2013 Investment Climate Statement - Rwanda
Openness To, and Restrictions Upon, Foreign Investment
The Government of Rwanda (GOR) recognizes that the private sector is an essential engine of development and actively pursues Foreign Direct Investment (FDI). Since 2008 the government has undertaken a series of pro-investment policy reforms to ensure Rwanda remains competitive in attracting foreign investment. As a result, in 2013 the World Bank recognized Rwanda as the second best reformer since 2005 and ranked the country as the 52nd best country in the world for “Doing Business.” Rwanda ranks third in sub-Saharan Africa according to the “Doing Business” criteria, behind only Mauritius and South Africa. Despite Rwanda’s strong improvement in international business climate rankings, FDI levels are still low. Many current investors cite the country’s taxation regime and a flexible interpretation of the sanctity of contracts as two of the main challenges to investing in Rwanda.
Building on the investment law of 2006, the GOR established Rwanda Development Board (RDB) in 2008 to fast track development projects and to facilitate new investment. RDB consolidates several government agencies previously involved in promoting investment, including the Rwanda Investment and Export Promotion Agency (RIEPA), the Rwanda Commercial Registration Service Agency (RCRSA), the Human Resource and Institutional Capacity Development Agency (HIDA), the Rwanda Information and Technology Agency (RITA), and the Rwanda Office of Tourism and National Parks (ORTPN).
The RDB’s “one-stop” investment services center assists foreign investors in securing required approvals, certificates, work permits, tax incentives, and land registrations. Rwanda’s 2006 investment law provides permanent residence and access to land for investors who deposit USD 500,000 in a commercial bank in Rwanda for a period not less than six months. The law also fixes the minimum initial capital investment requirement for foreign investors at USD 250,000 to qualify for tax and other investment incentives. Despite RDB’s role in facilitating FDI, international investors have remarked that they have faced difficulty in obtaining or renewing work visas due to the GOR’s demonstrated preference for hiring local or East African Community (EAC) residents over third-country citizens. Investors also cite the inconsistent application of tax incentives and import duties as a significant challenge to doing business in Rwanda. By law, foreign firms are to be treated equally with regard to taxes, access to licenses, approvals, and procurement.
No statutory limits on foreign ownership or control exist. With the exception of limiting visa issuance to non-EAC citizens, there is no official economic or industrial strategy that has discriminatory effects on foreign investors.
Rwanda continues to develop its legal infrastructure. Specialized commercial courts began operating in 2008 and, with the help of foreign commercial judges, have largely cleared a substantial backlog of cases. Despite this, the Heritage Foundation’s 2012 Economic Freedom Index raises concerns regarding a lack of independence and capacity in the judicial system, as well as political interference in legal processes. Investors have commented that the sanctity of contracts is not always upheld and court judgments are not always enforced in a timely fashion. For U.S. investors, the neutral arbitration clause of the U.S.-Rwanda Bilateral Investment Treaty, which came into force on January 1, 2012, may assuage some of these concerns.
In 2008, the government implemented business reform legislation, which included new bankruptcy regulations and arbitration laws. In 2009 it approved a new Intellectual Property law. A company law also adopted in 2009 strengthened investor protections by requiring greater corporate disclosure, increasing the liability of directors and improving shareholders’ access to information. In 2011, the Government of Rwanda reformed tax payment processes and enacted additional laws on insolvency and arbitration. Under the 2012 Penal Code, the government can compel a firm to disclose proprietary information to government authorities under the auspices of a criminal investigation of fraudulent bankruptcy or other alleged criminal offense. These laws were designed to facilitate international business and to further improve the investment climate.
There is no mandatory screening of foreign investment. However, RDB does evaluate business plans of investors seeking tax incentives in order to record incoming foreign investment and to better allocate investment incentives to qualified foreign investors.
The government encourages foreign investment through outreach and tax incentives. The only difference in treatment between foreign and domestic companies is the initial capital requirement for official registration – USD 250,000 for foreign investors; USD 100,000 for domestic investors. There are no reports of foreign investors declining to invest due to these differing treatments. Foreign investors can start a new business irrespective of the initial capital requirement.
Foreign investors can acquire real estate, but there is a general limit on land ownership. Although land is owned by the state, both foreign and local investors can acquire land through lease-hold agreements that extend to a maximum of 99 years.
The government established the Privatization Secretariat and the Rwanda Public Procurement Agency to ensure transparency in government tenders and divestment of state-owned enterprises. Rwanda’s ranking in Transparency International’s “Corruption Perception Index” has improved significantly, falling from 102 in 2008 to 50 in 2012. The 2012 index continued to rated Rwanda as the “least corrupt” country in East Africa, as it has since 2010. Despite the strong improvement in these rankings, the most recent Auditor General report to Rwanda’s Parliament highlighted multiple breaches of Rwandan procurement law in 2010-2011. Some of the entities applying inappropriate procurement methods were the Ministry of Infrastructure, the Prime Minister’s Office, and the Office of the Ombudsman.
There are no laws requiring private firms to adopt articles of incorporation or association which limit or prohibit foreign investment, participation, or control.
The World Bank, Transparency International, the Heritage Foundation, and MCC have all reported improved business climate indicators over the last five years.
TI Corruption Index
50 out of 176
Heritage Economic Freedom
World Bank Doing Business
2013 (published in 2012)
MCC Gov’t Effectiveness
2013 (published in 2012)
MCC Rule of Law
2013 (published in 2012)
MCC Control of Corruption
2013 (published in 2012)
MCC Fiscal Policy
2013 (published in 2012)
MCC Trade Policy
2013 (published in 2012)
MCC Regulatory Quality
2013 (published in 2012)
MCC Business Start Up
2013 (published in 2012)
MCC Land Rights Access
2013 (published in 2012)
MCC Natural Resource Protection
2013 (published in 2012)
Conversion and Transfer Policies
There is no difficulty obtaining foreign exchange, or transferring funds associated with an investment into a freely usable currency and at a legal market clearing rate. In 1995, the government established a market-determined exchange rate system under which all lending and deposit interest rates were liberalized. The central bank holds daily foreign exchange sales freely accessed by commercial banks.
Investors can remit payments only through authorized commercial banks. There is no limit on the inflow of funds, but the central bank requires notification from local banks for all transfers over USD 10,000 to mitigate the risk of potential money laundering. Additionally, there are some restrictions on the outflow of export earnings. Companies generally must repatriate export earnings within three months after the goods cross the border. Tea exporters must deposit sales proceeds shortly after auction in Mombasa. Repatriated export earnings deposited in commercial banks must match the exact declaration the exporter used crossing the border. Rwandans working overseas can make remittances to their home country without impediment.
It usually takes two to three days to transfer money using SWIFT financial services. Other financial services companies such as Western Union and Money Gram are also available to investors seeking to transfer funds.
Since January 2007, the Rwandan Franc (RwF) has been convertible for essentially all business transactions. Rwanda has a liberal monetary system and complies with International Monetary Fund (IMF) Article VIII and all Organization for Economic Cooperation and Development (OECD) convertibility requirements.
Expropriation and Compensation
The government reserves the right to expropriate property “in the public interest” and “for qualified private investment” under the expropriation law of 2007. The government and land owner negotiate compensation directly depending on the importance of the investment and the size of the expropriated property. The RDB may facilitate expropriation in cases where the expropriation is potentially controversial. Valuation of expropriated property is often opaque and controversial. In the past several years, a number of property owners have protested expropriation of their property by the city of Kigali and claimed the compensation offered was below market value and not in accordance with the expropriation law. Currently, implementation of the Kigali City Master Plan is creating additional threatened expropriations, with property owners being compelled to construct multi-story commercial developments or face potential eviction from their property. Likewise, mining sector investors have complained that the Government of Rwanda has denied access to their mining concessions without appropriate compensation.
Rwanda’s 2007 Law Relating to Expropriation in the Public Interest requires compensation to be paid to property owners prior to relocation or expropriation. In practice, however, this procedure has not always been followed. For detailed information on the expropriation law, visit www.amatageko.net and see official gazette law No 18/2007 of 19 April 2007.
There are no laws that require local ownership, but the Organic Land Law allows the Government to expropriate land that is “underutilized.”
Currently there are no known outstanding formal disputes between U.S.-registered businesses operating in Rwanda and the Government of Rwanda. However, it is expected that investors in the mining and energy sectors will proceed with arbitration against the Government of Rwanda in 2013. Known disputes between U.S. businesses and the Government of Rwanda in recent years have been resolved either through court judgment or an out of court settlement.
On January 1, 2012 the U.S.-Rwanda Bilateral Investment Treaty came into force. Under the auspices of this international treaty, U.S. investors have the right to bring investment disputes before neutral, international arbitration panels.
Rwanda is a member of the International Center for the Settlement of Investment Disputes (ICSID) and African Trade Insurance Agency (ATI), which are supported by the World Bank and Lloyds of London. ATI covers risk against restrictions on import and export activities, inconvertibility, expropriation, war, and civil disturbances. Rwanda is also a member of the East African Court of Justice for the settlement of disputes arising from or pertaining to the East African Community (EAC).
In 2012 the GOR launched the Kigali International Arbitration Center (KIAC) as an alternative venue for the settlement of business disputes. In launching the center, the GOR aimed to reduce the cost of contract settlement and enforcement for investors. Rwanda’s Private Sector Federation estimated that investors spend approximately 68% of the value of court judgments in pursuing a claim via commercial courts. Given the recent launch of KIAC, its effectiveness remains to be seen.
In 2008, Rwanda opened specialized commercial courts to address commercial disputes and facilitate enforcement of property and contract rights. To clear a backlog of commercial cases, Rwanda hired experienced foreign judges who presided over Rwandan commercial trials. Their role was positively received and non-controversial. The law governing commercial establishments, the investment law, the law on privatization and public investment, the land law and the law on protection and conservation of the environment currently are the main laws governing investments in Rwanda.
Judgments of foreign courts and contract clauses choosing foreign governing law are accepted and enforced by local courts. Local courts lack experience adjudicating cases with non-Rwandan governing law. There have been a number of private investment disputes in Rwanda, but the government has never been involved as a complainant or respondent in a World Trade Organization (WTO) dispute settlement.
Rwanda signed and ratified the Multilateral Investment Guarantee Agency (MIGA) convention on October 27, 1989. MIGA issues guarantees against non-commercial risks to enterprises that invest in member countries.
Rwanda has maintained good relations with the U.S. Overseas Private Investment Corporation (OPIC) since the 1960s. Although OPIC’s portfolio of investments and insurance policies in Rwanda is small, the corporation has been actively involved in Rwanda since the mid-1970s.
Unless stipulated in a memorandum of understanding that characterizes the purchase of privatized enterprises, performance requirements are not imposed as a condition for establishing, maintaining, or expanding other investments. They are mostly imposed as a condition to access tax and investment incentives. Investors who demonstrate capacity to add value and invest in priority sectors generally enjoy more tax and investment incentives including Value Added Tax (VAT) exemptions on all imported raw materials, 100 percent write-off on research and development costs, five to seven percent reduction in corporate income tax if the company exports products and services valued from USD three to five million, duty exemption on equipment, and a favorable accelerated rate of depreciation of 50 percent in the first year. The government offers grants and special access to credit to investors developing rural areas. There are no import quotas for investors.
Although there are no legal obligations regarding these matters, the government encourages foreign investors to transfer technology and expertise to local staff in order to help develop Rwanda’s human capital. Recently the GOR has limited the number of visas that investors can obtain for non-Rwandan or non-EAC citizen staff, in an effort to accelerate technology and expertise transfer to Rwandan staff. Many American businesses cite the GOR’s unwillingness to support visas for expatriate staff as one of the most significant limitations on doing business in Rwanda.
The RDB has been successful developing investment incentives and publicizing investment opportunities abroad. Registered foreign investors may obtain benefits including exemption from value-added tax and duties when importing machinery, equipment, and raw materials. However, investors have complained that coordination between the RDB and the Rwanda Revenue Authority is limited, resulting in the Rwanda Revenue Authority assessing duties or taxes on registered investments despite RDB assurances that these investments qualified for tax-exempt or tax-incentivized status. This was particularly the case with regards to importing machinery and equipment in 2011-2012. The GOR has made increasing Rwanda’s revenue base a policy priority. As such, the RDB’s ability to issue tax incentives to incoming foreign investors has been somewhat constrained.
There is no legal requirement that investors must purchase from local sources or export a certain percentage of their output. However, the government gives preferential tax incentives to investors who create significant export-oriented growth. The government determines eligibility for such incentives upon request and based on several factors: exports must total at least 80 percent of production (or at least 10 percent if manufacturing under bond); capital investment is at least USD 100,000 for local investors and Common Market for East and Southern Africa (COMESA) member states or USD 250,000 for non-COMESA investors.
There is no legal obligation that nationals own shares in foreign investments or that shares of foreign equity be reduced over time. However, the government strongly encourages local participation in foreign investments. The government does not impose conditions on transferring technology.
The government is not involved in assessing the type and source of raw materials for performance, but the National Bureau of Standards determines quality standards.
There is no visa requirement for U.S. national tourists for the first 90 days of their stay in Rwanda. Foreigners applying for work permits and/or residency visas must apply within 15 days of their arrival in country. The government generally processes visa applications for United States citizen investors in a timely manner. However, the application process for work permits and extended stay visas has recently become significantly more onerous. Immigration authorities frequently request extra documentation on applicants’ qualifications and have taken multiple months to reach a decision in many cases. Applicants may facilitate the process by ensuring that they travel with original police clearances, preferably stamped or notarized. Educational documents should be on original letterhead. Applicants should also obtain a certified copy of their diplomas, should they not be traveling with the original.
Investors should be aware that East African Community (EAC) applicants are given hiring preference and the Immigration Office may refuse work permits for non-EAC citizens when it is deemed that the job in question can be undertaken by an EAC citizen.
Right to Private Ownership and Establishment
Local and foreign investors have the right to own and establish business enterprises in all forms of remunerative activity. The Rwandan constitution stipulates that every person has the right to private property, whether personal or in association with others. The government cannot violate the right to private ownership except in the public interest and only then after following procedures that are determined by law and subject to fair compensation.
The law also allows private entities to acquire and to dispose of interests in business enterprises. Foreign nationals may hold shares in locally incorporated companies. The government has divested and continues to divest from public enterprises. However, in 2012 the GOR took control of CIMERWA, a previously privatized cement company, due to perceptions that the existing private stakeholders were not maximizing the firm’s output. Private holding companies closely affiliated with the government, the ruling party, and the military continue to play a dominant role in the private sector.
Protection of Property Rights
The law protects and facilitates acquisition and disposition of all property rights. Investors involved in commercial agriculture have lease-hold titles and are able to secure property titles, if needed. The land law passed in 2005 stipulates modalities of property registration and a land titling campaign that began as a pilot project in 2008 has recently been completed.
The Government maintains measures that may violate the WTO’s TRIMs (Trade Related Investment Measures) by allowing parallel imports of goods from countries where patents and original trademarks are not registered and recognized. However, as a least-developed country, Rwanda has until 2013 to abide by specific WTO TRIMs.
Rwanda adheres to key international agreements on intellectual property rights and their protection, but as a least-developed country, Rwanda has until 2013 to abide by specific Trade Related Intellectual Property (TRIP) arrangements. As a member of COMESA, Rwanda is automatically a member of African Regional Intellectual Property Organization (ARIPO). It is also a member of World Intellectual Property Organization (WIPO) and is currently working towards harmonizing its legislation with WTO trade-related aspects of intellectual property. The Ministry of Commerce (MINICOM), the Rwandan Revenue Authority (RRA), and the Rwandan Bureau of Standards (RBS) work together to address issues involving counterfeit products on the Rwandan market. Through the RBS and the RRA, Rwanda has earned accolades for its protection of intellectual property rights, but many goods that violate patents, especially pharmaceutical products, make it to market nonetheless.
Rwanda has not yet ratified WIPO internet treaties, but the Government has taken steps to implement and enforce the WTO TRIPS agreements. Intellectual property legislation covering patents, trademarks and copyrights was approved in October 2009. A Registration Service Agency, which is part of the RDB, was established in 2008 and has improved intellectual property right protection by registering all commercial entities and facilitating business identification and branding.
Transparency of the Regulatory System
The government generally uses transparent policies and effective laws to foster clear rules consistent with international norms. Institutions such as the Rwanda Revenue Authority (RRA), the Ombudsman’s office, the Rwanda Bureau of Standards (R BS), the National Public Prosecutions Authority (NPPA), the Rwanda Utilities Regulatory Agency, the Public Procurement Agency, and the Privatization Secretariat all have clear rules and procedures. However, investors claim that the RRA unfairly targets foreign investors for audits. In 2012, multiple investors raised concerns that the RRA breached Rwandan law by auditing corporate financial statements that had already exceeded the Rwandan statute of limitations for review.
There is no formalized mechanism to publish draft laws for public comment, although civil society sometimes has the opportunity to review proposed laws. There is no government effort to restrict foreign participation in industry standards-setting consortia or organizations.
Some investors complain that the strict enforcement of tax, labor, and environmental laws impede investment. The government updated the labor code in 2009 to simplify recruitment of labor and facilitate the hiring, firing and retention of competent staff.
Rwanda established an Ombudsman’s office in 2003 that monitors transparency and regulatory compliance in all governmental sectors. The Rwanda Utility Regulation Agency, the Auditor General’s Office, the Anticorruption Division of the RRA, the RBS, and the National Tender Board also enforce regulations. From 2009 through 2012 the press reported instances of alleged malfeasance involving private citizens and Rwandan officials. This led to investigations and arrests of high ranking officials as well as a number of resignations. In 2011, the only major reported instance of alleged malfeasance involving a senior Rwandan official led to the arrest and resignation of the editor of the newspaper that carried the story. The 2012 prosecution of a senior official of the Ministry of Local Government for alleged bribery and corruption ended in acquittal.
There is no informal regulatory process managed by nongovernmental organizations. Existing legal, regulatory, and accounting systems are generally transparent and consistent with international norms but are not always enforced.
A key component of the government’s regulatory system is the Office of the Auditor General, established in 1999 to audit government adherence to fiscal controls. The Auditor reports regularly to the Parliament and those reports led to wide-ranging criminal investigations of alleged misconduct in prior years.
Consumer protection associations exist, but are largely ineffective. The business community has been able to lobby the government and to provide feedback on government policy and execution through the Private Sector Federation, a business association with strong ties to the government.
Efficient Capital Markets and Portfolio Investment
Access to affordable credit is a serious challenge in Rwanda. Interest rates are high, banks only offer short-term loans, and Rwandan commercial banks are unable to issue significant loan values. Investors looking to borrow more than USD 1 million normally must engage in multi-party loan transactions, usually leveraging support from larger Kenyan institutions. Credit terms generally reflect market rates and foreign investors are able to negotiate credit facilities from local lending institutions if they have collateral and “bankable” projects.
The private sector has limited access to credit instruments. Most Rwandan banks are conservative, risk-averse, and trade in a limited range of commercial products. Following privatization, commercial banks introduced a variety of credit instruments with more products becoming available as the local banking industry matures. Credit cards are not used extensively, except in major hotels and a few restaurants. Debit cards have been introduced on a limited basis. In December 2011, Visa International opened an office in Rwanda and announced a partnership with the central bank through which the company intends to significantly expand electronic payment services throughout Rwanda. While the use of credit cards is becoming more popular, Rwanda remains primarily a cash-based economy.
An over-the-counter (OTC) market was established in 2008 with the assistance of the US Department of Treasury. Trading volume is limited and confined to sale of government treasury bills and a few corporate bonds and shares. In December 2010, Heineken launched the country’s first Initial Public Offering (IPO) for 30 percent of the shares in its Rwandan subsidiary Bralirwa. Subsequently, Bank of Kigali became the second listed Rwandan firm, with its shares officially trading on the Rwanda Stock Exchange from September 1, 2011. Kenya Commercial Bank (KCB) and Kenya’s National Media Group also cross-list their shares on the Rwanda Stock Exchange, bringing the total number of companies traded on the exchange to four.
The central bank capital requirement for commercial and investment banks is currently USD 8.3 million. As of 2011, all banks were compliant with the minimum capital requirement. The required minimum capital adequacy ratio of 15 percent is above the Basel minimum requirement.
With only a small OTC market, corporations generally trade shares among themselves or with private investors. No hostile takeovers have occurred involving foreign investors, and both the central bank and the government have been very active in seeking foreign investors for the banking sector.
The IMF gives the central bank high marks for its effective management of the regulatory system. In June 2010, Rwanda became the seventh country in the world to adopt the IMF’s Policy Support Instrument, a program designed for countries that have achieved macroeconomic stability and no longer need financial support from the IMF. Rwanda successfully completed its fifth review under the IMF’s Policy Support Instrument in 2012.
Competition from State-Owned Enterprises (SOEs)
Rwandan law allows private enterprises to compete with public enterprises under the same terms and conditions with respect to access to markets, credit, and other business operations. Since 2006, the government has made an intensive effort to privatize SOEs, to reduce the government’s non-controlling shareholdings in private enterprises, and to attract foreign direct investment, especially to the telecommunications, tourism, banking, and agriculture sectors. Foreign investors now own controlling interests in some of Rwanda’s largest firms. Rwandan investors and investor groups have acquired many privatized SOEs. A number of these investor groups are backed by government shareholders, including the Rwandan Social Security Board and other government savings schemes. Others are led by individuals with close ties to the government and/or ruling party. SOEs include water and electricity utilities and companies in construction, mining, finance, tea and other agricultural investments. The government continues to own significant and controlling interests in telecommunications, insurance, hotels and other sectors.
Some private sector firms assert that SOEs and private enterprises in which the government owns shares, or that have close ties to the government officials, receive preferential treatment with regard to access to credit and tax compliance enforcement.
SOEs generally have boards of directors that function independently. However, GOR officials and their representatives sit on SOE boards and exercise considerable influence. Most SOEs are required to publish audited annual reports, but some are not readily available.
Corporate Social Responsibility
There is a growing awareness of corporate social responsibility but only a few companies (primarily those that have international ownership) have actually implemented sustainable programs. In recognition of the firm’s strong commitment to corporate social responsibility, the U.S. Department of State awarded Sorwathé, an American-owned tea producer in Kinihira, Rwanda, with the Secretary of State’s 2012 Award for Corporate Excellence for Small and Medium Enterprises.
Rwanda is a stable country with relatively little violence. A strong police and military provide a security umbrella that minimizes potential criminal activity and political disturbances. On multiple occasions since 2008, unknown assailants detonated grenades in Kigali and in rural areas of the country. The most recent detonations occurred on March 30, 2012.
Presidential elections in 2010 were peaceful and orderly. President Kagame won 93 percent of the popular vote and returned for his second, and final, seven-year term in office.
In April 2012, conflict erupted in the eastern Democratic Republic of Congo (DRC) between the Congolese armed forces (FARDC) and M23, an armed group comprised of formerly integrated soldiers who defected from the FARDC. Ongoing fighting between those forces and among other armed groups has caused thousands of Congolese to enter northwest Rwanda as refugees.
In mid-November 2012, cross-border fire landed within the borders of Rwanda in the vicinity of Gisenyi. One week later, there was an apparent incursion by armed militants in the vicinity of Mudende. In early December 2012, a small element of armed individuals allegedly crossed the border from eastern DRC and attacked a ranger camp northwest of Kinigi. The attack, which occurred just south of Volcanoes National Park, left one ranger dead. The Government of Rwanda has accused the Democratic Forces for the Liberation of Rwanda (FDLR) of responsibility for these incursions. The FDLR is an armed group that includes former soldiers and supporters of the regime that orchestrated the 1994 genocide and that continues to operate in eastern DRC, near the border of Rwanda.
Despite the recent increase in violence along Rwanda’s border with eastern DRC, there have been no incidents involving politically motivated damage to investment projects or installations since the late 1990’s.
The government maintains a high-profile anti-corruption effort and senior leaders articulate a consistent message that combating corruption is a key national goal. There were relatively frequent public reports of investigations into allegations of misconduct by officials using their office for personal gain in 2010-2011. The government investigates such incidents and generally prosecutes and punishes those found guilty. Enforcement is the same for both foreign and local investors. High-ranking officials accused of corrupt activities often resign during the investigation period and many have been prosecuted. Senior government officials take pride in Rwanda’s reputation for being tough on corruption, and numerous governmental institutions play an active role in investigating public officials accused of corruption.
Rwanda has signed and ratified the UN Anticorruption Convention. It is a signatory of the OECD Convention on Combating Bribery. It is also a signatory of the African Union Anticorruption Convention. Giving and accepting a bribe is a criminal act under law, and penalties depend on circumstances surrounding the specific case. U.S. firms have identified the perceived lack of government corruption in Rwanda as a key incentive to investing in the country.
Some businesses report occurrences of petty corruption in the customs clearing process, but there are limited reports of corruption in transfers, dispute settlement, regulatory system, taxation or investment performance requirements.
A local company cannot deduct a bribe to a foreign official from taxes. A bribe by a local company to a foreign official is a crime in Rwanda.
Institutions including the Ombudsman’s office, the Anti-Corruption Unit of the RRA, and the Auditor General’s Office identify corruption cases. Rwanda’s National Public Prosecution Authority (NPPA) prosecutes cases. Since 2009, the Ombudsman’s office has held criminal investigative powers that allow it to pursue corruption cases. NPPA has also increased the number of financial crime and white-collar crime prosecutors in recent years.
There is a local chapter of Transparency International in Rwanda. Transparency International ranked Rwanda as 50th out of 176 nations worldwide in its 2012 Corruption Perception index.
Bilateral Investment Agreements
Rwanda is eligible for trade preferences under the African Growth and Opportunity Act (AGOA), which the United States enacted to extend duty-free and quota-free access to the U.S. market for nearly all textile and handicraft goods produced in eligible beneficiary countries. The U.S. and Rwanda signed a Trade and Investment Framework Agreement (TIFA) in 2006 and a Bilateral Investment Treaty in 2008. The Bilateral Investment Treaty officially came into force on January 1, 2012.
OPIC and Other Investment Insurance Programs
The Overseas Private Investment Corporation (OPIC) has provided a single investment guarantee in Rwanda to Sorwathe, an American-owned tea factory. Given Rwanda’s political, economic, and currency stability, OPIC officials have expressed interest in expanding OPIC involvement in Rwanda and are currently evaluating future projects.
The Export-Import Bank (EXIM) continues its program to insure short-term export credit transactions involving various payment terms, including open accounts that cover the exports of consumer goods, services, commodities, and certain capital goods. Rwanda is a member of the Multilateral Investment Guarantee Agency (MIGA) and the African Trade Insurance Agency (ATI).
General labor is available, but there is a shortage of skilled labor, including accountants, lawyers, and technicians. Higher institutes of technology, many private universities, and vocational institutes are improving and producing more and better-trained graduates each year. Carnegie Mellon University opened a campus in Kigali – its first in sub-Saharan Africa – and began offering masters-level courses in information and communication technologies in 2012. In 2012, the government extended basic compulsory education from nine to twelve years. In 2009, the government made English mandatory, instead of French, as the language of instruction from elementary school grade four onwards.
Rwanda attempts to adhere to International Labor Organization (ILO) conventions protecting worker rights. Policies to protect workers in special labor conditions exist, but enforcement remains inconsistent. The government encourages but does not require on-the-job training of and technology transfer to local employees.
The government revised the national labor code in 2000 to eliminate gender discrimination, restrictions on the mobility of labor, and wage controls. In 2009, parliament passed a new labor code, which sets the minimum work age for formal employment at 18 and strengthened prohibitions on the use of child labor and hazardous or forced work. Companies find skill deficits in many sectors when hiring, but these deficits will continue to shrink as literacy rates increase and more qualified people graduate from Rwandan institutions of higher learning. The general population’s literacy rate continues to improve.
Foreign Trade Zones/Free Ports
Rwanda is a member of several sub-regional economic organizations, such as the East African Community (EAC), which put in place a customs union in 2009. That union facilitates the movement of goods produced in the region and permits an EAC citizen with certain skills to work in any member country. Rwanda is also a member of the Economic Community of the Great Lakes (CEPGL) together with the DRC and Burundi, and of COMESA, which includes Rwanda, Burundi, Comoros, DRC, Djibouti, Egypt, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Seychelles, Sudan, Swaziland, Uganda and Zimbabwe. COMESA countries have a free trade agreement that permits goods originating in member countries and that comply with certain rules of origin to enter other member markets duty free. Value addition on imported raw materials must be three percent to qualify for duty free entry. Rwanda has established a free trade zone outside Kigali, with excellent current and planned future communications infrastructure. Bonded warehouse facilities are now available both in and outside of Kigali for use by businesses importing duty free materials.
Foreign Direct Investment Statistics
Despite a reputation for low perceived corruption and high rankings on the World Bank’s annual “Doing Business” survey, foreign direct investment in Rwanda remains scarce. The Rwanda Development Board reported FDI inflows of USD 398 million and USD 626 million in 2010 and 2011, respectively. However, official data from the United Nations Conference on Trade and Development’s (UNCTAD) 2012 World Investment Report lists only USD 42 million and USD 106 million of FDI inflows to Rwanda over the same periods. It remains to be seen if the official inflow figures will catch up with RDB’s projections over the coming years, as foreign investors decide if and when to implement previously proposed investment projects.