Rwanda is a landlocked country bordering Uganda, Burundi, Tanzania and the Democratic Republic of the Congo.
Rwanda is Africa’s most densely populated country, home to more than 12 million people, and approximately 90% of the population is engaged in subsistence agriculture and mineral and agro-processing.
Rwanda has been beset by ethnic tensions associated with the traditionally unequal relationship between the dominant Tutsi minority and the majority Hutus.
A bloody civil war, culminating in the Rwandan Genocide in 1994, decimated the country’s fragile economic base, severely impoverished the population, particularly women, and temporarily stalled the country's ability to attract private and external investment.
Since then, however, Rwanda has made substantial progress in stabilising and rehabilitating its economy.
With the support of the International Monetary Fund (IMF) and the World Bank, Rwanda has been able to make important economic and structural reforms and sustain its economic growth rates over the last decade.
GDP has rebounded with an average annual growth of 7%-8% since 2003 while inflation has been reduced to single digits.
Rwanda’s long-term development goals, defined in a strategy entitled Vision 2020, seeks to transform the country from a low-income agriculture-based economy to a knowledge-based, service-oriented economy with a middle-income country status by 2020.
The government of Rwanda has also formulated a medium-term strategy to help achieve its long-term goals. The Economic Development and Poverty Reduction Strategy II (EDPRS 2) aims to achieve the following goals by 2018: Raise gross domestic product (GDP) per capita to $1,000, have less than 30% of the population below the poverty line, and have less than 9% of the population living in extreme poverty. Recent surveys indicate that the percentage of people living below the poverty line has dropped by 5.8% from 44.9% in 2011 to 39.1% in 2014.
Rwanda has also joined the East African Community (EAC) and is aligning its budget, trade, and immigration policies with its regional partners.
The World Bank report, Doing Business 2015, shows that Rwanda is the third easiest place to do business in Africa, in spite of ranking 46 out of 189 countries in 2014 and 32 out of 189 countries in 2013.
The Rwandan government is now seeking to become a regional leader in information and communication technologies. In 2012, Rwanda completed the first modern Special Economic Zone (SEZ) in Kigali. The SEZ seeks to attract investment in all sectors, but specifically in agribusiness, information and communications technologies, trade and logistics, mining, and construction.
Bilateral trade – UK and Rwanda
Bilateral trade in goods between the UK and Rwanda was £21 million in 2014, up from £10 million 2012. UK exports to Rwanda, principally of machinery and pharmaceuticals, totalled £15 million.
There are around 150 British companies registered in Rwanda including De La Rue, Fusion Capital, Pfunda, Gisovu and Regus.
Top UK exports to Rwanda include:
- Power generating machinery
- Medicinal and pharmaceutical products
- General industrial machinery
Strengths of the Rwandan market
- Liberalised economy – government commitment to the private sector
- History of macro-economic stability
- Low cost workforce
- Attractive investment policies
- Political stability since 1994
- Relatively low corruption levels
Challenges of the Rwandan market
- Relatively poor infrastructure
- Cost and availability of electricity
- Energy shortages, instability in neighbouring states, and lack of adequate transportation linkages to other countries continue to handicap private sector growth.
More than two decades after the Rwandan Genocide, Rwanda has become a development success story and unity and reconciliation have been consolidated, strengthening good governance in the medium-term.
According to the World Bank, the private sector, which is still largely informal, will have to play a bigger role in ensuring economic growth in Rwanda in the future. Poor infrastructure and lack of access to electricity are some of the major constraints to private investment.
Rwanda’s continued integration into the EAC will be also vital for improving market access, enabling companies to do business on a regional scale, and attracting future investment.
And while Rwanda has made tremendous progress in improving the ease of doing business, in order to attract more investment, Rwanda needs to continue working to reduce the costs of doing business.
Reducing the country dependency on foreign aid (30% to 40% of the budget) through domestic resource mobilisation is also critical. While Rwanda has been effectively using aid for development, the country remains vulnerable to fluctuations in aid flows. Starting in mid-2013, Rwanda experienced a lagged effect of the aid shortfall experienced the previous year, causing economic growth to decelerate to 4.7%.
The economy is still dominated by agriculture, which contributes 32% of GDP and employs 80% of the population.
The government priority is to move from subsistence to commercial agriculture, in order to boost exports.
Wood is Rwanda’s main source of power. As part of its plans to increase the contribution of renewable energy, Rwanda is developing its hydro and methane gas potential.
Electricity coverage and supply is uneven and unreliable. There are ambitious plans under Vision 2020 to expand the grid.
Along with Uganda and Kenya, construction is planned for a standard gauge railway to connect with Kenyan ports. Rwanda is also planning to upgrade main arterial roads.
Kigali international airport is undergoing an upgrade and a new airport is planned 40 kilometres out of Kigali in the eastern province.
Information and Computer Technology (ICT)
Rwanda is promoting a progressive ICT sector as part of a strategy to become a ‘tech hub’.
It has laid fibre optic broadband cables across the country. It recently announced a project for the completion of the last stage of this installation – installing Wi-Fi in public areas and introducing 4G.
Finance and business services
Rwanda’s finance sector consists of several local and regional banks. ‘Microfinance’ institutions dominate the market and domestic finance is expensive.
Mobile banking is fast growing and competitive. There is potential for the expansion of the business services sector.
Production is mostly artisan, but the government is encouraging commercial investment in mines to upscale production. There are regulation challenges, although a new mining law was recently introduced to help.
The main areas for mining are:
Rwanda’s tourism sector continues to grow positioning itself as the leading foreign earner for the country.
For the financial year 2013 to 2014, the sector registered a three per cent increase in the number of visitors to Rwanda. These numbers grew from 1.14 million visitors to 1.2 million visitors also accounting for an increase in revenues from $293.4m in 2013 to $303m in 2014.