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Rwanda The Emerging Economy To Watch

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The tiny East African nation has proven to be a role model for the continent.

During her November 2018 visit to Rwanda, World Bank CEO Kristalina Georgieva described the country as one that has enjoyed impressive growth and often has bold ambitions.

In recent years, at business summits across the world, it’s not uncommon to hear such praise about Rwanda. Various speakers have singled it out as one of the emerging economies to look out for in terms of investment opportunities, value for money and economic growth.

The statistics explain why Rwanda has become Africa’s poster child for progress. The country has reduced reliance on donations and currently, domestically funds about 84% of the budget up from about 36% two decades ago.

In the last fiscal year (2017-2018), the economy grew by 8.9%.

Barely 24 years after the horrific genocide against the Tutsi, when the East African nation lost over a million lives and the devastation left a trail of trauma and economic ruin, its achievements have often been described as miraculous.

At the center of the tiny country’s recovery is President Paul Kagame, who led the revolt that ended the genocide.

Kagame has led his country from penury to prosperity. His government has co-invested alongside private capital to reduce risk and create a more appealing proposition.

For instance, when one of Africa’s leading telecoms groups, MTN, was keen on entering the Rwandan market in 1998, the government boosted their confidence by purchasing a 20% stake in the company.

This was driven by an ambition to not only attract the firm to the country but to ensure citizens have access to affordable telecom services. Years later, the government offloaded its stake in the firm through an initial public offering, allowing citizens to be part of a meaningful income-generating firm.

MTN is just one example of the strategic approaches taken by the Kagame-led government. The same has been replicated in multiple sectors, including finance and agriculture.

The last two decades on the Rwandan economic front have also been characterized by improving the investment ecosystem to create interest from the international and local business community.

While most would concentrate on the odds against the country, such as its small size, and its landlocked location, amidst a volatile region, Kagame sought to give investors every reason to put their money in Rwanda.

In a continent that has always been associated with corruption, the Rwandan government adopted a zero-tolerance stance on graft.

This was paired with the improvement of service delivery across all sectors, eliminating the need for bribes to access public services.

READ MORE | Paul Kagame: ‘Together Is When We Are Going To Succeed’

The most recent Corruption Perceptions Index by Transparency International placed Rwanda as third least corrupt country in Africa.

The reforms have for the last two decades addressed challenges that have often kept investors up at night. Steps that are cumbersome in countries across the world, such as business registration, were eased to a six-hour activity, while tax declaration and registration were simplified to online processes.

The World Bank ranked Rwanda 29th globally in its 2018 Ease Of Doing Business Report and put it second in Africa. The index tracks business efficiency across the world.

Many African economies are known for distinct exports or income streams that have remained unchanged for years. Rwanda chose a different path by embarking on a concerted effort to diversify exports and revenue streams.

This approach has seen services become the leading driver of gross domestic product growth  in the last three years, taking over from agriculture.

Diversification has been achieved, in part, through an increased focus on tourism, driven by initiatives such as the Meetings Incentives Conferences and Exhibitions (MICE) strategy which in less than five years placed Rwanda among the top conference destinations in Africa.

In May 2018, the International Congress and Convention Association (ICCA) ranked the capital Kigali as the third most popular conference and event destination on the continent, after Cape Town in South Africa, and Casablanca of Morocco.

The ranking considered as the country’s capacity to accommodate international meetings and events, together with landmark infrastructure such as a modern airport and a state-of-the-art conference center.

The country has projected doubling revenues from conference tourism.

READ MORE | A Country On A Roll

According to Clare Akamanzi, the Chief Executive of the Rwanda Development Board (RDB), the country collected a total of $42 million from 192 conferences in 2017 and was projecting $74 million in 2018.

The diversification strategy has opened up investment opportunities for local and international investors (Marriott, Radisson Blu, Park Inn, Serena among others) and created thousands of jobs in the hospitality industry.

The Rwandan media was in November abuzz with news that all hotels in the country’s capital were fully booked for conferences during the month. Conference organizers and tour operators were also said to be stretched to capacity.

Statistics from the RDB indicate there were about 10,488 hotel rooms in the country in 2017, while aviation traffic is expected to grow to about 1,151,300 in 2018, from 926,571 in 2017.

The trend is expected to persist going forward. Rwanda will by the end of 2020 have a new modern airport located in the Bugesera District, a 25-minute drive from the capital.

While pursuing externally-driven growth, Kagame has not forgotten about the home front. This led his government to adopt a ‘Made in Rwanda’ strategy in 2016, which has reduced the trade deficit by about 36% and increased the value of total exports by about 69% from about $558 million to $943 million. Local producers have fast become empowered to produce for the local and export market.

The Rwandan leader has turned his attention to regional integration in the six-member East African Community to counter complaints about Africa’s small, fragmented markets.

The consolidated market of over 200 million citizens is more reassuring to investors and makes a business case for joint infrastructure projects such as the Standard Gauge Railway, which will connect the major Kenyan centers of Mombasa and Nairobi.

Lisa Kaestner, a practice manager for finance competitiveness and innovation at the International Finance Corporation, says: “I see Rwanda is keen on this and trying to support through the East African Community. This is one way to reduce the cost of doing business. If you look at it through the doing business lenses, all countries are trying to improve.”

Kagame’s continental mission has been evident in his various roles at the African Union (AU).

As the chairperson of the AU Reforms team, Kagame has advocated for less donor dependency and more sustainable funding by African states.

He has often challenged African countries who contribute less than 30% of the AU’s budget and turn to external donors with a begging bowl, which has been blamed for influencing the body’s decisions and priorities.

As  AU chair, Kagame has sought an adjustment of terms between Africa and the rest of the world for mutual benefit. This, he has argued, is more sustainable in the long run and presents an avenue for growth among all parties, as opposed to aid, which maintains dependence.

Months after assuming the chairmanship of the AU, in March 2018, Kagame hosted over 50 African heads of state and government in Kigali for the signing of the African Continental Free Trade Area.

As a trade bloc, the trade agreement envisions a continental market of 1.2 billion people, with a combined gross domestic product of more than $3.4 trillion.

So far, 49 countries have signed the agreement, with nine ratifications. The development is a huge step towards encouraging industrialization and job creation across Africa.

Peter Mathuki, Executive Director of the East African Business Council, says: “The country’s leadership is on grip to lift the EAC country to middle income level faster than most African countries. The fast economic growth is premised on pillars of good governance, easy-to-do business climate and zero tolerance to corruption… Rwanda is indeed Africa’s rising star and driver for economic transformation.”

– Collins Mwai 

Economy

Rwanda ‘Walks The Talk’ Says Jack Ma

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Chinese billionaire and Alibaba co-founder Jack Ma came calling to Rwanda to sign a deal to boost its digital economy.


When a Chinese billionaire comes calling, for two consecutive years, it means serious business.

On Jack Ma’s November trip to Rwanda, he announced a first-of-its- kind-in-Africa deal with the Rwandan government.

The Alibaba Group, one of the world’s largest e-commerce businesses that Maco-founded and chairs, has established an electronic world trade platform(eWTP) hub that will enable Rwandan products to be sold in the Chinese market and boost cross-border trade.

Ma, with an estimated net worth of $34.4 billion according to FORBES, called Rwanda “a great country that walks the talk” at the launch of the hub at the Kigali Convention Centre. The mood was euphoric as Rwandans took to Twitter with the hashtag #Rwandaworks.

“It’s a great honor for myself and Alibaba to be able to partner with Rwanda. People ask me, why Rwanda? There are so many countries in Africa. It’s so difficult we have a lot of criteria to pick a country to be an eWTP hub. My answer is why not Rwanda?” said Ma.

“When I first came here, I was shocked by its safety, cleanliness and by its power to embrace change. Last year was my maiden visit to Africa, I realized that it is so different from what I thought. I said if every country in Africa was like Rwanda, how powerful Africa would be.

“Rwanda is making things happen. Most countries talk about supporting

small businesses, young people, farmers but very few of them take action…
This is why we came here. When other people complain, we take that as a great opportunity. What impressed us is not only the products you have but also the government’s efficiency.”

He said he was proud to know Kagame. The leader, in turn, also paid tribute to Ma, whom he referred to as “my friend”.

He commended Ma for looking at Africa differently.

 “Jack is a believer and in most cases, he believes correctly,” said Kagame.

The eWTP partnership covers tourism, capacity-building and e-payments as the primary areas of cooperation.

It ultimately aims to enhance the capabilities of small and medium enterprises to produce and export quality, globally-competitive products while supporting the development of the digital economy in Rwanda.

Products sold on the platform will initially be handicrafts and coffee, which is Rwanda’s third biggest foreign exchange earner after mining and tourism.

The platform presents an opportunity for Rwanda’s coffee producers to access the Chinese market whose coffee consumption is growing at 15% per annum.

On the platform, Rwandan coffee farmers will be receiving $12 per $16 sold, which is significantly higher compared to other markets like the US where they normally get $8 per $16 sold.

The deal will also attract high- spending Chinese tourists.

Players in Rwanda’s business community, especially in the trade and tourism sector, call the deal unprecedented and overdue.

Abdallah Bawazzir, Director General of New Dawn Associates, says: “We’ve been having issues as far as e-commerce is concerned. We’ve had promises from other big entities which come around and nothing really tangible comes of it. Alibaba having done this in China, I’m sure they are very much capable of doing this in Rwanda.”

Ephraim Rwamwenge, Chief Executive Officer at Rwa Business Group, adds: “One of the challenges that plagued our export markets such
as China, which is a massive market, is access. It was next to impossible to find customers to take your products but thanks to technology, it’s now cheaper to do business across borders.”

  • Steven Muvunyi 

READ MORE | Rwanda The Emerging Economy To Watch

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Offering The American Dream

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Gar Lippincott and Daniel Ryan of Atlantic American Partners were in South Africa recently looking for high-net-worth individuals wanting to invest in the US.

It’s a warm spring day in September, and Gar Lippincott and Daniel Ryan have just arrived in South Africa. It is Lippincott’s first time in the country, and he is jet-lagged.

A little over two months ago, he was booked to fly here from the United States (US) but was turned back at immigration.

“At Atlanta airport, the lady looked at Daniel’s visa and let him through and she looked at my visa and she said ‘I am afraid you can’t get on the plane because you have to have a blank page on your passport’. I said ‘I have three blank pages’ and she said ‘no, it’s supposed to be the one that says visa on it’. She said it’s the rules in South Africa so I had to sadly go back home… now when I was coming, I was told that’s not an issue anymore so I am happy they have made traveling into the country easier,” says Lippincott.

With a brand-new passport, he’s here with Ryan looking for people who want to invest in the US in exchange for a green card.

Lippincott, the Managing Partner of Atlantic American Partners, says he has always been keen on South Africa for its growth opportunities and prospects.

“From what I understand, the things that are causing short-term decline in the economy in South Africa are set up to provide long-term growth and hopefully people will understand this,” he says. Ryan, the company’s Managing Director of Emerging Markets – Africa, agrees: “I lived in Malawi for 12 years and South Africa is still considered the shining one throughout the continent. Even with all the problems, everyone still wants to come here because of the opportunities.”

According to an AfrAsia Bank report, South Africa comes second to Mauritius in boasting the highest number of high-net-worth individuals.

These are the kind of people Ryan and Lippincott target through their work at Atlantic American Partners. The company has real estate investors and professional private equity fund managers that manage money for banks, insurance companies, and pension funds. In addition, they help people get US green cards and ultimately US citizenship through the US government’s EB-5 Immigrant Investor Visa Program.

“Basically we look for people who want to move to the United States and we help them do so legally by investing and the nice thing is, with our program, they are also able to get a nice return on investment,” he says.

According to Lippincott, for a $500,000 investment that creates 10 jobs for American workers, you could get a green card in about two years and be a US citizen in about six or seven years. “Twenty seven countries have an investor visa program but with most of them, it’s essentially a fee you pay, or you need to be actively engaged in the day-to-day operation of a business. For example, you invest $1.5 million in Australia, but you need to hire employees and generate a certain amount of revenue. One of the biggest advantages with our program is you actually invest the $500,000 into a fund. We act as a trustee of that money and within five to seven years, they get that money back with a bit of return on investment and you are a permanent citizen in the US.”

Atlantic American Partners invests the money in real estate developments like hotels, apartments and student accommodation.

“What’s nice about the program is it doesn’t only cover the investor; it covers the spouse and children under 21. Our biggest family was a Hungarian family with seven children so they got nine green cards for $500,000,” says Lippincott.

The company says it has had positive response in South Africa. “Two months ago, we were here and we had scheduled six presentations for 100 people and we ended up speaking to 450 people. Most were business people, people worried about the economy, people worried about the political future of South Africa and people concerned about the education future of their children,” says Ryan.

According to Lippincott, despite the news of the clampdown on immigration, the US economy is booming and will perish without immigration. In the era of Donald Trump and his anti-immigrant views, that’s heartening news indeed.

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Are ICOs Relevant In Africa?

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Initial coin offerings (ICOs) see companies create their own digital tokens and sell them to the public.

They are like initial public offerings (IPOs), but investors take no equity in the business, and rather invest in the potential value of the token.

They are proving attractive to firms and investors alike, with over 230 companies raising almost $4 billion in such a way in 2017.

“Initial coin offerings allow companies an easy way to raise capital while bypassing many of the regulations and requirements associated with initial public offerings. ICOs also allow companies to tap into the hype around cryptocurrencies and crowd-sourcing,” says George Etheredge, Research Analyst in the Digital Transformation Practice at Frost & Sullivan Africa.

But are ICOs relevant in the African context? It’s early days, but a number of startups have recently given them a whirl. Nigerian remittances platform SureRemit netted $7 million, while South African company and property investment portal ProsperiProp secured $200,000.
ProsperiProp founder Llew Morkel says ICOs offer entrepreneurs an opportunity to dip into a global source of capital without having to go through formal channels like banks or venture capitalists.

READ MORE: Why it’s in everybody’s interests to regulate cryptocurrencies

“Investor institutions require the entrepreneur to commit to a period of exclusivity while the funder conducts their due diligence. In the event where the application is rejected, the entrepreneur has to start over, often costing valuable time to market. This cycle is discouraging,” he says.

The lack of regulation in this space makes it easier to fund starved African businesses. But it’s also the main drawback of ICOs.

“It’s far easier for groups to set up ‘fake’ ICOs. The general hype around the crypto space may cause investors to be insufficiently diligent,” says Etheredge.
This is likely to mean the space becomes the focus of more regulation as time passes.
“One factor here will be those parties that currently make money from the way things are done at the moment will have powerful incentives to lobby for regulation. This is a pattern in most disruptive industries, just look at Uber,” says Etheredge.
Getting the legal ducks in a row was one of the challenges for ProsperiProp.

“It’s important for an ICO to move inside the guidelines of each country’s legal framework. The country’s framework not only protects the ICO investor but also the entrepreneur,” says Morkel.

READ MORE: Forbes’ First List Of Cryptocurrency’s Richest People: Meet The Secretive Freaks, Geeks And Visionaries

With all the noise around ICOs, and awareness of potential scams, marketing is key. Wala CEO Tricia Martinez says trust, transparency and community are key elements.

“We quickly recognized that in order to gain trust you must be transparent. And the only way to build a community is by being transparent. Once we gained the trust of the individual and were transparent our community began to grow,” she says.

Africa’s foray into the world of ICOs have been tentative thus far, but those that have made the jump expect more to follow. SureRemit co-founder Adeoye Ojo says they are about more than just capital.

“There needs to be a real utility for the underlying token being distributed. Many businesses are rushing to tokenise without a proper plan to sustain the new economy they are creating. This isn’t unique to Africa,” he says.

Martinez agrees.

“ICOs shouldn’t be used as a funding mechanism. Only if there is a real use case to build a token economy should an entrepreneur look at this as a potential channel,” she said.

Yet the potential for token sales to provide access to funding cannot be ignored.

“The good thing is that barring countries that have some strict financial regulations about ICOs, almost anybody can participate. This allows projects, including African ones, to have exposure to a diverse audience who can both back and be first users of the product,” says Ojo.

Eugene Mutai, bitcoin ‘miner’ and software developer, uses the LBRY web site at his home in Nairobi, Kenya. Photographer: Luis Tato/Bloomberg via Getty Images

This diversity, however, also means the usage of ICOs by African companies will depend on how these strategies perform globally.

“They are attractive in an African context as they can, for now, get past regulatory and bureaucratic red tape. However, Africa is some distance behind wealthier areas with respect to crypto adoption,” says Etheredge.

Yet all the signs are that crypto, in Africa and globally, is on the rise. Much of the future of ICOs in Africa may hang on the level of success experienced by first movers like SureRemit, Wala and ProsperiProp. For now, it’s a question of riding the wave and seeing where it goes.

– By Tom Jackson

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