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Rwandan Bankers Predict Economy May Recover After 5 Years

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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.

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Business

Rwanda Launches Campaign To Reactivate Tourism After COVID-19 Shocks

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Rwanda has launched a campaign to reactivate tourism after the sector suffered devastating effects as a result of the Covid-19 pandemic.

A tourism exhibition was lunched on Thursday evening in Kigali as part of a tourism week.

The tourism Week 2021 is an initiative that seeks to campaign for recoveries after the shocks incurred by the tourism sector.

Dubbed ‘Rwanda Tourism Week 2021 is the first tourism exhibition event organized by the tourism sector since 2020. The event has attracted participants from Ghana, Tanzania, Zimbabwe, Somalia, Kenya, DRC, South Africa and Botswana.

The sector managed to earn US$ 498 million in tourism revenues in 2019 but because of COVID-19 but because of COVID-19, the activities were affected according to Rwanda Development Board.

Zephanie Niyonkuru, the Deputy CEO of RDB, speaking at the event, said, Rwanda continues to provide the required support to the tourism industry to ensure that it continues to recover and attain pre-COVID-19 levels growth levels.

“The tourism sector has significantly suffered from the adverse effects of COVID-19 but the government has also made several interventions entailing to support the sector with dedications of 50% of the economic recovery fund to the hotels that helped them to restructure their loans,” he said.

Citing statistics, he said the tourism sector is a country’s primary contributor to Rwanda’s GDP adding that the sector’s contribution to the economy grew from 4.7% to 15% in the last 19 years (2000-2019), however, that pandemic affected the sector contribution with an economic contraction by 3.4%.

He further said intra-Africa travel is undoubtedly a key booster for tourism recovery on the Africa’s continent but only through tourism leader’s efforts

“The AfCTA, the outcome, the outcome of the African Union Heads of State Summit held in Kigali in 2016 and signed by African countries in 2018, is a valuable instrument to make intra-Africa tourism a reality.” he adds.

When COVID-19 hit in March 2020, Revenues from foreign visitors dropped 35% in the final first quarter compared to 2019. One of the reasons for this decrease in revenues is the international visitors who had stopped coming due to cancellation of meeting and tourists travels.

For instance, in 2020, RDB slashed gorilla permits from US$1,500 uniform price to US$200 for Rwandans and East African Community nationals residing in Rwanda and US$500 for foreign residents as part of promotional efforts to encourage domestic tourists after the decline of international travelers.

Regardless of local initiatives aimed to recover the sector, the region is also launching strategies to recover through events and marketing campaigns. On the same note, the East African Community (EAC) launched a new regional tourism media campaign in Arusha Tanzania as part of the plans to implement the six member’s blocs tourism plan.

The EAC’s branding campaign dubbed Tembea Nyumbai will start on December 1.

The East African Business Council indicates that the tourism sector contributes to the 10% GDP and accounts for 17% of export earnings and about 7 in terms of jobs.

Nonetheless, during COVID-19, 4.2 million foreign tourists were not able to travel to their preferred East African Community destinations.

Read RDB’s Report HERE

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Nigerian SME Funder, Sabi, Receives US$6M To Expand In Kenya

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Sabi, Africa’s leading B2B marketplace serving the informal sector, has received US$6 million bridge round led by CRE Venture Capital to support its continued fast-paced growth in Nigeria and beyond.

Sabi is platforming Nigeria’s $244 billion informal trade sector by providing the digital infrastructure to help SMEs grow their businesses. Over 175,000 merchants use Sabi’s category agnostic platform to manage their businesses and make B2B transactions. Merchants are transacting at over a US$100 million GMV annualized rate on Sabi’s platform.

The company has been operational in Nigeria for just over a year and recently became operational in Kenya.

Sabi’s network of over 10,000 agents now interacts with merchants across all 36 Nigerian states, delivering the online and offline support needed to properly service the over 41 million micro, small, and medium-sized enterprises in Nigeria alone that can benefit from the Sabi platform.

Sabi’s bridge round follows the company’s seed round closed in mid-2020 which also attracted leading international investors including Janngo Capital, Atlantica Ventures, and Waarde Capital. This bridge round financing will help fuel the company’s rapid growth as it eyes new markets including South Africa, which is also home to a multi-billion dollar informal sector.

Anu Adasolum, CEO of Sabi, commented, “we are excited to have closed this bridge round as Sabi continues to grow at an incredible pace. Our merchant users are taking advantage of every part of our platform, and the quality of the B2B partners we have brought onto the market is clear from the ever-increasing transaction volume.”

Pardon Makumbe, Co-founder & Managing Partner of CRE Venture Capital, added, “CRE Venture Capital is proud to support Sabi’s continued growth across Nigeria and expansion into Kenya and South Africa.

Sabi’s online/offline approach to serving informal businesses, combined with the quality of its platform and service provider curation, has clearly taken root in

 

Nigeria. The company is on track to be one of the fastest-growing African companies of 2021 and is showing no signs of slowing down.” Ademola Adesina, co-founder of Sabi, added, “now that Sabi is operational all across Nigeria, we look forward to bringing our solution into new markets with similar informal sector challenges, starting with Kenya and then South Africa. Sabi’s team, platform, and investors are ready to continue scaling Sabi into Africa’s leading B2B marketplace.”

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Ecobank Group Secures €100M Credit Facility From European Investment Bank To Fund SMEs

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Ecobank Group has signed an agreement for a €100 million long-term credit facility for over 9 years with the European Investment Bank (EIB). The facility affirms joint Ecobank Group and EIB targeted support for business investment across Africa, with particular support for the sectors most impacted by the COVID-19 pandemic.

Ade Ayeyemi, Chief Executive Officer, Ecobank Group, said the bank will provide a range of initiatives that will support the growth and success of Africa’s Small and Medium-sized Enterprises and create employment opportunities.

“This informed the credit facility that we have just secured from the EIB which we believe will deliver real impact in our joint mission to develop SMEs across Africa. The €100 million facility will support the recovery of African SMEs from the COVID-19 pandemic while also helping to provide them with the impetus to grasp the immense growth opportunities from the African Continental Free Trade Area vast single market. We thank the EIB for its focus and commitment to the continent,” he said.

Ambroise Fayolle, Vice-President, European Investment Bank, said the EIB, as part of Team Europe, works with leading banks and financial partners across Africa to enhance private sector access to finance.

He added that the latest cooperation with Ecobank Group will help companies to better tackle challenges triggered by the COVID-19 pandemic, unlock economic and social opportunities, especially for SMEs and women-owned and women-run enterprises, across Sub-Saharan Africa in the coming weeks.

The latest cooperation between Ecobank Group and the European Investment Bank to support private sector investment across Africa was formally agreed at the EU Delegation to Togo in Lomé, in the presence of Koen Doens, Director-General for International Cooperation and Development at the European Commission.

The announcement was made during a Team Europe visit to Togo by EIB Vice President Ambroise Fayolle, Rémy Rioux, Chief Executive Officer of the Agence Française de Développement and Koen Doens.

The facility is split into three regional facilities: West & Central Africa, Eastern Africa, and Southern Africa. Funding will be provided through Ecobank affiliates, for investment projects undertaken by private sector companies. The EIB made the facility available through its COVID-19 Rapid Response Facility, for private sector entities active in eligible productive sectors, with fewer than 3,000 employees.

The EIB loan will also be accompanied by technical assistance under the AWRI (African Women Rising Initiative) program of the EIB with gender finance focused training and capacity building for lending to women entrepreneurs, closely aligned with the Ellevate by Ecobank initiative which supports women-focused businesses across the continent.

Ecobank Group and EIB both recognise the importance of ensuring access to finance by female-owned and female-focused businesses, in particular during times of economic and investment uncertainty related to COVID-19. Ecobank Group and EIB are also working on a €15 million “SME Access to Finance” Risk Sharing Facility Agreement granted by the EU’s European Fund for Sustainable Development (EFSD), that will support loans to SMEs worth €95 million.

This facility agreement follows on from the EIB’s signing of a €12.5 million loan to Ecobank Malawi in December 2020, to improve access to finance for SMEs in Malawi’s agricultural sector to expand, upgrade and modernise their equipment.

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