Rwanda - Clean & Green
Summary - 30 seconds
As I stepped off the plane, I was blown away at how clean and green Rwanda is. Imagine a rainforest after rainy season with perfectly paved roads, zero trash, and people cleaning the sidewalks. I would soon learn Rwanda's slogan: This is Rwanda, expect more.
After meeting with about 65 people across sectors, it's clear that Rwanda is well on its way to becoming a first world country. Here are the five takeaways:
1) The people are the key
2) The rule of law is sound
3) The scale of the opportunity is large
4) The actual risk is much lower than the perceived risk
5) Ordinary businesses make extraordinary investments and extraordinary impact
Detailed Overview - 3 minutes
People - I asked a room of 50 entrepreneurs, "If you could tell western investors one thing about the people of Africa, what would you tell them?" A brilliant woman replied, "The solutions to the problems in Africa lie with Africans." What became clear throughout my trip is that in Rwanda, the entrepreneurs, capacity builders, local investors, and government officials have well-thought out, brilliant strategies for addressing the problems they face. What they need are strategic partnership with investors who want to partner with them in their solutions, not people who are trying to bring solutions to problems they don't understand in cultures they don't understand. Westerners can provide insights, thoughts, expertise, and capital - but we must be humble in our approach, understanding that they know their markets much better than we do.
Rule of Law - The government has made extraordinary efforts to root out corruption and has now created a culture of honesty, safety, and security, making the rule of law sound and investing much easier.
Scale - While currently a small market relative to the rest of Africa, the pathway to growth for Rwanda is the fastest on the continent, in my opinion. Rwanda's leadership is vigorously focused on building prosperity for all Rwandan's by creating an environment that fosters private sector growth and invites partnership and investment. They view themselves not only as a great place to do business, but as a great place to headquarter a business with Kenya, Ethiopia, and Uganda next door. A population of 12.6 million people, a GDP of $12.65 billion, and a GDP per capita of $1,004, the government's "Vision 2050" plans for a 5.6x growth in GDP over the next 10 years and a 21.8x growth over the next 25 years, for a total GDP of $275 billion and a GDP per capita of $12,476 by 2050. While an ambitious goal, history shows us that this is very possible - China's GDP grew 28x in the 25 years between 1992 and 2017, and 42x in the 30 years between 1992 and 2022. We know there are differences here, but a GDP per capita of $12,476 is about that of Guatemala and Jamaica. So, the question is, can Rwanda in 25 years be what Guatemala and Jamaica are today? From my time on the ground, the answer is a resounding YES.
Risk - Dislocation is the eye of opportunity for investors and there may be no greater dislocation in the global markets than the perceived vs actual risk investing in African businesses. On an investability scale of 1-10, with 1 being an uninvestable market and 10 being a perfect market, I thought Rwanda was a 2 or 3 going into my trip. I now believe it’s a 6 or 7. It's hard for a westerner to comprehend the opportunity set here, so I invite you… come!
Ordinary Businesses - Simple is scalable. The kind of capital that is most helpful right now is investment in core businesses such as Agriculture, Energy, Food Processing, Healthcare, Infrastructure, Real Estate, and Manufacturing. We're not talking about creating the next AI innovation, we're talking about building companies with efficient supply chains that reduce food waste in transit by 50%. We're talking about building high-rise multi-family unit complexes in a country where the population is predicted to double in 25 years. These aren't difficult businesses; these are simple businesses… and they're scalable and highly impactful.
Challenges - While leaving Rwanda I am more optimistic than I thought I would be, there are still challenges to investing here. For one, currency devaluation is around 8-9% each year, eroding investment returns. With that being said, when your investments return 20-35% annually, you can absorb some of that, and as the economy grows and they depend less on imports, that will decrease dramatically. Second, liquidity in exiting investments can be challenging – although it is very much possible with the right networks. Third, the lack of data is material, but is currently being solved by innovative entrepreneurs and the government. Lastly, corruption in surrounding countries makes doing cross-border trade more difficult.
*Note - the above insights come from spending time on the ground with locals and does not include comments or views on the conflict between Rwanda and the DRC.
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