Special Economic Zone and Exports
- Step by step guide to SEZ licensing procedures
Your step by step guide to SEZ licensing procedures in Rwanda
What is a Special Economic Zone?
Special Economic Zone (SEZ) refers to a geographically specified and physically secured area administered by a single body, offering certain incentives including more liberal and simplified economic regulations for businesses to physically locate and operate within it.
Why a Special Economic Zone in Rwanda?
Rwanda’s SEZ program is designed to address some of the domestic private sector constraints such as availability of industrial and commercial land, availability and the cost of energy, limited transport linkages, market access and reduced bureaucracy and availability of skills. Designated, serviced land is provided for small and large scale industrial development, as well as reliable, quality infrastructure, competitive fiscal and non-fiscal regulations and streamlined administration procedures.
In 2010, the SEZ regulatory framework was developed into the SEZ policy and in the year 2011, the Special Economic Zones of Rwanda Law was enacted. This law spells out all the guidelines for SEZs to operate, the structures and the roles of key players.
Key players
Regulator: The regulatory Authority is an independent agency responsible for planning the national SEZ regime, designation of land as SEZs, coordinating with public agencies, licensing and permitting SEZ enterprises (developers, operators and users), monitoring performance and ensuring compliance with SEZ rules and legislations. The current SEZ regulator in Rwanda is the Special Economic Zones Authority of Rwanda based at the Rwanda Development Board (RDB).
Developer: A developer is generally a private sector entity licensed by the Regulator and holding the responsibility as the owner, to bear the risk and financing of designing and constructing all the necessary SEZ infrastructure and facilities. Prime Economic Zone Secretariat, developer of the Kigali Special economic zone, also owns the land and is therefore responsible for entering into sale agreements with the various users.
Operator: An operator is generally a private sector entity licensed by the Regulator with the responsibility to carry out the day–to-day management of SEZs and provision of specialized support facilities and services. The developer can also be the operator.
User: A private entity engaged in commercial activities in the SEZ which is compliant with the prevailing rules and regulations regarding SEZ. The SEZ user must be holder of a user license issued by SEZAR.
Kigali Special Economic Zone
The Kigali Special Economic Zone (KSEZ) has been set up through the merger of former Kigali Free Trade Zone and the Kigali Industrial Park projects.
The Kigali SEZ is developed in two phases:
Phase I covers 98 hectares of land. It is serviced with roads, electricity, water and firefighting systems, sewage and fiber optic cables that will serve in easing the operations of investors. This phase hosts 97 plots divided as follows:
- One plot sheltering a control room where all the electricity of the zone converges and is controlled
- One plot sheltering water tanks supplying potable water to individual plots
- One plot sheltering a sewage treatment plant that will treat all the sewage water from industries
- 94 plots that accommodates industries/warehouses
Phase II has 178 hectares of land. It is serviced with roads,electricity, water and firefighting systems and sewage network. The number of plots in that phase is 67 plots divided as follows:
- One plot sheltering a control room where all the electricity of the zone converges and is controlled
- One plot sheltering water tanks supplying potable water to individual plots
- One plot sheltering a sewage treatment plant that will treat all the sewage water from industries
- 64 plots that will accommodate industries/warehouses including
- One plot that will serve as an ICT PARK
Acquiring land in Kigali SEZ
Land in SEZ is acquired through the “developer” (private company) but under the regulation of the government in this case SEZAR. The price per square meter is USD 62 and the minimum size of land that can be acquired is one hectare. After acquiring the land you get all the relevant licenses and permits from RDB at SEZAR.
Main potential economic benefits from zones
- Increase foreign and domestic private sector investment
- Job creation
- Income generation – both direct (within the zone) and indirect through backwards and forwards linkages with businesses outside the zone
- Export growth and diversification and increase in foreign exchange
- Industrial development and other sectors requiring serviced, specialized infrastructure
- Skills upgrade and technological transfer
- Increased tax revenue through expanded tax base hence reducing the budget deficit
- Environment protection
- Import substitution due to increase in manufacturing of products for local consumption
- Reduced balance of payment deficit
New provincial industrial park status
With the creation of six sub cities in the pipeline by the government of Rwanda, services will draw closer to Rwandans, a potential for increased development also upon completion the proposed cities will double as economic poles of growth for the country with availability of serviced land for industrial development in remote areas. Hence curbing the habit of rural-urban migration as social amenities will be brought closer to the people.
How to have a particular site designated as a Special Economic Zone?
Special Economic Zone site designation
This procedure applies to organizations that wish to develop a newly identified site as a Special Economic Zone. Applications for Zone designation may come from either private, public or public-private institutions and are submitted to SEZAR-RDB for review and recommendation to the Cabinet.Special Economic Zones in Rwanda are established through a Prime Minister’s order that converts the subject area into a legally-designated Zone.
How to obtain a Special Economic Zone developer license?
Any applicant, whether from the private or public sector, wishing to develop, operate, maintain, or promote a Special Economic Zone should submit an application to SEZAR. The Head of SEZAR issues Zone Developer / Operator Licenses after obtaining the approval of the board of SEZAR.
International Selection Process:
When a Zone is to be developed and operated on private state property by a private domestic or foreign investor even when it is through a Public Private Partnership, SEZAR calls for expression of interest to select one or several Developers and / or Operators.How to obtain a Special Economic Zone user license?
A Special Economic Zone user is a private entity engaged in commercial activities in the SEZ and is compliant with the prevailing rules and regulations regarding SEZ. SEZAR shall either grant or reject the granting of the Zone user license within 3 working days from the date of submission of a complete application. The SEZ user must be holder of the SEZ status in form of the license provided by the Authority.How to obtain an Export Processing Zone user license?
According to the “East African Customs Act”, an Export Processing Zone (EPZ) is a customs area where one is allowed to import plant, machinery, equipment and material for the manufacture of export goods under security, without payment of duty. The imported goods are subject to customs control at importation, through the manufacturing process, to the time of sale/export, or duty payment for home consumption.
Other benefits of operating such enterprises include; free trade conditions, streamlined Government red tape allowing for one stop registration and licensing and also a facility of long term tax concession. -
Export development and business
The RDB Export Development And Business Department special focus is placed on the following aspects:
- Develop and implement the National Export Strategy (NES) that seeks to raise Rwanda’s international competitiveness and lead to significant improvement in the country’s export performance, and thus reduce the trade deficit.
- Identify goods that have a large domestic market, and develop and implement a strategy on how to efficiently produce them within Rwanda without using protectionism or protecting local industries and companies.
- Improving quality of products and services to meet standards.
- Implement an appropriate trade information system that improves access to information on national and international trade flows.
- Facilitate trade by removing barriers and fostering greater integration into regional and international trading networks.
- Provide sector-specific support for viable new industries: silk, textiles, processed fruits and vegetables, dairy products, as well as value addition in existing sectors such as horticulture and leather production.
Above outcomes shall contribute to achieving Vision 2020 and EDPRS by playing a major role in Rwanda becoming a more competitive nation with competitive enterprises, moving Rwanda from its current dependence on natural resources by increasing value addition, and contributing to reducing Rwanda’s trade deficit through increasing export revenues and development of domestic production opportunities.
Also, the Government of Rwanda fully recognizes the paramount role of the private sector in furthering economic development and pro-poor growth. Both Vision 2020 and EDPRS clearly articulate that the emergence of a viable and sustainable private sector will be the major engine of economic growth in Rwanda.
At the heart of above efforts lies the recognition that small and medium enterprises today make over 95% of the businesses in Rwanda, therefore a focus on manufacturing and trade fundamentally means a focus on these SMEs. Thus the RDB Trade and Manufacturing Department’s strategies aim at structuring and implementing SME support programs to increase the proportion of SMEs in value-adding sectors such as agriculture, tourism, etc.., and to facilitate their access to business development services (BDS).
The Government of Rwanda also recognizes that Business Development Services (BDS) are very crucial to the growth of SMEs. By enabling businesses to access tailored support services, including information, training, networking and consultancy advice, the BDS network helps new entrepreneurs and existing businesses to grow, become more competitive and contribute further to the prosperity of Rwanda.
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Overview of Rwandan trade sector
Rwanda’s participation in global trade or even regional trade is still low. As a rapidly growing economy, Rwanda imports more than it exports leading to a growing trade deficit. Between 2008 and 2012 export growth averaged 26% compared with growth in imports of 18%. The latest trade data indicate that in 2012 merchandise exports grew by 28.13%, over 2011, compared to 11.40% growth in merchandise imports.
To achieve Rwanda’s economic growth trade is a fundamental function. The Government of Rwanda is making every effort to meet sustainable high export growth over import growth and achieve Vision 2020’s ambitious target of 28% export growth per year.
In this regard, EDPRS II focuses on interventions to strengthen export promotion and enhance sector specific infrastructure on key export sectors.
Trade development divison
Trade Development Division of RDB has the goal of raising the level of domestic trade and increasing regional and international exports in order to improve Rwanda’s trade position.
This Division is responsible of conducting pro-active export promotion activities in target markets and conducting export development program.
1. Export Development Program
In the context of National Export Strategy (NES), RDB is implementing an Export Development Program to develop company competitiveness and increase exports. This program focuses mainly on capacity building of new and existing exporters.
It has three main sub-programs:
Export Adviser Initiative (EAI): Under this component 15 local consultants and institutions are being trained in export related matters. At the end certified Advisors will be able to:
- Undertake individual company export capacity audits,
- Develop export and market entry plans and support the implementation of agreed plans,
- Train and coach business owners in both strategic and technical export related activities.
Export Capacity Programme (ECP): This sub-program aims at upgrading the capacity of existing and potential exporters by:
- Providing access to specialized services that support value added, product development and export market development.
Market Linked Programme (MLP): The objective of Market linked sub-program is to undertake research to put Rwandan companies in front of potential clients and helps them to generate new export sales. RDB supports companies by:
- Conducting market research for Rwandan companies;
- Providing feedback from the market research;
- Linking Rwandan companies with potential distributors in EAC market through organized sales missions.
2. Export Promotion Program
This program aims at marketing Rwandan products in international markets, and coaching exporters on marketing strategies. Under this program it is important to highlight following initiatives:
- Trade fairs and trade missions: RDB supports Rwandan companies to participate in international trade fairs and trade missions thus they understand competition and identify opportunities. RDB leads implementation of the program across all sectors. This is done through:
- Selecting and coaching companies on imports requirement in foreign markets;
- Developing exhibitors catalogues;
- Producing promotion materials under the brand name “Buy from Rwanda”;
- Providing other related facilitation that companies need to enter new markets, to remain in force in existing markets and then increase Rwandan exports.
For more information on how to participate in these programs please contact the trade division at: tdd@rdb.rw
- Export Web Portal: This is an online information transmission and communication services that facilitates international business community to connect directly with Rwandan exporters. Through the portal Rwandan companies can showcase their products and learn about exporting and market opportunities.
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In 2011 RDB adopted a new strategy of involving private operators in the management of BDS Centers. Private sector engagement is Private-Public-Partnership (PPP) model in which government retains ownership of BDS Centre’s assets and the operator assumes responsibility for all expenditures. 4 private operators entered into contract with RDB to manage all 30 BDCs (1 BDC in each district) as follows:
- Africa Development Consultants (ADC) CO. Ltd: Eastern Province and Kigali City
- Rwanda Telecenter Network (RTN): Northern Province
- Agence de Fiscalité, Comptabilité et Courtage (AFICCO) Ltd: Southern Province
- Business Development Fund ( BDF) : Western Province.
The services provided by the BDCs (Business Development Centers) include, but not limited to the following;
Entrepreneurial Development Services
These services involve training entrepreneurs to develop essential skills for professional development. This help participant to identify, develop and implement business ideas.
Business Registration
The Centers provide commercial registration for companies so as to encourage formal businesses and to facilitate the process of starting a business by bringing it closer to the business community. This service has already started in 8 Centers and is to be extended to other Centers.
Trainings, Business Advice and Counseling
Trainings, individual business mentoring and counseling form an important part of the BDC’s daily activities. Participants can vary from new entrepreneurs with minimum skills needing general assistance to the established and skilled businesses needing specialized knowledge or a specific intervention.
The most training conducted through BDCs are:
- Business Plan Elaboration,
- Accounting,
- SME (including cooperatives) management,
- Business Skills
- Etc
And the business counseling services can relate to tender advice, business plan implementation, loan management, marketing, book keeping and performance management.
Facilitating Access to Finance
Companies or individuals are introduced to financial institutions; particularly those which offer loans to the people turned away by banks and other formal financial institutions such as micro finance institutions and support funds such as SME Support Scheme.
Information Services
This includes provision of trade point services by facilitating the business community to access domestic and international investment and trade information. The Centers serve as sources of information on tourism services in Rwanda, and any other information related services.
Export Development Services
These services involve facilitating and empowering SMEs in international trade. This program target companies or individuals that have no or little previous export experience yet have export potential. This program helps companies to assess their export readiness and develop an export plan. These services include training programs that enable participants to cover essential elements of exporting such as increasing volumes and value, export costing, methods of payment, international marketing, export documentation and foreign exchange, etc.
IT Services
IT services are offered by facilitating the business community to access and use internet and any other IT related facilities.
Tax Advisory Services
The BDCs also are used as a platform for the Rwanda Revenue Authority to offer tax education services to the potential and existing tax payers.