Those countries that sought to diversify their economies using the windfalls of the good times are better positioned to ride out the collapse of raw commodity exports and the downturn in the world manufacturing demand, especially from China.

The collapse of commodity prices highlights how fragile are economies based on raw mineral extraction without concurrent infrastructural spend and the development of capital intensive and local supportive industries, and especially local markets.

Although Africa remains impoverished by bad decision making on a national level, it is arguably the continent best placed to reward investment as we move into the next commodity cycle.

It is critical however that infrastructural development create a sustainable investment environment for well diversified economies going forward.

VBKOM firmly believes that …energy, supported with stable political regimes & policies, will be the two keys to unlocking Africa as the next global investment destination. Without these two fundamentals in place, infrastructure itself will have no business case and will not attract sustainable investment over the long term.

Capital markets are looking for high growth destinations and Africa’s low base makes it the obvious destination. However for the economic wheels to start tuning and the supporting sectors of agriculture, mining & transport to be jump-started, you first need an abundance of relatively cheap energy ... a and stable political undergirding.

Just how big is the “African Opportunity”? Have a look at Kai Krause’s depiction of the African continent. If has the potential to dwarf the China demand come the next 30 to 50 years.

It is for this reason that VBKOM is positioning itself as the niche adviser of choice in Africa and for Africa in the critical sectors of Risk, Energy and Mining.

In support of this strategy VBKOM recently visited Rwanda to inspect first-hand the political, economical and “Ease-of-Business” opportunities from this small, but potentially strategic entrance to Central & East Africa.

Recently, 2 of VBKOM’s principals, Frans van Daalen and Wynand Botes, visited the East African country of Rwanda to meet with mining and other industry officials to assess the prospects for development and partnership.

We caught up with Frans and Wynand and asked them about their findings and what advice they have to give us back at home:

Q What was the purpose of your trip?

Wynand 1:  To link up with senior members of key institutions like the Rwanda Development Board and the Rwanda Mining Association and discuss the avenues and possibilities of investment solutions, partnership and development, specifically in Mining, but also in the tangential industries of agriculture and industrial processing.

Q What were your experiences of Rwanda now given its very dark & recent history?

Frans 1:  Rwanda is known for the tragic Rwandan Genocide of 1994 where an estimated 800,000 to 1,000,000 Tutsis were killed in a mere 100 day period. The result was a humanitarian catastrophe of historical proportions of which the scars are still evident today.

However the country was liberated there after by a visionary leader, Paul Kagame, who is now serving his second term as president. Thanks to him and his cabinet’s efforts the country has picked itself up and is now one of the African countries with the lowest corruption indexes.

Tony Blair, at the Investing in Africa Mining Indaba 2015, even publicly noted that “economic and investment opportunities are very clear [in Rwanda]” ...and that “Rwanda is a well-run country”.  It is therefore no surprise that Kigali is noted as the top city in Africa for its “ease of doing business”.

Wynand 2:  Yes we personally experienced the country and the people as very friendly and compliant with a real willingness to live and go forward...to progress.

The government officials with whom we met also came across as genuinely friendly and honest, with a tangible willingness to do whatever is necessary to foster progress in their country. The Rwandan saying of “thousand hills and a thousand smiles” is definitely true!

Q Why Rwanda? You noted that it is easy to do business, please elaborate.

Frans 2:  For one Rwanda has specific economic zones with tax regimes lower than most other countries in Africa. Further to this the government also offer attractive rebates and export incentives to the point where you might end up operating in a very advantageous tax bracket.

If you actually set up a local head office in the country, they also give you a seven year tax holiday. All of this makes for a very attractive investment destination.

Q What is the state of mining in Rwanda and what natural resources do they possess?

Wynand 3:  Rwanda is endowed with deposits of tin in the form of cassiterite, wolframite, tantalite and gold. Rwanda’s GDP is about 2.2% of South Africa’s GDP and their mining sector is a fairly small contributor to their overall output...almost 2%.

However their Mineral Resources department is actively pursuing foreign investment and has recently awarded a handful of mining concessions to foreign companies.

Frans 3:  What was interesting though is the noted potential for the small-scale mining industry if one considers the success of the small-scale farming model.

Q What do mean by that last statement? Can Mining learn from Agriculture?

Frans 4:  Yes exactly, let me explain. Currently there are a lot of small scale mining concessions issued or available for issuing. Alone this might not be commercially or financially exploitable, but if you can pull a critical mass of these concession together then you might be able to commercialise something similar to that of the Rwandan Coffee industry. 

How the coffee industry works, is they have small coffee farmers, (privately owned) , who sell their coffee to a Rwandan trading company, almost like a co-operative in the SA wine industry. The trading company contracts with a couple of these farmers, who brings their coffee to a wash plant, where they pay them for their product on delivery.

This is great for the farmer, and the co-operative’s spot risk is diluted by means of the volumes and diversity of supplying farmers. From there on the coffee beans get processed and transported to a centralised storehouse, where some more processing, like separation and canning takes place. 

Once the co-op has the final product in sufficient volumes, it then distribute to the UK, USA and South Africa. This is by no means perfect or a “copy-paste” model for mining, but it might just hold the key to unlocking & legalising Africa’s small scale mining sector.

Q So what are your final closing views on Rwanda and your visit?

Wynand 4:  Rwanda is working and growing from quite a low base and there are major challenges, especially in terms of the African mining industry and its remoteness.

In Kigali the city’s the infrastructure is quite well developed, and visually you can see growth as the high-risers are being constructed. However going out of the city, you will definitely have some serious infrastructure challenges.

I think the possibilities are positive from a mining point of view as you can set up base and utilise the business-friendly regime to service the East Africa mining environment / community.

Frans 5:  Our work is not finished yet and like most African investments one needs to be patient and adopt a long term perspective. Looking however from where Rwanda has come in such a short space of time, I am personally very excited about the possibilities and their near-term future.