Local bankers in Rwanda predict that the economy might continue to suffer for the next three to five years because of negative effects of the #COVID-19 pandemic.
Taarifa talked to the industry captains Hannington Namara, the Managing Director of Equity Bank Rwanda and Robin Bairstow, CEO of I&M Bank Rwanda.
“The lockdown put a complete stand still to Rwanda’s largest contributor to its GDP which is services specifically tourism and travel”, Namara says.
According to Namara the dire economic situation will hang on with us for more than three years. And that paints a depressing picture that the local business community and the general citizenry should get used to, the so called new normal.
“While looking at events surrounding the #COVID-19 pandemic, we do not know how long the pandemic is going to be with us,” says Namara, whose Bank made about Rwf2billion of profit in the first quarter of 2020, but says the second quarter, even shareholders might have reinvest because there is no money expected.
Rwanda has been deeply reliant on tourism and travel for its large contribution to the country’s GDP. But disruptions of the travel industry supply chain that feeds into Rwanda’s hotel and tourism sector means that arrivals of visitors into the country is expected to drop below expectations.
“Leisure product is something that will take more than 5 years for the major source markets of Western Europe to think about as virtually the entire world has been hit badly by the pandemic”, he explained.
To create a sense of trust that their livelihoods will be safe in far flung markets such as Rwanda, Namara says that this is something that will take a bit of time.
“This means that investments in these sectors will remain largely dormant with negative spillover effects to be felt in several others including banking,” Namara explains.
“This paints a scary image but what investors ought to do is to reinvest in their businesses with a view to hold on to hope for a brighter future.”
Meanwhile, a major player in the tourism sector told Taarifa that they have some relief from the local tourism sector.
“Unless a miracle happens, the international segment is dead, let’s not debate that, but we believe the local tourism segment can be revived and made profitable,” he says, and hesitant for his name to be mentioned.
He insists that Rwanda Development Board needs to create local tourism products defined in the confines of the pandemic.
“Who will sleep in that small hotel at Musanze or Kibuye in the next six months so that they can make a bit of money too?” he asks, adding that In brief, “there is no clear plan for the tourism sector, the plan announced recently targets international unlikely to respond positively until a later stage.”
To be a little specific, “how many Rwandans will spend $1000 a night ($250/per family member). We need a robust plan for products tailored made for Rwandans and regional tourists, if don’t do it that way, the sector will suffer miserably.”
Away from a depressed tourism sector, Namara painted a picture of looming innovation likely to cut across all sectors of the economy.
“There is an opportunity for innovation. Question is; what else can people do to make money in the post lockdown economy?”
“That thinking now needs to become more eminent”.
So, where are the pointers to the new normal taking shape in Rwanda’s banking sector within post lockdown era?
“Agricultural sector is one key area. Food is a basic need and areas such as value addition of basic production remain an area worth deploying our capital into,” says Namara.
An interesting prospect is referred to- that the pandemic is likely to unleash within Rwanda’s banking sector. This is with respect to warming up by local bankers to get more into making investment into agricultural sector.
There is an opportunity for everybody to fit into agricultural value chain.
“#COVID-19 has changed the “how” of doing things. Bankers need to figure out how to remain relevant to the business community. It will take time but it needs to happen”.
The brick and mortar practice of traditional banking, as we know it, will increasingly becoming more diminishing.
Robin Bairstow talks about the ongoing construction boom that will offer a real buffer to Rwanda’s economy in the next coming years thereby shielding it from the severe effects.
“Rwanda’s continuous focus on huge infrastructure projects will generate demand and positive stimulus into other sectors while we are adversely taking a strain from tourism and travel sectors,” says Bairstow.
He says; “Demand for cement in Rwanda is growing which is a key indicator of demonstrating that the construction boom is not reducing.”
Mid June, government launched a national wide project for construction of school blocks across the country, thus employing thousands and increasing volumes of production of contrition materials including cement.
Also, Bairstow says, one of the best shots for Rwanda in the post lockdown era is boosting consumption expenditure, and strongly advocates for international trade (at least cross-border).
Rwanda’s economy is slowly raving back despite at a reduced pace going by key areas such as agriculture, community trading and importation of goods.
Infrastructure Minister, Amb. Clever Gatete told journalists on Friday that trade volumes are healthy, with almost 600 cargo trucks entering Rwanda in 24 hours, despite economic activities closed on borders.
“Demand for foreign exchange which is key for sustenance of the business community for instance has reduced slightly by less than 25 percent across our counters,” he says.
This points to a fact that wheels of the economy are in motion albeit at a slower pace.
Bairstow’s view on the government’s recently launched recovery plan meant to cushion affected sectors, is that, “The recovery plan is meant to reduce cost of operations by those affected by #COVID-19 by over 20% which is significant only worry being that it is not generating revenue.”
If the demand has been affected, it makes no business sense for the supply side to produce or burn more money.
Bairstow, like Namara says agriculture is one key area that is very promising.
RDB CEO, Clare Kamanzi told us a few weeks ago that indeed “agriculture is top of our post #COVID-19.”
For the very first time in a very long time, Rwanda is facing a real prospect of reduced growth.
From double digits figures registered in last decade, official statistics are indicating a slowdown to single digit growth of 3.6%.
How the country emerges a victor out of this excruciating pandemic remains a mystery on one hand and mastery in policy orientation on the other.
And the burden to win seems like it hasn’t fully been discussed by all stakeholders.