Assessing the potential of Rwanda’s investment code

Rwanda's ambitious investment law, enacted a year ago, aimed to boost Foreign Direct Investment (FDI) flows into the country has already shown promising results. In a recent interview, Paul Mugambwa, Associate Director for Tax Services at PwC Rwanda, highlighted the quick wins and significant developments spurred by the investment code. The law, which replaced the outdated investment code that had been in place for six years, aimed to provide new incentives for businesses and attract more investments. One of the major success stories of the past year has been the establishment of the Kigali International Finance Center, which has attracted substantial investments and launched businesses under the new law. Additionally, initiatives like the Kigali Innovation City have been instrumental in positioning Rwanda as a hub for Pan-African businesses and startups. The Kigali International Finance Center has proven to be a magnet for new businesses, fund managers, and investors, with a recent announcement of a massive $500 million investment into the center. This influx of funds and expertise is not only benefiting Rwanda but also creating a critical mass for Pan-African businesses. The center's success is further bolstered by the establishment of double taxation treaties with several countries, signaling Rwanda's commitment to fostering a conducive business environment. Moreover, the Kigali Innovation City has already attracted $20 million in construction investments, reinforcing Rwanda's status as an IT hub for Africa. Another noteworthy development is the influx of global startups into Rwanda, with notable companies like Norsk Technologies setting up operations in the country. This trend marks a shift from solely attracting regional startups to now drawing global players to Rwanda's burgeoning startup ecosystem. With plans to host over 100 startups and secure investments worth $100,000, Rwanda's investment code is proving to be a catalyst for innovation and economic growth. While the investment law has garnered praise for its success in attracting investments, questions have been raised about its impact on tax revenue. Critics, including international bodies like the Tax Justice Network for Africa, have expressed concerns about the potential loss of tax revenue due to the incentives offered under the law. However, Mugambwa argues that the new businesses attracted by the investment code are not part of the current tax base, meaning that the country is not losing existing revenue but rather generating new sources of income. Furthermore, Rwanda's unique economic substance requirements set it apart from other financial centers, ensuring that businesses operating in the country contribute to its economic development. Overall, Rwanda's investment code has demonstrated early signs of success in attracting foreign investments, fostering innovation, and positioning the country as a promising investment destination in Africa. With a focus on sustainable growth and attracting a diverse range of businesses, Rwanda is carving a unique niche in the global investment landscape.