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South Africa-based Rand Merchant Bank (RMB) has ranked Rwanda as the ninth most attractive investment destination on the continent in its 2014/2015 rankings released this month.

Rwandan economy  is one of the fastest growing ones in Africa
Rwandan economy is one of the fastest growing ones in Africa

RMB, a leading African corporate and investment bank with a presence in more than 35 African countries, compared the investment climate of 54 economies on the continent and placed Rwanda in its top ten investment destinations on the continent with South Africa, Nigeria, Ghana, Morocco and Tunisia in the top five, in that order.

The report said that although Rwanda is a small country, its reform efforts have been so outstanding that it is reaping rapid rates of economic growth and associated improvements in the business environment.

As a result, Rwanda’s impressive reforms have contributed to dislodging Kenya from the list of Africa’s top ten, where East Africa’s largest economy has previously enjoyed a regular slot in the Bank’s annual survey. Kenya ranked in the 11th place.

Rwanda’s growth and subsequent rankings, noted the report, have risen from 39 in 1999 to the ninth position this year.

“I am not surprised. It is not the first reputable report to rank Rwanda favourably. This is an endorsement of Rwanda’s investment climate and another point of reference for potential investors to consider,” said Anand Sanjeev, the outgoing managing director of I&M Bank in Kigali.

The report noted that although Kenya remains East Africa’s gateway for foreign investment, authorities face a daunting number of challenges (including an inefficient legal system, graft, and the failure to put into practice a double taxation treaty with Uganda and Tanzania), which hampers access to finance.

The other countries in the top 10 are Egypt, Ethiopia, Algeria and Tanzania, which completes the list of top destinations.

According to the report, 2014 was a less favourable year for Africa’s investment attractiveness ratings that saw the continent’s overall investment attractiveness deteriorate and 22 countries having their rankings slashed.

Established in 1998, the Johannesburg-based investment bank reportedly had+ assets worth over US$80 billion as of 2014 and has funded several infrastructure and resource finance projects, mergers and acquisitions in many African countries over the past decade.

Timely rankings

RMB’s new rankings come at a time when Rwanda has just phased out the 2005 investment code, which was a major part of the reforms that have seen the country’s investment outlook become one of the most sought after on the continent.

After its introduction in 2005, the investment code had an almost instant impact with its generous incentives to investors attracting foreign direct investment (FDI) worth US$470 million that year, from just over US$103 million in 2004.

The investments were in critical sectors of the economy including, construction, financial services and ICT, which helped not only drive economic growth but also created thousands of direct and indirect jobs for Rwandans.

For instance, 4,144 jobs were created in 2007, mainly from projects that had been registered under the then new investment code and two years later in 2009, the number of jobs increased to 10,734 and surged further in 2012 when 17,311 jobs were created by registered investments. Yet, the new code is seen as an upgrade from the previous one.

New Code

Speaking on Monday at the East Africa-China business forum held in Kigali, Rwanda Development Board CEO Francis Gatare told a room full of prospective Chinese investors that a new investment code has been unveiled to further streamline incentives to spur more investment.

Gatare said the new code, unveiled a month ago, will facilitate a shift from a rather generic investment promotion to a more targeted approach that’s aligned to national development strategies in key sectors.

Under the new investment code, incoming investors will be exempted from paying capital gains tax, an incentive that was not provided for under the previous code.

The previous code also required an investment threshold of US$250,000 for foreign investors but that too has been removed under the new code and will only be applied for those looking for immigration incentives.

The New Times