Lack of domestic financing tailored to the mining sector’s needs is making Rwanda’s mineral business highly reliant on loans from foreign companies and therefore biting into the country’s revenues because investors use a big chunk of their revenues to repay credit, lawmakers heard on Wednesday, January 10.

This was revealed during a session in which Rwanda Mines, Petroleum and Gas Board (RMB) officials appeared before the Lower House’s Committee on Political Affairs and Gender to provide responses to sector-specific issues highlighted in the Office of Ombudsman’s report for the fiscal year 2022/2023.

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The RMB CEO, Yamina Karitanyi, told lawmakers that majority of mining activities in Rwanda were still artisanal, indicating that such a situation creates challenges including issues related to environmental protection, in addition to losing some minerals, as a result of the use of traditional mining techniques.

All this stems from a general lack of access to finance among investors in the sector, she said, pointing out that available financial products from banks do not favourably respond to the sector’s needs. While the extraction of an estimated 80 per cent of minerals in Rwanda is done by local firms — foreign companies account for almost 20 per cent of minerals extracted in the country — the trade of these naturally formed precious substances is dominated by foreign finance, according to RMB Deputy Chief Executive Officer, Ivan Twagirashema.

Twagirashema said that it is the traders who mainly need a lot of money so that they can buy minerals to sell on the international market. Since traders get funding from foreign financiers who also want to purchase the minerals from the former, the financiers set conditions that result in the traders remaining with a small margin, he pointed out.

"That’s why money is generated, but it immediately gets back (in form of loan repayment). That is why, of the $1 billion we will reach this time [2023], a small proportion will remain in our economy,” he said.

"We want to reach a level where our banking system has trust in them and provides them with finance.”

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Karitanyi said that foreign investors are able to buy minerals from Rwandans and employ them, because they have access to better financing instruments abroad.

"The competition we have currently is a foreigner who can go to the London Stock Exchange, takes the most appropriate instrument, brings money here, recuperates their investment but also takes the money back,” she said.

Proposed solution

While there are countries where investors offer mining concessions as collateral for bank loans, Karitanyi said, this is not possible in Rwanda because, among other reasons, investors do not have enough exploration data for their mineral reserves.

She noted that collaterals that local banks accept include buildings, indicating that the maximum value of residential houses – for the relatively well-off – is about Rwf500 million, an amount that is too little for mining business.

"What we need is an access to finance for mining purposes. If you go to banks here, you will not find a financial instrument meant for mining” she told lawmakers, pointing out that mining requires long-term and affordable loans.

For her, "the mining sector should be digested in our baking sector.”

She expressed the concern that even the limited financing products available on the market are short-term loans.

"Mining is a long-term endeavor, it’s a long-term investment,” she said, pointing out that the government is committed to de-risking through carrying out mineral exploration research to complement what investors can do, but local banks should also develop financial products that adequately support the sector.

"What we have started doing is holding talks between entities including the Ministry of Finance and Economic Planning and banks to see how we can be able to get finance that can be used in mining. This will help us to acquire equipment which can help us to shift from artisanal mining practices to professionalisation and modernisation,” she said.

Rwanda’s mining sector generated $851.6 million (approx. Rwf1 trillion) in export revenues from January to September 2023, representing an increase of 45.6 per cent compared to $584.8 million recorded during the same period in 2022.

The country targets to earn $1.5 billion in 2024, according to RMB.