RWANDA ECONOMIC REVIEW

C O N F I D E N T I A L KIGALI 000818


STATE AF/E AND AF/EP

E.O. 12958: DECL: 05/11/2017
TAGS: ECON EFIN EINV ETRD PGOV KIDE OPIC RW
SUBJECT: RWANDA ECONOMIC REVIEW

Classified By: Ambassador W. Stuart Symington for reasons 1.4 (B),(D)


1. (U) This issue of the Rwanda Economic Review Covers:


-- Methane pilot project begins feeding power to national
power grid
-- International Finance Corporation (IFC) invests $4
million in Kivu Methane Gas Project
-- Millicom wins tender to become Rwanda's third telecom
provider
-- MTN reaches one million subscribers mark
-- Rwanda hosts Commonwealth East Africa International
Business Forum
-- Gayaha Links wins Legatum award
-- Mineral exports hit record $70 million for nine months in
2008
-- Coffee exporters hope for record year in 2009
-- Land reform moves forward


Rwanda Harnesses Methane from Lake Kivu
--------------


2. (U) Methane: A government funded pilot project in
Gisenyi (north Lake Kivu) has successfully extracted methane
gas dissolved in the lake water and used the gas to power
turbines. The pilot plant is currently feeding 1.8 MW of
electricity to the national grid with a target output of 5MW
when fully optimized, a process that may take several months.
The $15 million project was engineered by Ludan Technologies
of Israel. Lake Kivu has estimated reserves of 55 billion
cubic meters of methane gas (dissolved in the water at depths
below 400 feet) with an additional 250 million cubic meters
generated annually from lake floor emissions. Engineers
estimate these reserves could generate 700MW of electricity
annually (shared between Rwanda and the Democratic Republic
Congo --DRC) for the next 55 years.


3. (U) Contour Global Rwanda Project Manager told emboff that
agreement has been finalized with the Government of Rwanda
(GOR) for a gas extraction concession and power generation
project in Kibuye (central Lake Kivu). American owned
Contour Global is planning to build four 25 MW power plants
using methane as fuel. The first plant is expected to be on
line by the end of 2009 with the final three operational by
the beginning of 2012, he said. Contour Global will invest
an initial $80 million of its own capital in the project and
hopes to secure $160-180 million in additional funding from
OPIC to complete the project.


4. (U) IFC: IFC VP Thierry Tanoh confirmed in a press
release that IFC will invest $4 million in a venture capital
consortium that will develop a second 100MW methane-fueled
power project. The consortium includes local Rwanda
Investment Group (RIG) and the Agha Khan Fund for
Development. IFC, the World Bank and the African Development
Bank will finance the project. RIG is also developing two
additional pilot projects using different methane gas
extraction technologies. The two pilot projects, with a
combined power output of 7.6MW, are scheduled for completion
by early 2009.


5. (U) In November, the GOR awarded South African Industrial
Development Group a tender to build a Gas to Liquid (GTL)
facility using methane as a source material. The plant when
operational will produce 2,800 barrels daily of synthetic
diesel fuel, roughly equivalent to Rwanda's current petroleum
imports.


Rwanda Picks New Telecom Provider
--------------


6. (U) Millicom: The Rwanda Utilities Regulatory Agency
(RURA) announced that the Rwandan cabinet has approved
Q(RURA) announced that the Rwandan cabinet has approved
Luxembourg based Millicom International Cellular S.A. as the
preferred bidder to be the country's third telecom provider.
Millecom agreed to pay $60 million for the 15 year fixed and
mobile phone license. Telecel Globe and Zain were named as
first and second reserve bidders. Millecom, which has
existing operations in Tanzania and the DRC, will partner
with Marathon Corporation. Marathon Corporation, an Israeli
owned company with close ties to the GOR, is also a joint
venture partner with Tri-star (Rwanda Patriotic Front
controlled investment company) in the Rwanda Enterprise
Investment Company (REIC). Rwanda currently has two telecom
operators, MTN Rwandacell and Rwandatel.


7. (C) Telecel Globe Business Development Director raised
concerns about a lack of transparency in the bidding process.
The Telecel director claimed invitations to bidders to
attend the opening of the "sealed" financial bids were sent
out six hours after the bids had already been opened in
closed session, even though the bid regulations indicated
that the bidders should be present for the opening of the
bids. He asserted this provided "insiders" the opportunity
to "adjust" their bids without public scrutiny. He added;
"what rendered things suspect was the fact the Millicom offer
was only marginally higher that Telecel's - usually there is
more of a difference" (Note: Zain the second reserve bidder
offered $45 million -- more than 30 percent below the winning
bid. End note).


8. (U) MTN: Rwanda's largest telecom provider, MTN
Rwandacell, has quadrupled its customer base from 250,000 in
2006 to over to one million subscribers in 2008. The telecom
provider, jointly owned by the GOR and MTN, has invested over
$145 million over the last ten years to build and upgrade
infrastructure including the construction of 200 antennas
throughout the country. MTN Rwanda's CEO told reporters the
company's mobile and internet services now reach 80 percent
of the country.


Conferences
--------------


9. (U) Rwanda hosted the first Commonwealth East African
International Business Forum in Kigali October 29-30. Over
500 participants attended the forum including 250 delegates
from 23 countries outside of East Africa. The forum sought
to position the East African Community (EAC) as a single
market and engage the private sector on trade and investment
opportunities in the region. The forum also addressed
eliminating barriers to trade within the community, the need
to accelerate infrastructure development through public
private partnerships (PPP),improving access to finance and
the minimizing the impact of the global financial crisis on
member states. Private sector representatives supported the
policy direction taken by regional governments, but noted
that implementation was often inconsistent with stated
policy.


10. (U) Gahaya Links: On November 19th, Rwanda hosted the
second annual Legatum Pioneers of Prosperity Africa awards in
Kigali. Legatum, a privately owned international investment
group, in collaboration with the OTF Group and the S.E. Ven
Fund (Social Equity Venture Fund) recognizes and rewards
business leaders in Africa who serve as a role model to the
continent's aspiring entrepreneurs. The awards panel
selected six prize winners out of 1,400 submissions from ten
African countries including Botswana, Cameroon, Cote
d'Ivoire, Ghana, Kenya, Namibia, Nigeria, Rwanda, South
Africa and Uganda. The top prize of $100,000 was awarded to
Nigerian company Superflux International. The five
runners-up were awarded $50,000 and included Gahaya Links
(Rwanda),AAR Health (Kenya),Safi Cleaning (Uganda),Africa
Polysack (Uganda) and Integr8 Group (South Africa). Legatum
Managing Director and panel judge Alan McCormick told the
QManaging Director and panel judge Alan McCormick told the
audience that each of the winning entrepreneurs demonstrated
the level of excellence, leadership and vision required to
grow their business regionally and internationally.


Exports
--------------


11. (U) Minerals: Rwanda's mineral exports for the first
nine months of 2008 have reached $70 million compared to
$70.6 million for all of 2007. Dr. Michael Biryabarema,
Director General of Rwanda Geology and Mining Authority told
reporters he was optimistic that exports for the year would
exceed $100 million. Mineral exports include Tin, Wolfram,
Tungsten, Columbium and Coltan. While the Rwandan mining
sector remains largely artisinal, the recent privatization of
mining concessions has brought in new investment and
expertise that has contributed to increased mine

productivity. Local production of Wolfram has increased from
250 tons in 2005 to over 1,000 tons in 2007. South African
owned Eurotrade International acquired a Wolfram concession
near Kigali 18 months ago and has since increased yields from
1.5 tons per month to over 35 tons monthly. Employment at
the mine during the same period increased from 135 workers to
over 850. Managing Director Martin Kahanowitz attributed the
gains to improved mine management, safety and training. He
told econoff that he expects mine production will increase to
2,000 tons within five years as the company introduces new
equipment and technology.


12. (U) Domestic mineral production represents approximately
25 percent of total exports, the balance being minerals
trans-shipped and re-exported from the DRC. In 2007, Rwanda
re-exported 1,700 tons of Wolfram, 1,000 tons of Coltan and
3,100 tons of Tin, approximately $52 million of total mineral
exports. Eighty percent of the world's known Coltan reserves
are located in the DRC.


13. (U) Coffee: Coffee exporters are predicting $75 million
in exports next year compared to $46 million so far in 2008
and $30 million in 2007. Emmanuel Hareliman, Deputy Director
General Caferwa (leading coffee exporter) told the local
press that extensive marketing, improved farm management,
introduction of improved coffee seedlings and expanded use of
fertilizers will increase coffee yields to 31,000 tons in
2009 compared to 23,000 tons in 2008. Rwanda will also
benefit from increasing exports of higher value "fully
washed" coffee. Rwanda with support from USAID hopes to
increase the percent of fully washed coffee from 15 percent
currently to 85 percent of total coffee exports by 2012.


Land Reform
--------------


14. (U) In a historical first, 56 farmers in Musanze (north
Rwanda) received land titles to their property as part of the
governments National Land Tenure Reform Program. State
Minister in charge of Natural Resources, Vincent Karega told
reporters the program will encourage agricultural development
by enabling farmers to obtain bank finance using their land
as collateral. Until now banks have been reluctant to lend
to farmers without clear property titles. The land reform
project includes air surveys, mapping, land demarcation and
investigation and recording of traditional word of mouth
records of land ownership. Provincial Governor Boniface
Rucagu noted that the project would also help resolve
long-standing property ownership disputes.

SYMINGTON