Rwanda cushions ailing businesses with $350m economic recovery fund
Rwanda has unveiled an additional Rwf350 billion ($350 million) stimulus plan for its economy to support businesses hard hit by the pandemic, boost jobs and reduce poverty.
“Businesses negatively impacted by the restrictions put in place to prevent the spread of the virus, or exposed to consumer discretionary spending, and those with global supply chains that have been disrupted are eligible to apply for the support provided by the Economic Recovery Fund,” said Rwanda’s Prime Minister Edouard Ngirente, presenting the revised economic recovery plan in parliament on Thursday.
The funding, under the Economic Recovery Fund (ERF), was initially set up in June 2020 with an allocation of approximately Rwf100 billion ($100 million) for two years, targeting tourism and hospitality, manufacturing, transport and logistics as well as small and medium enterprises linked to domestic and global supply chains.
While the latest source of the funding has not been made public, Covid-19 related spending, health and economic measures have cost the government more than $311 million or 3.3 percent of the GDP as of September 2020, according to the International Monetary Fund.
The additional funding relief will also support construction.
The education sector has been added after the prolonged shutdown of learning institutions, lasting about eight months, locked out at least 3.5 million students according to the World Bank.
This has left many private academic institutions struggling financially, with some indefinitely closing. All academic institutions in Rwanda resumed physical tutoring on February 23, 2021.
While Rwanda has successfully contained the spread of coronavirus, strict restrictions imposed by the government have hit key sectors — retail trade, leisure and hospitality and conference tourism — which collectively account for most jobs in the country.
The GDP in real terms fell by 3.6 per cent (year-on-year) in the third quarter of 2020, following a 12.4 per cent contraction in the second quarter, signalling the country’s anaemic recovery.
To create jobs and accelerate economic recovery, the government is now rolling out additional incentives targeting labour intensive sectors — construction and manufacturing — to lower the cost of doing business for the private sector under the Manufacture and Build to Recover programme.
Specific tax incentives include VAT exemption on imported construction materials not available in the region and those sourced domestically, as well as tax credits off-setting 2021 Pay-as-you-earn, Corporate Income Tax and tax credits on export revenues.
Rwanda has a positivity rate of 2.5 per cent and 1,372 active cases.
A total of 348,926 people had been vaccinated as of March 25.
Denis Karera, chairman of Gold Capital Investment, a shareholder in Savannah Creek Development company co-owned with the Finnish investors that plans to construct at least 100 affordable housing units says the new tax incentives targeting the construction sector will reduce costs for investors on import duties, giving them the much needed relief after halting operations during the pandemic.
Savannah Creek is investing at least $11.7 million in the project.
“Most of our construction sites had closed since last year until recently a few months back...With lockdowns and restrictions, construction had almost come to a standstill…” Mr Karera said, adding that his company will benefit from the tax incentives through reduced import duties.
“As developers we are a big employer and we create over - more than 20 percent of employment is provided under the construction sector ...we will attract as many people as possible…” he said.