Business in 2014: Winners and losers

It is only eight days for the sun to set on 2015. So how has been the year as far as business world is concerned? According to analysts, 2014 has been a year of lobbying, advocacy, blame game, optimism as well as pessimism and takeovers; some sort of cocktail of mixed fortunes for business community. However, there have been numerous business-to-business joint ventures, public-private sector partnerships and buy-ins, especially in the insurance, banking and hotel sectors. On the whole though, it has been a relatively great year for businesses, which has been crowned by an impressive a 7.8 per cent economic growth rate recorded in the third quarter. This was largely driven by a robust growth in the agriculture and service sectors, which contributed 34 per cent and 47 per cent, respectively. This was an increase from a 7.3 per cent growth rate in the second quarter. Remember, as we start 2015, there are only three years left on the second Economic Development and Poverty Reduction strategy (EDPRS II) calendar, a key development strategy that is pivotal to the country’s economic growth. Year’s gainers In the world of telecoms, it was a huge relief for subscribers especially the business community, expatriates and parents with students studying in Uganda and Kenya, when phone roaming fees between Rwanda, Kenya and Uganda were harmonised in November. This has greatly reduced the cost of doing business and easy communication across the three Northern Corridor countries. The ban on the importation of right hand drive commercial trucks was also lifted, giving hope to local transporters. It is however awaiting the necessary legislation to be implemented, but it will go a long way in helping the logistics sector become competitive. According to the Minister for Trade and Industry, Francois Kanimba, the move will help truckers save up to $500 million per year. The implementation of the single tourist visa for the Northern Corridor countries on January 1 was a great boost for both the local and regional tourism industry. Despite the other barriers like terrorism that continue to plague the region especially Kenya, the sector has performed relatively well. On the local scene, government also allocated 240 hectares of land formerly owned by Akagera Game Lodge to Akagera National Park to boost the tourism sector. For honey exporters, a ban on the country’s honey exports was lifted by the European Union, bringing hope to thousands of apiary sector players. The move is also expected to augment Rwanda’s export volumes and value going forward. Kenyan-based company, Shalimar Flowers signed a deal to develop Flower Park at Gishari in Rwamagana District to rejuvenate the country’s cut flower export sector that is struggling. Rwanda hosts AfDB meet Rwanda hosted the 49th Annual Meetings for the African Development Bank (AfDB) and the 40th meetings of the African Development Fund (ADF) in mid-May, which was a huge boost to local tourism sector. The 2014 AfDB Annual Meetings that attracted over 3,000 participants from Africa and beyond were the major event hosted by the country this year. RwandAir milestone The national carrier had a great year with the International Air Transport Association (IATA) raking it among the safest airlines in the world. RwandAir also received a certficate of safety worthiness this month after passing the IATA operational safety audit (IOSA), making it eligible to fly to any part of the world and eligible to enter into code share deals with five-star airlines without any restrictions. Gains on the regionaL integration front Many experts agree that 2014 could have set a concrete foundation for regional integration process. The Northern Corridor initiatives, including the launch electronic payments, a reduction in the number of non-tariff barriers (NTBs), the launch of another shipping terminal at Mombasa and the rail and oil pipeline projects that were unveiled this year will play a critical role in the development of the region. The initiatives have given the business community hope, especially as far reducing the cost of doing business in the region is concerned. In fact, initial estimates based on a 20-feet container indicate that the tripartite single customs territory initiative is already saving well over $25 million per year. The cost is expected to further reduce going into 2015, according to Rwanda Revenue Authority. Tourism was one of the sectors that got local and regional support. The cost of clearance, excluding transport, of 20-feet containers is expected to reduce by 50 per cent from $383 to $193 going to 2015, a source at RRA customs told Business Times. As of September 2014, through the EAC time bound programme, over 68 NTBs were resolved, though 24 of them remain unresolved. And according Nathan Gashayija, the Ministry of East African Affairs director of economic and productive sectors, more NTBs will be resolved as the region ushers in 2015. Takeovers One of the big deals of the year could undoubtedly be the takeover of Development Bank of Rwanda by a UK-based firm Atlas Mala that now commands a controlling stake in the country’s development bank, scooping 77 per cent. The deal also saw the birth of BRD Commercial Bank. The move was seen as a game changer towards efforts to boost access to finance and financial inclusion. The company was formed by former Barclays Bank chief executive officer Bob Diamond and Uganda businessman Ashish J. Thakkar. Still in the financial sector, Cogear and Prime insurance firms were acquired by Greenoaks Partners, a United Kingdom-based insurance venture firm. The company acquired 85 per cent shareholding in each of the companies and subsequently, rebranded to Prime. Romain Dequesne, the Prime board chairman, is quoted as saying the firm would bring on board international insurance experience and expertise “to enable us deliver outstanding insurance services on the Rwandan market. Earlier in July, Sanlam Emerging Markets, a South African financial services firm, acquired a 63 per cent interest in Rwanda’s largest life and non-life insurance company, Soras Group, for $24.3 million. These two acquisitions breathed timely impetuous into the local insurance sector that has been largely struggling with policyholders always complaining of late settlement of claims. This will hopefully change going into the New Year. In the hotel sector, the top management of Hotel des Mille Collines was taken over by global brand Kempinski. However, the partnership between the two has largely been shrouded in mystery. Government in a tactical move privatised Rutsiro Tea factory to boost production and competitiveness in the tea sector. RwandAir made huge inroads, being billed as one of the safest airlines in the global skies. More power generated During the third and fourth quarters of this year, a total of 45MW of electricity were added onto the national grid, bringing the country’s total power generation capacity to 155MW. The governments also signed a deal to import 30MW from Kenya by June 2015, and plans to import an extra 400MW from Ethiopia after the power infrastructure in Kenya and Uganda has been upgraded. Government moves to spur exports Since August, the government has signed agreements with 38 companies from mining, agro-processing, manufacturing and coffee sector to boost production and exports. Under the agreements, government will improve or put in place enabling infrastructure, including power and construction of access roads, as well as instituting quality mechanisms. Alphonsine Rubangura, the chairperson of the Chamber of Industries at the Private Sector Federation, is confident the initiative will reduce the cost of trade and enhance participating firms’ productivity and quality. In a related development, a new investment code was sent to Parliament and is waiting for approval. Once approved, it is expected to provide more incentives to investors, especially those in the energy sector who will see corporate tax slashed by 50 per cent. PSF on 2014 Gasamagera Benjamin, the Private Sector Federation chief, said the successes achieved this were mainly due to regional integration initiatives, like the single customs territory, and sustained public-private sector dialogue. “This year’s experience has taught us the power of advocacy. Through PSF structures, we have managed to raise pertinent issues affecting the ease of doing business in the country, with some being solved. It is important for the private sector dialogue with the government to solve the challenges facing us. Therefore, the business community should seize opportunities that have emerged as a result of advocacy during 2014 and improve their operations,” Gasamagera noted. 2015 priorities As we go into 2015, the private sector looks to see the new lease law passed, and rectification of the double taxation treaty by EAC partner states. And according experts, these should be top priorities going into 2015. Meanwhile, the 15 trade missions by the private sector players and government officials to Turkey, Malaysia, Singapore, Canada, Sweden, Ghana, UK and the US should bear fruit in the coming year. Otherwise, the effort and resources spent would all be in vain and to the detriment of the private sector and the economy generally.

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Business in 2014: Winners and losers