The Hefty Price Rwanda Pays To Attract Investors
Rwanda has unveiled the long awaited new investment code with expectation to attract more investors, despite allegations that the country is losing large volumes of revenues through tax incentives.
The country says, its incentives are attractive and are aimed at tapping investors sought after by various countries globally.
â€œThere is a competition for investment globally; investors chose where to put their money on basis of the return,â€ Francis Gatare, the CEO of Rwanda Development Board (RDB) told KT Press
Gatare unveiled the investment code amidst controversy that there is no return on investment as indicated by a report by the Institute of Policy Analysis and Research (IPAR-Rwanda).
The report concluded the country is being too generous.Â RDB on the other hand says the report is not reflective of the new global investment trends.
Rwanda has reduced its corporate income taxes from 30% to 15%, for priority sectors, including energy, financial services, transport, affordable housing and logistics in an investment code that was published in May 2015, replacing a code of 2005.
The country is giving up to 7 years of tax holidays to projects investing $ 50 million in energy, manufacturing, health and ICT, key sectors in countryâ€™s economy.
An investor in priority areas has inviolable right to own property, except when national interests are considered, among other incentives.
However, the IPAR report says Rwanda lost $ 234 million in taxes in just two years (2008 and 2009), due to taxes foregone through incentives.
However, in 2004, a year before the investment code was enacted; Rwanda registered $ 103 million worth projects from both domestic and foreign investment. Rwanda started giving incentives in 2005, and business registered increased to $ 470.5million.
In 2009, registered investments increased to $1.1 billion, slightly the same amount in 2012.
The greatest increase was registered in 2013 with $1.3 billion worth of business projects.
In these three years, foreign investment increased from 146 million, to $ 428 million.
The period saw several companies in the top five sectors, including construction, tourism, energy, ICT and agriculture.
These include Real Contract with $ 389.9 for Kabuga Hill Estate and Kagugu villas, Kivu Watt Ltd in Methane Gaz with $ 293.3 million and Tigo Rwanda worth $ 117 million.
Aegle on the Lake Ltd injected $ 162 million in tourism, while Ngali Ltd joined energy sector, with $ 146 million.
Between 2007 and 2013 the businesses created over 70,000 direct off farm jobs, in a country that is looking for 200,000 new off farm jobs annually.
Rwanda targets 20% contribution of private investment to the countryâ€™s GDP, from current 11%.
Daniel Salvaretnam, a Singaporean Investment expert working with RDB said, â€œMy country has one of the highest incentives in the world; we offer 10 year tax holiday, yet for many years, we have been registering a budget surplus.â€
He said â€œitâ€™s all about how you incorporate the incentives within other strategies.â€
Aimable Gahigi, of Rwanda Revenue Authority told KT Press, â€œwe are actually satisfied with this investment code; it creates a win-win situation.â€
â€œFor example, an energy company that would add 25 megawatt to the national grid would procure far more returns to us than some taxes we may forego for some years.â€
Rwanda is looking for a total $ 1.2 billion of registered investments this year, and to increase this by $ 2 million for 2016 and 2017.