Africa Market Update -December 2014

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04. Rwanda www.stratlinkglobal.com StratLink Africa Ltd.| 18
MARKET UPDATE – AFRICA | November 2014 POLITICAL OUTLOOK Repressed Civil Liberties: Long-Term Fault Line Rwanda continues to be on the radar for repression of civil liberties as the High Court sentenced eight to jail terms for ‘incitement’. Reports indicate that the eight criticized President Paul Kagame, terming him as authoritarian. This reaction to critique indicates that the administration is failing as far as broadening democratic space is concerned. In 2011, the sentencing to jail of former Kagame allies, Faustin Nyamwasa, Theogene Rudasingwa and Patrick Karageya, for ‘disturbing public order and threatening state security’ elicited grave concern over repression of rights in Rwanda. Whereas Kagame’s leadership is widely credited with the economic emergence of Rwanda, repression of rights and freedoms is bound to create fault lines that will present long-term fragilities. The Rwandese economy has had a robust decade (2003 – 2013) with stellar economic growth and improved business climate. Repressed liberties and pent up grievances are, however, likely to present a challenge as the nation begins contemplating a post- Kagame phase. ECONOMIC OUTLOOK The Recovery Path: Fragile but resilient Despite having a tough year characterized by fragile recovery in 2014, the economy should remain resilient through the tail end. Growth momentum decelerated in Q22014 (6.1%) but stood 180.0 bps above 2013’s aggregate growth pointing at sustained, albeit subdued, recovery. Two factors are likely to give impetus to the recovery process in the coming months: One, favourable weather is boosting supplies from the agriculture sector thereby anchoring inflation at single digits which is expected to rev up domestic consumption. Two, growth in the agriculture sector has been stable at 5.0% in the first two quarters of 2014 indicating defiance to depressed commodity prices. Coffee, one of the country’s key exports has suffered a downtrend in prices in the recent past. BUSINESS ENVIRONMENT The energy sector is expected to generate opportunities as the government targets public-private partnerships in view of growing demand. Electricity demand is projected to reach 563.0 megawatts by 2017 against the present installed capacity of 155.0 megawatts. As economies such as Kenya engage on energy cost reduction measures, we expect Rwanda, driven by need to maintain pole position in ease of doing business, to adopt measures aimed at lowering the cost of energy. The government estimates capital requirement of about USD 3.0 billion between 2014 and 2018 in meeting the envisioned energy generation target. 43.0% of this investment is expected to be drawn from private investors. Quarter-on-quarter GDP vs Agriculture Sector Growth Source: National Bureau of Statistics, StratLink Africa Agriculture accounts for 70.0% of Rwanda’s export revenue; 36.0% of GDP and employs about 90.0% of the population both directly and indirectly 6 . The sector’s performance will be an indispensable lever in determining the country’s performance as it pursues economic recovery following the 2012/13 foreign aid shock. The economy’s growth path has been mimicking that of agriculture, indicating that the new found momentum in the sector’s growth bodes well for the near term outlook if sustained. 6 Institute of Policy Analysis and Research Rwanda The Rwandese economy has had a robust decade (2003 – 2013) with stellar economic growth and improved business climate. Repressed liberties and pent up grievances are, however, likely to present a challenge as the nation begins contemplating a post-Kagame phase. 19 | StratLink Africa Ltd. www.stratlinkglobal.com
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Africa Market Update -December 2014

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