Businesses relocate to Rwanda's new Special Economic Zone

On a gate alongside a spotless asphalt road in the city's new industrial zone, big red capitals spell out the letters of the "Every Time Beijing Paper Corporation Ltd". Opposite, a bright yellow gate welcomes visitors to "Rwanda Foam Ltd", promising "the paradise of mattresses".

The two companies are among 61 businesses that have relocated to phase one of Rwanda's new Special Economic Zone, set amid the green hills of the capital Kigali.

While Rwanda has long focused on developing a service economy pinned to tourism, telecommunications and conferences in a bid to overcome its very obvious logistical constraints, it is also now earnestly embracing light manufacturing.

"It's pretty thin for now, but [Rwanda's] salvation really lies in industry," says a senior western diplomat who believes it is the only sector that could accommodate population growth with the necessary number of jobs.

Manufacturing has grown 14.7 per cent between 2007 and 2013, but the sector still has a way to go. "Most subsectors showed no growth," says a desultory World Bank report this year.

"Lack of adequate infrastructure, especially electricity and transport routes, and a low skill base, together with Rwanda's landlockedness, limit investment in manufacturing."

Last year, manufacturing was weaker even than usual because restricted movement between Rwanda and eastern Congo limited exports of beverages and cigarettes, which underpin the sector. "Exports have taken a real battering because of DRC ups and downs," says one exporter.

But finance minister Claver Gatete says the country is trying to deliver an infrastructure bonanza that addresses Rwanda's shortcomings - based on private sector concerns about the lack of energy, water and roads - all in one hit at the SEZ.

"We provide incentives for the private sector because we know that there is money to be made and the private sector can go in," he says. "We provide tax incentives, we will also provide infrastructure as well, and then of course land," he adds.

So despite the high cost of power - at more than 20 cents per kilowatt hour, more than four times that of some regional competitors - and the long distance to the coast, the government believes light manufacturing can take off in the country if it concentrates sufficient infrastructure to attract private manufacturers in one place.

"It will be cheap for us because [with the creation of the SEZ] you don't have infrastructure chasing every company wherever it locates; you want it in a dedicated place," says Mr Gatete, adding the country is also setting up special economic zones for every province and eventually in every district.

"You realise that that's the cheapest way of doing things . . . and then they [private sector investors] know that they are paying less."

But the SEZ has potential to realise some of Rwanda's grand hopes. Although by far the majority of companies that have settled into phase one make goods solely for sale in Rwanda or the wider east African region, three companies will export beyond the East African Community, bringing in much-needed dollars and securing tax breaks because of it. One makes baby food, one produces airline food and the third is a Chinese investment into textile manufacturing, which hopes to expand its provisional workforce from 200 trainee workers now to 2,000 staff next year.

"The support of the government is really strong," says Candy Ma, the Chinese investor and former factory manager who has set up rows of sewing machines at her new factory in Kigali's industrial zone, targeting contracts with US and European importers that allow African-made products duty-free imports. "Government was very efficient at getting us started," says Ms Ma, who decided to invest - and secured a factory spot - within three months of first visiting Rwanda last year.

Despite the distance to port, she believes that such advantages as tax breaks offered to exporters and a disciplined workforce will make her business viable, targeting sales of $10m next year.

Closer to home, Rwanda's business community is hoping to add value to the country's agricultural output. Faustin Mbundu, an entrepreneur with business interests ranging from real estate to car-hire for VIPs, has just set up operations in a leased factory in phase one of the SEZ. He has already booked more space to build his own factory in the forthcoming phase two, where so far only one factory - a Tanzanian wheatflour manufacturer - is in operation.

His new company, Proxi Fresh, exports fine green beans grown in Rwanda to Europe, South Africa and beyond.

His new company will make use not only of Rwanda's agricultural output and packaging warehouse at the SEZ, but also a cold room at the airport and the growing global access offered by national airline RwandAir.

"The whole export chain was there but it wasn't being used - now we are shipping every other day; before it was once a week; by the end of next month we will be shipping every single day. We're aiming at doing about $2m-3m [in sales] next year," says Mr Mbundu. "Government is creating the bridge over which the private sector will come."

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