Rwanda bets that mining will sustain its upward trajectory.
KIGALI, RWANDA – Bordered by Uganda and the Democratic Republic of Congo to the north, Tanzania to the east, and Burundi to the south, Rwanda is fast becoming the most attractive business environment in East Africa and across the continent. The 2014 Word Bank Doing Business Report ranked Rwanda as the second easiest country in Africa to do business, after Mauritius and surpassing South Africa. Radical reforms have made it the most improved economy since 2005, and Rwanda now ranks 32nd out of 189 countries.
Pivotal in this success was the creation of the Rwanda Development Board (RDB), which has enabled private sector growth and economic development. As a one-stop shop for all investors reporting directly to the President, the RDB has streamlined systems and processes and created incentives to promote investment in the mining sector.
Recently, at the African Development Bank (AfDB) annual meeting held in Kigali in May 2014, AfDB president Dr. Donald Kaberuka, said, “Rwanda was chosen to host this event because of its track record as a champion of Africa’s need for homegrown solutions.” Inspired by the unprecedented growth witnessed in Singapore, President Kagame’s 20-year rule has emulated the Asian Tiger’s solutions to governance, economic reform, and business development.
However, private sector investment will be needed to drive growth and meet the ambitious goals of the Second Economic Development and Poverty Reduction Strategy (EDPRS 2) by 2018 – the home stretch to Rwanda’s 2020 vision. This aggressive medium-term strategy to ensure that the country achieves middle-income status by 2020 will depend on the mining sector to be a major pillar of growth and focal point for international investment.
Currently, the mining industry is the second largest foreign exchange earner after tourism. The country’s mining industry exported $226 million in 2013 and hopes to surpass $400 million in 2017. Though the sector has grown at more than 10% annually since 1999, its contribution to GDP remains low, hovering below 2%. This percentage is expected to increase to over 5% in 2017. Despite increased production, exceeding last year’s figures will be a challenge because metal prices remain low and downstream buyers are reluctant to purchase African material, out of fear that they are conflict minerals. Rwanda is peaceful and has implemented a tagging system to track all minerals and ensure that none are moved from conflict zones into Rwanda and resold, but buyers remain hesitant.
To achieve its mining targets, the Ministry of Natural Resources in charge of Mining is focused on several key areas: collecting and improving the availability of geological data, moving from an export orientated industry to a production and processing one, and introducing technology at the administrative and operational levels.
Little is known about the geological potential of Rwanda. To date, Rwanda has been associated almost exclusively with the three T’s: tin, tantalum, and tungsten. Rwanda is underlain by a series of rock types commonly referred to as the Kibaran system, which extends from northern Tanzania through southwestern Uganda, Rwanda, Burundi, the eastern part of Democratic Republic of Congo, Zambia, and Angola. The Kibaran system contains numerous granite-related ore deposits rich in minerals ores like cassiterite, niobotantalite, wolframite, beryllium, spodumene, amblygonite, and gold.
To understand the geological composition of the country, the Government of Rwanda invested more than €2 million to assess the potential in four Prospective Target Areas, within which 11 promising areas were identified. In 2014, the government will again invest $2 million to explore these areas and conduct geochemical and geophysical surveys to identify and assess the quantity and type of their minerals. Early indications reveal potential in copper, cobalt, zinc, phosphorous, and semi-precious stones. Complete geological data is expected by the end of 2015 and will be accessible through an online system to encourage further foreign investment. The Rwandan mining sector is largely composed of artisanal miners, who lack the knowledge, skills and technology to produce at high levels. The government and industry are working with artisanal miners to upgrade existing sites and foster awareness around safety and environment. Still, the miners lack financial backing and are always seeking joint ventures or partnerships with foreign investors. With more than 75% of the population below 30, there is the potential for a sustainable long-term workforce, and investments in education are underway. Rwanda’s Ministry of Education (MOE) signed an MOU with Cairo University to establish a regional center of excellence in mining and geology in Rwanda, which will strengthen the skills capacity of the MOE.
Although the geological potential remains unrealized, Rwanda’s political stability and transparency make it one of the most attractive countries in the region. Rwanda recently launched its first 10-year bond to international markets, and stood above its neighbors by receiving a B rating from Standard & Poor’s and Fitch Ratings.
Rwanda is also strategically located between East and Central Africa, making it well situated to capitalize on the mineral wealth from its neighbors by becoming a regional hub. Plans are already underway to fast-track regional integration in the East African Community. The Standard Gauge Railway project, which will run from Mombasa to Kigali through Uganda, will reduce transportation costs. Although 100% of Rwanda’s mineral ores are exported as raw mineral concentrates, current forecasts reveal that more processing plants could be built to serve the region. Private sector companies have already started constructing processing plants and reviving smelters, but processing plants to smelt cassiterite into tin, refine wolframite, and tantalite into tungsten and tantalum are also needed. Phoenix Metal Ltd is upgrading a tin smelter expected to come online next year. It will be the first conflict-free certified smelter in Africa. Another newcomer, Pella Rwanda Resources Ltd, signed a $22 million deal with the Rwandan government to undertake mining operations in the Rwamagana District and plans to construct a processing plant in the later part of its five-year agreement. All industry participants are awaiting the imminent release of the new mining law, which is expected to offer generous tax incentives.
As private sector investment rises and the artisanal mining industry adopts sustainable technical methodologies, the Rwandan mining industry will transition from a trading center to a productive and processing industry. Together, the Ministry of Natural Resources in charge of Mining and the RDB have fostered an unrivaled investment environment. If Rwanda can systematically address the gaps in geological data and develop skills as well as processing capacity, it could become a global hub for business, investment, and innovation.
This article was written as part of the research being conducted by GBR for its upcoming Mining in Africa Country Investment Guide (MACIG) 2015. To participate in this report, please contact Sharon Saylor at firstname.lastname@example.org.