Good Times Ahead For Rwanda’s Travel Industry

Kigali International Airport

As Rwanda continues to attract foreign airlines to its landlocked country, previous challenges stemming from its disadvantageous geographical position are gradually disappearing. With more airlines connecting Rwanda to the rest of the globe, the country could see increased exports, especially horticultural commodities such as vegetables, flowers and fruits, which would help the import-dependent country lower its wide trade deficit.

The Chairman of Rwanda Hotels and Restaurants Association Dennis Karera says that the increase in airlines and passengers has also boosted hotel and restaurant businesses in the country. With increased demand for accommodation facilities, food and drinks, says Karera, investments in the hospitality sector have increased dramatically. There are currently over 5,000 hotel rooms and over 100 hotels in Rwanda.

In the recent years, Rwanda has seen a rapid increase in the number of foreign airlines applying for license to operate flights to and out of Kigali. The Rwanda Civil Aviation Authority (RCAA) has granted licenses to at least five passenger airlines and one cargo carrier, bringing together the total number of licensed airlines in the country to over ten.

The recently licensed airlines include Air Uganda, KLM Royal Dutch airlines, Turkish Airlines, South African Airways (SAA), as well as Emirates Cargo and Qatar Airways. These airlines compliment Kenya Airways, Ethiopian Airlines and Brussels Airlines, which already had licenses.

Some of the airlines such as Air Uganda, KLM and SAA have already opened Kigali route. Since Feb. 2010, Air Uganda has been operating flights between Kampala and Kigali, while KLM launched flights between Kigali and the Dutch capital Amsterdam towards end of the year.

SAA, which had halted flights to Kigali for over five years, resumed the Johannesburg– Kigali –Bujumbura flights mid January this year. Others, such as Turkish Airlines, which seeks to connect Rwanda to the Turkish capital Istanbul via Kampala, and Qatar airways, which promises to connect Kigali to Qatar’s capital Doha via Kampala, are expected to launch a Kigali route in the next few months.

As airlines increase, Kigali has also been seeing a “significant jump” in terms of passengers according to RCAA Director General Dr. Richard Masozera. In an interview late last year Masozera said that passengers using Kigali International Airport (KIA), Rwanda’s main international air traffic gateway, increased from 300,000 in 2009 to 330,000 in 2010 and was expected to reach 400,000 in 2011.

Masozera said that the increase in passengers, especially the incoming ones, could be attributed to many factors including the overall trajectory of the country’s economy.

“People don’t just fly to a country just to look at the airport,” he said. “They come for more than what is just being done at the airport; it has to do with the rest of development in the economy.”

Much of the growth in the air transport industry is mainly attributed to the prevailing peace and security in the Rwanda, business friendly policies and approach on an institutional level, tourist attractions and a growing economy, which offers attractive returns on investment.

Over the past few years, Rwanda has embarked on economic reforms, including the abolishment of unnecessary bureaucratic procedures and charges to allow foreign and local businesses to thrive. This has reduced the number of days it takes to register a company from over two to one, all of which can be done online. The country has also eased access to construction and land registration related approvals in Kigali city, which was one of the bottlenecks to the growth of investments that required land.

These reforms have raised Rwanda’s profile on the regional and international scene where it was ranked as one of the most business friendly nations globally in the World Bank/International Finance Corporation (IFC) annual ‘Doing Business Reports’. According to the latest report, Rwanda ranks third in Africa after Mauritius and South Africa and the first in East Africa in terms of ease of doing business.

As a result, according to the census report released last year, enterprises operating in Rwanda have increased significantly. The report showed that there were 123,562 private, public and nongovernmental enterprises operating in the country. Out of these, private enterprises constitute 96.5%, and more than 80% of the private enterprises were micro, small and medium enterprises.

The increase in enterprises has also triggered growth in investment. For instance, in 2010, investments hit $390 million and in 2011 they reached $626 million, surpassing the target of $550 million. This has translated in stable and impressive growth for Rwanda’s economy. In 2010, the economy grew by 7.5%, while in 2011 it was expected to expand to around 8.8%. Final statistics are expected on Feb. 9 but given the performance seen throughout the year, growth will not likely fall below 8%. Most sectors ranging from agriculture, tourism, financial services, trade and transport, telecom and exports performed very well in 2011.

The tourism sector, which attracts most foreigners to Rwanda, staged strong performance in the past two years. In 2010, over one million tourists visited Rwanda spending $200 million, while in 2011 the sector is believed to have earned a whooping $250 million from tourists.

Rwanda is home to the endangered mountain gorillas and other wildlife attractions such as hippos, buffalos, zebras, chimpanzees, monkeys and birds. The gorillas in north of the country, however, are the biggest tourist attraction, generating a bigger share of tourism earnings because Rwanda has invested a lot in conservation of the animals but it also charges tourists a high fee to see them.

2012 is also beginning on more stable footing than last year when high inflation, volatile food prices and unpredictable fuel prices were the norm. The governor of the Central Bank Claver Gatete hopes that the economy will expand by 7.6%, while inflation, which closed 2011 at 8.3%, will close this year at 7.5%; the International Monetary Fund (IMF) has made similar projections.

This growth, which is expected to continue even in the medium term, will spur growth in all sectors including air transport. Sectors such as tourism are also seeing the development of new products such as the recently launched Congo Nile Trail in western Rwanda. Plans are also at advanced stages to launch conference tourism as well as cave tourism.

Consequently, said Masozera in a recent interview with a local newspaper, Rwanda expects increased flights and passengers this year. He said flights are expected to jump from 200 per week to 300, and passengers are expected to increase from 400,000 last year to 420,000 this year.

Masozera said RCAA has embarked on renovation and expansion of KIA in order to provide better services to the airport users; the airport has been equipped with a new VIP lounge to serve the people with higher travel requirements.

He said Rwanda is also signing air service agreements with different countries to enable their airlines to fly to Rwanda and Rwanda’s national carrier Rwandair to fly to those countries. He noted that close to 12 agreements have been signed in the recent past. Last year alone, Rwanda signed air service agreement with India and five other countries and updated its existing one with Uganda.

Rwandair has begun to take advantage of these agreements. The airline has embarked on increasing its fleet, which currently consists of around seven aircrafts and has opened new destinations according CEO John Mirenge. Late last year the airline launched flights to Lagos, Nigeria and it is targeting India.

According to the Minister of Finance and Economic Planning John Rwangomba the country is investing in long-term infrastructure projects to increase its competitiveness. These projects include generation of electricity for distribution to households and businesses, putting in place fibre optic cables across the country to spur internet access and investment in five star hotels and the convention centre to make Rwanda attractive for meetings and conferences.

With the opening of Bugesera International Airport (BIA), which is expected to replace KIA by 2016, Rwanda is bracing herself for an airport with astonishing standards of the 21st century. This is expected to put the emerging East African economy at par with her regional competitors, Kenya, Uganda, and Tanzania.

In Oct. 2011, the government invited private airport operators through the Request for Expressions of Interest (REOI) to come and partner in the project.

Construction of the airport is a Public Private Partnership (PPP) model, which the Rwandan government is embracing for the development of heavy pocket, but long-term infrastructure projects with high investment returns. According to the information from the RCAA, the new airport had its detailed technical studies released in July 2011 by a government contracted company–TPS, a UK engineering consultancy firm.

The airport will be developed into four phases and is expected to cost between $400 million and $600 million. The first phase will see the construction of passenger and cargo terminal buildings, a 4.2km long runway designed to handle the largest commercial aircrafts, an airfield and other buildings meant to support the operation of an international airport, including an air traffic control tower and an airport rescue and fire fighting facilities.

Phases 2-4 are provisionally provided for further expansions with the ultimate phase involving the construction of a second runway and additional passenger and cargo terminals. With an initial peak hour capacity of 450 passengers, BIA is expected to handle more than three million passengers per year in 2030.

The airport will be able to accommodate large modern aircraft including B777 and Airbus A380, with peak hour aircraft movements of five passenger aircraft and allowance for three cargo aircraft. It will also have peak hour passenger movements of 450 and annual cargo tonnage of 15,500 tons.

Already, construction of BIA has received huge interests from airport operators that wish to clinch a share on the airport cake, according to the State Minister for Transport in the Ministry of Infrastructure Alexis Nzahabwanimana. Eleven firms have been shortlisted for further screening.

By May this year, the successful company will be announced and construction the airport is scheduled to start in early 2013. Rwanda Development Board, which received the bids, has kept secret the names of the companies that expressed interest in the airport