Rwanda is a landlocked country with few natural resources. So why is China investing so heavily in it?

Published by Quartz
On 23 November 2016 saa 03:16
Views : 384
0 0

It’s hard not to see China’s footprint wherever one goes in Rwanda. Chinese engineers have designed and built the country’s tallest building, Kigali City Tower, a gleaming 20-story glass skyscraper; the building that houses Rwanda’s foreign ministry; various hotels, schools, and hospitals; and 80% of the country’s roads, according to a former Chinese ambassador to Rwanda. A sign on a primary school near government offices declares the school’s playground “a gift from China.” A clinic in town offers acupuncture and traditional Chinese medicine.

There are less tangible signs too. Driving through the Kigali Special Economic Zone—a free-trade area on the outskirts of the capital, modeled after those that helped launch China’s economic opening in the 1980s—a man stopped our car to tell us that he’d been learning Chinese at the local Confucius Center, a cultural institute run by China’s ministry of education. He broke into song, singing in Mandarin about how much he likes learning Chinese, to the tune of “Happy Birthday.”

Rwanda doesn’t fit the usual narrative of China’s interest in Africa—namely that China is only interested in Africa for its mineral wealth, expanses of arable land, and potential as a dumping ground for Chinese-made goods. Small, landlocked Rwanda has few natural resources, and with a population about half that of Beijing’s, it offers a negligible new market for Chinese products.

Instead, private Chinese companies and entrepreneurs are investing in property, telecoms, manufacturing, and small-scale businesses like restaurants, car import outfits, and travel agencies. Big state-owned Chinese enterprises are building much of Rwanda’s roads and infrastructure, but not in exchange for oil or mining rights, as has been the case elsewhere.

As such, Chinese activity in Rwanda offers one of the best counterpoints to the oft-heard criticism that African countries are falling under the yoke of yet another foreign power. “Rwanda is home to 26,000 square kilometers of land and a population of 12 million. What city is there to attack? What land is there to invade?” a representative from the Chinese ministry of commerce in Kigali told Quartz.

A hub for Africa

Rwanda, which went from suffering one of history’s worst genocides in 1994 to becoming one of the fastest-growing economies on the continent, wants to establish itself as the business and technological hub of Africa. By attracting more foreign investment, Rwanda also hopes to wean itself from foreign aid, which accounts for almost 40% of its annual budget.

To that end, the government offers hefty tax incentives: Companies headquartered in Rwanda that invest at least $10 million are exempt from corporate income tax, while those that export at least 50% of their goods pay only 15% tax. Rwandan officials hosting Chinese trade delegations emphasize Rwanda’s stability, government transparency, and business-friendly regulations—it takes less than 24 hours, on average, to set up a company.

JPEG - 47.5 kb
Sanitary napkins made in a factory in the Kigali Special Economic Zone.

Chinese businesses seem to have gotten the message. In Kigali’s special economic zone, Chinese companies produce clothes, sanitary napkins, and wooden doors. A Chinese government-funded agricultural technology center to modernize Rwandan farmers is also focused on helping Chinese companies find new markets in the region. China emerged as Rwanda’s largest investor (pdf) after South Africa in 2009, and though it’s since fallen back to fifth place, it remains among Rwanda’s top trading partners. (China does import a relatively small amount of minerals from Rwanda.)
Some of the most dominant Chinese companies in Africa got their start in the country. Star Times, a Chinese pay-TV provider, began its overseas efforts in Rwanda in 2008. It now rivals Africa’s biggest provider, DSTV, in 30 African countries. Tecno Mobile, a Chinese cellphone manufacturer whose cheap phones are ubiquitous across the continent, also chose Rwanda as one of its earliest markets.

Smaller-scale Chinese entrepreneurs are focused on the promise of Rwandan consumers. “They need everything, and in China we can make everything,” says Han Kai, who imports cars from China and the Middle East, selling them to locals who can’t quite afford the models imported from Japan.

All this is making Rwanda something of a service and logistics hub for China-Africa trade and business, according to Norbert Haguma, a Rwandan businessman whose consultancy advises on China-Africa issues. Rwandan shipping companies have started to offer container services to the Chinese manufacturing hubs Guangzhou and Yiwu. Traders can use instant money-transfer services to send money via popular Chinese platforms like WeChat and AliPay, converting between dollars, renminbi and Rwandan francs. Last year, Haguma’s company hosted a business forum that brought 150 Chinese and African businesses to Kigali.

“Chinese activity in Rwanda can illustrate more diverse types of Chinese involvement across African countries,” says Janet Eom, research manager of the China Africa Research Initiative at Johns Hopkins University, who has done field work in Rwanda.

JPEG - 56.3 kb
Chinese staff at an agricultural demonstration center in Rwanda.

Elsewhere in Africa, Chinese investment is also becoming more diverse. Researchers Wenjie Chen and Hewai Tang, from George Washington University and Johns Hopkins University, looked at data between 1998 and 2012 from China’s Ministry of Commerce—all Chinese enterprises making direct foreign investments must register with the ministry. They found that among 2,000 Chinese firms in 49 African countries, the most popular sectors were services and retail, and investors had “no particular preference” for resource-rich countries over resource-poor ones. According to their research, more than twice as many projects were in the business services sector, compared to mining:

JPEG - 32.8 kb
A construction site in a Special Economic Zone in Rwanda

Rwanda is a landlocked country with few natural resources. So why is China investing so heavily in it?