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UNCLAS KIGALI 000368 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PGOV EINV ENRG ETRD EPET BTIO RW
SUBJECT:  RWANDA ECONOMIC ROUNDUP 
 
REF: A. KIGALI 202 
 
     ¶B. KIGALI 264 
 
¶1. (U)  This edition of the Rwanda economic review includes: 
 
Commercial News: 
 
- Rwandair shakes up management, cancels flights to 
Johannesburg 
- Government cracks down on shaky micro-finance institutions 
- Rwandex - Rwanda's largest coffee exporter suspends 
operations 
- Nakumatt - Kenya's leading hypermarket chain opens branch 
in Kigali 
 
Investment Issues: 
 
- Canadian oil exploration firm finds traces of oil in Rwanda 
- African Development Corp. buys 25 percent stake in 
Development Bank of Rwanda (BRD) 
 
Development Issues: 
 
- Government plans $200 million investment in agricultural 
development 
- African Development Bank (ADB) commits $13 million to rice 
production project 
  World Bank approves additional $6 million for the Rwanda 
Competitiveness and Enterprise Development Project (CEDP) 
 
Regional Issues: 
 
- Rwanda to host East African Community (EAC) presidential 
summit June 26 
- Trade with Uganda and EAC grows 
 
Macro Economic Indicators: 
 
- Inflation pressures grow 
- Fuel consumption increases 74 percent in last 5 years 
- Exports increased by 56.54 percent during first quarter of 
2007 compared to first quarter of 2006 
- Imports increased by 31.09 percent over the same period 
 
Commercial News 
--------------- 
 
¶2. (U)  Rwandair: Rwanda's national airline Rwandair has been 
battered recently by safety concerns, poor customer service 
and financial woes (refs a,b).  Former CEO Manzi Kayihura was 
arrested March 28 on charges of abuse of office.  Incoming 
CEO and former Board Chairman Gerald Zirimwabagabo confirmed 
the airline has been forced to cancel flights to Johannesburg 
and Nairobi, but said it was continuing flights to Bujumbura, 
Entebbe and Kilimanjaro.  The new CEO admitted that a 
long-hoped for privatization was delayed because, "Rwandair 
is too weak to be privatized."  Zirimwabagabo asserted the 
airline is now looking at rebuilding its business plan and 
restructuring operations. 
 
¶3. (U)  Microfinance: The Government of Rwanda (GOR) has 
cracked down on microfinance institutions that abused public 
funds and engaged in questionable financial transactions.  In 
April, the Prosecutor General's office arrested 33 managers 
of microfinance institutions on charges of fraud.  The 
government alleges those arrested were issuing loans to 
friends and relatives.  The Prosecutor General claims 
depositors were defrauded up to $10 million as a result of 
the questionable transactions. 
 
¶4. (SBU)  Rwandex: After 44 years of operations, Rwandex (the 
largest coffee processing and exporting company in Rwanda) 
has suspended operations for financial reasons.  Rwandex has 
struggled since 2004 when government liberalization of the 
coffee sector allowed more competition into the market.  The 
former Commercial Director of Rwandex Leo Aguma told emboffs 
he does not expect the company to renew operations and that 
creditors will likely sell off the company's assets. 
 
¶5. (U)  Kenyan chain opens: Nakumatt, a leading department 
store and supermarket chain in Kenya has opened a branch in 
Rwanda and plans to invest $7 million to build a 25,000 
square foot supermarket stocked with more than 20,000 items 
including foods, beverages, electronics and furniture.  This 
will be the first supermarket of this size in Rwanda. 
 
Investment News 
--------------- 
 
¶6. (U) Oil exploration: Canadian oil exploration company 
Vangold Resources Ltd announced it has discovered traces of 
oil in lake Kivu using satellite imagery and technical 
review.  Vangold has an exploration concession in 
northwestern Rwanda covering 1,631 square kilometers.  The 
findings suggest that Tullow Oil's discovery in Southwestern 
Uganda extends into Rwanda.  Vangold will now undertake a 
geochemical sampling and gravity and magnetic surveys to 
determine the potential for oil exploitation. 
 
¶7. (U) Banking: The African Development Corporation has 
purchased a 25 percent stake in the Development Bank of 
Rwanda (BRD) for $8.2 million.  Henry Gaperei, Chairman of 
the Board of Directors of BRD, told the local press the 
capital infusion would strengthen the bank and allow it to 
invest in longer term investments such as mining.  The 
Government of Rwanda which previously was the majority 
shareholder in the bank with 48 percent of share capital, now 
owns 20.6 percent of the bank. 
 
Development Issues 
------------------ 
 
¶8. (U)  Agricultural Investment: The GOR announced plans to 
invest $200 million over the next four years in agricultural 
development, including irrigation and soil conservation 
projects, to encourage production of high-value crops and 
improve agricultural yields.  The investment will be financed 
15 percent from the GOR, 40 percent from donor grants and 45 
percent from loans from the World Bank and China.  The 
Rwandan Finance and Economic Planning Minister told reporters 
10,000 hectares are targeted for terracing and irrigation 
projects and will support increased yields of coffee, tea, 
apples and avocados.  The GOR and the African Development 
Bank have also committed $13 million to towards rice 
production in Bugesera. 
 
¶9. (U) Private Sector Development: The World bank approved an 
additional $6 million grant to the CEDP to expand support for 
private sector development.  The funds will be used to help 
build capacity in the microfinace sector, develop accounting 
and auditing standards and enhance regulation and supervision 
of non-bank financial institutions. 
 
Regional Issues 
--------------- 
 
¶10. (U) EAC Summit: Rwanda will host the EAC presidential 
summit on June 26.  The summit will focus on fast-tracking 
regional integration and feature an EAC investment forum. 
Rwanda, which joined Kenya, Tanzania, Uganda and Burundi in 
the EAC in 2007, has been a strong advocate of EAC economic 
integration and has seen a rapid expansion of trade with 
member states.  According to the Uganda Export Board, trade 
between Rwanda and Uganda has tripled since Rwanda joined the 
EAC. 
 
 
Macro-Economic Indicators 
------------------------- 
 
¶11. (U) Inflation: Inflationary pressures continue to grow 
with annualized inflation now estimated at 12-13 percent 
(from below 10 percent last year), according to local bank 
sources.  Increased food and fuel prices have been 
significant contributors to accelerating inflation.  The 
Central Bank reported fuel imports have increased by 74 
percent over the last five years and account for 90 percent 
of all imports.  As a result of increased fuel demand and 
Qof all imports.  As a result of increased fuel demand and 
higher prices, overall imports increased by 29 percent in 
¶2007.  Similarly, imports of food products during the first 
quarter of 2007 increased by 107.4 percent in value compared 
to the same period in 2006.  Additionally, growing domestic 
capital and foreign exchange reserves have not been 
efficiently recycled into long term capital investments 
increasing upward pressure on inflation, according to US 
Treasury Department consultants. 
 
¶12. (U)  Export Growth: During the first quarter of 2007, the 
dollar value of Rwandan exports increased by 56.6 percent 
compared to the same period in 2006.  Export growth was 
driven by traditional exports of coffee, tea and minerals 
which accounted for 80 percent of all exports.  Pyrethrum 
exports also showed strong growth, assisted by a 40 percent 
rise in market prices. 
ARIETTI