President Paul Kagame is expected to be re-elected in the August 2017 presidential election, given the lack of credible opposition and his popularity among Rwandans. Despite some criticism of Kagame’s authoritarian tendencies, his victory will be risk positive for Rwanda in the medium term. Policy continuity on the economy and business will ensure robust growth and investor interest in a range of sectors, including infrastructure and ICT.
The risk of civil unrest in the run-up to Rwanda’s August 2017 presidential election is limited. Incumbent President Paul Kagame is expected to win a third term. Despite criticism that Kagame has presided over increased repression of political opposition, he remains popular with the electorate. Having restored political stability in Rwanda following the 1994 genocide and delivered annual average real GDP growth of 8.0%, Kagame was re-elected in 2010 with 93% of the vote. Kagame’s popularity, alongside the weakness of the political opposition, tight control of civil society and an effective security service, means that the election is expected to pass without protests or riots.
The most significant election related security threat stems from isolated low capability grenade attacks in Kigali. In the run-up to the 2010 presidential election, 10 grenades exploded in Kigali, resulting in five deaths and 73 injuries. A repeat of such incidents in 2017 would have a minimal impact on business operations in Rwanda, as they are not likely to occur in central business districts of Kigali. However, there remains a low risk that personnel may be injured or killed in such explosions.
With Kagame likely to remain in office until at least 2024, policy continuity is expected in the economic sphere. Whilst this will ensure that real GDP growth remains robust at 6.2% in 2017, rates will be below historic averages. Between 2011 and 2015, real GDP growth averaged 7.6%. Decelerating growth will be a result of reduced household consumption, in the wake of drought related inflationary pressures. Moreover, a number of major infrastructure projects were completed in 2016, leaving a weaker project pipeline in 2017.
Looking further ahead, however, these investments should begin to deliver returns. The USD 1 billion Kigali Conference Centre will facilitate Rwanda’s goal of being a regional leader in business tourism. As a result, growth will recover to 7.0% in 2018.
Rwanda’s government debt has risen over recent years, rising from 20.5% of GDP in 2010 to a forecasted 51.7% of GDP. Despite this, sovereign credit risks remain moderate. Increased debt levels have been the result of carefully managed investment in growth-positive infrastructure projects, which will yield long term economic benefits.
As a result, debt should peak in 2021, at around 61.5% of GDP, and thereafter fall as economic growth strengthens. Despite allegations of political repression, Rwanda maintains robust relationships with Western aid donors, and Kagame’s re-election will not materially change this. A USD 204 million International Monetary Fund Standby Credit Facility, agreed in June 2016, will ease debt repayment stresses.
Policy continuity during a third Kagame term will ensure on-going investor interest in Rwanda. The government worked to improve the business environment in recent years, introducing a new investment code in 2015. The code removed minimum investment thresholds in key sectors, opening up opportunities in industries such as business process outsourcing. In addition, investing over USD 50 million in energy, health, ICT, tourism or manufacturing can secure a seven year tax holiday.
Rwanda’s non-residential construction sector will offer a substantial number of investment opportunities. The government is keen to transform Rwanda into a knowledge-based economy, partly by establishing itself as a regional hub for ICT and business tourism. Central to these plans is the construction of the USD 1.9 billion Kigali Innovation Centre (KIC), which will enable Rwanda to develop human capital and house technology companies. In a mark of Rwanda’s attractiveness to foreign investors, the KIC will also host Swedish telecommunications firm Ericsson. Projects such as this, alongside investment in transport and power, will support construction sector growth of 10.1% in 2017.
In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Bangladesh, Venezuela, Chile and Ghana, all of which have been the subject of recent enquiries from JLT's client base.
The monthly Risk Outlook is supported by JLT’s proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.
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For further information, please contact Eleanor Smith, Political Risk Analyst on +44 (0)121 626 7837 or email email@example.com