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Rwanda is often regarded as one of Africa’s economic and development success stories. According to the World Bank, the country averaged annual GDP growth of 7.2% a year in the decade to 2019, with per capita growth at 5%.
Childhood (under the age of five) mortality rates, an indicator of human and economic development, have also plunged this century, from 185 deaths per 1,000 births, to under 40 in 2021 (the average for Africa is about 70).
These achievements have been underpinned by several factors, including political stability over almost two decades and a range of economic and structural reforms, with a strong emphasis on public sector investment.
While Covid-19 was a setback for Rwanda (and many other countries), the country has rebounded strongly since then, even managing to grow by 8.2% in real terms in 2022, despite the global challenges of high inflation and the knock-on effects of the war in Ukraine.
According to the World Bank, Rwanda is now aspiring to middle-income country status by 2035 and high-income country status by 2050.
To achieve these ambitious goals, Rwanda will have to tackle many challenges, including reducing poverty even further and encouraging greater private sector and international investment. The country currently is highly dependent on public sector investment, but this has meant high fiscal deficits and public sector debt (estimated at 71% of GDP).
Rwanda aims for the skies
There are some encouraging signs that are fuelling the country’s grand ambitions. The Bugesera International Airport, expected to be completed by 2026 at an estimated cost of US$2bn, will be 60% owned by Qatar Airways.
In addition, the airport will draw on the input of local companies, growing local employment and helping them to build capacity for future growth.
One such company is Master Steel, one of the largest manufacturing companies in Rwanda. Master Steel is a manufacturer of steel and plastic construction products based in Kigali, Rwanda, founded in 2005 by Jean Damascene Niyongabo.
Master Steel recently entered into a landmark transaction with Investec, which acted as co-mandated lead arranger in a facility worth a total of US$25m.
Ngiyongabo says that, in addition to growing its domestic market, Master Steel aims to contribute to trade with key neighbouring countries.
“Increasing the export sales in neighbouring countries is one of the strategies to increase sales in hard currency and reduce any problem related to foreign currencies while importing raw materials,” he says.
“The funds raised will therefore enhance our financial capacity to import more raw materials and satisfy the market needs, local and regional,” he added.
PPPs integral to growth
Master Steel is just one example of the increased role of public-private partnerships in Rwanda that should help it grow its gross fixed capital formation (GFCF), says Nonkululeko Dlamini, a consultant in structured finance solutions at Investec Bank, and a member of Investec’s African Structured Debt Solutions team.
“We believe that Rwanda’s business-friendly environment will ensure that the country remains an attractive destination for foreign investment, as it further diversifies its economy and develops trade in the region,” she says. “Over the medium term, we believe that Rwanda will remain amongst the economic outperformers in Sub-Saharan Africa.”
Rowan King, Investec Head of Business Development and Origination in Africa, adds: “This is Investec’s first corporate deal in Rwanda and we’re proud to have been able to support one of Rwanda’s largest manufacturers in its growth by arranging this facility alongside Etihad Cap Africa and I&M Bank Rwanda. This fits our strategy of exploring new markets in Africa while partnering with trusted partners in the ground.”