VZCZCXYZ0000
PP RUEHWEB

DE RUEHLGB #0514/01 2330647
ZNR UUUUU ZZH
P 210647Z AUG 09
FM AMEMBASSY KIGALI
TO RUEHC/SECSTATE WASHDC PRIORITY 6241
INFO RUEHXR/RWANDA COLLECTIVE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RHMFIUU/HQ USAFRICOM STUTTGART GE

UNCLAS KIGALI 000514 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN ENGR RW
SUBJECT: RWANDA ECONOMIC REVIEW 
 
¶1. (U) This issue of the Rwanda Economic Review covers: 
 
Investment: 
-     Sorwathe Tea Factory Innovation 
-     Starbucks 
 
Macroeconomic Issues: 
-     Central Bank Addresses Rwandan liquidity shortfall 
-     Fitch Ratings optimistic about Rwanda,s 
creditworthiness 
-     Remittances to Rwanda remain strong 
-     General Economic Indicators 
 
Major Events: 
 
New Tea Investment 
------------------ 
¶1. (U) Sorwathe: On July 10, American-owned Sorwathe 
inaugurated a $2.8 million "orthodox tea" factory. Orthodox 
tea is produced by "rolling" tea leaves instead of using the 
more common "cut-tear-curl" (CTC) process.  Sorwathe Managing 
Director Calle Alles explained to visiting dignitaries that 
orthodox tea fetches nearly double the market price of CTC 
tea.  Sorwathe, the first tea factory in Rwanda to obtain 
International Organization for Standardization (ISO) and Fair 
Trade certifications, is also the first tea company in Rwanda 
to produce orthodox tea. 
 
¶2. (SBU) The Rwandan Government (GOR) continues to privatize 
government-owned tea estates.  Three tea factories in Karongi 
district (western Rwanda) have been listed by the GOR for 
privatization including Gisovu, Gisakura and Kitabi.  After 
privatization, government parastatal OCIR-THE will retain a 
thirty percent stake in the estates and local tea growing 
cooperatives an additional ten percent.  OCIR-THE Managing 
Director Anthony Butera told Emboff and visiting OPIC 
representatives that the tea grown in Karongi district is 
considered among the best in the world and commands the 
highest prices at the Mombassa auction.  The GOR is seeking 
investors to expand tea production in the region, upgrade the 
factories and add value by introducing orthodox and flavored 
teas.  American-owned Olyana group is negotiating with the 
GOR to purchase the Gisovu tea estate while Sowathe is 
partnering with local investors in a bid on Gisakura.  Both 
Olyana and Sorwathe are registered with OPIC. 
 
Starbucks 
--------- 
¶3. (U) Starbucks president and CEO Howard Schultz visited 
Rwanda in July to officially open the company's first "Farmer 
Support Center" (FSC) in Africa -- modeled after its FSC in 
Costa Rica.  "The center will support both Rwanda and other 
countries in Africa for the sole purpose of replicating what 
we did in Costa Rica: help farmers produce high quality 
coffee," said Schultz.  At an Embassy-hosted conference, he 
added that Starbucks will start selling Rwandan coffee in its 
800 UK-based stores in addition to North America-based 
outlets.  In the United States, Starbucks has partnered with 
the (Product) RED campaign to sell Fair Trade-certified 
Rwandan coffee. 
 
Macroeconomic Issues 
-------------------- 
¶4. (U) Rwandan Central Bank Responds to Liquidity Shortage: 
In July, Banque National du Rwanda (BNR) agreed to place new 
deposits with commercial banks to strengthen the liquidity of 
the financial sector.  This is the first time since 2004 that 
the Central Bank has needed to inject liquidity into the 
sector.  Since the end of 2008, Rwandan commercial banks have 
been struggling with a shortage of liquidity and, in the 
first half of 2009, were forced by the shortage to reduce 
medium- and long-term lending by over twenty percent. 
Central Bank Governor Francois Kaniba told Emboff the Central 
Bank would deposit funds in those banks who applied for 
long-term deposits from the Central Bank to support specific 
medium- to long-term commercial loan requests.  The Governor 
added that the Central Bank's measures were aimed at 
Qadded that the Central Bank's measures were aimed at 
offsetting a decline of both deposits and money in 
circulation. 
 
¶5. (U) Fitch Ratings:  Fitch recently rated Rwanda on its 
long-term foreign and local currency Issuer Default Ratings 
(IDRs) as well as Country Ceiling Rating at B-, an 
improvement over prior years.  Fitch gave Rwanda's short-term 
foreign currency IDR a slightly higher B rating. The revised 
Fitch Ratings indicate strengthening investor confidence in 
Rwanda. 
 
¶6. (U) Rwanda Remittances: The Central Bank reported that 
remittances have increased by 25.8% within the first five 
months of 2009, reaching $71.4 million, as compared to $56.8 
million in the first five months of 2008.  Bank Officials 
cautioned that large amounts of remittances come through 
informal channels, making it difficult to measure receipts 
accurately.  Most countries in the region have reported 
declining remittances due to the global economic downturn. 
 
¶7. (U) General Economic Indicators: 
 
-     In June, the GOR reported inflation declined to 10.1 
percent.  IMF country representative Dmitry Gershenson 
confirmed to Emboff that Rwandan inflation has steadily 
declined in 2009, and will likely drop to single digits by 
the end of the year. 
 
-     GDP growth forecast 2009: The GOR has revised downwards 
its 2009 growth estimate from 7 to 5.3 percent.  Economic 
growth in 2008 was 11.2 percent.  The new 
estimate--consistent with IMF projections--reflects slowing 
activity in construction, service and industrial sectors. 
According to the Central Bank, exports dropped by 31.9 
percent in value during the first half of the year compared 
to the same period last year.  During a recent press 
conference the Central Bank Governor said "even the 
assumption of 5.3 percent growth is unlikely to be achieved 
unless there is a strong recovery in the second half of the 
year.  Positive growth of 11.2 percent in the agricultural 
sector for the period ending June 30 has kept overall 
economic growth in the black." 
SYMINGTON