Sunday, March 12, 2017

Rwanda's Business Climate-2017

If you build it, they may not comeBusinesses are being forced to move into designated properties

Empty buildings prompt draconian action

BEETHOVEN’S “Für Elise” floats through the lift of Makuza Peace Plaza, a shiny new office block, as it climbs to the 12th floor. Opened with fanfare by Paul Kagame, Rwanda’s president, in 2015, Makuza is one of several new high-rises in the central business district of the capital, Kigali. But the music has an eerie quality as you rise to the building’s summit. This is because, from the seventh floor up, Makuza is empty.
For a city pitching itself as east Africa’s business hub, under-occupied skyscrapers look bad. So at the start of the year the government took action. Letters were sent to thousands of businesses ordering them to hew to the city’s master plan and move to designated commercial buildings by March 31st. Confusion and panic ensued, as startups and even NGOs scrambled for space in the limited number of reasonably priced buildings available. In the area around Makuza, office space costs on average nearly $20 a month per square metre, as much as four times what it would be outside. “It’s been a nightmare,” says one exasperated foreign businesswoman, who fears she may have to move to Kampala, in neighbouring Uganda.

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Rents in the city centre are prohibitively expensive for many because land in Rwanda is pricey, as are building materials and bank loans. But lack of supply is not the problem. Enticed by juicy tax incentives, investors have been funnelling vast amounts of capital into high-end buildings, anticipating hefty profits. Vacant floors are a headache. They are especially painful for the ruling Rwandan Patriotic Front (RPF), which is heavily involved in property through its business ventures (see article). Some suspect that by issuing the directive, the RPF is protecting its own investments.
City authorities suggest they will be lenient towards those who have recently signed new leases, and hint that some NGOs will be exempt. But few doubt that the government means what it says. The master plan, which carves up the city into zones defined by the type of activity allowed in each, has acquired almost biblical status since its adoption in 2013. Unusually for an African city, land use and construction rules are vigorously enforced. “This is Rwanda,” smiles an estate agent in his office overlooking Makuza. “They will have to comply. There is no choice.”

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