Fourteen years of rule by Rwanda’s President Paul Kagame, whose forces ended the 1994 genocide that killed at least 800 000 people, is rewarding bond investors with record low yields amid the fastest economic growth in east Africa.

Growth in the landlocked nation would reach 7.5 percent this year, up from 5 percent last year and ahead of the 5.4 percent for sub-Saharan Africa, the International Monetary Fund said last month.

Rwanda’s first dollar bonds, sold in April last year, have returned 9.3 percent since year-end, compared with 6.6 percent for emerging market peers, Bloomberg indices show.

Kagame, 56, who said in January he might return to markets this year to borrow about $1 billion (R10bn), is building roads and internet connections, tackling corruption and making it easier to start businesses. Foreign aid has resumed after some donors withheld funds in 2012, following allegations by the UN, denied by the government, that the country was backing rebels in the Democratic Republic of Congo. Germany pledged e18 million (R254m) in November last year.

“Rwanda is a sound macroeconomic story and that is why the bond has done so well,” Rune Hejrskov at Jyske Bank said on Tuesday from Denmark. Progress included “government reforms, a reduction in crime, improving infrastructure”, he said. “In-house, we call it the Singapore of Africa.”

IFC bonds

Singapore’s gross domestic product (GDP) per capita rose to $52 052 in 2012, up from $16 099 two decades earlier, according to the World Bank. The island of more than 5 million people, which became independent from Malaysia in 1965, tops the lender’s ranking for ease of doing business. Rwanda is the best in Africa after Mauritius.

The International Finance Corporation is offering as much as 15 billion Rwandan francs (R224m) of five-year notes with so-called bookbuilding due to end yesterday, according to Standard Bank, one of the arrangers.

The nation of 12 million people planned to tap international debt markets when the government had projects ready to absorb the financing, Finance Ministry permanent secretary Kampeta Pitchette Sayinzoga said last month.

Aid risk

Yields on Rwanda’s dollar bonds have dropped 51 basis points since they were issued to 6.417 percent by noon in Kigali yesterday.

Rwanda planned to lessen its dependence on foreign aid grants to 7.5 percent of GDP in the 2015/16 fiscal year from 9.5 percent in the prior period, Finance Minister Claver Gatete said on April 30.

“The main risk still remains with aid partners,” Phumelele Mbiyo, the regional head of macroeconomic research at Standard Bank’s Kenyan unit, said on Tuesday. “Their continued provision of aid remains crucial for the economy.”

Rwanda had made it easier to do business by streamlining bureaucracy and tackling public sector corruption, Sarah Tzinieris, the Africa analyst at UK-based Maplecroft, said.

“Rwanda’s economy is also more diversified than most others issuing eurobonds in sub-Saharan Africa,” she said. “This enables investors to diversify their portfolios.”

The country is rated B by Standard & Poor’s and Fitch Ratings, or five levels below investment grade.

Rwanda would be able to sell a second bond “at a slightly lower coupon” of 6 percent to 6.25 percent, Christian Mejrup at Global Evolution said.