In this interview with BusinessDay in Kigali, Robert Bafakulera, President of Rwanda’s Private Sector Federation and hotelier highlighted the impact of the “Visit Rwanda” campaign in partnership with British football club, Arsenal, and consistent efforts by the government to open the economy for more private sector participation.
Rwanda hospitality sector coming of age
The hospitality sector has come a long way since not being able to properly accommodate the 1800 people that attended our national dialogue conference in 2010.
At that time some people had to move out of their homes to accommodate the flurry of guests. We had very few hotels and the most prominent was probably the Intercontinental hotel, which is now Serena Hotel.
A lot has however changed since realizing we needed more high quality rooms to match a fast growing hospitality sector.
Between 2015 and 2016, we opened several four and five star hotels owned by both locals and foreigners.
Intercontinental hotel was renovated and expanded before it was bought by Serena hotel and transformed into a five star hotel.
Conferences and several other meetings were being hosted in Rwanda, so we saw the need for rooms and we have gone on to address that.
After our Convention centre was completed, the likes of Marriott hotel and Raddison Blu were also completed and we had other local brands come up.
Booming tourism and hospitality sector
The government has a plan to encourage private sector to add at least 1000 rooms every year. We will need more rooms in the future as the hospitality sector expands.
The high return on investing in Nigeria has over time proven a strong incentive for prospective investors from around the world.
The return on investment is around 30 percent.
The government has also put other incentives in place.
For instance, investors get at least a three year tax holiday for investing in the hospitality sector.
Challenges for private sector in Rwanda
Our private sector is small in terms of size and there are very few corporates.
The challenge is we have small and medium size enterprises, which are unable to sometimes access finance and not able to do big things.
Small businesses don’t have access to finance because they are not formally structured. Most of the young people, men and women operate informally. They don’t have the books of account in order to get affordable loans. When they do get loans, they get it at high interest rates. Corporates get loans at 14 percent interest but small businesses get loans at 20 or 21 percent. Another thing is to get this loan takes a very long time.
Govt role in private sector growth
The Government is trying its best and what is being done is to encourage people to have investments where people put money together and invest big. When we do that, government will do what it can to make sure such company grows fast. They give tax incentives and exemptions and so on. That is the only way we can grow our private sector because most businesses do not grow beyond certain limits but people who have come together have done a lot of things. We have sizable commercial buildings in town where people have come together and set it up together.
Many companies are buying the idea of joint investment, to make sure they are able to solve what they cannot solve individually.
Another way the government is aiding private sector growth has been by building strong institutions that work.
Government processes have limited individual services and increased online services which help to limit corruption and improved the ease of doing business.
Today, transfer of land titles is done online, as the days of moving from one place to another and wasting time is gone. Before, you would queue up to pay tax but today you can do it in the comfort of your offices.
In Rwanda, all you need to do is to present your invoice and you just pay tax. You don’t need to go to revenue offices. The same thing applies to domestic tax. There are lots of improvements in domestic tax. We have the Electronic Bill System (EBS). When you sell and issue an invoice, data is shared with the Rwanda Revenue service. At the end of the month, you both know how much tax you will pay and at the end of the year, they equally know your turnover. In that way, it increases the trust between the business people and those receiving the tax.
Positioning Rwanda for gains of Africa Continental Free Trade Agreement
Rwanda has come a long way and Rwandans are already exporting.
As private sector we are trying our best in this regard and government is trying to build relationships with most African countries, especially in West Africa. We have been going to West African countries such as Ivory Coast, Ghana, Congo Brazzaville etc. We are encouraging our people to start moving to these countries to build relations as well as do business. They will soon come to Nigeria. You know Nigeria is a big market and a very interesting one. We have partners who are already there and moving from one country to another country to do business is not so easy, something the AfCFTA will help improve.
I’ll say we (private sector and government) are in the process of laying the type of foundation that will see us be big beneficiaries of what would be the continent’s biggest trade deal.
Impact of Nigeria’s border closure
Nigeria’s land border closure has affected us, but not much. I know some business people with whom we have relationships have been affected. Some import rice which comes through the Nigerian border.
How inclusive is Rwanda’s high economic growth
The growth in Rwanda is evenly distributed. Here government has encouraged and guided the local administrators to be more responsible for the people.
Every year, local governments come to showcase what they have done in terms of education, health and other ways of improving the standard of living of the people within their jurisdiction.
If you go out, you find that it’s not only the capital Kigali that is well developed but also the towns which mostly have well-constructed roads. Also, there is electricity and water everywhere. When you go to some other countries, you find out that it is only the centre that is developed but not here, everywhere in Rwanda is developed and squeaky clean, and the private sector is being encouraged to drive job creation and reduce poverty.
Another thing is that there have been a lot of social campaigns targeted at the poor.
There was a campaign where the poor were given cows. There was also another campaign on medical insurance, where everyone can use medical insurance. So, all these initiatives have made people grow together and feel a sense of belonging.
Benefits of Rwanda’s free trade mantra
Free trade is about the free movement of people and reducing barriers to trade. In East Africa, you are able to bring products from other countries tax free. According to our understanding of West Africa, things are very expensive. When you go to other countries, the prices are high. In Rwanda we have the policy of Made-in-Rwanda which is encouraging local production even as we adhere to the principles of free trade which helps make our industries more competitive.
How Made in Rwanda goods are promoted
We give priority to goods made in Rwanda but we are not raising taxes on imports.
It is just a matter of goodwill by Rwanda people to promote Made-in-Rwanda products. We appeal to patriotism to buy what is produced here above other goods.
Impact of “Visit Rwanda” campaign
We have a good success story to tell from that particularly from the branded Arsenal shirts. I run a five-star hotel of 153 rooms which I opened in 2016.
When we opened in 2016 we were managing five to seven percent occupancy rate. In 2017, we moved to 16 percent and in 2018, we were at 40 percent.
However, since the Arsenal deal in 2019, we are doing about 70 percent daily occupancy rate on average. That shows the impact it is having has been positive. I also must acknowledge the vital role of our visa on arrival policy on boosting hotel occupancy rate.
Cost of “Visit Rwanda” campaign with Arsenal
It cost around $30 million. If I told you I was getting six percent when I started my hotel and now I am getting close to 70 perent, along with other hotels, then we are taking of a return of investment of over 60 percent.
Marriott Hotel, which has 260 rooms, was facing the same problem as we did at our hotel with low occupancy rate in 2016.
Serena Hotels and every other hotel were also facing the same problem. Today, we are almost moving at the same pace in terms of occupancy and that has had a huge impact.
My colleagues will tell you that the investment on Visit Rwanda is small money compared to what we are getting today in terms of hotel patronage and economic activity.
This initiative came with the help of our Tourism Board and Rwanda Development Board. Rwanda Development Board is a one stop centre for investors. You will get all the information you want there.
About Rwanda private sector federation
The Private Sector Federation was set up 1999, having replaced Rwanda chamber of commerce.
The structure of the Private sector Federation is into two chambers and five provinces. The ten chambers are sector based and the chambers are associations. We have association of hotels, manufacturing and so on. The people who are not in the associations are independent businesses. So those are under the leadership of provinces. Under provinces there are districts and under districts, there are small sectors. We have categorised them into different circles. We have about 15,000 members out of 180,000 businesses.
