Foreign direct investment (FDI) in Rwanda

FDI in Figures

Although FDI stocks have increased in recent years due to measures focused on improving the business climate, FDI flows still remain rather weak. According to UNCTAD's World Investment Report 2024, FDI inflows to Rwanda increased by 5.4% y-o-y in 2023, totalling USD 523 million. At the end of the same period, the stock of FDI was estimated at USD 3.69 billion, around 26.4% of the country’s GDP. The National Bank of Rwanda’s Foreign Private Capital (FPC) census shows that in 2023, FPC inflows (including FDI, FPI, and other investments) totalled USD 236.0 million for the financial sector, the largest share at 26.6%, followed by manufacturing with USD 165.2 million. Mauritius led FPC stock distribution at 27.4%, followed by Kenya (9.3%), the USA (5.3%), South Africa (4.1%), India (3.5%), China (3.1%), and the Netherlands (3.0%). The financial sector topped the stock distribution with 26.9%, followed by ICT (18.1%), manufacturing (15.2%), and electricity (8.9%). According to the Rwanda Development Board, the country recorded USD 3.2 billion in registered investment commitments in 2024, a 32.4% increase from the previous year. Manufacturing attracted the most investment at USD 1.35 billion, followed by financial and insurance services with USD 811.2 million, and real estate with USD 377.7 million. China and India were the top sources of foreign investment, contributing USD 460 million and USD 445.1 million respectively. Notable projects that began operations in 2024 include Africa Green Mobility Solutions, Asia Machinery Ltd, SCON-N Ltd, Lipton Ltd, and MVG Developers Ltd.

Rwanda boasts a history of robust economic growth and a notable reputation for low corruption. The country does not impose statutory limits on foreign ownership or control, nor does it have official economic or industrial strategies that discriminate against foreign investors. Both local and foreign investors enjoy the right to establish and own business enterprises across all lucrative activities. Long-term leases, known as emphyteutic leases, are available to citizens and foreigners alike for residential and commercial purposes, typically lasting 99 years and renewable. Foreign investors can also obtain land through concessional agreements with the government, with a maximum duration of 99 years, but renewable upon agreement. The Investment Code presents a comprehensive set of benefits and incentives for registered investors in key growth sectors, subject to specific conditions. These incentives comprise preferential corporate income tax rates, withholding tax advantages, tax holidays, exemptions from customs duties on goods utilized within export processing zones, and support for internationalization efforts. Additionally, supplementary incentives are extended through the "Manufacture and Build to Recover Program" (MBRP), aimed at stimulating economic revitalization, particularly focusing on manufacturing, agro-processing, construction, and real estate development sectors. On the other hand, the low human resource capacity of Rwanda, its poor infrastructure, its landlockedness and its high operating costs are some of the factors that limit the potential attractiveness of the country. Other obstacles include the complexity of the tax system, which complicates business operations, and difficulties in securing a steady supply of quality, competitively priced raw materials, limiting production efficiency. Additionally, limited access to affordable financing and high interest rates in the local financial market hinder business expansion and investment. Rwanda ranks 104th among the 133 economies on the Global Innovation Index 2024 and 120th out of 184 countries on the latest Index of Economic Freedom.

What to consider if you invest in Rwanda

Strong Points

Among the reasons to invest in Rwanda are:
-a steady and high growth rate (averaging over 7% in the last decade)
-it is one of the most favourable business environments on the African continent
-significant progress in governance and relative political stability
-low levels of corruption (for the standards of the region)
-important natural resources: the country has reserves of cassiterite, coltan, gold and precious stones (like aquamarine, ruby, sapphire)
-a high potential for the tourism industry
-governmental incentives for foreign investors.

Weak Points

Some of the factors that could hinder Rwanda’s attractiveness for FDIs are:
-a high dependence on commodity prices and international aid
-the country’s location, with exposure to geopolitical tensions in the Great Lakes region
-a high demographic pressure, with one of the highest population density rates in Africa
-a shortage of qualified labour
-its small domestic market and,
-insufficient coordination between the RDB, RRA, the Ministry of Trade and Industry and the Rwanda Directorate of Immigration and Emigration can lead to inconsistent application of incentives for FDIs.

Government Measures to Motivate or Restrict FDI

The government of Rwanda seeks to attract more foreign direct investments and in May 2015 approved a new Investment Code aimed at providing tax breaks and other incentives to investors, such as:
- for an international company with its headquarters or regional office in Rwanda, a preferential corporate income tax rate of 0%
- for any investor, a preferential corporate income tax rate of 15%
- corporate income tax holiday of up to 7 years
- exemption from taxation on capital gains
- exemption of customs tax for products used in Export Processing Zones
- VAT refund (foreign firms should receive VAT tax rebates within 15 days of receipt by the RRA, although many companies reported delays in the reimbursement process, from a few months up to several years in some cases)
- accelerated depreciation
- immigration documents facilitation
- various Special Economic Zones have been established, including the Kigali Free Zone (KFZ) and the Kigali Industrial Park free-trade zone.
Further details on benefits under the Investment Code can be accessed here: https://www.visitrwanda.com/investment/how-to-invest/one-stop-centre/