Category: Economy

The country has a developed tourism sector with national parks covering 38% of its land area.

The latest population census in the country indicate that it has slightly more than 2 million sparsely populated people as 70% of the country is covered by Kalahari desert.

About 11.6 percent of the population lives in the capital and largest city, Gaborone wile the majority of its population is concentrated in in eastern part of the country.

The country was a colony of the British and held the name of Bechuanaland under the colonial rule. The name changed to Botswana in 1966 after obtaining Independence.

Botswana is also renowned for its strong democratic tradition. After gaining independence in 1966, the country has experienced more than four decades of uninterrupted civilian leadership and a consistent record of democratic elections.

Botswana was among African countries hit by poverty following its Independence in 1966 but rapidly transformed into an upper middle-income country, enabled by significant mineral wealth, good governance, prudent economic management, and a relatively small population.

It is among 12 African countries that achieved upper-middle income status including Gabon, Namibia, Ghana, Cape Verde, and South Africa.

The country’s Gross Domestic Product (GDP) amounts to US$18.3 billion with a per capita income of US$7 831.

Among others, the country’s currency (Botswana Pula- BWP) is among strongest ones in Africa where US$100 is exchanged for approximately 1210BWP.

Figures from the World Bank show that the livelihoods of Botswana’s population continue to improve overtime.

From 2002 to 2006, the number of people living on a daily per capita income below US$1.90 per day dropped from 29.8% to 16.1%.

Economic analysts show that the country owes its fast development to advanced agriculture, tourism and reducing inequalities among the poor and rich.

Other reasons include the presence of minerals including Diamond and Gold.

In 2020, Botswana’s exports hit US$4.58 billion becoming the 114th country with large scale exports.

These include Diamonds worth US$4 billion, Gold worth US$87.2 million among others, majority of which was exported to Belgium, USA, the United Arab Emirates, India, South Africa and Singapore.

{{Opportunities for Rwandan investors}}

During COVID-19 pandemic, Botswana faced economic shortfalls as the mining sector was not fully operational due to related restrictions yet the country’s economy heavily relies on minerals.

This pushed the country to expend much effort in other sectors of the economy to keep national development on track where agriculture and tourism were given priority.

To ensure the efforts yield good results, investors from Botswana toured different countries to explore avenues for collaboration with their counterparts.

In April 2022, the delegation from Botswana led by the Minister of Foreign Affairs, Lemogang Kwape and Keletsositse Olebire, the CEO at the Botswana Investment and Trade Center (BITC) visited Rwanda for the same cause.

At the time, Botswana business delegation had an opportunity to engage one on one with their Rwandan counterparts as well as undertake site visits to explore areas of collaboration.

Lemogang Kwape said that Rwandans have investment opportunities in his country.

He explained that Rwanda has developed its agriculture sector where Botswana can learn from Rwanda’s practices to reduce related imports.

“We are exploring how to collaborate with our counterparts so that we can exchange expertize to reduce agricultural imports and increase exports,” he said.

Lemogang added that tourism is among potential areas of collaboration.

He said that Rwanda and Botswana have developed tourism sector and stressed the need to create synergies to lure tourists from outside Africa to attractions fin respective countries.

The visit was concluded with the signing of Memorandum of Understanding (MoU) between Rwanda and Botswana in the areas of economy and investment.

Both countries also signed framework for cooperation agreements in the areas of mining among others.

The signed agreements open doors for Rwandans to explore investment opportunities available in the country.

Botswana has introduced different incentive programs to lure international investors where manufacturers, financial institutions and tech companies are taxed 15% on profits from approved operations.

Meanwhile, businesses in other sectors are charged 22% while the Value-added tax (VAT) is 12%.

Depending on negotiations, an international investor may be exempted from taxes between five and ten years while those with investments transforming communities’ livelihoods are not taxed on imports of raw materials. The same applies to the import of machinery to be used in these factories.

Investors also benefit from the country’s agreements for elimination of double taxation with South Africa, the United Kingdom, Sweden, Mauritius, India and Russia.

For Rwandans, it is an opportunity to export goods to countries of Southern African Development Community (SADC) with more than 300 million population.

Minister Ndagijimana presented the budget on Tuesday 7th February 2022 where he announced that the proposed budget revision will increase the government budget by Rwf 633.6 billion. The original budget of Rwf3,807 billion will increase by 16.6% to 4,441 billion. This increase will ensure the Government of Rwanda’s continued success in fueling a strong recovery from the Covid-19 pandemic.

This increase will supplement the existing support to jobs and businesses, and ensure the continued success of the Covid vaccination drive, as well as investing in areas of long-term development. Further investments in Education, Healthcare, ICT, and Agriculture, will be at the forefront of the ongoing effort of the government to invest in Rwanda’s future, and move closer towards achieving the Vision 2050 goals.

“The Rwandan economy has outperformed forecasts in the previous two quarters. This budget revision reflects these successes, and the effectiveness of the economic recovery plan in keeping businesses afloat, encouraging new investments, creating jobs, and maintaining strong social protection for vulnerable citizens”, remarked Minister Ndagijimana following the announcement. “The increased investments in the Rwandan economy will ensure that we will emerge from this pandemic stronger than ever”.

{{Key changes in the 2022-2021 Revised Budget}}

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The proposed revised budget contains several important adjustments, such as an increase of domestic revenues by Rwf 155 billion – from Rwf 1,993 billion in the original budget to Rwf2,148 billion – a 7% rise.

A stronger than expected recovery has increased revenues for the government, including an increase of Tax Revenue to Rwf 42.4 billion – 2% higher than expected.

Furthermore, non-tax revenue has also increased, partly thanks to internationally-distributed IMF debt relief of Rwf 23.2 billion, as well as increases in internally generated revenue streams. The budget revision will re-invest these extra earnings in the Rwandan economy.

External loans are also a key funding source for the increased investment in the economy. The successful launch of Rwanda’s first Eurobond, and funds distributed by the IMF’s Covid recovery programme, are set to increase external loan funding to FRW 1,469.7 billion

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On the expenditure front, Government expects the recurrent budget to increase by Rwf371.2 billion from Rwf2,413.7 billion in the original budget to Rwf 2,784.9.

This increase will be primarily be invested in improving public service provisions for Rwandans, including by meeting existing budgetary gaps in the school feeding programme at all levels. Following the confirmation that Kigali will host an in-person CHOGM in June 2022, there will also be further allocations made to CHOGM related activities, as well as to other existing commitments.

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For capital expenditure, the original budget amount of Frw 1,398 billion is being raised by a net amount of Rwf262.4 billion to Rwf 1,655.7 billion. This increase in investment will be primarily allocated to key sectors including Education, Healthcare, ICT, Agriculture, Energy and Transport.

In the short and medium-term, these increased capital expenditures will further bolster Rwanda’s strong economic recovery against Covid-19 by making immediate improvements to public services for Rwandans. Furthermore, in the long-term, these investments are also aimed at Rwanda’s future, and at fulfilling the Vision 2050 targets.

The Government will continue to monitor closely all components of the economic performance that may affect the implementation of the revised 2021/22 budget, and will take any necessary corrective measures to ensure its full implementation and maintain macro-economic stability.

In the second quarter of 2021, GDP at current market prices was estimated at Rwf 2,665 billion up from Rwf 2,177 billion of the same quarter in 2020.

The statistical report released on Wednesday 15th September 2021 shows that the service sector was the main contributor to the Gross Domestic Product (GDP) with 47%, followed by agriculture (25%) and industry (19%) while 9 % was attributed to adjustment for taxes and subsidies on products.

Unlike the past year, figures released yesterday reflect a good progress on economic recovery from adverse effects of COVID-19 pandemic due to instituted measures to prevent the spread of the virus.

Overall, the GDP grew by 20.6%, while other sectors of the economy including agriculture, industry and services grew by 7%, 30% and 24% respectively.

Overall, agricultural activities grew by 7 percent and contributed 2.0 percent to overall GDP growth.

Within agriculture, the production of food crops increased by 7 percent while the production of export crops decreased by 2 percent.

Industrial activities grew by 30 percent and contributed 5.1 percentage points to GDP growth. The main contributors in the industry sector were construction activities, which grew by 33 percent, and manufacturing activities, which grew by 23 percent. Mining and quarrying activities also increased by 87 percent.

Among others, the growth in manufacturing activities is due to an increase of 111 percent in the production of furniture and other manufacturing, 11 percent in food processing, 39 percent in production of chemicals, rubber and plastic products as well as 47 percent in metal products, machinery and equipment.

Service activities grew by 24 percent and contributed 10.8 percentage points to GDP growth.

Within services sector, wholesale and retail trade increased by 34 percent, transport increased by 48 percent, education increased by 168 percent, information and communication increased by 28 percent while financial services increased by 19 percent.

As per released report, total final consumption expenditure increased by 46 percent in the second quarter of 2021, with household final consumption increasing by 52 percent.

Government final consumption increased by 20%, imports remained constant at 0 percent growth while exports and gross capital formation decreased by 7 percent and 58 percent respectively.

The decision of scrapping transfer charges for Push and Pull services is part of new directive released by BNR and follows concerns among members of the public lamenting that transfer charges from one’s bank account to mobile money wallet and vice versa could slow down the country’s efforts to embrace cashless transactions.

In May this year, BNR announced that it was conducting a study to fix prices for digital financial services.

The directive signed by the Governor of the National Bank of Rwanda, John Rwangombwa reads that ‘Charges and fees on transfer of funds between e-money and deposit accounts belonging to the same person are prohibited’.

The Central bank has also waived 6 per cent interest rate which banks have been paying previously on the funds held in the trust account.

“Trust accounts and related individual e-money accounts are only used for the purpose of facilitating payment services. As such, interest on trust accounts and interest on individual e-money accounts are prohibited unless the latter is explicitly used as a savings account,” adds the directive.

The sale of new 10-year debt drew more than US$1.6bn of orders, according to bankers arranging the deal.

Investors have been drawn to relatively high-yielding emerging market dollar bonds in recent weeks amid a plunge in developed country bond yields which has pushed US and European borrowing costs to their lowest since February.

Monday’s Rwandan bond follows a second visit to the international bond market by Benin last month, and dollar debt sales by Cameroon, Kenya and Senegal in June.

“Yields for these countries are pretty low considering what’s happened in US Treasuries,” said Kevin Daly, a fund manager at Aberdeen Standard Investments who participated in Monday’s sale.

“It makes sense for Rwanda to do this now.” The sale, which was handled by Deutsche Bank and Citigroup, priced the new debt at a yield of 5.5 per cent. Just over half of the proceeds will go towards refinancing the majority of the country’s other outstanding bond, which raised $400m in 2013 and was due to mature in 2023, with the remainder destined for spending on “key priority projects” to bolster Rwanda’s economic recovery. The larger size of the new bond means it qualifies for “benchmark” status and will be included in widely followed bond indices.

President Paul Kagame who has led Rwanda since the aftermath of the 1994 Genocide against Tutsi has sought to develop the country’s tourism sector while transforming the capital, Kigali, into a business hub. The economy has grown rapidly in recent years, although it contracted last year due to the impact of the pandemic.

Fitch last week gave the new bond a B plus rating, four notches into “junk” territory, and revised Rwanda’s outlook to negative from stable. The rating agency said a failure to stabilise debt at current levels of roughly 70 per cent of gross domestic product could lead to a downgrade in the future, even though much of the country’s debt is in the form of low-cost loans from international institutions such as the African Development Bank and IMF. Debt levels have leapt from about 50 per cent of gross domestic product in 2019 due to emergency funding to low income countries to help them weather the pandemic.

“These kind of sums are peanuts for the bond market but for Rwanda it’s a lot of money,” said Gregory Smith, a fund manager and author of Where Credit Is Due, a book about Africa’s debt burden. “A yield in the 5 per cent range is low for Rwanda so this kind of liability management is a good idea. But if they started to come back to the market regularly that could be a cause for concern.”

Commenting on the results, the Minister of Finance and Economic Planning Dr. Uzziel Ndagijimana said thatRwanda has a strong track record of sound economic policies and reforms that have led to sustained high economic growth, a conducive investment climate, prudent debt management and strong recovery prospects despite the impact of the COVID-19 pandemic.

The Governor of the National Bank of Rwanda, John Rwangombwa also welcomed the positive response from investors in this 2021 Eurobond issuance.

“The lower yield of this issue will result in a reduction in our annual interest payments over the next 10 years, strongly contributing to our debt sustainability strategy. The funds raised will accelerate strategic projects in productive sectors that will further boost the country’s economic transformation efforts,” he said.

The Infrastructure Investment Economist at AIIB, Suzanne Shaw recently told CNBC Africa that the loan is meant to boost economic recovery by financing private sector investment in the areas including textile manufacturing, agro-processing and construction.

Shaw explained that the loan was approved in consideration of the impact of COVID-19 pandemic which has had a big impact on the world, particularly the African continent.

“It is important for the bank to be relevant to its members. This loan from AIIB will help to boost economic recovery and build resilience in Rwanda post Covid-19 to put the country back on the path to sustainable growth. This is very important to meet to the needs of our members in a time of crisis like this,” she said.

The loan is AIIB’s first engagement in Rwanda since it became member in 2019.

It is also the bank’s first investment in Sub-Saharan Africa.

Shaw stated that the loan is expected to restore Rwanda’s economy which experienced first recession in 20 years.

“Rwanda has for the last couple of decades implemented a number of structural reforms to improve the economy and put it on goof growth path. What we have seen with Covid is that the country experienced its first recession in 20 years. This is huge when you think about a country like Rwanda that has been on great path in terms of economic growth,” she noted.

“We are convinced that by providing this loan, we can have an impact on the country by bringing it back to recovery but also ensuring long term economic resilience and growth. The loan will go to finance investment by private sector in the areas of textile, agro-processing, construction and line manufacturing which is also part of the country’s plan to put itself on the path of pre-Covid growth by investing in these sectors,” added Shaw.

The loan will be repaid within 34 years and six months with a grace period of 5 years and half.

The loan was approved by the bank’s fourth annual board meeting held in Luxemburg.

AIIB is a multilateral development bank that aims to improve economic and social outcomes in Asia. The bank currently has 103 members as well as 21 prospective members from around the world.

Addressing both chambers, Minister Ndagijimana pointed out that the fiscal policy of 2021/22 will prioritize spending to deliver on investments aimed at achieving National Strategy for Transformation (NST1) goals.

“Significant budget spending will focus on the needs under the Economic Recovery Plan and the National Strategy for Transformation with much attention to the key economic sectors, as well as the rollout of the Covid-19 vaccination program,” he said.

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The total resources estimated for the fiscal year 2021/22 will amount to Rwf3,807 billion. This amount is made up of domestic revenues amounting to Rwf1,993.0 billion comprising of Rwf 1,717.2 billion from tax revenue and Rwf275.8 billion from other revenue collection. External grants are estimated at Rwf 612.2 billion whilst external loans of Rwf 651.5 billion is envisaged for accrual to the Treasury.

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Equally to the projected resources, total expenditure in the fiscal year 2021/22 is projected at Rwf3,807 billion. This figure is made up of recurrent spending of Rwf 2,431.7 and capital spending worth Rwf1,393.3 billion. Furthermore, projected spending include an amount of Rwf 5.7 billion on inventory, Rwf 43.8 billion under various equity investment and fund shares for government and loans spending amount of Rwf 134.9 billion.

{{NST-1 and Resources Allocation}}

Government’s expenditure policies in fiscal year 2021/22 are guided by National Strategy for Transformation priorities and objectives. To this end, the Economic Transformation pillar takes the lion’s share of the resources at Rwf 2,234 billion amounting to 58.7 % of the total budget. Social transformation will take up Rwf 1,034 billion (27.2 %) while Transformational Governance is allocated Rwf538 billion representing 14.01% of the total budget.

In line with NST-1 strategic objectives, some of the priority areas agreed during planning and budgeting consultations formed the basis for resource allocation in 2021/22 fiscal year as shown below;

Agriculture productivity will be increased through scaling up use of inputs.
The budget will cater for increased access to electricity and clean water through construction of water supply systems.

Promoting urbanization will include execution of urban development project in secondary cities. Affordable housing projects will be supported with basic infrastructure.

Other areas of focus include; accelerating transport projects and construction of national roads, promoting innovation and increasing digital literacy, strengthening the health system by increasing access to quality health, improving the quality of education, strengthening social protection programs by Scaling up the coverage of Social Protection programs and support businesses affected by Covid-19 through Economic recovery fund.

The 2021/22 draft finance bill is in line with the 2021/22–2023/24 Budget Framework Paper presented to Parliament on May 5th 2021 and was amended to reflect the recommendations from the Parliament as submitted on June 3rd, 2021.