Incentives drive investments up $5 billion in five years

Incentives provided in priority development areas have in the last five years facilitated the growth of investments in the sectors to about $4.8 billion, according to statistics from Rwanda Development Board (RDB). The statistics further show that beyond investments, the incentives have further led to socio-economic impact such as job creation with more than 58,000 jobs created in the last five years. The investments have been made by local, foreign investors as well as ventures between local and foreign investors between 2011 and 2015. Infrastructure investments in water and energy made up the largest sum of investments at about $1.1 billion and about 2,627 jobs created. The service sector was second at about $690 million and ICT sector third with investments totaling about $620 million during the same period. Explaining the role of incentives in a developing economy, RDB chief executive Francis Gatare told The New Times last week that in Rwanda’s case, they acted as signaling tools to direct capital to priority areas. “Incentives are very important as they are signaling tools that direct capital to priority sectors. Capital is influenced purely by returns, decision made by individuals and corporations,” he said. In Rwanda’s case, he noted, the prioritisation and incentive packages that are put around specific sectors are important for capital to go to areas considered strategic for growth and economic development. The mobility of capital and the strive to remain attractive to investors from Rwanda and beyond had further informed the incentive move. In recent years, tax incentives have been among avenues of attracting foreign direct investments into the country. Last year, the Government revised the investment code that, among others, saw investors enjoy preferential corporate income tax of 15 per cent, for sectors such as energy, transport, financial services and affordable housing and logistics project. The code also allows up to seven-year tax holidays to projects investing more than $50 million in energy, manufacturing, tourism, ICT or health sectors. “Tax incentives come in to reduce cost of doing business. Another form of tax incentive is when you are incentivising the business to grow or pay its cost of capital. It is usually going at the early stages,” Gatare explained. However, he noted that contrary to perceptions that incentives were wasteful, they were rather necessary to increase the attractiveness of an economy. “When people look at the incentives as revenue lost, they assume that the same investment would have been made without the incentives, which is not entirely the case. We should not have the notion that incentives are wastefu; if anything, they are never enough,” Gatare said. In the process of putting up the incentives, Gatare said Rwanda conducted a comprehensive competitiveness assessment in the form of a SWOT (strengths, weakness, opportunities and threats) analysis. At the time, starting from early 2000s as the Government was aiming at growing private capital, it was important that a lot of capital comes from outside as the economy was still small, the savings still low and few firms established in the country. RDB registrar general Louise Kayonga said the investment code had been tailored to avoid blanket incentives but rather have targeted impacts on the economy. “More than any other country in the region, our investment code is probably one of the most balanced. We do not have blanket incentives. They are in areas that are going to have actual benefits for the economy,” she noted. Serge Kamuhinda, the chief operating officer of RDB, said incentives had been proactive in channeling investors to where the Government would like them to be more active to transform the economy. These he explained had mobilised investments and facilitated the growth of areas such as energy and construction in recent years. Fred Karemera, a manager at the One Stop Centre, said that tax administration and the Rwanda Development Board had made it possible to track the implementation of incentives making sure they are not prone to abuse. editorial@newtimes.co.rw

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Incentives drive investments up $5 billion in five years