Category: Economy

The purchase of the treasury bonds began on October 21 and will close on October 23, 2024.

Treasury bonds are a means used by the government to raise funds for national development activities.

Depending on the required funds, the government determines the value of the treasury bonds issued, which are also seen as investment opportunities for individuals looking to save for the long term.

When a person purchases treasury bonds, they are effectively lending money to the government, receiving interest. They will be reimbursed the amount they spent to buy the bonds when the maturity period ends.

The Rwandan government started the program to raise resources through treasury bonds in 2008.

In Rwanda, the main buyers of treasury bonds include financial institutions, insurance companies, and individual investors, who have increasingly participated in this market, especially after a major awareness campaign explaining their benefits that started in 2014.

The Rwandan government has also put significant effort into providing opportunities for treasury bondholders, as they can use them as collateral in banks to obtain loans that promote their development.

According to NISR, the CPI for September 2024 increased by 1.2 percent compared to August 2024.

Prices for ‘Food and Non-Alcoholic Beverages’ decreased by 4.5% on an annual basis, but saw a monthly increase of 2.5%.

The ‘Housing, Water, Electricity, Gas, and Other Fuels’ category also recorded a 4% increase year-on-year, with a slight monthly rise of 0.1%. Transportation costs surged by 18.2% annually, with a modest monthly increase of 0.1%.

Additionally, the data show that prices for “local products” rose by 1.3% year-on-year and 1.5% month-on-month. Meanwhile, “imported products” saw a 6.3% increase annually and a 0.4% rise on a monthly basis.

Prices for “fresh products” decreased by 4.3% year-on-year but experienced a significant monthly increase of 4.7%. In contrast, “energy” prices increased by 2.7% annually but dropped by 1.5% month-on-month.

Excluding fresh products and energy, the general index increased by 5% on an annual basis and 0.4% on a monthly basis, highlighting the broader inflationary pressure in the economy.

The first edition of B-READY assessed the business environments of 50 global economies, focusing on three pillars: regulatory frameworks, public service delivery, and operational efficiency. The report focuses on ten indicators, which include Business Entry, Business Location, Utility Services (water, electricity, and internet), Labour Force, Financial Services (access), International Trade, Taxation, Dispute Resolution, Market Competition (Public Procurement), and Business Insolvency.

Rwanda performed exceptionally well in several key areas. In terms of Operational Efficiency, the country earned an impressive score of 81.31%, ranking 3rd globally. For Public Services, Rwanda scored 67.37%, placing 8th in the world. Additionally, the country achieved a score of 70.35% in the Regulatory Framework, securing the 17th spot globally.

The scores position Rwanda as one of the top-performing countries worldwide and the top-performing country in Sub-Saharan Africa.

In terms of operational efficiency, Rwanda remains one of the fastest countries in Africa and globally for company registration. This efficiency stands in contrast to global averages of 32 days for domestic firms and 39 days for foreign firms, reinforcing Rwanda’s position as a regional leader in ease of doing business.

Other measures that have encouraged investments include free online business registration, automated tax filing and payments, one-stop center services for business permits and licenses, and support for foreign ownership and ease of profit repatriation.

In Public Services, Rwanda’s digitization of public services has been a key driver of its strong performance. Systems like the Integrated Electronic Case Management System (IECMS) for the judiciary and the e-titles system for land services have streamlined processes, reducing both the time and cost of doing business. These innovations play a vital role in enhancing the overall business environment.

Additionally, Rwanda’s regulatory reforms continue to enhance its global competitiveness. Recent legislative efforts, including the 2021 Investment Promotion Law, the Company Law, and the Insolvency Law, have created a more business-friendly regulatory environment. Furthermore, Rwanda’s commercial courts and streamlined processes for business registration and dispute resolution set benchmarks for the region.

On environmental sustainability, the B-READY report highlights Rwanda’s leadership in integrating environmental sustainability into its business practices. Initiatives such as e-mobility and renewable energy demonstrate the country’s commitment to a green economy, positioning Rwanda as a leader in sustainable development across Africa.

Rwanda’s holistic approach to reform also prioritizes good governance, macroeconomic stability, and anti-corruption measures, all of which have contributed to its favourable rankings in the B-READY report.

The Rwanda Development Board (RDB), a government agency responsible for promoting economic development and investment, stated that this performance demonstrates the country’s sustained drive to enhance its business environment and foster a welcoming climate for investors.

Francis Gatare, CEO of the RDB, participated in the launch of the World Bank report in Washington, D.C., United States. He acknowledged the good performance and pledged to further improve the business environment. Ongoing initiatives include the digitization of the One Stop Center, upgrades to business and mortgage registration systems, and the integration of trade services under a Single Transaction Portal.

“Rwanda’s performance in the B-READY report reflects our unwavering commitment to creating a conducive environment for private sector growth and investment. These reforms are the foundation of our socioeconomic transformation, and we will continue to prioritize innovation, sustainability, and efficiency to attract investment and grow the private sector.”

According to the World Bank, the B-READY report will offer countries a roadmap to create a business climate that benefits firms, consumers, the environment, and society as a whole. The 2025 report will assess more than 100 economies, and in 2026, the coverage will expand to about 180 economies.

According to the OECD economic outlook, annual GDP growth in the United States is projected to slow down to 2.6 percent in 2024 and further down to 1.6 percent in 2025, but be cushioned by monetary policy easing.

For Euro area, the OECD said that GDP growth is projected to be 0.7 percent in 2024 and speed up to 1.3 percent in 2025, with activity supported by a recovery in real incomes and an improvement in credit availability.

Headline inflation has continued to fall this year in most countries, partly due to further declines in food price inflation and low or negative energy and goods price inflation, the organisation noted, adding that the recent steep fall in oil prices, and the ongoing easing of global food prices could place further downward pressure on headline inflation in the short-term.

“Oil prices have declined by over 10 percent since July, amid expectations for excess supply next year and market concerns about weakening oil demand growth… If oil prices remain at their current level, global headline inflation could be reduced by around 0.5 percentage points over the coming year,” the OECD explained.

According to the OECD, declining consumer price inflation has supported household spending, providing a counterbalance to the negative impact from restrictive financial conditions and the uncertainty about the ongoing Ukraine conflict and the evolving crisis in the Middle East.

Along with stable GDP growth and further disinflation, the OECD also said that real incomes would improve and less restrictive monetary policy in many economies would help underpin demand.

The recovery in real incomes could provide a stronger boost to consumer confidence and spending, and further oil price declines would hasten disinflation.

Headline inflation is projected to ease from 5.4 percent in 2024 to 3.3 percent in 2025 in the G20 economies.

He was presenting the Monetary Policy and Financial Stability Statement (MPFSS) on September 25. The latter features the economic performance for the first half of the year and provides projections for the remainder of 2024.

With this robust growth, Governor Rwangombwa emphasized that the Rwandan economy is expected to surpass the initially projected growth for the year.

“We expect our economy to perform much higher than the original 6.6 percent projection for 2024,” he stated.

According to Rwangombwa, all sectors of the economy have contributed to this growth, with the service and industrial sectors showing particularly strong double-digit increases.

Over the past five years, the service sector has grown by an average of 48.2%, the industrial sector by 24.1%, and the agriculture sector by 18.4%.

However, Rwangombwa pointed out a significant challenge: the growth is not reflected in the export sector, which has impacted Rwanda’s foreign exchange earnings.

“The only challenge we have is that this growth is not reflected in our export sectors. This impacting our foreign exchange earnings and foreign exchange market.

“This is where the government and the private sector need to do more because the economy is growing but the imbalance between imports and exports continue to widen,” he stated.

This issue is evident in the rising level of imports, which grew by 5.7% in the first half of 2024, while exports decreased by 0.9%.

In 2023, imports rose by 17.4%, and exports increased by 11.2%, highlighting the ongoing trade deficit. The widening of the trade deficit—up by 9.6% in the first half of this year—can be attributed to a drop in the prices of exported commodities, while imports continue to rise.

This trade imbalance has also contributed to the depreciation of the Rwandan franc against the US dollar. In the first half of 2024, the franc depreciated by 3.7%, which is a notable decrease compared to the 8.8% depreciation recorded during the same period last year.

Governor Rwangombwa noted that while this year’s depreciation is expected to be just above 8%, it remains higher than the historical average, driven by pressures from the trade deficit.

On a positive note, inflows from travel, tourism, and remittances continue to rise, helping to finance the trade deficit. Rwanda currently has enough reserves to cover 4.7 months of imports, with projections to end the year at 4.8 months.

Inflation stood at 4.7% in the first half of 2024 and is projected to average around 5% for the entire year.

This new factory is perceived as a crucial step in the country’s ongoing efforts to industrialize the economy and diversify its manufacturing capabilities thereby positioning herself as a regional hub in the textile and garment sector.

AC Better Limited, a company comprised of Rwandan and Chinese business owners with deep roots in China’s robust textile industry and strong ties to Rwanda, is uniquely positioned to drive this transformation.
Edward Yin, the company CEO and key figure in the Kigali operations regards the establishment of the factory as a strategic move that aligns with both Rwanda’s national goals and the broader economic vision for the region.

“Rwanda is emerging as a central hub for the modern clothing industry in East Africa,” Yin explains. “Establishing this factory is not just about producing textiles; it’s about creating an ecosystem that supports local businesses, fosters innovation, and connects Rwanda to global markets.”

The company already operates a successful warehouse and supply chain business, providing local consumers with a wide range of textile fabrics, sewing machines, and essential accessories such as buttons and zippers.
They go beyond merely supplying products, providing spare parts and repair services to ensure that clients, from tailoring companies to retailers, receive comprehensive support and high-quality products.

This will serve as a major supply center for textiles in Rwanda, significantly enhancing the availability of high-quality fabrics and related products. This will be particularly beneficial for local designers, tailors, and fashion entrepreneurs who often face challenges in sourcing materials and accessing modern equipment.

The decision to establish the factory comes at a time when Rwanda is experiencing rapid growth in its industrial landscape. With a strong emphasis on promoting local manufacturing, the government has been actively encouraging investments in sectors that have the potential to create jobs, reduce dependency on imports, and boost exports. The textile industry, identified as one of the key areas for development, is now set to receive a major boost with this new venture.

The factory is expected to not only meet local demand but also cater for the broader East African market, thereby positioning Rwanda as a key player in the regional textile industry. Shyaka Gakuba, a Rwandan shareholder in AC Better Limited has been instrumental in conceptualizing the project.

Reflecting on the journey that led to this point, Gakuba said, “The idea to establish a modern textile factory in Rwanda was conceptualized when a ban against importation of second hand clothes was adopted. We looked at this as a way of creating a more self-reliant environment in clothing production.”
He is optimistic that this will enable a thriving, competitive industry that could provide jobs, support local businesses, and reduce reliance on imported textiles.

This development has since garnered significant interest from various stakeholders in Rwanda’s textile sector such as Maximilien Kolbe Uwayo Hategekimana, co-CEO of Kuza Africa Ltd, a hub dedicated to advancing the textile and garment industry in Rwanda.

He believes that this will positively contribute to transforming Rwanda’s fashion and textile sector. “Sourcing supplies and machines can be incredibly costly particularly for designers and small businesses from low-income economies,” he notes.

“By clustering designers into one entity, we can achieve economies of scale that reduce costs and streamline the production process. Our collaboration with AC Better Limited will ensure that our members have access to the materials and equipment they need at competitive prices,” he affirms.

Hategekimana, who connects tailors, fashion designers, and other value chain stakeholders by offering education, business development services, and access to world-class equipment, believes this is a positive step in the right direction.

In reducing Rwanda’s reliance on imported textiles, the idea of any contribution towards improving the country’s trade balance, industrial landscape and economic resilience is palpable.

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.