Rwanda Green Well Potential for Investment In
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Rwanda’s Green Well Opportunities to engage private sector investors in Rwanda’s forest landscape restoration Global Forest and Climate Change Programme Rwanda’s Green Well Opportunities to engage private sector investors in Rwanda’s forest landscape restoration i The designation of geographical entities in this book, and the presentation of the material, do not imply the expression of any opinion whatsoever on the part of IUCN or other participating organisations concerning the legal status of any country, territory, or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. The views expressed in this publication do not necessarily reflect those of IUCN or other participating organisations. This report has been produced by IUCN’s Global Forest and Climate Change Programme, funded by UKaid from the UK government. Published by: IUCN, Gland, Switzerland Copyright: © International Union for Conservation of Nature and Natural Resources Reproduction of this publication for educational or other non-commercial purposes is authorized without prior written permission from the copyright holder provided the source is fully acknowledged. Reproduction of this publication for resale or other commercial purposes is prohibited without prior written permission of the copyright holder. Citation: IUCN (2015). Rwanda’s Green Well: Opportunities to engage private sector investors in Rwanda’s forest landscape restoration. Gland, Switzerland: IUCN. xii+85pp. Cover Photo: Craig Beatty/IUCN 2016 Layout by: Chadi Abi Available From: IUCN (International Union for Conservation of Nature) Global Forest and Climate Change Programme Rue Mauverney 28 1196 Gland, Switzerland [email protected] www.iucn.org/FLR ii Executive summary Rwanda has pledged to plant two million Rwanda has a complex policy environment as hectares of trees by 2020. Adopting a forest it relates to investment in FLR. The country’s landscape restoration (FLR) approach, the Vision 2020 promotes the expansion of both country has committed to the Bonn Challenge: a forest cover and Rwanda’s forest-based global aspiration to restore 150 millioan hectares industries as a means of raising per capita of the world’s deforested and degraded lands incomes. Rwanda’s Economic Development by 2020 and 350 million hectares by 2030. and Poverty Reduction Strategy promotes the use of key performance indicators to guide the In order to achieve this goal, Rwanda needs distribution of resources from Rwanda’s national to undergo five restoration transitions as environmental fund. The National Green Growth recommended by the International Union for Strategy – Vision 2050 promotes low-carbon Conservation of Nature and the World Resources economic development and aims to reduce Institute in the paper Forest Landscape the impact of climate change on the national Restoration Opportunity Assessment for economy. Rwanda (MINIRENA, 2014). If implemented, these transitions will constitute a significant FLR Central to achieving the objectives of these achievement and contribute towards multiple national policies are sectoral strategies, as well sustainable development objectives, including: as private sector, export and other finance- increased agricultural productivity, food security, related strategies. The selected strategies and rural incomes; increased resilience to climate include the National Forestry Policy, aimed at change; improved water supplies; and reduced improving management and competitiveness, vulnerability to landslides and other disasters. various agricultural policies and institutional frameworks, and the Private Sector Current official development assistance (ODA) Development Strategy, which promotes greater and government funding, however, cannot meet investment and improved financial tools for the financial needs of Rwanda’s FLR plans. For businesses and entrepreneurs. It also includes Rwanda to meet its goal of restoring two million the Finance Strategy, which promotes improved hectares, it will require attracting new sources of financial inclusion, institutions, and markets, financing, including private investors. and the National Export Strategy, aimed at increasing the value and competitiveness of This desk-based study assesses the feasibility domestically produced goods. of attracting private investments to finance FLR in Rwanda. It provides a detailed review of Rwanda’s attractive World Bank “ease of doing the main factors that will determine if and how business” ranking is the highest in East Africa, Rwanda can attract private (return-motivated) with inflation and currency exchange remaining investors. These factors include the alignment stable over the past decade. Given that 70% of policies, the country’s investment profile, of the country’s exports are agricultural, there availability of public funds, investment potential is a strong basis for FLR activities that rely of specific FLR activities, and potential private upon exports for returns. The financial and investors in Rwanda’s FLR. The study also tax treatment for domestic and international provides recommendations on how Rwanda can investments is favourable, with laws that move forward and mobilize the resources and protect property rights. The newly completed technical assistance needed to secure private land tenure reform and the implementation of investment in FLR. the Land Administration Information System iii Rwanda’s Green Well have registered millions of parcels, allowing Promoting the improved management of for tracking of smallholdings that can support woodlots and plantations can be addressed FLR investments. The government is making a with better silvicultural practices for woodlots, concerted effort to promote private investments as well as reducing the demand for wood through the Rwanda Development Board. through fuel-efficient stoves and green charcoal. Their current set of investment offerings, However, unless investors target large wood however, lack the professionalism needed to and charcoal producers or there is adequate attract private investment, particularly from market demand for emission reductions from international sources. these activities, investment opportunities in this area may be limited. Instead, forest plantations Although the government has prioritized public could offer attractive long-term investment sector support for agriculture by allocating over opportunities by replacing imported wood with 10% of the budget for agricultural activities, local sources. there remains a large financing gap of as much as ten times the annual national budget that is For the improved management of natural needed to implement its policy objectives. This forests, there are two potential investment budget allocation is also broadly applied to opportunities; including expansion of agriculture and does not specifically focus on ecotourism and cultivation of non-timber forest FLR. products such as honey and bamboo in the buffer zones. Rwanda has seen a growth in ODA, with over a third of the allocation dedicated to agriculture. Investment opportunities for the improvement There is the potential to dedicate some of or establishment of protective forests includes these programmes to attracting matching the installation of small-scale hydropower; private investment funds. Development finance a cost-effective, multi-use energy source institutions (DFIs) have provided a limited for rural communities that reduces wood amount of grant funding. The Overseas Private energy usage. Another potential investment Investment Corporation and the International opportunity could come from the FLR activities Finance Corporation have provided political that produce emission reductions for voluntary risk and weather insurance products for private and compliance markets. However, this would investors in Rwanda, and if scale can be require the demand for emission reductions to achieved to create investment packages of at improve; given Rwanda’s limited forest areas, least US$ 10 million, DFIs could be a valuable this would primarily come from afforestation. source of funding for FLR. Smallholder farmers will be a key source of Promoting the transition from traditional private investment if they adopt commercially agriculture to agroforestry will require viable FLR activities at scale while still balancing smallholder farmers to adopt crops grown in their food security needs. integrated agroforestry systems. For these productive systems to be investable, they will Although Rwanda’s banks and the Business need to combine fast-growing and tree crops Development Fund offer programmes that can that can produce high value exports. These be expanded to finance FLR, additional capital will include selected fruits, nuts, essential oils and the tailoring of the programs to fit FLR and pyrethrum. There are numerous private are needed. Rwanda’s microfinance sector is companies in Rwanda that can be leveraged geographically dispersed and has the potential to promote commercially viable agroforestry to assist in FLR financing. By leveraging mobile practices with farmers. banking channels, microfinance programmes iv could effectively supply funds and distribute This study demonstrates that Rwanda is well weather insurance to smallholders without positioned to attract private investment for FLR expensive intermediaries. from both a policy and ease of doing business perspective. Moreover, there are existing Existing impact funds, DFIs, and private equity financial products that can be leveraged. The funds with active agricultural