Rwanda aims to increase foreign direct investment in 2015 to 1.2 billion US dollars, a fourfold jump from two years ago, helped by a new investment code that offers tax breaks and other incentives, a senior official said on Thursday.
World Bank rankings show Rwanda is one of the easiest places to do business in Africa, after Mauritius and South Africa, but the country has struggled to meet past investment targets.
(READ MORE: Rwanda’s economy on the right path: IMF)
While setting up a new business is simple, running an operation can soon prove challenging, investors say. Some complain that state-backed firms squeeze out competition.
“This year we aim to achieve $1.2 billion worth of private investment into the economy and to grow that annually by 20 per cent,” Francis Gatare, chief executive of the state’s Rwanda Development Board, told a meeting of local businesspeople.
“That’s an ambitious target we’ve given ourselves based on the broader objectives of our economic growth ambitions.”
In 2013, the latest year for which figures are available, foreign direct investment in Rwanda was 257 million US dollars.
Long praised by Western and other donors for rebuilding swiftly after the 1994 genocide, Rwanda has been aiming for double digit economic growth. Although it has not attained that level, the economy managed 7 per cent in 2014.
Rwanda published a new investment code in the official gazette in May, outlining incentives that included a seven-year corporate tax holiday to firms investing at least 50 million US dollars, of which 30 percent was equity in strategic sectors.
(READ MORE: Is Rwanda Africa’s next economic powerhouse?)
The sectors included manufacturing, tourism, health, information technology, other export-oriented industry and energy projects with capacity of at least 25 megawatts (MW).
Incentives to those investing 50 million US dollars or more were designed to attract large single investments “that can have bigger and sustained impact to the economy,” Gatare said, adding the sectors were ones expected to have “wider multiplier effects.”
Rwandan officials have said more investment and spurring on growth would help wean the country off foreign aid, which now accounts for almost 40 percent of the annual budget although the proportion has been gradually falling in recent years.