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Rwanda’s enabling environment and huge growth potential draw investors

Interview - July 27, 2016

Rwanda’s central bank governor John Rwangombwa looks at why investors are increasingly keen to be involved in the country, highlighting not only the leaps and bounds it, and indeed the continent, has made over the past two decades, but also its massive potential to grow any new investment.



Africa is becoming a growing investment destination and, as President Obama stated, “Africa is the continent with the greatest potential”. Could you please discuss this prominence the African continent is gaining in the international arena?

Two main factors may explain the attention the continent is getting: the first one, and probably the most important, Africa has a nearly virgin economy, and the potential to grow any kind of investment is massive.  A young and growing population, combined with growing incomes, leads to growing markets. This might explain the interest of international investors in the continent. The second reason is that we are not considered a hopeless continent anymore – we are a rising continent.

Many African countries have implemented strong macro-economic management policies, leading to stability across the continent. It truly is a trend that we see happening all over the continent with clear track records; it is by no means an accident. This improved economic management and the drive to integrate our economies are key. Today, an investor who would want to invest in Rwanda would be looking at the East African Community as the market rather than the Rwandan market itself, and with the COMESA-EAC-SADC tripartite agreement, we are hopeful that within the next five years we will have a big market with goods flowing freely across regions. Countries are now gateways, more than anything else.


Christine Lagarde, Managing Director of the IMF, said three of Africa’s biggest challenges are building people, building infrastructure and building institutions. How would you assess the work done by Rwanda regarding building institutions?

We have been building ourselves institutions that can deliver to the expectations of the citizens and investors. We have had numerous reforms across different sectors of the country, like removing bureaucracy barriers or unnecessary procedures that would delay service delivery.

We also have a special program of building strategic staff capacities within our institutions through the National Capacity Building Secretariat, which supports capacity building in different institutions of the government. We have also had capacity building support from the Tony Blair Africa Initiative.

Finally promoting ICT usage across all institutions facilitated a lot administrative tasks. For instance, Rwanda’s citizens can now pay their taxes online. All of these progresses came hand in hand with drastic resource accountability, to optimize the impact of such measures.


Rwanda is undergoing major infrastructure projects. What are the challenges to financing these mega projects?

The amount required to finance the infrastructure we need to facilitate quick growth and development of our country is really huge. Therefore, the strategy we have elaborated is to work as a block, not as individual countries. We are working with Kenya, Uganda and Tanzania to address this infrastructure challenge. We are working with private investors, through public-private partnerships, interested in specific projects. It is true that these implementations are not going as fast as we would like, but we do not want to see ourselves in heavy debts that might jeopardize our economy’s future.


KPMG recently said Rwanda’s financial system remains solvent and with sufficient capital buffers. How would you describe Rwanda’s financial sector?

Our financial sector is still young, but very stable and sound. It has been growing at a very good rate, in terms of assets and profitability, with an average growth of between 18% and 20%, and has been supporting private sector investments. Bank credits towards the private sector also have increased averagely between 18% and 20%, and this has really helped drive investment in the private sector. We think this is key and that is why we have continued supporting this sector. When you look at our monetary policy, it is normally structured in such a way that it supports the financing of the private sector through financial institutions, as we’ve had relief from inflation pressure for quite some time now.


Are you also ensuring that inflation and growth remain balanced to stimulate economic activities?

Yes; from day 1, during our 2020 Vision elaboration, economic stability was a key foundation to drive whatever we would do to achieve economic development. We have maintained a stable economy for the last 15 years, except in 2008 because of the international crisis that also hit our country. Apart from that, we have maintained inflation rates below 5%, which is our medium objective. It remains a key factor in whatever we are doing, and we have good working relations as a monetary authority and the fiscal authority, which has helped us contain inflation going forward.


The Chairman of the Rwanda Bankers’ Association told us that integration is already well advanced from the private sector’s perspective. But there is a window opportunity becoming narrower and narrower because of regional integration, for the public sector. From the Central Bank perspective, what are the efforts that have been taken to reach regional integration through a common currency, etc.?

Our ultimate aim is to achieve a monetary union with one central bank, one monetary policy, one currency. We have given ourselves until 2024 to achieve this goal.  However, right now we are doing a lot as central banks of the region. Last week, for instance, I was in Kampala attending the Monetary Affairs Committee. We have been working, and still are, on three main preoccupations. Harmonizing our legal and regulatory framework across our region: we should all be subjected to the same regulation, whether here in Rwanda or in Kenya, or wherever in the region. This enables financial institutions to have subsidiaries across the region. We also signed a MoU on what we call currency convertibility, where trading between our countries will be done using the domestic currency without first going through a hard currency, leading to regional trading using regional currencies.

We have invested in the Eastern African Payment System across the region, giving tools to traders to transfer funds from one region to another, without having to use international banks. We are also harmonizing our monetary policies regimes and have agreed that by 2018, we will all be using the same monetary regime.


Do all diverging monetary policies, such as major central banks or Brexit, affect your regional integration efforts?

These examples are good to analyze to avoid making the same mistakes. A lot of lessons were learned from these cases: in our protocols we have provisions for non-compliance, but today we also have to look at provisions for a country that would want to exit. We questioned ourselves to know how to react if a country decides to leave. All these examples are not taken as discouraging factors in our integration but rather as lessons. We are convinced that we can grow faster if we work together as a region rather than on our own.


The Financial Sector Strategy 2013-2018 has broadening financial services as a core pillar. What are the achievements so far and what are the challenges you still have to overcome?

Remarkable achievements were made between 2012 and 2015. In 2012, 28% of Rwanda’s population was fully excluded from financial services: that has been reduced to 11% today. Therefore 89% of Rwanda is covered by financial services, and those assessing formal financial services have increased from 52% to 76%. We still have some challenges though.

The government supported the establishment of savings and credit cooperatives across the country – SACCOs – which has helped bring many people to use financial services, as one of the main challenges we had was access to financial institutions. Technology has also helped a lot to leapfrog the issue of accessibility.

The government reduced issues linked to accessibility and raised awareness regarding the benefits of using financial services. Today in Rwanda we also have agent banking. In other words, people no longer need to use formal banks, but various businesses may act as a bank agent by providing different services. This is supported by the use of mobile financial services, which was the biggest driver towards financial services usage maturity in 2015. Financial services help us in our fight against poverty.


Are you going to drive M&As? Are you comfortable with your banks’ current size, or should the market decide itself?

The market will decide itself, however we would be happier to see more mergers appearing, although we do not force these. As competition picks up, we expect to see more mergers. Our aim is not to force anything. The market will decide itself. But of course we also encourage the entrance of foreign capital in the banking sector.


The National Bank is a key knowledge-generation center for the country. This work is developed through projects of economic and financial research, production and dissemination of statistics and promoting economic and financial education. Please tell us more about your knowledge-generation activities.

Work is in progress, but we have been doing pretty well until now. We have a team of economic researchers here. Twice a year our teams present their research papers at a Research Day Forum in order to disseminate key information to the public. Some sectorial researches are made to advise the government in the decision-making process. We improved our library and encouraged scholars to access our material within our walls.  Twice a year we produce the Monetary Policy and Financial Stability statement, a crucial source of information for many economic actors in the country. There is a lot of interest in this produced data.


After the US Secretary for Commerce’s visit this January the US said Rwanda is a strategic ally to enhance trade in the region.  What is your assessment on the diplomatic and commercial relations and how could they be enhanced?

We’ve had very good diplomatic relation with the US for quite some time now. We are now strengthening our existing relations. When President Bush came into the country, a trade agreement was signed to facilitate US trade and investments in Rwanda. Our relations are definitely on the right path.


As President Kagame said, “In Africa today, we recognize that trade and investment, and not aid, are pillars of development.” What opportunities would you highlight for US investors?

We have been creating an enabling environment for investors in Rwanda and also within the region. A Chinese investor recently invested in the textile industry in Rwanda to target the US market for exports. We have created an environment in which investors may find good technologies, skilled manpower, reduced bureaucracy, and regional transport efforts are being done to facilitate efficiency. We are doing all that is possible to attract investors by making our economic context as seductive as possible.


What motivates you as a governor to serve your country?

The drive to make our country better, to make our lives as Rwandans better. I want to create opportunities for our population, and witnessing the progress made in a short time is really motivating: poverty, health, education, and financial services have greatly improved.

We have this belief that, as our President always says, despite all the challenges, when you think big, you always achieve big results. We have opportunities to build a successful country and not taking advantage of these would be appalling. We want Rwanda to play as an equal partner in the international arena we are playing in and we believe it is possible. When we look at the poverty numbers reducing from 60% in 2001 to 39% by the end of 2015 it makes us believe that we can even have no Rwandan under the poverty line.