Rwanda will soon be among the few African countries to link every corner of the country when it rolls out the first ever 4G LTE broadband network in the region.
LTE (Long Term Evolution) is a wireless broadband technology designed to support roaming Internet access via cellphones and handheld devices.
The $140 million project, to be rolled out over the next three years by the government in partnership with KT Corporation, South Korea’s biggest telecommunications provider, will see the whole country linked to a fiber optic cable.
Its launch coincides with Transform Africa, a continental ICT and innovation summit that takes place in Kigali from October 28 to 31.
Seven African presidents and more than 1,500 delegates from all over the world are expected at the summit to discuss how Africa can overcome its connectivity and ICT challenges.
The presidents who are expected to attend include Rwanda’s Paul Kagame, Uhuru Kenyatta of Kenya and Yoweri Museveni of Uganda — who will also be in Kigali for their countries’ Infrastructure Summit on October 28.
According to Rwanda’s Minister for ICT Jean Philbert Nsengimana, the country is today ranked among the “most connected” countries in Africa.
The 4G LTE network will be the final phase to deliver the “last mile” of connectivity after putting in place all the other infrastructures needed, including linking the whole country to the fiber optic backbone. The project will connect 95 per cent of Rwandans.
“Six years ago, African leaders met in Kigali for the connect Africa summit to find means of addressing the digital divide the continent was facing. At the time, only five per cent of the population had mobiles but today 65 per cent of Rwandans own mobile phones,” Mr Nsengimana said.
Connecting all citizens
“Today, when we meet in Kigali for Transform Africa, the question will not be how Africa will be connected but rather how this infrastructure can reach the final person,” he added.
Africa’s biggest challenge remains linking population to available ICT infrastructures as well as the high cost of making phone calls.
Rwanda and other EAC member states are among the countries where making a single phone call is more expensive than in any other part of the world.
The issue of affordability of telecoms and data will be one of the key issues to discussed at the Kigali summit this week.
Fitch Ratings revised Rwanda’s Outlook to ‘Positive’ from ‘Stable’ while simultaneously affirming Rwanda’s long-term foreign and local currency Issuer Default Rating (IDR) at ‘B’ and short-term foreign currency IDR at ‘B’. Fitch has also affirmed Rwanda’s Country Ceiling at ‘B’.
According to Fitch ratings, the revision of the outlook from stable to positive reflects continuing rapid and inclusive GDP growth in the future, high governance standards relative to regional peers, marked improvements in poverty reduction that attracted high levels of international support, and low public and external debt.
A sovereign rating indicates the rating agency’s opinion of a country’s credit worthiness, or in other words ability and willingness to meet its financial obligations in timely manner. Credit ratings, as opinions on vulnerability to default, do not necessarily imply a specific likelihood of a country’s defaulting on its payment.
This year’s rating is the fourth following the first in 2006, the second in 2010 and the third in 2011. At ‘B’, Rwanda’s rating is within the range of regional countries. A ‘Positive” outlook may imply to a certain extent possibility of rating upgrade provided continued positive trends in factors that triggered the upgrade in the outlook.
Rwanda’s debut US$400Million Eurobond has been over subscribed, a lead banker has revealed saying, “its well over subscribed as you can imagine”.
An investor source told media that the order book was $3 billion, or 7.5 times the issue size.
The 10-year dollar bond was issued on Thursday with a 6.875% yield, a lead banker said. That was at the tighter end of Rwanda’s final guidance of 6.875-7 %.
Investors were attracted by Rwanda’s strongly growing economy, low debt and recent political stability.
President Paul Kagame has been commended for presiding over Rwanda’s recovery after the 1994 genocide against the tutsi that claimed over a million lives.
Economic growth averaged 8.2% from 2006 to 2012 and the International Monetary Fund projects growth of 7.6% this year.
Rwanda’s debt levels are equivalent to 23.3 % of gross domestic product in 2012 and Inflation is in single digits.
Rwanda’s debut in the Eurobond market will offer investors the rare opportunity to buy into one of the fastest growing economies in Sub-Saharan Africa – but don’t expect the country to get carried away.
The sub-benchmark size of the trade, combined with the country’s strong dependence on foreign aid and volatile sectors of the economy, will see some buyers take a step back and demand a reasonable premium to get involved.
The East African sovereign, rated B/B, will wrap up investor meetings for its planned US$400m 10-year bond sale next Wednesday, after conducting a one-week roadshow in Asia, Europe and the US through BNP Paribas and Citigroup.
The last Eurobond issue from the continent, Zambia’s 5.375% US$750m 10-year note offering, generated an order book of US$12bn when it was issued in September, pricing through the curves of the country’s regional peers.
While Rwanda is unlikely to replicate that success, a shortage of African paper in the market will generate strong interest among yield-starved investors.
Despite a US$50m increase from the originally targeted US$350m, Rwanda’s transaction will fall short of the US$500m minimum required for inclusion in global emerging market indices, reducing the notes’ potential buyer base and limiting their liquidity in the secondary market.
“The sub-benchmark size is a problem because it means there is no automatic demand from index followers,” said Graham Stock, chief strategist at Insparo Asset Management. “It is a market distortion created by the importance of the index, but it can’t be ignored.”
Borrowing more for the sole purpose of joining the index league, however, would make little sense for a country with annual GDP of US$6.4bn. “It would be risky for the government of a small economy to borrow more than it needs and thereby increase debt service costs and refinancing risks just to qualify for the benchmark,” said Stock.
While Rwanda’s growth story is compelling – real GDP growth averaged 7.4% between 2003 and 2011 – the country relies on foreign aid to finance almost 40% of its budget. Subsistence agriculture accounts for one-third of annual GDP, employing 73% of the labour force.
Eyeing a 7% yield
In light of these challenges, a syndicate official away from the deal reckons investors are likely to demand a yield of around 7% to buy the new notes. “I see a definite floor of 6%, on top of which you need to add a new issue premium and [an additional concession for] non-index eligibility,” said the banker.
“I think the premium for the size will be significant. A pricing [of] circa 7% is not far-fetched,” said a London-based portfolio manager who specialises in African markets.
He suggested, however, that the rarity value of the name could push the yield even lower. “I would go tighter, between 6.5% and 6.75%, mainly because of the appetite for Eurobonds from the region and current yield levels for SSA names,” he added.
Proceeds from the sale will be used to repay outstanding loans and finance the completion of the Kigali Convention Centre and the Nyabarongo hydro power plant.
KIGALI, April 16 (Reuters) – Rwanda will issue a debut $400 million debut Eurobond in the days ahead to raise funds for the retirement of short-term debt and complete strategic investments, the International Monetary Fund (IMF) said on Tuesday.
Investors have lapped up sovereign bonds by African countries in recent years, thanks to fairly attractive yields and robust economic growth prospects at a time European economies struggle to shake off a persistent debt crisis.
Rwanda will be the first country in east Africa to issue a Eurobond. Kenya planned to borrow from the international market but postponed it repeatedly due to worries over the prospects of violence in polls held last month.
Officials in Nairobi say the government will issue the $1 billion bond this year after the election passed peacefully in contrast with last election five years ago that resulted in deadly post-election violence.
Rwanda had initially indicated that it would borrow $350 million.
The country’s ministry of finance confirmed on Twitter that it had mandated BNP Paribas and Citi to arrange the issue, with road shows set to start on April 18.
Fitch Ratings assigned the issue ‘B(EXP)’ rating in line with the country’s ‘B’ Long-term foreign currency Issuer Default rating with a stable outlook.
“Rwanda’s rating is supported by solid economic policies and a track record of structural reforms, macroeconomic stability and low government debt,” the ratings agency said.
“Rwanda will continue to attract significant budget support flows, reflecting its strong track record in poverty reduction and control of corruption.”
The country had a debt to GDP ratio of 23.3 percent last year, Fitch said. The IMF said in a statement it expected the economy to expand 7.5 percent this year, barely changed from its previous forecast of 7.6 percent.
Rwandan President Paul Kagame said Thursday his country will aim for average annual economic growth of 11.5 percent for the next five years.
“We have set ourselves a target of promoting this country’s economic development. We want economic growth to average 11.5 percent” for the period 2013-2017, Kagame told a government retreat.
“It’s a feasible target,” he went on, saying that the fact that Rwanda managed 8 percent growth in 2012 despite suspensions of foreign budget support was “a miracle”.
The 8 percent growth figure is according to the government. The International Monetary Fund put Rwanda’s 2012 growth at 7.7%.
In 2012 several donor countries suspended their budget support to Rwanda following accusations from the United Nations that Kigali was backing rebels in eastern Democratic Republic of Congo.
Rwanda has always denied the claims.
Nearly two decades after the 1994 genocide, 40% of Rwanda’s budget still comes from aid.
In February Germany unfroze some 7 million euros of aid and reallocated it for professional training.
Kigali — The World bank has approved a grant of $50m aimed at bolstering Rwanda’s poverty eradication efforts.
It fund will also see Rwandans cushioned from the full impact of shocks, from unemployment or illness to sudden natural disasters.Carolyn Turk, World Bank Country Manager for Rwanda said that while Rwanda has pushed back poverty dramatically in the past decade, it is still one of the world’s poorest countries.
“We are happy to continue supporting Rwanda’s efforts to manage its social safety net programs more efficiently, so that poor people can withstand economic and climatic shocks better and benefit more from economic growth,” she said
Rwanda has recently seen a record decline in poverty, from 57 percent in 2006 to 45% in 2011. The government has partly attributed this success to its social safety net programs.
The insurance sector grew by 36 per cent between 2011 and 2012, according to the latest National Bank of Rwanda monetary policy and financial stability statement released by the central bank last month.
The sector’s revenues also grew progressively, for instance by December 2012, the industry recorded Rwf214b compared to Rwf157 in 2011, representing a 36 per cent expansion. The gross premiums also grew by 67 per cent, from Rwf46b in 2011 to Rwf77b in 2012.
“Last year, we tripled our advertising campaigns, which increased general public awareness about insurance services and their importance. This was more new people coming on board,” said Pamela Abonyo, the assistant manager corporate communications at Sonarwa Insurance Company while commenting on the sector’s growth.
She added that a bylaw passed by the government last year, which made it compulsory for all commercial properties to be insured against fire also played a big role as property owners were forced to take on policies.
Last year, the industry’s profitability (after taxes) also increased by 192 per cent, from Rfw12b in 2011, to Rwf35b in 2012.
“Ever since the central bank started supervising the insurance sector, the number of policy holders (clients ) increase as this protected their interests,” Bonaventure Sangano, the director for non-bank financial institutions department at the central bank, said.
He added that separation of life and non-life insurance, instituting of corporate governance structures, coupled with latest licensing of a number of insurance companies, boosted capitalisation and ensured efficient management.
“The fact that last year in July, the government made a general salary increment for most of its employees may have partly contributed to the general increase in subscription to insurance services,” noted the National Bank of Rwanda governor, John Rwangombwa, at a recent media conference.
By the end of 2011, the sector had six non-life insurers, three life and two public insurers, totaling to 11 insurers in the entire market. However, by the end of 2012 the number had increased to 152 insurance agents, six insurance brokers and nine loss adjusters.
The liquidity position of the insurers also improved as the current ratio stands at 241 per cent.
The return on assets increased from 9 per cent to 17 per cent, and the return on equity from 13 per cent to 25 per cent, according to this periodic statement review
The pension sector is comprised of the National Social Security Fund (NSSF/CSR), which merged with Rama to form Rwanda Social Security Board (RSSB) and about 40 private pension schemes.The National Social Security Fund covers largely salaried workers representing eight per cent of the working population in Rwanda.
The pension sector assets increased by 74 per cent from Rwf192b recorded during the quarter that ended in December 2011, to Rwf334b recorded in the quarter that ended in December 2012, this excludes private pension schemes.