholders.
Introduction of electronic filing of tax returns.
Reduced cost of obtaining a new connection for electricity.
New company law requiring greater corporate disclosure, increasing director liability and improving shareholders access to information.

Tourism

Blessed with active volcanoes, national parts, forests and home to a multitude of different species of animals. The potential tourist industry in Rwanda is relatively untapped and undeveloped. With increased promotion and investment this sector could see rapid improvements.

Aid

In 2012 the British government withheld aid payments to Rwanda due to fears that they had been financing rebels part of the M23 group in the DRC. This amounted to £21m of budget support that would have gone to the government. This followed aid withdrawals from the US, Germany and Sweden.

This was a significant complication for the Rwandan economy as Britain is Rwanda's largest bilateral donor and had in fact intended to increase its aid to £90m by 2015. The situation is especially critical since Rwanda relies on donors for about 40% of its public budget. This allows foreign funds great leverage over Rwanda's democratic, politically and economic future.

There is also significant controversy surrounding trafficking, especially of women and children for sex and slavery. Men and children have also been forcefully recruited to M23, the DRC rebel group with the consent of Rwandan officials. Rwanda has initiated major reforms and subsequently has risen rapidly in the World Banks 'Easiest place to do business' report from 145^th to around 42^nd.It has also seen significant gains in 'protection of minority investors' allowing it to climb from 121^st position to 88^th.

Stock Exchange

The Rwanda Stock Exchange, initially set up in January 2011, has shown an increase so far this year of Rwf34.4bn turnover, a 45.7% increase compared to last year. There has been an 18% increase in new investors, 78.9% of whom are in fact Rwandans. Although still extremely volatile due to currency fluctuations the exchange shows promise. Celestin Rwabukumba, the RSE chief executive officer has said that all listed firms on the RSE are blue-chip companies and market leaders in their respective markets. Some of Rwanda's largest companies have announced and successfully carried out IPO's on the exchange.

An example is Crystal Telecom, which owns a 20% stake in mobile operator MTN Rwandacel. The shares traded at a 38% premium and were oversubscribed by 123%. This was only the third firm to have a primary listing on the exchange. The future is perhaps bright for the Rwandan capital markets with companies seeking to list, invest or trade on their exchange.

They announced that on November 23^rd it would sell a three-year Treasury bond worth $20m to provide support for infrastructure financing and increase the developed in the Rwandan capital markets. They have in fact engaged in a couple of successful bond issuances in the last couple years starting from 2014.

Although clearly facing a myriad of challenges. The future is bright as President Kagame said 'Twenty years ago, Rwanda had no future, only a past. Today, half of all Rwandans are under 20.' They have overcome great adversity to be in the current economic condition they are today, with growth rates on par with the emerging Asian economies and per capita income increasing by 400% since 1994. Their Gini coefficient has fallen from 28.9 in 1985 to 46.8 by 2000 showing that not all gains from the rapid development has gravitated to the wealthy there has been relatively even growth.