AfricaTHIS IS

A GLOBAL PERSPECTIVE SPECIAL REPORT

MAY 2016

RWANDA

A new model for growth

A publication from the Financial Times

TELECOMSRwanda’s ICT

ambitions

MANUFACTURINGWork in progress

COGEBANQUE, SECOND LARGEST BANK IN RWANDA AS MEASURED BY TOTAL ASSETS

COGEBANQUE is pleased to release its results for 2015. The bank closed the year with a profit before tax of Frw 3.8 billion and an asset base of Frw 178 billion. The bank was ranked second in the banking sector as at the end of 2015, as measured by total assets. This growth is supported by a robust level of liquidity and pro�tability . The bank grew its asset base by 32.8% and net lending assets by 20.1%. Customer deposits grew by 21.9%. The bank’s rapid and consistent growth over the

past few years have made it a force to reckon with in the banking sector in Rwanda. According to the bank’s Acting Managing Director, Mr. Rachid MUREMANGINGO: ‘’the bank delivered strong and the highest profitability in 2015 in a market that is becoming increasingly competitive’’ Financial highlights

Frw'000 2014 2015 Growth

Net interest income 7,320,210 8,671,480 18.5% Net fee income 2,273,453 2,374,362 4.4% Other income 996,192 1,465,164 47.1% Total income 10,589,855 12,511,006 18.1% Operating expenses (7,266,295) (7,784,684) 7.1% Pro�t before tax 3,259,124 3,814,453 17.0%

Pro�t after tax 2,236,288 2,581,918 15.5%

Net loans and advances 78,807,542 94,671,109 20.1% Total assets 134,000,000 177,958,000 32.8%

Customer deposits 90,574,057 110,413,118 21.9% Capital and reserves 13,718,087 18,285,005 33.3%

Cogebanque’s achievements as at end of 2015 compared to the industry

Variable Banking Indutry* COGEBANQUE

Balance sheet growth 18.3% 32.8% Loans/total asset 57.6% 53.2% Deposits/total liability and Equity 81.3% 88.5% Costs of funds 3.2% 6.0% Capital adequacy ratio (norm > 15%) 22.5% 16.60% Liquidity ratio (norm>20%) 45.9% 42% RoA 2.1% 1.90% RoE 11.2% 15.50%

* Source: BNR, February 2016, Monetary Policy and Financial Stability statement

Cogebanque’s Board Chairman, Mr. Philibert Afrika, highlighted that: «The bank’s performance over the years attests to its ability to deliver both quantitative as well as qualitative growth. It is a strong contributor to the development of our country and remains optimistic about the future prospects of the Rwanda’s economy».

According to the bank’s Acting Managing Director, Mr. Rachid MUREMANGINGO: ‘’the bank delivered strong and the highest profitability in 2015 in a market that is becoming increasingly competitive’’ Financial highlights

Frw'000 2014 2015 Growth

Net interest income 7,320,210 8,671,480 18.5% Net fee income 2,273,453 2,374,362 4.4% Other income 996,192 1,465,164 47.1% Total income 10,589,855 12,511,006 18.1% Operating expenses (7,266,295) (7,784,684) 7.1% Pro�t before tax 3,259,124 3,814,453 17.0%

Pro�t after tax 2,236,288 2,581,918 15.5%

Net loans and advances 78,807,542 94,671,109 20.1% Total assets 134,000,000 177,958,000 32.8%

Customer deposits 90,574,057 110,413,118 21.9% Capital and reserves 13,718,087 18,285,005 33.3%

Cogebanque’s achievements as at end of 2015 compared to the industry

Variable Banking Indutry* COGEBANQUE

Balance sheet growth 18.3% 32.8% Loans/total asset 57.6% 53.2% Deposits/total liability and Equity 81.3% 88.5% Costs of funds 3.2% 6.0% Capital adequacy ratio (norm > 15%) 22.5% 16.60% Liquidity ratio (norm>20%) 45.9% 42% RoA 2.1% 1.90% RoE 11.2% 15.50% *Source: BNR, February 2016, Monetary Policy and Financial Stability statement

2015 COGEBANQUE ACHIEVEMENTS COGEBANQUE, SECOND LARGEST BANK IN RWANDA AS MEASURED BY TOTAL ASSETS

Financial highlights

Frw'000 2014 2015 Growth

Net interest income 7,320,210 8,671,480 18.5% Net fee income 2,273,453 2,374,362 4.4% Other income 996,192 1,465,164 47.1% Total income 10,589,855 12,511,006 18.1% Operating expenses (7,266,295) (7,784,684) 7.1% Pro�t before tax 3,259,124 3,814,453 17.0%

Pro�t after tax 2,236,288 2,581,918 15.5%

Net loans and advances 78,807,542 94,671,109 20.1% Total assets 134,000,000 177,958,000 32.8%

Customer deposits 90,574,057 110,413,118 21.9% Capital and reserves 13,718,087 18,285,005 33.3%

Cogebanque’s achievements as at end of 2015 compared to the industry

Variable Banking Indutry* COGEBANQUE

Balance sheet growth 18.3% 32.8% Loans/total asset 57.6% 53.2% Deposits/total liability and Equity 81.3% 88.5% Costs of funds 3.2% 6.0% Capital adequacy ratio (norm > 15%) 22.5% 16.60% Liquidity ratio (norm>20%) 45.9% 42% RoA 2.1% 1.90% RoE 11.2% 15.50%

*Source: BNR, February 2016, Monetary Policy and Financial Stability statement

Cogebanque’s Board Chairman, Mr. Philibert Afrika, highlighted that: «The bank’s performance over the years attests to its ability to deliver both quantitative as well as qualitative growth. It is a strong contributor to the development of our country and remains optimistic about the future prospects of the Rwanda’s economy».

past few years have made it a force to reckon with in the banking sector in Rwanda. According to the bank’s Acting Managing Director, Mr. Rachid MUREMANGINGO: ‘’the bank delivered strong and the highest profitability in 2015 in a market that is becoming increasingly competitive’’ Financial highlights

Frw'000 2014 2015 Growth

Net interest income 7,320,210 8,671,480 18.5% Net fee income 2,273,453 2,374,362 4.4% Other income 996,192 1,465,164 47.1% Total income 10,589,855 12,511,006 18.1% Operating expenses (7,266,295) (7,784,684) 7.1% Profit before tax 3,259,124 3,814,453 17.0%

Profit after tax 2,236,288 2,581,918 15.5%

Net loans and advances 78,807,542 94,671,109 20.1% Total assets 134,000,000 177,958,000 32.8%

Customer deposits 90,574,057 110,413,118 21.9% Capital and reserves 13,718,087 18,285,005 33.3%

Cogebanque’s achievements as at end of 2015 compared to the industry

Variable Banking Indutry* COGEBANQUE

Balance sheet growth 18.3% 32.8% Loans/total asset 57.6% 53.2% Deposits/total liability and Equity 81.3% 88.5% Costs of funds 3.2% 6.0% Capital adequacy ratio (norm > 15%) 22.5% 16.60% Liquidity ratio (norm>20%) 45.9% 42% RoA 2.1% 1.90% RoE 11.2% 15.50%

*Source: BNR, February 2016, Monetary Policy and Financial Stability statement

Cogebanque’s Board Chairman, Mr. Philibert Afrika, highlighted that: «The bank’s performance over the years attests to its ability to deliver both quantitative as well as qualitative growth. It is a strong contributor to the development of our country and remains optimistic about the

past few years have made it a force to reckon with in the banking sector in Rwanda. According to the bank’s Acting Managing Director, Mr. Rachid MUREMANGINGO: ‘’the bank delivered strong and the highest profitability in 2015 in a market that is becoming increasingly competitive’’

Financial highlights

2014 2015 Growth

Net interest income 7,320,210 8,671,480 18.5% Net fee income 2,273,453 2,374,362 4.4% Other income 996,192 1,465,164 47.1% Total income 10,589,855 12,511,006 18.1% Operating expenses (7,266,295) (7,784,684) 7.1% Pro�t before tax 3,259,124 3,814,453 17.0%

Pro�t after tax 2,236,288 2,581,918 15.5%

Net loans and advances 78,807,542 94,671,109 20.1% 134,000,000 177,958,000 32.8%

Customer deposits 90,574,057 110,413,118 21.9% Capital and reserves 13,718,087 18,285,005 33.3%

Cogebanque’s achievements as at end of 2015 compared to the industry

Banking Indutry* COGEBANQUE

Balance sheet growth 18.3% 32.8% Loans/total asset 57.6% 53.2%

ts/total liability and Equity 81.3% 88.5% unds 3.2% 6.0%

dequacy ratio (norm > 15%) 22.5% 16.60% Liquidity ratio (norm>20%) 45.9% 42%

2.1% 1.90% 11.2% 15.50%

BNR, February 2016, Monetary Policy and Financial Stability statement

Cogebanque’s Board Chairman, Mr. Philibert Afrika, highlighted that: The bank’s performance over the years attests to its ability to deliver

both quantitative as well as qualitative growth. It is a strong contributor to the development of our country and remains optimistic about the

past few years have made it a force to reckon with in the banking sector in Rwanda. According to the bank’s Acting Managing Director, Mr. Rachid MUREMANGINGO: ‘’the bank delivered strong and the highest profitability in 2015 in a market that is becoming increasingly competitive’’ Financial highlights

Frw'000 2014 2015 Growth

Net interest income 7,320,210 8,671,480 18.5% Net fee income 2,273,453 2,374,362 4.4% Other income 996,192 1,465,164 47.1% Total income 10,589,855 12,511,006 18.1% Operating expenses (7,266,295) (7,784,684) 7.1% Pro�t before tax 3,259,124 3,814,453 17.0%

Pro�t after tax 2,236,288 2,581,918 15.5%

Net loans and advances 78,807,542 94,671,109 20.1% Total assets 134,000,000 177,958,000 32.8%

Customer deposits 90,574,057 110,413,118 21.9% Capital and reserves 13,718,087 18,285,005 33.3%

Cogebanque’s achievements as at end of 2015 compared to the industry

Variable Banking Indutry* COGEBANQUE

Balance sheet growth 18.3% 32.8% Loans/total asset 57.6% 53.2% Deposits/total liability and Equity 81.3% 88.5% Costs of funds 3.2% 6.0% Capital adequacy ratio (norm > 15%) 22.5% 16.60% Liquidity ratio (norm>20%) 45.9% 42% RoA 2.1% 1.90% RoE 11.2% 15.50%

* Source: BNR, February 2016, Monetary Policy and Financial Stability statement

Cogebanque’s Board Chairman, Mr. Philibert Afrika, highlighted that: «The bank’s performance over the years attests to its ability to deliver both quantitative as well as qualitative growth. It is a strong contributor to the development of our country and remains optimistic about the future prospects of the Rwanda’s economy».

past few years have made it a force to reckon with in the banking sector in Rwanda. According to the bank’s Acting Managing Director, Mr. Rachid MUREMANGINGO: ‘’the bank delivered strong and the highest profitability in 2015 in a market that is becoming increasingly competitive’’

Financial highlights

Frw'000 2014 2015 Growth

Net interest income 7,320,210 8,671,480 18.5% Net fee income 2,273,453 2,374,362 4.4% Other income 996,192 1,465,164 47.1% Total income 10,589,855 12,511,006 18.1% Operating expenses (7,266,295) (7,784,684) 7.1% Pro�t before tax 3,259,124 3,814,453 17.0%

Pro�t after tax 2,236,288 2,581,918 15.5%

Net loans and advances 78,807,542 94,671,109 20.1% Total assets 134,000,000 177,958,000 32.8%

Customer deposits 90,574,057 110,413,118 21.9% Capital and reserves 13,718,087 18,285,005 33.3%

Cogebanque’s achievements as at end of 2015 compared to the industry

Variable Banking Indutry* COGEBANQUE

Balance sheet growth 18.3% 32.8% Loans/total asset 57.6% 53.2% Deposits/total liability and Equity 81.3% 88.5% Costs of funds 3.2% 6.0% Capital adequacy ratio (norm > 15%) 22.5% 16.60% Liquidity ratio (norm>20%) 45.9% 42% RoA 2.1% 1.90% RoE 11.2% 15.50% Source: BNR, February 2016, Monetary Policy and Financial Stability statement

Cogebanque’s Board Chairman, Mr. Philibert Afrika, highlighted that: The bank’s performance over the years attests to its ability to deliver

both quantitative as well as qualitative growth. It is a strong contributor to the development of our country and remains optimistic about the future prospects of the Rwanda’s economy».

2015 COGEBANQUE ACHIEVEMENTS

COGEBANQUE, SECOND LARGEST BANK IN RWANDA AS MEASURED BY TOTAL ASSETS

COGEBANQUE is pleased to release its results for 2015. The bank closed the year with a profit before tax of Frw 3.8 billion and an asset base of Frw 178 billion. The bank was ranked second in the banking sector as at the end of 2015, as measured by total assets. This growth is supported by a robust level of liquidity and profitability. The bank grew its asset base by 32.8% and net lending assets by 20.1%. Customer deposits grew by 21.9%. The bank’s rapid and consistent growth over the past few years have made it a force to reckon with in the banking sector in Rwanda.According to the bank’s Acting Managing Director, Mr. Rachid MUREMANGINGO : ‘’the bank delivered strong and the high-estprofitability in 2015 in a market that is becomingincreasingly competitive’’

Cogebanque’s Board Chairman, Mr. Philibert Afrika, highlighted that: «The bank’s performance over the years attests to its ability to deliver both quantitative as well as qualitative growth. It is a strong contributor to the development of our country and remains optimistic about the future prospects of the Rwanda’s economy».

In line with the bank’s mission and vision, various initiatives are being pursued geared towards offering superior and unrivalled products to customers. Central to this strategy is the use of technology to enhance efficiency and improve delivery channels.The bank will continue to strengthen relations with our estimated customers in line with the bank’s mission and vision. We will continue to demonstrate innovation and creativity and service our clientele with distinction.

New branches opened in 2016 in the city of Kigali (CHIC building),Karongi District and in Ruhango District.

The bank plans also to relocate their branches located at Musanze District and Muhanga District to the new buildings in the same region with the aim of offering better services to its customers.

The new Head Office Building is at an advanced level of construction and will be completed by the end of the year 2016.

The bank would like to express its appreciation to the Government of Rwanda and to all its stakeholders including shareholders, customers and staff whose fervent support and patronage was vital in achieving 2015 results.

www.thisisafricaonline.com 3

Editorial

Rwanda’s transformation from the peak of its political crisis culminating in the 1994 Rwandan genocide until now is remarkable.

Though the country is frequently held up as a model for rapid development by politicians and development policymakers, its trajectory and political culture are unique. Rwanda’s president, Paul Kagame, is an unabashed admirer of Singapore’s transformation from a resource-poor island nation into a high tech global finance and technology hub.

There is a long way to go before Rwanda can be the ICT-driven knowledge economy its leaders envision. Though the poverty rate has dropped rapidly since the turn of the millennium, 39 percent of the population still lived in poverty in 2014, according to the UN Development Programme.

Rural road networks are underdeveloped, electricity is both scarce and pricey, and investors complain that skilled labour is still hard to come by.

However, despite the challenges, clearly some things are working well. The small, landlocked nation is managing to maintain strong growth of 6 percent through 2016 even as sub-Saharan Africa as a whole is forecasted to slow to 3 percent. It has averaged more than 8 percent for the past decade.

This is partially because Rwanda, a net

Letter from the editor

importer of most products including oil, stands to benefit from global commodity and oil price plunges. But speaking to both foreign investors and government officials, it is Rwanda’s business climate that helps to set it apart.

The country frequently tops rankings for the best places to do business and to invest in Africa. It has a reputation for a clean, corruption-free public sector and a stable regulatory framework. Rwanda’s strong-handed government may divide opinion, but its track record also shows that the commitment of top leaders to development objectives goes a long way towards achieving them.

As the 2016 World Economic Forum opens in Kigali, Rwanda’s capital, this report provides insight and analysis focusing on two key sectors for Rwanda’s continued development: telecoms and ICT, and manufacturing. While neither is currently a dominant driver of GDP, both are key to building the dynamic, middle income economy that Rwanda is aiming towards.

ADRIENNE KLASAEditor

Published by The Financial Times Limited

Number One Southwark BridgeLondon SE1 9HL, United Kingdom

Tel: +44 (0)207 873 3000Editorial fax: +44 (0)20 775 6421

www.thisisafricaonline.com

Editor Adrienne Klasa +44 (0)20 7775 6843

adrienne.klasa@ft.com

Sub Editor Elliot Smither +44 (0)20 7775 6379

elliot.smither@ft.com

Associate Publisher Charlotte Lloyd +34 682 736 571

charlotte.lloyd@ft.com

Senior Marketing Manager Tamsin Purchase+44(0)20 7775 6342

tamsin.purchase@ft.com

Marketing Executive Jack O’Brien+44(0)20 7873 4938

jack.obrien@ft.com@ft.com

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paramjit.virdee@ft.com

Publishing Director Angus Cushley +44 (0)20 7775 6354

angus.cushley@ft.com

ISSN 1759-7978© Financial Times Business 2016.

‘Financial Times’ and ‘FT’ are registered trademarks and service marks of The Financial Times Ltd. All rights reserved. No part of this publication

or information contained within it may be commercially exploited in any way without prior permission in writing from the editor.

The Financial Times adheres to a self-regulation regime under the FT Editorial Code of Practice:

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THIS IS AFRICA

Telecoms

In remote villages across Rwanda, squat yellow boxes peek up out of the rich black soil.

These small boxes are the country’s fibre optic backbone. This far-reaching digital infrastructure is the result of the

government’s drive to ensure that – though access to basic services like electricity and running water may be lacking in many rural areas – broadband is never far from reach.

Landlocked and with few natural re-sources at its disposal, Rwanda remains reli-ant on tea and coffee exports to fuel its econ-omy. The government has plans to change this, and has crafted an ambitious develop-ment plan driven by telecommunications.

More than just a plan, it is a “transforma-tion agenda” intended to take Rwanda from an “agrarian economy to an information-rich, knowledge-based one by 2020”, accord-ing to the 2015 National ICT Strategy. Presi-dent Paul Kagame is co-chair of UNESCO’S Broadband Committee, demonstrating high level commitment to this policy direction.

However, despite strong growth and a widely praised business environment, per capita GNI remains low at $700 per person while more than a third of the population lived in poverty as of 2014. Subsistence farm-ing remains the most common occupation. Turning Rwanda into the high-tech “Singa-pore of Africa” will be no small feat.

According to the country’s minister for youth and ICT Jean-Pierre Nsengimana, his goal is “to churn out successful tech compa-nies and also to attract large multinational companies to come and set up in Rwanda to serve the larger African community”.

As impractical as this vision may seem, the growth of the telecoms sector since the devastating genocide of 1994 is remarkable. Starting from nothing, strong leadership and at times full government control of the sector has pushed the industry forward, posi-tioning it to become a model for the region.

Rapid transformationRwanda now has 17 internet service pro-viders offering competitive internet and added services packages, including cutting edge 4G LTE and fibre-to-the-home. As late as 2012, even loading a Gmail inbox was a painfully slow task for many internet users. Today,residents in Kigali, the capital, stream movies and video chat with ease.

Sam Nkusi, east Africa regional executive of Liquid Telecom, has a long history in the Rwandan telecoms sector. As former cabinet minister for infrastructure tasked with over-seeing energy and ICT, Mr Nkusi helped form the country’s ICT strategy after the war.

Rwanda’s ICT ambitions: Fast enough? The government has an ambitious goal to make Rwanda the continent’s digital services destination. Can the private sector keep pace?

BY KATHERINE SULLIVAN

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initial public offering on the Rwandan stock exchange for their remaining 20 percent stake in MTN, managed by their subsidiary Crystal Telecoms.

Mr Nkusi attributes the opening of the market to favourable business conditions, easy entry into the market, and to a general realisation by the industry that the tele-communications market in Africa is under-served. “People in ICT realised it is the time for Africa. It helps to get the push from [the Rwanda Development Board] and the govern-ment, and now it just makes business sense.”

In order to expand accessibility, the government of Rwanda and Korea Telecom, the largest telecom provider in South Ko-rea, partnered to lay 3,000km of fibre optic backbone at a price tag of $130m. In fields of cassava and potatoes, the little yellow boxes began to appear.

These measures gained international attention. Last year, 46 percent of foreign di-rect investment in Rwanda went into the ICT sector, according to the World Bank.

In Kigali, the signs of the cash influx are

The new government first initiated talks with South African carrier MTN in 1995. “The government of Rwanda was very instrumen-tal in bringing MTN to the country,” explains Mr Nkusi, who later went on to manage the government’s share in MTN under the Rwan-dacel brand.

Given the state of the country at the time, the government “had to put in the right incentives” to attract business, he says. To achieve this, it went in as a partial share-holder when MTN began Rwanda operations in 1998.

MTN was the “first operation coming from post-apartheid South Africa, and com-ing to post-genocide Rwanda required lead-ership insight and foresight”, says Mr Nkusi.

MTN still holds more share of the mar-ket than any other telecommunications company in the country, with over 4 million subscribers in a population under 12 million.

Tigo, a subsidiary of Millicom and the second largest telecom in Rwanda by mar-ket share, entered the market in 2009, along with other companies.

Alex Ntale, CEO of the ICT chamber of Rwanda’s Private Sector Federation, said the entry of companies such as Tigo and and Air-tel filled a gap left by MTN’s monopoly.

“It became clear there was some money to be made. There was still a huge gap in [mo-bile] penetration because of affordability is-sues,” Mr Ntale says.

UK-based Liquid Telecom entered the market as well, purchasing the existing core network of Rwandatel fibre cables, and offer-ing fibre-to-the-home for the first time.

In a further step towards opening the market, in 2014 the government made an

evident. Under the SMART Kigali project, the government has made a concerted effort to make free Wi-Fi accessible throughout the city.

Working with private providers like MTN, Tigo, and Airtel, as well as with restau-rants and hotels, there is now free Wi-Fi on public buses, in the city centre’s shiny tiled malls, in cafes and on the streets.

At kLab, a tech incubator and collabora-tive workspace, young tech-inclined innova-tors sit on an upper floor of a government-owned office building overlooking the city. Members work on projects ranging from food delivery apps, to mobile communica-tion platforms, to an Uber inspired app for the city’s ubiquitous taxi motorcycles.

The ICT boom has has had the knock-on effect of spurring the success of digital finance across the country. Mobile phone penetration stands at around 78 percent, and the majority of Rwandans rely on tele-communications networks to make financial transactions.

According to Mr Nsengimana, Rwanda has 7.5 million users on mobile money plat-forms compared to only 2.5 million with tra-ditional savings accounts. Analysts feel that, learning from the success of M-Pesa in Kenya, lighter, less burdensome regulations in this sector will allow for further growth.

Long way to goDespite the excitement, ICT still only ac-counted for 4 percent of GDP in 2015.

Mr Nsengimana is not worried about this disparity in investment versus returns. He notes that most investment in the sec-tor has gone into ICT infrastructure

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“MTN was the first operation coming from

post-apartheid South Africa, and coming to

post-genocide Rwanda required leadership

insight and foresight”Sam Nkusi

and human capacity building, such as edu-cational initiatives. These investments, he argues, tend to take a long time to yield full benefits.

There are also disagreements as to the direction the sector should take. Not sat-isfied with internet speed and reliability, in 2012 the government proposed a law to launch 4G LTE service across the country. With the recent launch of 3G in late 2011, telecoms companies opposed the idea.

To push ahead, in 2013 the government set up a public private partnership with Korea Telecom to create Olleh Rwanda Net-works (ORN), with a 50/50 split in ownership.

In order to keep prices as low as possible, the government has approached providing 4G LTE internet like a utility, granting ORN a guaranteed 25-year monopoly on 4G and ensuing technologies. ORN then sells 4G wholesale to ISPs and mobile network opera-tors. However, ORN claims, they are not pric-ing it appropriately.

“We are giving it for a cheap price, but retailers are marking it up to 30 or 40 per-cent margin,” laments Han-Sung Yoon, CEO of ORN.

While initially consumer uptake of 4G services was slow, pricing is gradually im-proving. “Some of the retailers have under-stood that they need to enhance their com-petitiveness, and as a result we slowly see the price trend going down,” he notes.

Mr Yoon says that ORN is in talks with the Rwanda Utilities Regulatory Authority (Rura) to be allowed to publish their whole-sale prices so that customers can pressure retailers to sell it at a lower price.

Mr Ntale of the Private Sector Federation sees it somewhat differently. “I would not say [retailers are] necessarily inflating prices, but rather the business models of the com-panies involved [vary], some are based on voice and not on data,” he says.

But he admits that 4G LTE rollout has not been without tensions. “Any industry where you find incumbents and you bring disruptive technology or business models, [the incumbents] are not going to welcome you. It is expected that they are going to put up a fight.”

Mr Yoon says Korea Telecom was origi-nally attracted to the public private partner-ship by the “very strong leadership and clear guidance” of President Kagame.

Lack of energy access and low smart-phone penetration do not seem to discour-age those on the frontlines of Rwanda’s tele-coms transformation. Currently just over 20 percent of the population is connected to the grid.

Critics claim that the country may not be ‘leapfrogging’ development, but instead leaving gaping holes. “The case for government subsidy of high speed internet rollout is hard to make even in rich countries,” says Charles Kenny, senior fellow at the Centre for Global Develop-ment.

“It is not clear that having a fantas-tic national fibre backbone is necessary to attract investment into things like IT services...I would be very wary of pouring government money into fibre optic cables when there are so many other potential investments that are more likely to deliver development returns.”

Despite these doubts, plans to trans-form Rwanda into an ICT hub continue unabated. The government recently an-nounced another lofty goal: to have 100

Rwandan ICT companies each valued at $50m or more in the next 10 years.

To support this, Rwanda’s government is launching a $100m innovation fund in June, supported in part by the African Develop-ment Bank and a UK-based venture capital firm.

“We have one, two, maybe three com-panies that reach” the $50m value mark, says Mr Ntale. Wearily but undeterred, he admits: “We are very far away from [that] number.”

Mr Nsengimana, for his part, has no doubt that the country’s young people will embrace the new ICT-driven economy.

“Youths are the future of this country and technology is the future of the econo-my,” he says. “Putting these two together [is essential] to accelerate towards the future we want.”

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Telecoms

www.AnalyseAfrica.com 7

Statistics

Rwanda: By the numbers

RWANDA’S RESILIENT ECONOMY

CONNECTIVITY AND DIGITAL INNOVATIONLIFE EXPECTANCY

Rwanda has the highest female life expectancy of any mainland east African country (Seychelles and Mauritius are

higher)

Mobile penetration has almost doubled since 2010, as measured by subscriptions per 100 people:

67

GENDER EQUALITY

63.8% Rwanda has the higest percentage of women in the lower house of parliament in the world

That is almost triple the average rate for the rest of Africa at

23.3%

Rwanda’s manufacturing exports as a

percentage of total exports increased

from 6.8% in 2013 to 12.3% in 2014

Manufacturing exports

Expected GDP growth (%)

Rwanda

6.8%2013

2014 12.3%

7.5

2020

6.3

2016

3.16

World av

erag

e20

16

3

Sub-S

ahar

an Afri

ca

2016

2nd in Africa for Doing Business in 2016, behind

Mauritius

3rd most competitive economy in Africa, according to

the World Bank

2 3

2010

2014

33

64

Rwanda is a leader in the use of internet for learning purposes in schools, ranking first in east Africa and second in the region

behind Senegal

Mobile cellular subscriptions have averaged yearly growth of more than 20 percent since 2010

20%

While Africa is facing slowing growth and global headwinds, Rwanda’s economy is looking resilient by comparison. The country has come a long way since the political crises that led to the 1994 genocide, and now leads the region across many indicators.

Rwanda regularly tops regional business destination rankings

Data in this article was accessed via Analyse Africa, a leading online macroeconomic database for African countries. Analyse Africa contains over 5000 indicators for 54 African countries. Data dates from 2000 to the present. For more information go to www.AnalyseAfrica.com or contact analyseafrica@ft.com

Sources: World Economic Outlook, IMF - April 2016 edition, Doing Business Report 2016, Global Competitiveness Report 2015-2016, World Economic Forum, World Development Indicators, World Bank , International Telecommunication Union, Inter-Parliamentary Union

ADVERTISING FEATURE

Venturing into sectors where other private investors dare not – leading the way

pany was born out of the engineering regiment of the Ministry of Defence and has focused primarily on roads and large infrastructure projects.

Horizon Sopyrwa is a pyre-thrum processing business. Prior to being acquired by the Horizon Group in 2008 the company was privately

run. Horizon Sopyrwa has over 3,000 hectares under cultivation. This acre-age is cultivated by seven farming co-operatives that produce a combined annual output of some 600 metric tons of dry flowers. Horizon Sopyrwa contributes an estimated 10 percent of the world’s supply of pyrethrum.

Horizon Logistics is the succes-sor company to both Horizon Clear-ing and General Services and the Su-dan Maintenance Project which have been in existence since 2009. Services include import/export trade, clearing services, equipment maintenance and leasing of construction equip-ment. The company has specialised in peacekeeping logistics, and is a UN Registered Vendor.

The Horizon group of compa-nies aims to build a strong future for Rwanda through investments that deliver value, social impact, and pros-perity.

Horizon Group maintains a number of independent subsidiaries. There are, however, structural ties be-tween the operating subsidiaries and the holding. The core responsibility of the holding company is the formu-lation of a clear strategy in addition to serving as an incubator of busi-nesses. The holding is also respon-sible for taking investment decisions, enhancing capacity, policy formula-tion, and monitoring and control of operations.

Horizon Group is wholly-owned by the government of Rwanda but registered as a private company. The government is not in charge of the day-to-day oversight of the company but acts through the board of direc-tors.

Horizon Group is aware that in the emerging global economy – where the internet, the news me-

Horizon Group Ltd was estab-lished in 2007 by the Rwan-dan government. The creation of the company was prompted

by the need to contribute to acceler-ated socio-economic development of Rwanda. The group would focus on those critical sectors of the Rwandan economy where local private players are less willing or unable to venture. The initial focus was on the launch of the Horizon Construction Company. Currently, Horizon Group consists of three established subsidiary compa-nies: Horizon Construction Ltd, Hori-zon Sopyrwa Ltd, and Horizon Logis-tics Ltd. The company is also involved in several joint ventures, including Agropharm Africa for value addition to pyrethrum, S&H Industries Ltd for manufacturing of roofing materials, and Afriprecast for production of pre-cast materials for construction.

Horizon Construction is the first subsidiary of the group. The com-

Eugene Haguma, CEO, Horizon Group

Cactus Green Park, one of our estates under development, is designed to be environmentally friendly. It is a pilot project in implementation of Green Cities as enshrined in Rwanda’s Economic Development & Poverty Reduction Strategy

dia, and the information revolution shine light on business practices around the world – companies are more frequently judged on the basis of their environmental stewardship.

This transparency of business practices means that for many com-panies, corporate social responsibil-ity including environmental conser-vation and protection is no longer a luxury but a requirement. Rwanda’s Economic Development and Pov-erty Reduction Strategy (EDPRS), to which Horizon Group is a major contributor, acknowledges that sus-tainable poverty reduction and envi-ronmental conservation and protec-tion are inextricably inter- linked.

The country’s reconstruction process in the 2000s prompted the establishment of Horizon Construc-tion Company to take advantage of the opportunities offered by the emerging market. In 2007, Horizon was awarded its first construction contract for an asphalt concrete road in Kigali. The successful com-

pletion was followed by many other construction projects both road and infrastructure developments like the Kigali public library landmark and the first dyke in Rwanda, built in Bugesera District.

An example of the Horizon Group’s dedication to sustainable business practices may be found at Horizon Sopyrwa, one of the world’s leading producers of pyrethrum – the main ingredient of eco-friendly pest control products.

Compared to many other pes-ticides, most notably the synthetic pyrethroids, pyrethrins have a fa-

vourable profile. While all pesticides can be toxic to aquatic and other or-ganisms, pyrethrins are ten to over hundred times less toxic than some of the synthetic pyrethroids.

Because of the relatively water insoluble nature of the pyrethrins, they are considered immobile in soil. This property greatly limits their ability to migrate into ground-water. The binding of pyrethrins to soil makes microbial metabolism in the soil an important component of their degradation, with half-lives of 10.5 days under aerobic soil con-ditions, and 86.1 days in anaerobic conditions.

In both production and process-ing of pyrethrum, Horizon Sopyrwa has consciously adopted a number of environmentally friendly ap-proaches, including sun-drying py-rethrum flowers and the rotation of pyrethrum with food crops to keep soil depletion to a minimum.

www.horizongroup.rw

One of the many roads in Kigali City, recently constructed by Horizon Construction

Eco-friendly pest control products produced by AgroPy Ltd

One of the pyrethrum fields in Musanze District

Horizon Construction introduces the Road Recycling Technology to the Rwandan construction market

Manufacturing

For most Rwandans a journey from Kigali, the capital, to the north-ern hub city of Ruhengeri is never complete without a stop at Kwany-irangarama, a trading post on the Kigali-Ruhengeri highway.

The town is well known across Rwanda for its locally manufactured brands Agashya and Akabanga. Manufactured from locally sourced materials by Urwibutso Enterprise, Akabanga, a hot chilli oil, and Agashya, a passion fruit juice, are iconic homegrown brands for Rwandans living at home and abroad.

“Having Agashya at my house always reminds me of home,” explains Hellen Aba-toni, a Rwandan expat living in the UK.

The two local brands are undeniably popular, but the lack of other domestically produced alternatives is testament to how underdeveloped the manufacturing sector in Rwanda remains.

Rwanda’s government has set itself a target for industrial production (which includes manufacturing, mining and utili-ties) to account for 20 percent of GDP by 2018. Currently it stands at 14.4 percent of GDP, according to the World Bank.

Manufacturing accounts for nearly 45 percent of all industrial output, and some 7 percent of GDP. Despite rapid acceleration, there is still a ways to go.

In the first two months of 2016 Rwan-da’s trade deficit increased by 12.7 percent, according to figures from the central bank. The rise from $263.55m to $297.02m points

Manufacturing in Rwanda: A work in progress Landlocked Rwanda struggles to price local products competitively, but now government interventions are trying to boost manufacturing

BY SAMUEL BAKER

it costs a Rwandan manufacturer $4,990 to import a 20ft container of raw materials. Coastal neighbours Kenya and Tanzania pay substantially less.

Cimerwa made a public appeal, asking Rwandans to buy locally. The manufacturer also introduced a new, efficient plant in an effort to increase productivity and lower costs.

Eight months on, however, the issue is far from resolved. Challenges such as high transport costs and energy prices still make it nearly impossible to bring down prices suffiecently.

Coffee productionOther potential sectors that could be a boon to domestic manufacturing face simi-lar constraints. Rwanda’s coffee industry is a case in point.

Rwanda’s hilly terrain is ideal for cul-tivating the cash crop, and some 400,000 farmers in the country depend on its pro-duction for their livelihoods.

The sector has made some strides in adding value. Farmers have been encour-aged to plant better quality beans that retail for higher prices in Western mar-

to how high demand for imports remains. As is the case in many African coun-

tries, most imported goods to Rwanda still cost less than locally produced alternatives. The country’s small size, high operational costs, poor infrastructure and landlocked geography make it very difficult for home-grown brands to build market share and price competitively.

“I always advise my clients to buy im-ported cement rather than using that manufactured by [local brands] Cimerwa or Kigali Cement because it is cheaper that way,” James Hakizimana, a Rwandan con-struction engineer, explains.

A 50kg bag of Cimerwa cement costs around Rwf 11,000 ($14.15) compared to around Rwf 8,500 ($10.93) for an imported equivalent.

Declining demand for highly priced locally manufactured products is hurting Rwandan businesses. In August 2015, prices for cement peaked in Rwanda due to expen-sive, inefficient production and competi-tion from other producers within the East African Community economic block – of which Rwanda is member – and abroad.

Part of the problem is that on average

kets. The number of washing stations in the country where farmers can clean and sort beans have grown from two in 2002 to more than 200 today.

These initiatives help. Doubling the volume of washed beans Rwanda exports, for instance, has the potential to increase coffee export revenues by 10 to 20 percent, according the London School of Economics.

Big brands including Starbucks began sourcing high quality coffee from Rwanda in the mid-2000s. However, most buyers still do most of their processing and pack-aging outside of Rwanda.

“A coffee roasting facility in Rwanda would not be a reasonable business model for our company,” says Ewan Reid, techni-cal director at Mathew Algie, a Scottish cof-fee company that sources green coffee from Rwanda.

At one point Mathew Algie looked into the prospect of setting up a roasting facil-ity in country with the Clinton Hunter Foundation, a non-profit. However, despite the company’s ethical sourcing outlook – it claims 90 percent of its coffee beans are cer-tified fair trade – the business case was not strong enough.

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“As a business, I do not think our com-pany would profit from manufacturing products in Rwanda. It is cheaper for us to do it in Scotland,” says Mr Reid.

Economies of scale are part of the prob-lem. Very little of the final product is des-tined for African markets. Export taxes are also very low in Rwanda according to Mr Reid, so the firm has little incentive to build a roasting facility in country to increase the value of the products at the point of export.

The firm does, however, export back finished coffee products processed in Scot-land. Their main customer in Rwanda is Bourbon Coffee, a coffee shop in Kigali.

“The business environment in Rwanda is great, but there is not enough incen-tive to establish a manufacturing business there,” Mr Reid concludes.

The jobs conundrumAccording the Rwandan government’s Vision 2020, the goal is to transform the country into a knowledge-based economy driven by ICT along similar lines to Singa-pore’s.

However, Rwanda still needs to boost manufacturing and value addition to in-crease prosperity and create jobs for its growing population.

The Made in Rwanda campaign, launched in March 2016, is one of the chan-nels the government is using in its efforts to support local manufacturing. Part of the idea is to encourage consumers to buy lo-cal.

In addition, as part of the campaign, Francois Kanimba, the minister of trade and industry, has said that the government will support local producers through pro-curement contracts.

Some see positive effects already. “The Made in Rwanda campaign is really help-ing to put our brand out. Our customer base has increased since the campaign was launched and we think that with contin-ued government support, manufacturing could go far,” says Uzamukunda Husna, an entrepreneur who makes and sells crafts.

However, impacts will be limited as long as structural issues in the economy are not resolved. “The problem we still face is that of costs. Most of the raw materials we use are sourced from abroad which is very expensive,” says Ms Husna.

Another step taken by the government has been to create Special Economic Zones (SEZs). The Kigali Special Economic Zone is the country’s first, and is now in operation. Construction is being completed in two phases, the first of which is complete and

can accommodate 61 investors. It is already fully booked, and many in-

vestors have begun operations. Phase two of construction is under way. According to the trade and commerce minister, several glob-al tech companies have expressed interest in leasing spaces.

Within the industrial zone, manufac-turers have access to land, water, electric-ity, well-developed roads and easy access to markets. This helps them to circumvent the challenges caused by poor infrastructure.

Claver Gatete, the minister for finance and economic planning, says that boosting industrialisation through developing spe-cial economic zones will increase exports. “We support the private sector by providing infrastructure,” he explains.

The government also encourages in-vestors within the zones to take on local employees and offer training. Alphonse Hategeka, who works for a textile manu-facturing company that operates there, has benefited.

“When I started out, I had no experi-ence of using any of the machines at the factory. I was intensively trained on the job and today, I understand how everything op-erates, and am in a position to train new people,” he says.

He adds that before the introduction of such programmes finding a job was very difficult. “Today, I earn what I consider to be a good income for a person with no [higher] education.”

Candy Ma, a Chinese national, runs tex-tile factory C&H Garments in the industrial zone. Her company has been in Rwanda since 2014 and now employs 200 people. She says the SEZ was essential to getting her business off the ground. “The govern-ment was very supportive and efficient at getting us started,” Ms Ma explains.

Creating incentivesAlthough manufacturing remains a small sector in Rwanda, the government’s com-mitment to develop it may make it an in-creasingly attractive opportunity.

“Creating incentives for businesses is what matters. What we are doing as Rwan-da is giving investors incentives to operate successfully in the country,” explains Mr Gatete.

Inyange Industries is a case in point. Established in 1997, the drinks manufac-turer has established a strong brand across Rwanda, slowly beating Agashya to become the next local manufacturing beacon in the country.

Today, Inyange drinks bottles deco-rate tables during high level conferences, boardroom meetings and weddings. The company sells well in Uganda, thanks in part to the large Rwandan diaspora popula-tion there, and wants to expand across all of east Africa.

Clearly Rwanda’s manufacturing sec-tor, though challenging, has potential for those with solid strategies.

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Manufacturing

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