- Rwanda is landlocked and transportation costs for imports and exports are high. The country lacks a link to regional railway networks, which means all trade is conducted by road or air. However, this will soon change, as the government is developing two major regional lines that will link the country to the major sea ports of Mombasa, Kenya and Dar-es-salaam, Tanzania.
- Despite the fact that agriculture is one of Rwanda’s major contributors to economic development, access to finance, especially to businesses in the agricultural sector, still remains a challenge.
- Access to affordable credit is a challenge to small and growing businesses in Rwanda. Interest rates are high for the region and most banks offer predominantly short-term loans.
- Most Rwandan banks trade in a limited range of commercial products. However, additional products are becoming available as the industry matures and competition increases.
- General labor is available, but the country still suffers from a shortage of skilled labor. Nonetheless, higher education institutions are improving and producing more and better-trained graduates each year.
Ecosystem Snapshot
Rwanda
Stakeholder Insights
Challenges
Opportunities
- Rwanda is politically stable with well-functioning institutions, rule of law, and zero tolerance for corruption. It also has a clear vision for growth through private investment that is well articulated in their Vision 2020 development program.
- The country has sustained high economic growth with an average 8.16% year-on-year GDP growth from 2007-2011. This is one of the highest GDP growth rates among major African economies and neighboring countries.
- Rwanda has the potential to serve as a services hub to access the regional EAC market, which has a combined GDP size of about US $147.5 billion and market access to more than 145.5 million people.
- Radical reforms have made it easier for businesses to register (it takes less than 48 hours to register and legally establish a business), pay taxes, and to access credit.
- The Government of Rwanda is positioning the country as a high-end eco-tourist destination and there could be numerous of opportunities for investors in entertainment facilities, hotels and lodges, tour operations, and training services.
- There is also an opportunity for investors invest in the energy sector since electricity supply is not keeping up with domestically-generated demand. Grid-connected generation capacity tripled since 2010, but it still has not fully met the demand.
- According to the Rwanda Development Board, agriculture employs 80% of the population and contributes 33% of GDP growth. There are opportunities to invest in food processing, mechanization for irrigation, and large- scale farming.
Recommendations
- Financial institutions should provide affordable capital for small and growing businesses by reducing their interest rates and the collateral needed to access financing.
- The government, in conjunction with the institutions for higher learning, should continue focusing on creating a well-educated and highly skilled workforce.
- There is a need for more organizations to offer business advisory services, especially for early-stage businesses outside of Kigali.
- As a measure to increase electricity connectivity, the government should continue incentivizing energy investors to invest in the sector so as to achieve their universal access target of 100% electricity connectivity by 2024.
- Beyond financial investments, investors also need to consider offering technical assistance to their portfolio companies.