Category: Economy

Central Bank Governor John Rwangombwa made the announcement on Wednesday, August 21, 2024, following a Monetary Policy Committee (MPC) meeting held the previous day.

In his address to the media, Rwangombwa noted that in the second quarter of 2024, headline inflation slightly increased to 5.1 percent in the first quarter, up from 4.7 percent, but remained within the target range of 2 to 8 percent.

He further affirmed that inflation in 2024 and 2025 is expected to remain within the target range, stabilizing around 5 percent.

“Given the current and anticipated stable trend in inflation, the MPC has reduced the CBR by 50 basis points to 6.5 percent from 7.0 percent,” Rwangombwa announced.

The decision to reduce the country’s monetary policy rate is expected to make borrowing more affordable compared to last year, encouraging increased spending and investments.

During its last review in May, the Central Bank reduced the key lending rate from 7.5 percent to 7.0 percent, citing a similar inflation trend. Inflation has decreased significantly since January 2023, when the rate stood at 20.7 percent.

Rwangombwa has attributed the rise in inflation in the second quarter of 2024 to increases in core and energy inflation, which offset a decrease in fresh food inflation.

He explained that the rise in core inflation from 5.6 percent to 6.4 percent was driven by higher transport costs, following an upward revision in public transport fares in March and April this year, as well as increased vehicle prices during the second quarter.

“This was partly offset by the decline in fresh food inflation from 2.5 percent to 1.6 percent resulted from an improved supply of certain fresh fruits and vegetables such as sweet potatoes, cassava roots, tomatoes, green peas and green bananas from Season B 2024 harvest, along with remaining stocks from the bumper harvest of Season A,” he explained.

“There is also a base effect since some vegetable prices were higher in the corresponding quarter of last year. On the other hand, energy inflation rose from 2.7 percent to 4.5 percent due to higher liquid fuel prices after the upward revision in pump prices in April, aligning with international oil trends.”

For 2024 and 2025, headline inflation is projected to remain close to 5.0 percent due to easing food inflation as domestic agricultural production returns to normal levels.

On the other hand, core inflation is expected to increase in 2024, driven by import costs, but is anticipated to decrease in the second half of 2025. Energy inflation is likely to increase slightly in 2024, in line with international oil price projections.

Risks

The Central Bank Governor, however, warned that the projections could be affected by various risks and shocks. Heightened global geopolitical tensions due to conflicts in the Middle East and between Ukraine and Russia could create uncertainties around international commodity prices. Additionally, adverse weather conditions could impact future agricultural supply and food prices.

Meanwhile, Rwanda’s deficit expanded by 9.5 percent in the second quarter of 2024, driven by increased imports compared to exports.

The Central Bank revealed that merchandise exports increased by 0.9 percent in the second quarter of this year, constrained by weak coffee performance due to declining global commodity prices and seasonal factors, as well as reduced revenues from processed food exports. In contrast, merchandise imports rose by 6.4 percent, mainly due to strong demand for core food items, energy products, and some capital goods.

Latest data from the National Institute of Statistics (NISR) shows that the country’s trade deficit widened by 30.9 percent year-on-year, reaching $411.6 million in June this year, up from $314.5 million in June 2023.

On a month-by-month basis, the trade gap expanded by 13.7 percent, from $362 million in May to $411.6 million in June.

The Central Bank notes that the trade deficit continues to put pressure on the Rwandan Franc, though the pressure is lower compared to last year.

“By the end of June 2024, the Rwandan Franc had depreciated by 3.70 percent against the US dollar, compared to 8.80 percent in the same period last year,” Rwangombwa explained.

He assured that, with private and government inflows, gross official reserves stood at 4.7 months of import cover as of June 2024 and are projected to remain adequate, exceeding the 4-month benchmark in the medium term.

For Rwanda, a landlocked country with ambitious goals for economic development, embracing air cargo transport is not just an option; it is a necessity. It plays a crucial role in the global supply chain, responsible for the movement of high-value and time-sensitive goods.

Although it represents only a small percentage of global trade by volume, it accounts for over 35% of global trade by value, underscoring its importance for industries that depend on the rapid and reliable delivery of products.

Key sectors that rely on air cargo include pharmaceuticals, electronics, and perishable goods such as fresh produce, flowers, and seafood.

The need for speed in these industries is driven by the perishable nature of the products, the high costs associated with delays, and the necessity of maintaining product integrity during transit.

For many businesses, especially those operating in just-in-time supply chains, air cargo is the only viable option for ensuring that goods reach their destinations on time and in perfect condition.

Locally, air cargo transport is still in its infant stages. Many businesses and importers continue to rely on traditional shipping methods, such as using ports in Mombasa, Kenya, or Dar es Salaam, Tanzania, to bring in goods that are then transported over land across several borders to their final destinations.

Whilst this method has served Rwanda for many years, it is fraught with challenges, including delays, higher costs, and the risk of goods being damaged or spoilt during transit.
Companies like Heart of Africa Trading (HAT) Plc are leading the charge, recognizing the transformative potential of air cargo transport to redefine the nation’s economic landscape.

HAT, a prominent logistics and freight services company based in Kigali, has been instrumental in promoting the benefits of air cargo transport in Rwanda.

With a robust presence both locally and internationally, including offices in Dubai and sea transport services across East Africa, it has become a key player in the country’s logistics sector with efficiency and reliability, a preferred choice for businesses looking to transport goods quickly and securely.

Shyaka Gakuba, the CEO at HAT explains the critical role of air cargo in supporting Rwanda’s economic growth.

“Air cargo offers the speed and reliability that businesses need to stay competitive. It’s not just about moving goods; it’s about ensuring that products reach their markets in the best possible condition,” he says.

This is particularly important for perishable goods and high-value items, where any delay can lead to significant financial losses. Gakuba also highlights the broader impact of air cargo on the economy, noting that it enhances Rwanda’s ability to compete in global markets.

“By embracing air cargo transport, Rwandan businesses can build stronger relationships with international partners and customers. This, in turn, can lead to increased exports, higher revenues, and greater economic stability for the country,” he notes.

In addition to providing reliable transport services, HAT ensures that air cargo services are more accessible to Rwandan businesses, with a range of business incentives to encourage more traders to adopt air cargo transport.

One of the key incentives is providing cash advances to traders who may run out of funds while conducting transactions in foreign countries. This financial support can be a lifeline for businesses, enabling them to continue their operations without interruption and seize new opportunities in the global market.

“At HAT, we understand the challenges that businesses face when dealing with international logistics, that’s why we go the extra mile to offer financial solutions that help our clients overcome these challenges. Our goal is to make air cargo transport not only efficient but also accessible and affordable for businesses of all sizes,” he explains

The limitations of traditional shipping methods are particularly pronounced in industries where speed is essential. For instance, Rwanda’s main exports to the United Arab Emirates, including fruits, flowers, and other perishable products, require rapid transport to maintain their freshness.

Similarly, pharmaceutical products such as vaccines and medicines are highly sensitive to environmental conditions and can lose their efficacy if subjected to the long transit times associated with sea or road transport.

This is where air cargo transport comes into play, offering a faster, more reliable alternative that ensures goods arrive at their destinations quickly and in optimal condition.
For Rwanda, this could mean the difference between maintaining and growing its export markets or falling behind in an increasingly competitive global marketplace.

RwandAir has played a pivotal role in promoting air cargo transport. Having been recognized this year for its exceptional service, ranked third among African air transport companies for customer care and operational efficiency, the national carrier is taking the air cargo business, even a notch higher.

The Cargo department is one of the key developing segments where much emphasis is put to empower handling capabilities and network development both regional and across long haul routes. Currently RwandAir cargo departments is divided into two sub-units.

Cargo commercial section which handles sales and marketing activities, network planning, pricing and revenue Management while the Operations section overlooks all operational activities which include acceptance, tallying, warehouse operations, and handling for both imports and exports, as well as transiting cargo to and from customers.

Currently RwandAir, operates 7 dedicated cargo freighter destinations using 737 SF cargo freighter with a capacity to carry up to 21 tons depending the nature of cargo. These destinations include; Entebbe, Nairobi, Brazzaville, Bangui, Djibouti, Sharjah, Dubai World Centre and Kigali as the hub.

These are supplemented by other destinations served by RwandAir belly capacity. Some of the main destinations served by belly capacity include the United Kingdom, Belgium and France.

RwandAir Ltd. is undeniably steering a challenging environment in trying to capitalize on Rwanda’s untapped potential through air cargo transport with many strategies despite the existing challenges.

Some of the strategies include infrastructure development such as establishing regional connectivity, construction of facilities for Pharma and dangerous goods strategic partnerships and alliances, adaptation to new technology and improving on the existing regulations.

Jean Bosco Gakwaya, the Director of Cargo Services at RwandAir explains that some of the challenges include capacity constraints where the limited number of cargo freighters/Aircraft, warehouse capacities which in turn restricts cargo volumes to be processed

“Rwanda cargo market is relatively small, with limited demand from local businesses. This makes make it difficult to achieve economies of scale,” he says.

Other challenges include competition from road transport, competition from other Airlines, high operational costs and limited Skilled Workforce: External Factors:
Gakwaya admits that geopolitical instabilities in addition to the complex and inconsistent regulatory requirements slow down the development of air cargo services in Rwanda.

And as Rwanda continues to grow and develop, the importance of air cargo transport will only increase. The country is well-positioned to capitalize on the opportunities that air cargo presents, but this will require a shift in mindset and a willingness to invest in the future.
By embracing air cargo transport, Rwanda can ensure that it remains competitive, innovative, and prosperous in the global economy.

In some districts where a master plan dictating land use has not been developed, individuals use the land as they wish, leading to activities such as constructing buildings on land designated for agriculture, which can cause future losses.

Residents of Bugesera state that the master plan has become proof that development has reached their area.

Alphonse Nshimiyimana, a resident of Ruhehe village, Batima cell, in Rweru sector, said, “We used to see master plans being made for big cities like Kigali, Musanze, or other urban areas. But under the broad strategy taken by the government to develop rural areas, the land here will gain value and everything done here will also gain value, thus raising the living standards of the residents.”

Nshimiyimana explained that the master plan helps them understand where to build commercial buildings, factories, and other structures that contribute to community development.

Francine Bamurange, a resident of Ruramba village, Kindama cell, in Ruhuha sector, mentioned that they are ready for changes in construction and housing by separating commercial buildings from residential ones. She said, “For instance, in the Ruhuha trading center, people both trade and live there, which is problematic. Trading in one place while living in the backyard does not align well. Therefore, in Ruhuha town, people will separate commercial buildings from residential ones. This will also lead to the construction of modern houses with all amenities since they will be outside the main city.”

“This will prevent land from being wasted because all land will be used for its designated purpose as shown in the master plan. Besides, the district is developing, and the master plan will 100% transform the lives of the residents. It will allow us to progress since even without the master plan, just the tarmac road alone has brought significant changes to the residents’ lives.”

The Mayor of Bugesera District, Richard Mutabazi, told IGIHE that, in collaboration with the Belgian Development Agency, Enabel, various activities were carried out, including developing the district’s master plan and setting up an information collection room for different activities using technology.

He said, “Land use is crucial because when people build haphazardly, they might lack access to infrastructure. For example, roads might not reach where they have been built. People might have built in many places, but when you need a place with greenery and fresh air, you can’t find it. Following the master plan will ensure well-organized construction. Additionally, infrastructure must follow, as the master plan outlines where infrastructure should go, roads should pass, and where playgrounds should be built, making it easier for district budgets and partners to plan without the need to create new plans for everything.”

Mayor Mutabazi emphasized that the master plan is a powerful tool to protect agricultural land from being built on, as people will not abandon houses to seek food. It is essential to protect agricultural land to sustain the population.

Emmanuel Ahabwe, head of the housing development department at the Rwanda Housing Authority (RHA), stated that, in partnership with Enabel, residents of Bugesera have been helped not to misuse their land.

He said, “Previously, there were areas designated for agriculture, but due to their proximity to Kigali, people quickly turned them into whatever they wanted. Now that has changed; they must follow a specific plan. This project, supported by the Belgian government, ensures that.”

Bugesera District borders Kigali City and Burundi. It is home to over 551,000 residents, most of whom engage in cassava, maize, bean, and rice farming.

The National Land Authority (NLA) indicates that the 2023/2024 fiscal year will end with more than 10 approved master plans by the Cabinet, with only six to be developed next year.

Regarding environmental protection, the Kayumbu area has been developed with gardens where people can relax.

Seven years ago, the areas surrounding Rwamagana town were mostly characterized by dirt roads, which resulted in dusty conditions or mud during the rainy season. The Mayor of Rwamagana District, Radjab Mbonyumuvunyi, told IGIHE that in collaboration with the Belgian Development Agency, Enabel, nearly 10 kilometres of roads around various parts of Rwamagana town have been paved.

These roads have transformed the image of the town, with the roads also being equipped with streetlights. Mayor Mbonyumuvunyi stated, “Initially, there were 4.6 kilometres of roads, followed by another 2-kilometre road from the bus station to the craft centre. We have now constructed additional roads in various phases, totalling nearly four kilometres. These roads have helped change the town’s appearance and improve living conditions. Previously, the roads were dusty in dry seasons and slippery during rains, sometimes causing cars to get stuck. But today, people can move confidently, knowing they will reach their destinations.”

He also highlighted that these infrastructure developments have led to the renovation of old commercial buildings and the construction of new, modern ones.

He said, “New buildings have been constructed, and those with old ones have renovated them. Those who had only residential buildings have also built commercial ones, allowing them to trade and support their families. The commercial buildings generate taxes for the country, enabling us to build more roads, clinics, schools, and other infrastructure.”

Rehema Uwamahoro, who owns a water processing and selling plant in Rwamagana town, told IGIHE that she started her business there in 2016, initially facing ridicule for working in what was considered a rural area. She recalled, “The roads were dirt and in poor condition, making it difficult for trucks to transport goods without breaking down. Today, a truck can complete a delivery within an hour and return for a second trip because of the well-maintained roads.”

Modern Market Replaces Traditional One

As part of this project, a modern market was built, replacing the old one that accommodated fewer than 300 traders. The old market was essentially a shelter with metal pillars and a roof. Mayor Mbonyumuvunyi explained, “We had a makeshift market with a metal structure that wasn’t a proper building. It was very old, leaking, and not in line with the direction of Rwamagana town and Rwanda as a whole.”

The new market will accommodate about 1,000 traders, including those selling in boutiques, stalls, and various other sections like fruits and vegetables. It is designed to house many people comfortably, making it easier for traders to conduct their businesses.

He emphasized that doing business in a well-structured market allows traders to earn profits more easily. He also mentioned that they are encouraging nearby residents to build modern and multi-story buildings to support the market.

“When the market is completed, many people will need places to trade and work. We are not self-sufficient, which is why we are asking people nearby to construct large, modern buildings to support the market. This will ensure that those who need spaces to work and trade can find them, reducing unemployment,” he stated.

Expanded Craft Center

In addition to the market and roads, a modern craft centre has been built in collaboration with Enabel, greatly assisting local development.

Thierry Mbarushimana, a carpenter at the Rwamagana Craft Centre, told IGIHE that before the new centre, they were scattered in different parts of the town. Now, they work with the assurance that their products are secure and have a designated place to sell them.

Mayor Mbonyumuvunyi noted that they previously faced challenges asking craftsmen and artisans in Rwamagana town to move to the old, small craft centre. Now, three large hangars have been constructed.

“One hangar is for drying timber, which previously led to poorly crafted doors due to insufficient drying. The other two large hangars are temporarily housing market traders while the new market is being completed. Once the market is ready, these hangars will continue to serve the craft centre, providing ample and quality workspace for craftsmen.”

The craft centre does not only focus on carpentry and artisanal work but also trains youth in various relevant skills.

The ongoing prepayment is based on sales made in January, February, and March 2024.

Hajara Batamuliza, Commissioner for Domestic Taxes at RRA, explained that all individuals who earned profits or registered a business in 2023 and declared income tax for the first time in March 2024 are subject to this quarterly prepayment.

“When we talk about profitable and taxable activities, there is no exclusivity. All individuals, including those who own vehicles such as motorcycles, trucks, taxis, or buses and are engaged in transporting people and goods as a profitable activity, are subject to this tax prepayment,” she said.

“There are other sectors, such as businesses with diversified operations, service providers, and banks. All activities conducted in Rwanda, where a person received taxable income,” she added.

For taxpayers under the real regime, you can make a declaration via the RRA website (www.rra.gov.rw). Click on “Declare Domestic Taxes,” fill in your TIN and password, and fill in the annexures if you have withholding taxes.

Click on “Tax Declaration,” then on “New Declaration,” and search for First Quarterly Prepayment. On the declaration form, click on the declaration number. Click on “Enter Declaration” and fill in the required information on the declaration form, click ‘compare with the declaration,’ then submit your declaration.

Micro-enterprises under the flat regime can declare their taxes by dialing *800#. Payments are made using mobile banking, Mobile Money, MobiCash, or Internet Banking.

According to the Law establishing taxes on income, taxpayers must declare and pay a quarterly prepayment tax to the account of the Tax Administration by June 30, September 30, and December 31 of the year of taxable business activities.

However, Article 8 of Law No. 020/2023 of March 31, 2023, on tax procedures, specifies that if a deadline falls on a public holiday or a weekend, the deadline is moved to the last working day prior to the holiday or weekend. This is the case for this month.

“Taxpayers should be aware that the deadline is June 28. Our staff are ready to help taxpayers at all our offices across the country. I urge them not to wait until the 28th but to come earlier so we can assist them. Once they come late, it becomes difficult,” Commissioner Batamuliza added.

Waiting until the last day can also lead to technological difficulties, which may result in late declarations and associated penalties.

Article 82 of the law on tax procedures provides that a taxpayer who fails to declare and pay tax within the time limit provided by law pays such tax and is liable to an administrative fine of 20% of the due tax if the time limit for payment extends for a period not exceeding 30 days; 40% for a period ranging from the 31st to the 60th day; and 60% of the due tax if the taxpayer exceeds the time limit for payment by more than 60 days.

A taxpayer who declares tax due within the time limit provided by law but does not pay that tax in the prescribed time limit pays the principal tax and an administrative fine of 5% of the due principal tax for a delay not exceeding 30 days; 10% for a period ranging from the 31st to the 60th day; and 30% if the taxpayer exceeds the time limit by more than 60 days.