Rwanda - Market Challenges Rwanda - Market Challenges
- Landlocked: Rwanda is landlocked and transportation costs for imports and exports are among the highest in the world. The country lacks a link to regional railway networks, which means all trade is conducted by road or air. Non-tariff barriers add to high transportation costs leading to inflated prices of domestically manufactured products, as most raw materials used for manufacturing need to be imported.
- Cost of electricity: Rwanda’s average energy costs, at $0.19 per kilowatt-hour (KwH) exceeds the rate in other East African countries and ranks in the top 10 most expensive tariffs in Sub-Saharan Africa.
- Low purchasing power: Annual per capita income at USD 720 in 2017.
- Low level of human resource development: General shortage of skilled labor including accountants, lawyers, technicians, tradespeople, and other skilled professions.
- Limited Access to finance: High interest rates and limited local capital markets.
- Competition from state-owned enterprises: Some investors complain about competition from state-owned and ruling party-aligned businesses.
- Investor aftercare issues: While business registration is easy, implementation can be less smooth due to delays in government payments for services or goods delivered, changes in memorandum of understanding (MOU) conditions during contract negotiations, and/or additional tax assessments. Investors also face difficulty in obtaining or renewing work visas for expatriates due to the government’s demonstrated preference for hiring local or EAC residents over third country nationals.
- Taxation: Investors have cited the inconsistent application of tax incentives and import duties as a significant challenge to doing business in Rwanda. Under Rwandan law, foreign firms should receive equal treatment with regard to taxes, as well as access to licenses, approvals, and procurement. Foreign firms should also receive VAT tax rebates within 15 days of receipt of relevant documents by tax authorities, but firms often complain that the process for reimbursement can take months or years and often involves lengthy audits by and negotiations with the Rwanda Revenue Authority (RRA). Some investors express frustration that audits are conducted with great frequency, even on businesses that have demonstrated excellent compliance.