Wire and Cable

Manufacturing

in Rwanda

…a growing market

in an appealing

business context

with NO local

competitors

Construction in Rwanda

is Big & Growing

Trends in construction & materials: ▶ Construction material is the largest and fastest growing component

of Rwanda’s manufacturing sector

▶ 51% of recent investments in the manufacturing sector have been in

the area of building materials

▶ Construction spending in Rwanda

grew 24% (to 500 million USD)

between 2010 and 2011

▶ Construction permits issued: see

adjacent chart

▶ Commercial buildings and hotels

have dominated recent building

▶ There are over $204 million USD

worth of building material

investments expected in 3 years

Local Dynamics Attract

Investment in Manufacturing 20 Rwandan manufacturers reveal key features and trends:

▶ 25% (5) have other production facilities in the region

▶ 70% (14) have expatriate management

▶ 50% (10) are exporting (Burundi and Eastern D.R.Congo)

Significant new investments committed in the sector…

Rwanda is Well Positioned

Within a Growing Region

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1.0

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5.0

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9.0

2008 2009 2010 2011

US

D (

Bil

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ns)

EAC Construction Spending Trends

Burundi

Tanzania

Uganda

Kenya

Rwanda

Rwanda: • Effective government;

stable political context

• Strong business

environment; low corruption

• Local insight; access to

Eastern D.R.C. & Burundi

• Adequate labor pool

Source: Data from Central Bank in Respective Countries (and estimates)

Global Wire and Cables:

Eyes toward Rwandan Market

Note: highlighted countries are currently primary sources of cable and wire imports into Rwanda

Expansion in the region

▶ East African Cables (Ke) recent investments in DR

Congo and Tanzania

▶ General Cable (US) current plants in Angola and

Zambia; recent investment in S. Africa

▶ PowerTech (SA) expansion plans into SADC and

EAC

Rwanda, 30.9

E. DRC, 40.2

Burundi, 12.9

Regional Wire and Cable Market (annual market – 2011 USD millions / yr)

Source: RRA Customs, Trademap, Interview Data

Imports to Rwanda

▶ Aluminum and Copper Cables are 4th

largest building material import into

Rwanda after Cement, Rebar and

Metal Sheets

▶ Of 160M USD imported in 2011,

Cables represented 30M USD

▶ Targeting 10x increase in Electricity

Installed Capacity by 2020

▶ 90% of Energy Production projected to be

from Renewables

▶ Construction growth ~ 25% / year

▶ Urbanization rate estimated 4.4% ~ 2.5

times global average

▶ ICT Infrastructure attracted investment ~

500 M USD over last 3 years

▶ Mineral exports growing at over 100% per

year

Strong Local Wire and Cable

Market Drivers

Worthy of Note:

• World Bank funded Rural Electrification project of 110 million USD

agreed in 2010; currently in implementation phase

• Large housing developments underway (RSSB alone=4,000 units)

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30

40

50

60

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90

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300

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500

600

700

2008 2009 2010 2011 2012

MW

In

sta

lle

d C

ap

ac

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US

D (

mil

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)

Rwandan Wire & Cable Market Drivers

Construction GDP Electricity - Installed Capacity

2011 BNR Annual Report; EWSA

Construction Spending and

Electricity Installed Capacity

Growing at ~ 25% per annum

100% Imported Supply ▶ EA Cables: recognized as the quality

leader, single largest importer, has

ownership of plants in Kenya, DR

Congo and Tanzania

▶ Variety of other importers – low

quality – limited profitability due to

transport costs and taxes/tariffs/fees

> 45% on non-EAC imports

Demand Constrained

by Limited Quality Supply

EA Cables

11%

Other Imports

89%

Wire & Cable Competitors Market Share in Rwanda

Source: Customs, TradeMap, Interviews

▶ Majority of market from Public Utility and

Large Contractors

▶ Success based on Public Tender

process and a few key relationships

▶ Copper primary product with limited

aluminum for overhead utilities

Not Difficult to Break into

Growing Local Market

EWSA 25%

Large Developers

30%

Telecom 38%

Retail 7%

Wire & Cable Customers Share of Market

Source: Interviews

Tender 63%

Non-Tender

37%

Wire & Cable Purchasing Share of Market

Source: Interviews

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5

10

15

20

25

30

35

2007 2008 2009 2010 2011

US

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usa

nd

s)

Rwanda Wire and Cable Import Trends

Aluminum

Other Copper

ElectricalconductorsInsulated cables

Fiber optic

Co-axial

Source: RRA Customs, TradeMap

Comparable P&L

Analysis (millions USD)

EA

Cables

(Ke)

KEI

(India)

Oman

Cables

(Oman)

General

Cable

(US)

PowerTe

ch (SA)

Revenue 58.5 215.4 630.6 5,866.7 955.0

Cost of Sales 43.5 595.6 5,241.1

Gross Margin 15.0 35.0 625.6

Gross Margin % 26% 6% 11%

Other Costs 11.3 17.8 540.4

Net Income 3.7 2.0 17.2 85.2 13.8

Net Income % 6.3% 0.9% 2.7% 1.5% 1.4%

Source: Various Annual Reports

General Profitability

▶ Regional players with healthy margins

comparable to or better than large global

companies reflect “opportunity”

▶ Profitability driven primarily attributable to

benefits of local production (limited

competition, reduced transport and tariff

barriers)

High Potential for

Profitable Local Manufacturing

Raw Material

▶ Raw material costs dictated by global copper and

aluminum commodity market fluctuations (advantage

of scale without local raw materials)

0

5

10

15

20

25

2009 2010 2011

US

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tho

usa

nd

s)

Rwanda Average Finished Cable Prices (USD/MT)

Aluminum Conductors Armoured Cables

Auto / Battery / Flexibles House Wire Source: Supplier Interviews

Copper

Aluminum

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2004 2005 2006 2007 2008 2009 2010 2011

LME Cash Metal Price (USD / MT)

Source: LME = London Metal Exchange

Costs

Staffing Costs: Rwanda has adequate supply

of low-skilled labor (65% low-skilled linemen)

Transport and Carrying Costs: Local production

will…

Maximize inventory / product mix flexibility

Minimize transport costs coming from small

shipments and value-based transport pricing

(10% to 12% of value)

Avoid high local warehousing costs (5

USD/sqm/day)

Reduce significant non-tariff barriers

Target Investment

~ 10M USD plant converting semi-finished to

finished single-core copper and aluminum

2nd phase ~ 25M USD multi-core plant

Transport and Carrying Costs

Primary Drivers

Max

Min

Mean

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Low-skilledLabor

JuniorTechnician

Mid-levelTechnician

SeniorManager

Rwanda Manufacturing Labor Costs

(USD monthly gross salary)

Source: Karisimbi Partners Survey

Based upon the draft Sector Strategic Plan

By 2018, the following will be spent on energy in Rwanda:

Electricity access roll-out program: 1.2 Billion USD

Electricity generation programs: 3.2 Billion USD

Transmission & distribution programs: 400 Million USD

Total Costs for Strategic Plan: $4.8 Billion USD

Steel Product Demand

Anticipates Growth in Energy

Rwanda’s energy sector plans will require significant

wire and cable material to be realized

The case for investment:

Rwanda: ideal business & investment climate

Construction Boom: significant & growing

Building Materials in Rwanda: too import dependent &

quality products are too expensive at present

Wire & Cable Manufacturing: best investment

opportunity in the building materials sector Large & Growing Demand

Good Profit Potential

Strong Labor Supply

Very limited competition

(but many investigating)

Competition + Growth =

Limited Window of Opportunity

The time is ripe for the first local

production facility for wire and

cable manufacturing in Rwanda

Government of Rwanda Support: Visit Rwanda to learn more about manufacturing capacities and to meet senior

government officials

Construction is booming in line with Master Plan and Vision 2020 goals

The planning and implementation procedures are being streamlined

Special Economic Zones and land concessions are available for you

Completed initiatives to attract wire and cable

manufacturing: Standards have shifted from French to UK as more architects have been

trained to UK standards

Rwanda Bureau of Standards has adopted EAC standards regarding low

quality and counterfeit products

Electrical Cables: Government

Support & Incentives

Why is Rwanda a compelling business context?

1) Political stability; sound rule of law; no tolerance for corruption

2) Vision 2020: impressive growth to middle-income country status

3) 8% average year-on-year GDP growth from 2007-2011 (one of the

highest in Africa (and world)

4) Global Reformer: ranked #4 out of 181 countries by World Bank

Doing Business Report 2013, improving the context for starting and

operating a business by making 26 different reforms since 2005 #1

in East Africa and #3 in Africa: as ranked by WEF Global

Competitiveness Report 2011-2012

5) 6-Hour Business Registration: ranked #8 easiest in the world

6) New Special Economic Zone opened; 4 others planned; 30 district

industrial areas ready for development

Rwanda Offers an Climate for

Investment

Kigali’s serviced Special

Economic Zone (SEZ):

Phase I: 98 hectares (ha.) -

Fully serviced and fully occupied

Phase II: 178 ha.

7 companies have already booked

space

Land price: $32 - $40 per M2

Phase III: 134 ha.

Additional sites outside SEZ

include:

Bugesera zone (serviced): $15 M2

Rwamagana zone (un-serviced):

$4,750/ha.

Serviced Sites are Ready for

Investors in Special Economic Zone

15

Investment Benefits:

• Free initial work permit & visa for investor and foreign workers

• Assistance with land acquisition and concessions

• Waiver of import duties, withholding and VAT for imported machinery and raw

materials

• Waiver of duties for 1 personal vehicle; personal property import

• Waiver of duties for special vehicles, trucks & heavy machines

• Optional:

• Construction projects greater than 1.8 Million USD: 10% flat fee for imported

materials

• Income tax “investment allowance” of 40% inside; 50% outside Kigali

• Tax deductible training and research expenses

• Tax discounts based on the number of jobs created (900+ jobs = 7% discount)

• Export earnings may secure tax discounts (5 Million USD exported = 5% discount)

Investor Incentives are Available

Let us know how we can help you take the next step

Contact us today

Contacts:

Robert Muhizi

Manufacturing Development Division Manager

robert.muhizi@rdb.rw; +2560785342567; Skype: muhizir

Global Market:

Wire & Cable Manufacturing

Note: highlighted countries are currently primary sources of cable and wire imports into Rwanda

Large (163 Billion USD) and

growing global market

Low Voltage

Energy, 62

Copper Power

Cable, 37

Aluminum Power

Cable, 10

External Copper

Telecom, 5

Internal Telecom / data, 16

Fibre Optic Telecom /

data, 7 Winding Wire, 25

2010 Global Cable and Wire Consumption (USD billions)

Source: ICF Stats; CRU

Rwanda: Facts & Figures

Population 11 million

Average age 18

Workforce 4.4 million

Literacy 71.1%

GDP/capita (PPP) $1,400

GDP growth 8,8%

Inflation 3.9%

Prime lending rate 16%

Industrial production

growth 7.5%

Export growth

(ytd 11/12) 33%

Rwanda is the #1 in EAC and

Top Business Reformer Worldwide

20

Category Rwanda*

Starting a Business 8

Construction Permits 84

Getting Electricity 50

Registering Property 61

Getting Credit 8

Protecting Investors 29

Paying Taxes 19

Trading Across Borders 155

Enforcing Contracts 31

Overall Ranking – Ease of Doing Business 45

*All scores are comparative ranking out of 181 countries featured

Source: WorldBank Doing Business Report, 2012

Rwanda Compares Well in

University Enrolment for Region

21

Source: WorldBank Doing Business Report, 2012

The Rwandan Context for

Manufacturing Support

In the region, Rwanda

compares well on many of

the factors important to

manufacturers (e.g. GDP

growth, literacy, labor) Source: Karisimbi Business Partners Survey

Rwanda Manufacturing Labor Costs

(USD monthly gross salary)

The Government has clear plans to increase energy availability for industry.

By the mid 2013, we expect that methane gas, extracted from lake Kivu will

increase supply by 25 MW and double the national supply (100MW+) by the end of

2014

Additional investments are being made in hydro-electricity which will produce a

further 45 MW by 2014

DSI Energy Ltd. has plans for $73 million USD investment for a 30MW solar power

project

Recent investments in peat energy generation is expected to produce as much as

100 MW additional energy by 2015.

The above initiatives will enable the government to increase access to electricity to

meet the growing demand of industrial users while expanding domestic supplies.

Current industrial rates per KWH are shown in the table below:

Electricity Supplies are

Growing with Energy Demands

23

Time RWF USD

07.00 - 17.00 126 0.20

17.00 - 23.00 168 0.27

23.00 - 07.00 96 0.15

Next Steps

Contact an RDB representative to register your interest and gain added detail

Work with Government of Rwanda stakeholders and agencies to improve conditions for your pending success

Craft detailed business plan

Seize the benefits of being Rwanda’s first manufacturer of wire and cable products