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Cablegate: Rwanda Economic Review

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SENSITIVE
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DEPT OES FOR DREIFSYNDER

E.O. 12958: N/A
TAGS: ECON EFIN EINV ENRG EPET ETRD PGOV KIDE OPIC
RW
SUBJECT: RWANDA ECONOMIC REVIEW

1. (U) This issue of the Rwanda Economic Review covers:

Commercial Issues:

-- Kobil Rwanda acquires Stippag petroleum business
-- Total sells Rwanda operations to Engen Petroleum Ltd.
-- Nakumatt launches business operations in Kigali
-- Electrogaz dismantled

Development Issues:

-- Rwanda improves "Ease of Doing Business" rank
-- Tourism receipts up 15 percent from last year
-- Rwanda hosts Climate Change Conference
-- Climate Change Observatory proposed

Macroeconomic Issues:

-- Economy grows by 8.5 percent but inflation soars to 18.8
percent
-- Rwanda currency stable against US dollar


Commercial Issues
-----------------

2. (U) Kobil: Kobil Petroleum Rwanda, a fully-owned
subsidiary of Kenya's Kenol Kobil Group, has acquired the
service stations of local petroleum distributor Stippag. The
acquisition follows Kobil's purchase of Shell Rwanda in 2006
and local petroleum company KLSS in 2007, and consolidates
Kobil's market leadership. Kobil Rwanda was incorporated in
2002 with the goal of servicing Rwanda, Burundi and eastern
Congo. The Kenyan-owned company has also invested $1.5
million in a Butane gas (LPG) filling facility with a
capacity of 200 metric tons per month. Kobil is now the
major distributor of LPG in Rwanda.

3. (U) Total: Total has agreed to sell its Rwandan
operations to South African Engen Petroleum Limited,
according to Total Rwanda General Manager Mamadou Ndom.
Total currently has 19 service stations and one fuel depot in
Rwanda representing 22 percent of the Rwandan market. The
French energy multinational, the last of the major oil
companies present in Rwanda, follows Shell and Chevron in
pulling out of the country.

4. (U) Nakumatt: Kenyan supermarket chain Nakumatt
officially launched business operations in Rwanda on August
24. The new 25,000 square foot outlet is the largest
supermarket in Rwanda and the first Nakumatt store to be
opened outside of Kenya. The Kenyan chain is investing $20
million to expand operations into Uganda, Rwanda and Tanzania.

5. (U) Electrogaz: The Government of Rwanda (GOR) has broken
up Rwanda's electricity and water utility company into two
separate entities. A bill passed by both chambers of
parliament in August disbanded utility provider Electrogaz
and replaced it with the Rwanda Electricity Company (RECO)
and the Rwanda Water and Sanitation Corporation (RWASCO).
Electrogaz has been struggling with frequent power outages
and water shortages. Critics assert the utility has been
mismanaged and wasted resources.

Development Issues
------------------

6. (U) "Doing Business Indicators": Rwanda improved its
ranking in the 2009 World Bank "Ease of Doing Business"
report by nine positions moving up to 139 out of 181
countries surveyed compared to 148 out of 178 in 2008.
"Registering a Property" and "Dealing with Construction
Permits" showed the strongest gains improving 78 positions
and 35 positions respectively and "Starting a Business" and
"Employing Workers" also improved by 11 positions and 9
positions respectively. However, the country's rankings in
other key indicators including "Protecting Investors",
"Getting Credit", "Trading Across Borders" and "Closing a
Business" showed little improvement and remained at the
bottom tier of world rankings. Rwanda continues to lag
behind regional competitors Kenya (82) Uganda (111) and
Tanzania (127) in the overall rankings.

7. (U) Tourism: The Rwandan tourism industry showed a 15
percent increase in revenues for the first half of 2008 and a
3.4 percent increase in number of visitors to the country.
Overall revenues from tourism reached $80 million in the
first six months of 2008 and have surpassed coffee and tea in
foreign exchange earnings. The improved revenues, now 3.7
percent of GDP, are attributable to increased national hotel
room capacity -- up from 2,391 rooms in 2007 to 3,282 in 2008
-- and higher fees charged at the national parks.

8. (U) Environment: On September 9, Rwanda hosted the Africa
Climate Change Forum organized by the London School of
Economics (LSE). In his opening remarks President Kagame
noted that "there is hardly any region on our continent that
is not in some way affected by grave environmental
degradation of one kind or another." In contrast to other
speakers, including LSE's Howard Davis who castigated Western
governments and the U.S. for their policies, Kagame
emphasized that these governments were not responsible for
the "vicious cycle of poverty, over-population,
deforestation, and weak national environmental policies." He
added that Rwanda and other African governments cannot "keep
lamenting western policies" but need to start implementing
measures and adopt a "self-help" attitude rather than
criticizing donor governments. Speakers at the conference
stated that Africa is among the most affected regions in the
world (by climate change) despite the fact that it produces a
small fraction of the worlds emissions. Mary Robinson,
former UN High Commissioner for Human Rights and former
President of Ireland, urged the world's richest countries to
do more to assist poorer and vulnerable nations adapt to
changing climate.

9. (U) Climate Change Observatory proposed: In a separate
meeting with visiting USTDA consultants, Romain Murenzi,
Minister for Science and Technology in the President's
Office, expressed interest in using existing communications
infrastructure located at the top of 4,507 meters high Mount
Karisimbi to mount meteorological equipment and connect this
to an integrated Climate Change Observatory that would
analyze meteorological, seismic, soil data and Geographic
Information Systems (GIS) data. Mount Karisimbi is located
at the nexus of the headwaters of the Nile and Congo river
basins and offers a "ground zero" window on climate change
occurring in these unique and fragile ecosystems. A climate
change observatory would provide invaluable data and
long-term forecast capability on precipitation, water levels,
atmospheric conditions and volcanic and seismic activity in
the Central African Albertine Rift. This would be useful to
civil aviation, agriculture, hydropower generation and water
management throughout the region, Murenzi said.

10. (U) Murenzi noted the global food crisis was a "wake-up
call" to African governments to better understand and manage
their natural resources. Timely forecasting of climate and
environmental change would help avert socio-political
Qenvironmental change would help avert socio-political
upheavals, he asserted. The minister suggested that Rwanda
would like to "partner" with either another government, an
international organization or a university in the project as
Rwanda lacked the technical and scientific expertise to
implement and maintain the observatory by itself.

Macroeconomic Issues
--------------------

11. (U) Economic growth/Inflation: The Rwandan economy is
expected to grow by 8.5 percent in 2008 according to Minister
of Finance and Economic Planning James Musoni. The growth is
powered by higher yields in the agricultural sector and
strong performance in construction, financial services and
tourism during the first six months of the year. However,
inflation grew to 13.1 percent for the first six months of
the year and increased to an annualized 20 percent for the
month of August compared to under nine percent for the
comparable period in 2007. The Governor of the Central Bank
Francois Kanimba blamed higher global fuel and food prices
for triggering the increase in inflation.

12. (U) Foreign exchange: The Rwandan Franc (RWF) registered
a slight appreciation of 0.09 percent against the US dollar
between December 2007 and June 2008. Central Bank Governor
Francois Kanimba attributed the stability of the RWF to
strong foreign exchange inflows stemming from remittances,
external aid, private transfers and higher than expected
exports.
SIM

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