For the third consecutive year, investors from the United States have cut their portfolios in Rwanda, dealing a blow to the country’s bid to position itself as a prime destination for international capital.

In 2024, American investors reduced their holdings in Rwanda by $73 million, a 23 percent drop from $95 million in 2023, marking the lowest level since 2013.

The decline came even as neighbouring countries recorded an influx of US investments.

This trend persists despite a string of reforms and promotional drives by Rwandan agencies to improve the investment climate and market the country as a top destination on the continent.

While the US government has acknowledged Rwanda’s progress in improving the business environment, it notes that investors still face “significant challenges” preventing them from consistently turning a profit in the country.“Despite these commendable strides, the reality for many foreign investors in Rwanda presents a contrasting picture,” the US Department of State said in its latest analysis of the country’s investment climate.“Many foreign companies operating in the country have reported encountering significant challenges that hinder their ability to sustain profitable ventures.”By contrast, US investors marginally increased their holdings in Kenya, Uganda, and Tanzania in 2024. Investments in Kenya rose by $3 million to $1.374 billion, Uganda saw a $7 million increase to $191 million, and Tanzania posted the strongest growth, a $10 million or 20 percent rise to $58 million – all in equity.

In Kenya, after years of reductions since 2019, American investors raised their exposure for the first time in 2024, favouring long-term debt securities over equity, reflecting growing appetite for sovereign bonds. Analysts attribute this to higher returns on Kenyan debt, compared with regional peers, along with the stabilisation of the shilling and renewed confidence in local capital markets.

Uganda, which had also seen declining US investment since 2021, reversed that trend last year, signalling a rebound in investor confidence.

In Rwanda, however, American investors’ funds remain concentrated in long-term debt securities, with minimal exposure to equities – an indication of low confidence in the private sector.

According to the US State Department, private companies in Rwanda have limited room to thrive due to stiff competition from state-owned enterprises (SOEs) that enjoy government backing and privileged access to resources.“Businesses operating in Rwanda often face competition from state-owned enterprises (SOEs) and entities or individuals with close ties to the ruling party or government, presenting barriers to fair market competition and equal access to resources and opportunities,” it said.

“Despite their willingness and experience, they often find themselves sidelined, lacking the opportunity to actively participate in the reform process,” said the State Department.“Meanwhile, government officials, often lacking direct business experience themselves, frequently spearhead reforms without fully grasping the practical implications for businesses on the ground.”Rwanda, however, remains one of Africa’s fastest-growing and most stable economies, with a relatively low risk of debt distress compared to its neighbours.

In 2024, its gross domestic product grew by 8.9 percent – the second-fastest on the continent – and is projected to expand by at least 7 percent this year.

The Rwanda Stock Exchange (RSE) also performed strongly last year, with the all-share index up 15 percent and transaction volumes more than doubling to $89 million (Rwf129 billion).

Yet, despite robust economic and market performance, the renewed optimism has not translated into renewed confidence, especially among American investors who continue to exit the market.

Across the region, Kenya, Uganda, and Tanzania also saw stronger economic growth and market performance in 2024, as African economies continued to recover from the twin shocks of the pandemic and the Russia-Ukraine war.

But unlike Rwanda, they have been receiving increasing investor confidence, especially from the US, the world’s largest economy.

© Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).