Photo credits: Adam Bence, Myles Mander and James Blignaut Design and Layout: Macro Graphics Pvt Ltd  |  www.macrographics.com A post-pandemic, nature-based tourism and conservation Recovery Plan for Rwanda Pablo Benitez, James Blignaut, John Kalisa, Peter Katanisa, Evariste Rutebuka and Alex Mulisa Abstract O ver the past two decades, the Rwandan economy had grown well above average compared to its peers and rest of the world, anticipated expansion of 8%. The GDP per capita thus also declined to $816. The year-on-year decline of $21 per capita in absolute terms from achieving growth rates of more than 8% the 2019 level is the largest decline recorded regularly, it being 12.5% in 2019. As a result, since 1999, the year in which the compilation of Rwanda made significant strides along its comprehensive national accounts commenced. development path from being the second Some of the other main implications of the poorest country in the world in 1994 to sitting Covid-19 pandemic are the following: iii ahead of 19 other countries in 2017. While 1 There has been a decline in the number these growth rates had been achieved from a A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda of visitors to the National Parks by 67% to very low base, they have been the catalyst for a levels last seen about 15 years ago quadruple increase in the GDP per capita from $268 in 2000 to $837 in 2019. 2 A drastic decrease of 52.5% in the value of services exports, mainly from tourism, Conservation and nature-based tourism, and from $987 million in 2019 to $469 million the services sectors supporting these natural in 2020 in current prices has been resource-based sectors such as the hospitality observed, a level last seen in 2004 industry and transport, had contributed much to Rwanda’s economic development. This is 3 There has been a decline in merchandise evident from the increase in the number of export earnings of between 30% and visitors to the National Parks by more than 60% per month in 2020 2,800% over the period of 2000 to 2019, 4 The decrease in mining production by amongst other indicators. In 2019, tourism approximately 60% during the first half of generated foreign exchange earnings of 2020 is apparent, putting the sector under $498 million, which is about double the further financial pressure and reducing its combined earnings from tea, coffee and ability to respond to the safety, health and minerals (the ‘3Ts’), which was $254 million. environmental challenges in the sector The Covid-19 pandemic and the resultant local 5 The capability of the national government and global lock-down have, however, stalled to address environmental challenges the progress made with respect to economic has been seriously compromised as is development. This is evident from Rwanda’s first indicated in a 21% decline in the allocation economic recession since 1994 with the GDP to the agriculture, environment and contracting by 3.4% in 2020, compared to an natural resources pillars for the 2020-21 budget year whereas the other sectors flow, declined by 11% between 1990 and showed an increase of 13% to deal with 2015. Base flow is important as it determines the immediate humanitarian crisis the availability and security of supply water, 6 There has been a deepening of poverty especially in the dry season. The implication on due to an almost complete elimination the duality of increased quick flow and a decline of any revenue-sharing opportunity from in base flow is the reduction in the amount of natural parks, the reduction in tourism, an usable water, thus deepening the associated increase in food prices and a slowdown development challenges. in mining exports, thus putting more The degradation and encompassing impacts pressure on the land from a livelihood thereof on livelihood placed more emphasis perspective. on the nature-based tourism and conservation The broad-based and far-reaching impacts sectors to support rural households as articulated of the Covid-19 pandemic on the economy through the importance of the revenue-sharing in general and on the nature-based tourism system of the protected areas. Given the near- and conservation sectors specifically have complete collapse of nature-based tourism exacerbated the development challenges the and thus also the revenue-sharing system and country is already facing due to land degradation sector-related sources of revenue generation and climate change. This is since most economic from the hospitality and transport industries, activities are highly connected to the natural poverty has intensified, as is also noted in the decline in the GDP per capita. iv resources sector of the country. This implies that changes in the natural resources sector have Given the seriousness and depth of the impact A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda extensive impacts that affect the lives of most, of Covid-19 on the nature-based-tourism and if not all, residents. In this context Rwanda’s set conservation sectors, a dedicated recovery effort of Natural Capital Accounts (NCAs) indicates, is required; more so since Rwanda is an agrarian disconcertingly so, that the country is in an and natural resource-based economy in which advanced stage of rapid land use and cover the ecosystem services derived from natural transformation. This transformation implies capital are of high importance. The protection the liquidation of its natural assets in the form and conservation of the natural capital estate of converting its existing natural capital to are thus essential, yet it is placed under further various forms of transformed areas such as pressure through the dependency on the croplands or urban areas. Such land cover and resources due to the absence of tourism-based use conversion leads to serious soil, water and revenues. livelihood concerns that are likely to have a long-term impact. Soil erosion, for example, Given this elevated and increasing importance contributes to a societal loss of between $476 of the nature-based tourism and the and $798 million per year, which is more than conservation sectors from both a livelihood the value of the earnings from tourism in 2019 and biodiversity perspective as well as the was. The loss in the topsoil has led to a 35% importance of ecosystem services, a set of increase in the water that runs off quickly during recommendations and policy reforms are and just after storms, also called quick flow. This offered below. This is presented in terms of increase further contributes to soil nutrient loss, the following: i) integrated land use planning, reduction in water quality, and flooding, which urbanisation and disaster risk management, causes further infrastructure and crop damage ii) actions required within the core protected and a loss in life. Contrastingly, the water that areas, iii) actions outside of the core protected replenishes soil moisture and aquifers, or base areas, and iv) financing options. A nature-based tourism and conservation recovery plan for Rwanda: Recommendations and policy reforms Sectors Policy recommendations Institutions responsible Integrated Rwanda has approved its Integrated National Land Use Master The Ministry in land use Plan, Rwanda’s second urban development plan (RUDP II) is also charge of Emergency planning, on-going, and Rwanda has an active disaster risk management Management (MINEMA), urbanisation, policy, to mention but a few. Ministry of Environment and What is required is a multisectoral co-operative governance (MoE) and affiliated disaster risk policy that considers feedback effects to allow the agencies (REMA, RFA, management management of the natural capital both in- and outside FONERWA, RLMUA, RWB) Protected Areas (PAs) in a pro-active manner by considering the and RDB value of the ecosystem services it renders. Development of a policy framework to ensure a multisector Ministry of Environment approach towards the development and enhancement of the (MoE) and affiliated following: agencies (REMA, RFA i) Ecotourism and Payment for Ecosystem Services (PES), and and FONERWA, RLMUA), Ministry of Agriculture ii) An institutional response on key challenges such as land and Animal Resources degradation, drought, water, protected areas, forests, (MINAGRI) and RDB and nature-based tourism in accordance with the Green Growth and Climate Resilient Strategy (GGCRS). A broad-based multi-sector development plan to fast track MINAGRI, MoE, REMA soil protection and to combat soil erosion while restoring and RWB v watersheds and natural biota to enhance both below and above soil carbon and biodiversity. A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda The periodic update and expansion of the natural capital MINECOFIN/NISR, MoE, accounts to include tourism and biodiversity accounts, as well REMA, RWB, RFA, RLMUA, as the valuation of the impacts of environmental degradation and RDB which is to contribute to the development of Green GDP and genuine savings rate indicators for improved monitoring and reporting also in the NBSAP. PA core areas Facilitate the investment in conservation and nature-based RDB, MINECOFIN, MoE (to be read in tourism through the following: (FONERWA), BRD conjunction i) Collaborative Management Partnerships (CLPs), and with the section on ii) An investment-friendly environment especially for foreign financing) nationals with respect to the new PAs, including Gishwati Mukura. Development of “Brand Rwanda”, an initiative to articulate RDB, MoE, REMA, and and promote the value of conservation and tourism as RFA pertain in the objectives of the GGCRS for residents, visitors, and prospective visitors from abroad by identifying and communicating the importance of Rwanda’s natural capital and ecosystem services. Roll-out of revenue sharing schemes to communities and RDB and Districts near local landowners for co-management and maintenance of PAs the PAs beyond the VNP. Commercialisation of the PAs by the following, among others: RDB, PSF-Tourism i) Improving PA operational and management efficiency, Chamber and other partners (e.g. Africa ii) Reviewing and adjusting the entry fees, Parks) iii) Concession fees, and iv) Traversing rights for especially the Akagera National Park and the Gishwati Mukura Park. Sectors Policy recommendations Institutions responsible Buffer zones Identify and remove explicit and implicit subsidies in, MINECOFIN, MINAGRI of PAs: among others, mining and agriculture, that incentivise land (RAB), RWB and Rwanda Remnant degradation. Mining Board (RMB) forests Reduce the demand for wood from natural forests through the MININFRA (REG) and outside PAs, following measures: MoE (RFA) and MINALOC woodlots and i) Active sourcing and roll-out of energy efficient stoves, and (Districts) plantations (to be read in ii) Incentives to move away from unsustainable firewood and conjunction related fuel sources. with the Increase the use (e.g., through extension services, financial MINECOFIN and section on incentives) of conservation and regenerative agriculture, MINAGRI (RAB) financing) agroforestry and silvo-pastoral systems. Increase the supply of timber by improving management of the MoE (RFA, REMA) and existing woodlot to increase their productivity; this includes PSF incentives to increase plantations and woodlots, R&D (including on improved genetic material, extension of rotation age). This is to support both the commercial sector and the small outgrowers to prevent the premature felling of trees. As part of the multisectoral land use plan and strategy, conduct MoE (RFA, RLMUA) and mapping of areas potential for commercial forest plantation PSF development in aligning with Rwanda’s NDC targets. vi Initiate certification (PEFC or FSC) of forest plantations and Rwanda Standards Board woodlots. (RSB), PSF and RFA A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Financing Develop results-based payments for forestry under REDD+ and MINECOFIN, MoE (RFA, (incl. cross- future carbon market mechanisms under the Paris Agreement. REMA and FONERWA) cutting While Rwanda has a small forest area being in a tropical zone issues) the carbon sequestration potential per hectare is high. Develop guiding principles and procedures and implement a MoE (RFA, REMA), PES scheme for the following: MINAGRI (RAB) and RWB i) Watershed protection, especially in the Congo-Nile Ridge and RDB area, ii) Biodiversity conservation and restoration, including aspects such as pollinator strips, and iii) Above and below soil carbon. Domestic resource mobilisation through – MINECOFIN, MoE i) PA fee structuring, (FONERWA), RDB, RMB, and MINAGRI (RAB) ii) The repurposing of mining and agriculture subsides towards the protection and enhancement of natural capital, and iii) The expansion of the community adaptation fund. Incentives, such as tax breaks, for the investments from foreign MINECOFIN and RDB nationals (expatriates) in PAs and nature-based tourism. Develop and implement a nature-based tourism and PA RDB and MoE and protection and safeguarding mechanism using through MINECOFIN concessional resources. Ranking of the financial instruments in terms of their most MINECOFIN and MoE likely impact on meeting the NDC targets (REMA, FONERWA) Acknowledgements T he policy research paper on a post-pandemic nature-based tourism and conservation recovery plan for Rwanda with an emphasis on the natural resources sectors have been prepared by Pablo Benitez, James Blignaut, John Kalisa, Peter Katanisa, Evariste Rutebuka and Alex Mulisa. The team acknowledges the extensive support that was provided by the Government of Rwanda (GoR) through the Ministry Finance and Economic Planning (MINECOFIN), the National Institute of Statistics of Rwanda (NISR), Ministry of Environment (MoE) and its affiliated agencies of Rwanda Environment Management Authority (REMA), Rwanda Development Board (RDB), the department of Tourism and Conservation, and the Private Sector Federation (PSF) – Tourism vii Chamber. Without their continuous assistance this paper would not have been possible. A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda The team would also like to thank the peer reviewers, Sofia Ahlroth, James Seward and Shaun Mann for the very helpful and constructive comments provided as well as support. We would like to express utmost gratitude towards the Country Manager, Rolande Pryce, for the encouragement, leadership and guidance, as well as all the members of the review meeting. This study was supported by the World Bank with funding provided by the Global Program on Sustainability (GPS). The findings, interpretations, and conclusions expressed in this report do not necessarily reflect the views of the World Bank, the Executive Directors of the World Bank or the governments they represent. Key words Rwanda, Covid-19, nature-based tourism, conservation, natural capital accounts, economic recovery, policy reforms Corresponding author: Pablo Benitez pbenitez@worldbank.org Table of Contents Abstract iii Acknowledgements vii Abbreviations xiii 1 Introduction 1 1.1 Background and objective 1 1.2 Nature-based tourism and conservation within Rwanda’s policy environment 3 ix A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda 1.3 Nature-based tourism, conservation and Covid-19: A global perspective 4 1.4 Nature-based tourism and conservation in Rwanda: A snapshot 7 1.4.1 The Rwandan economy 7 1.4.2 Nature-based resources in Rwanda 8 1.4.3 The economic importance of nature-based tourism and conservation 9 1.5 Conclusion 11 2 Economics of the Environment and Biodiversity: Natural Capital Accounting in Rwanda 13 2.1 Introduction 13 2.2 NCAs in Rwanda: A reflection 14 2.2.1 Land accounts 15 2.2.2 Mineral resource flow accounts 15 2.2.3 Water accounts 16 2.2.4 Ecosystem accounts 17 2.3 A policy response to the challenges 18 2.4 Conclusion 24 3 Covid-19’s Impact on Nature-Based Tourism and Conservation 25 3.1 Nature-based tourism in Rwanda: A profile 25 3.2 Contribution of tourism to Rwanda’s economy 27 3.3 The impact of Covid-19 on tourism in Rwanda 29 3.3.1 Impact at a national level 29 3.3.2 Impact at a local level 30 3.4 The impact of Covid-19 on biodiversity conservation: A summary 32 4 A post-Pandemic Nature-Based Tourism and Conservation Recovery Plan for Rwanda 35 4.1 The impacts of Covid-19 on the nature-based sectors: An overview 35 4.2 Hypothetical Rwandan tourism bond: A plausible scenario 38 4.3 Recommendations and policy reforms 42 References  45 Annexures  45 Annexure 1: Impact of Covid-19 management practices on nature-based tourism in Africa 53 Annexure 2: Rwanda export by services and merchandise 55 Annexure 3: Impact of Covid-19 on merchandise export: 2019 and 2020 55 x Annexure 4: Impact of Covid-19 on the export of the 3Ts: 2019 and 2020 56 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Annexure 5: A selection of financial instruments 56 A.5.1 Capital raising 56 A.5.2 Capital deployment 59 List of Tables Table 1: Revenues from gorilla-based tourism 29 Table 2: Summary of the impacts of Covid-19 on the economy and the natural resources sectors 35 Table 3: Biodiversity expenditures as percentage of both budget and GDP: 2014 prices 38 Table 4: Rwandan tourism bond: Terms 39 Table 5: Rwandan tourism bond: The performance 40 Table 6: A nature-based tourism and conservation recovery plan for Rwanda: Recommendations and policy reforms 43 List of Figures Figure 1: Strategic framework for Rwanda’s green growth and climate resilience strategy 3 Figure 2: Rwanda National Parks and wetlands 9 Figure 3: Composition of the Rwanda GDP: 2020 in current prices 9 Figure 4: Revenue from tourism: 2006 to 2019 10 Figure 5: National land cover: A comparative analysis: 1990, 2000, 2010, and 2015 15 xi Figure 6: Soil erosion (tonnes per 900m2): 2015 18 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Figure 7: Rwanda’s nature-based solutions: Model in agricultural land and national parks 20 Figure 8: Resource allocations to the economic transformation pillar: 2017-2021 22 Figure 9: Total number of park visitors: 2000-2020 25 Figure 10: Total number of park visitors by park: 2009-2020 26 Figure 11: Total number of park visitors by residence: 2009-2020 26 Figure 12: Distribution of park activity: 2019 27 Figure 13: Rwanda’s revenue from tourism compared to traditional export commodities 28 Figure 14: Tourism’s contribution to Rwanda’s service export 29 Figure 15: Services export and GDP/capita 30 Figure 16: Impact of Covid-19 on merchandise exports and foreigner visiting parks: 2019 & 2020 31 Figure 17: Covid-19’s impact on park visits on a monthly basis: 2019 and 2020 31 Figure 18: The delicate and complex human-gorilla network of relationships 33 Figure 19: Real biodiversity expenditures and projections: 2011/12 – 2024/25 38 Figure 20: Rwanda tourism bond: Ability to finance itself 42 List of Boxes Box 1: The impact of Covid-19 management strategies on nature-based tourism in Africa 6 Box 2: Losing nature – losing our well-being 13 Box 3: Food insecurity in time of a pandemic 23 xii A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Abbreviations $ United States Dollar 3Ts Tin, Tungsten, Tantalum ANP Akagera National Park BNR Banque Nationale du Rwanda (National Bank of Rwanda) CAT Catastrophe Bond CAF Community Adaptation Fund CBD Convention on Biological Diversity xiii CLPs Collaborative Management Partnerships A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Covid-19 Coronavirus Disease of 2019 CPI Consumer Price Index EIB Environmental Impact Bonds FBR Forest Resilience Bonds FNA Finance Need Assessment GAIN Global Alliance for Improved Nutrition GDP Gross Domestic Product GMNP Gishwati–Mukura National Park GGCRS Green Growth and Climate Resilience Strategy GoR Government of Rwanda Ha Hectare ICCA International Congress and Convention Association IGCP International Gorilla Conservation Programme IVA Independent Verification Agent LAIS Land Administration Information System LTRSP Land Tenure Regularisation Support Programme MDBs Multilateral Development Banks MIDIMAR Ministry of Disaster Management and Refugee Affairs MINAGRI Ministry of Agriculture and Animal Resources MINECOFIN Ministry of Finance and Economic Planning MINICOM Ministry of Trade and Industry MINILAF Ministry of Land and Forestry MINIRENA Ministry of Environment and Natural Resources MoE Ministry of Environment NAIS National Agricultural Insurance Scheme NBSAP National Biodiversity Strategy and Action Plan NCA Natural Capital Accounts NCE Small Molecule New Chemical Entities NDC Nationally Determined Contribution NISR National Institute of Statistics of Rwanda NNP Nyungwe National Park NP National Park NPV Net Present Value NST1 First National Strategy for Transformation NWRMP The National Water Resources Master Plan xiv P4R Payment for Results PAs Protected Areas A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda PES Payments for Ecosystem Services PoA Programme of Action RBF Results-Based Financing RCT Rwanda Chamber of Tourism RDB Rwanda Development Board REDD+ Reducing Emissions from Deforestation and Forest Degradation REMA Rwanda Environment Management Authority RTB Rwanda Tourism Bond RwF Rwanda Francs SDG Sustainable Development Goals SMEs Small and Medium-sized Enterprises SPV Special Purpose Vehicle UNDP United Nations Development Programme VCU Verified Carbon Units VNP Volcanoes National Park WTTC World Travel and Tourism Council 1 Introduction 1.1 Background and objective The Rwandan economy has grown well above average compared to its peers and the world over for the past two decades achieving growth rates of more than 8% regularly with 2019 being 12.5% (NISR 2020). While these growth rates have been achieved from a very low base, it has been the catalyst for a quadruple increase in the GDP/capita from $268 in 2000 to $837 in 2019 (NISR 2021). Conservation and nature-based tourism and the services sectors supporting these natural resource-based sectors have contributed much to this success. This is evident by, among others, the increase in the number of visitors to the National Parks that have increased by more 1 than 2,800% over the period 2000 to 2019 (RDB 2020). In 2019 tourism has generated foreign A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda exchange earnings of $498 million, which is about double the combined earnings from tea, coffee and minerals (the so-called 3Ts) which was $254 million (RDB 2020a; UNCTAD 2014a). The prevailing Covid-19 pandemic, however, is undoing much of the hard-fought gains made in development over the past two decades. As a case in point, the GDP/capita declined to $816 in 2020, a decline in absolute terms of $21/capita, the largest decline since 1999. Additionally, the tourism sector saw a decline in the number of visitors to the National Parks of 67% to levels last seen in the early part of this millennium (RDB 2020). This decline coincides with loses in income and jobs. In additional there has been the complete collapse of the highly praised and well-functioning revenue sharing model whereby local communities benefitted from the proceeds the National Parks were generating. The decline in park revenue also resulted in the conservation sector’s decreased ability to manage and maintain the National Parks. This has had a debilitating impact on the livelihoods of people living adjacent and near the conservation areas as well as all the people employed as well as enterprises within the tourism and conservation sector and value chain. Moreover, it is not only the decline in nature-based tourism and the conservation sector’s ability to manage, maintain, restore and invest in natural resource management that has been compromised, but that of all the natural resources sectors. These sectors include conservation, the water, forest and land sectors, agriculture and mining. All the challenges these sectors have had before the pandemic have been exacerbated by the pandemic and thus have had a further negative impact on the wellbeing of all the citizens. This is because biodiversity and the ecosystem services generated by and through them are important to many, if not all, aspects of the economy, human health and phycology, and the maintenance of life as we know it. These services include aspects such as treating and storing water as well as climate regulation and the provisioning of food and materials for use. The conservation sector also does much towards cultural and aesthetic services by providing a habitat for species such as the iconic gorillas. Given the beneficial impact of natural capital and the resultant ecosystem services on preserving and supporting life, the investment in the restoration of natural capital is therefore of utmost importance. This is true both globally and also in Rwanda and is key to unlock Rwanda’s green growth trajectory as articulated in its updated Green Growth and Climate Resilience Strategy (GGCRS) (GoR 2021); more so now that governments are contemplating ways to recover from the Covid-19 pandemic and hence it is important to consider it in an eco-friendly manner. Given this background there is a need to develop a strategy and action plan that can assist the Government of Rwanda (GoR) in a post-pandemic nature-smart economic recovery with its natural resources sectors, specifically nature-based tourism and conservation, as catalysts. It is also important to go beyond recovery and for these sectors to provide an important stimulus for Rwanda’s overall green growth trajectory. With this objective in mind this paper will achieve the following: 1. Use natural capital accounts to incentivize private and public sector investment from local and international sources in conservation, biodiversity, and nature-based tourism. This investment is to be dedicated to the restoration and the expansion of the conservation sector as well as to infrastructure supporting the conservation sector such as transport and roads and the rekindling of the tourism industry after the impact of the pandemic. 2 The focus of these investments should be both in and outside of the National Parks, i.e., in buffer zones and in the agricultural fringes because of the dominance of the natural A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda resources sectors in the Rwandan economy and of these sectors’ impact on the wellbeing of the people of Rwanda. 2. Recommend a set of interventions, including financial, to support the recovery and expansion of Rwanda’s nature-based tourism and conservation sector. These recommendations are supported by evidence from around the world as to mechanisms and instruments that has been used in the past with great success elsewhere and that can be applied in Rwanda also (Deutz et. al. 2020, Palahi et. al. 2020, World Bank 2020a). Within this context, the Word Bank (2020a:4) states governments and regulators, supported by financial institutions and multilateral development banks (MDBs), hold the key to mobilizing private finance at the scale needed to transform the way we build, produce, and consume in order to protect nature while fostering sustainable poverty reduction. To do this, this paper will reflect briefly on the following: 1. The local policy environment to which the recovery of the nature-based tourism sector and conservation will contribute (Section 1.2); 2. The lessons learnt from the impact of Covid-19 on the natural resources sectors globally with a specific focus on Africa (Section 1.3); 3. A brief overview of the Rwandan economy and nature-based tourism (Section 1.4); 4. A summary of the outcomes of Rwanda’s natural capital accounts documenting the intricate relationship between the state of the environment and wellbeing on the one hand and the link between conservation and biodiversity and resource management on the other (Chapter 2); 5. Details the tourism sector and the impact the Covid-19 pandemic has had on it (Chapter 3); and 6. Propose a range of potential mechanisms and plausible financial instruments through which the resource deficit could be addressed as well as a strategy and action plan for an economic recovery of the sector (Chapter 4). 1.2 Nature-based tourism and conservation within Rwanda’s policy environment Rwanda, within its most recent revision of its Green Growth and Climate Resilience Strategy (GGCRS) (GoR 2021), has emphasised the need for the vibrant and resilient green rural livelihoods as is highlighted through the fourth programme of action (PoA), as highlighted in Figure 1. Within this PoA specific mention is made to the promotion of conservation, community-based ecotourism, and enforcement of PES (Payments for ecosystem services) under strategic intervention 4.1.6. Other supporting strategic interventions include the building of climate resilient water infrastructure for storage and supply (3.2.1), the development of catchment restoration and soil erosion control strategies (3.2.2), the development of agroforestry and soil management for sustainable agriculture and fruit production (4.1.4) and the rehabilitation of degraded forest resources (reforestation and afforestation) and improvement of forest management (4.1.5). 3 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Figure 1: Strategic framework for Rwanda’s green growth and climate resilience strategy Vision 2050: For Rwanda to be a developed, climate-resilient, and low-carbon economy by 2050 Energy security & low Inclusion, livelihoods Sustainable resource carbon economy and disaster management for food, for green industry management for urban and ecosystems climate resilience Sustainable land Green Green urban Vibrant resilient use and industrialisation transition and green rural resource and trade integration livelihoods management PoA & PoA & PoA & PoA & Interventions Interventions Interventions Interventions Pillar 1: Institutional arrangement Pillar 2: Finance Pillar 3: Capability, inclusion and training Pillar 4: Digital Transformation & Innovation Source: GoR (2021) These interventions, among others, are to work in concert towards achieving Rwanda’s Vision 2050 namely for Rwanda to be a developed, climate resilient and low carbon economy by 2050. This is indicative of the cross-cutting nature of nature-based resources and interventions towards the improvement of economic livelihoods and economic development in general. The consequences of the Covid-19 pandemic have been severe on these and other development targets adding significant pressure to the development challenges. Nature-based operations tend to have a strong rural bias and impacts on the rural populations are much more intense given their dependence on these resources and the income derived from tourism-based operations. This necessitates a dedicated investigation as to the plausible economic recovery for the sector. Important, however, is to gain an understanding as to the international experiences with respect to the impact of Covid-19 on nature-based tourism and the conservation sector in general to learn from those lessons. To this we turn next. 1.3 Nature-based tourism, conservation and Covid-19: A global perspective Globally there has been a disparate response with respect to what the impacts of the response strategies to the coronavirus disease of 2019 (Covid-19) were on nature-based tourism, conservation and the protection of biodiversity and natural resources in general. Evidence exists which suggests an increase in both poaching and the loss in wildlife (Buckley 2020; Cherkaoui et. al. 2020), but also 4 the enjoyment and societal value of nature among segments in society (Venter et. al. 2020; Zellmer et. al. 2020). Similarly, while some are proposing much stronger regulation measures to curb wildlife A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda trade (Roe et. al. 2020; Turcios-Casco and Gatti 2020; Yuan et. al. 2020), others are concerned about the moral/ethical impact of some of the proposed regulations and emerging rhetoric on especially the developing nations (Santana 2020). What is clear, however, is that the link between conservation and human health and the economy is an extremely delicate and intricate one that requires careful consideration (Hockings et. al. 2020). It is furthermore acknowledged that the relationship between these three factors is even more sensitive in Africa given the dependency on natural resources, livelihood concerns and the deep cultural connection with nature (Cherkaoui et. al. 2020; Lindsey et. al. 2020). Because of these impacts, governments had to resort to economic recovery and emergency plans for the natural resources sectors, and tourism in particular. To cover for the anticipated shortfall in revenue for National Parks in South Africa the budgets of most projects funded by the Department of Environment, Forestry and Fisheries were reduced and the funds transferred to the parks’ authority. This is only to assist in the short term and to support the on-going management of the parks1. In Ethiopia, the government is working with the Economic Commission for Africa on a $3.6 million project on nature-based solutions to improve water resources2. Further in Africa, the African Union Development Agency has developed a Tourism Recovery Strategy for the recovery and sustainability of the travel and tourism sector. Its recommendations include the following3:  The diversification of markets, products and services;  The investment in market intelligence systems and digital transformation; 1 https://www.thesouthafrican.com/news/tourism-when-does-air-travel-open-revised-budget-covid-19-thursday-9-july/ 2 https://www.wri.org/blog/2020/09/coronavirus-green-economic-recovery 3 https://www.nepad.org/news/auda-nepad-supporting-recovery-plans-africas-tourism  The reinforcement of tourism governance at all levels;  The preparedness for crises, build resilience and ensure that tourism is part of national emergency mechanisms and systems;  The investment in human capital and talent development;  The placement of sustainable tourism firmly in the national agenda; � The transition to the circular economy and embrace the SDGs. In the United Kingdom, the UK government provided additional funding of $2.48 billion for investment in public infrastructure. This is earmarked for cycling and pedestrian infrastructure for urban greening and the connection with nature. In China, the government has invested $4 billion towards a Green Development Fund that will be directed at ‘green’ investments along the Yangtze River. The fund is aimed at environmental protection, pollution control, ecological restoration, land and space greening, energy conservation and utilisation, green transportation, clean energy and other fields (Vivid Economics 2020). India’s stimulus includes $780 million on afforestation and forest management, which will stimulate the economy in rural areas while increasing the amount of carbon stored in trees, decreasing soil erosion, making water more easily accessible and expanding wildlife habitat. New Zealand’s recovery plan includes an investment of $740 million in restoring wetlands and controlling pests and weeds4. The plans presented above reflect various interventions undertaken by governments to support conservation in the short-term. The pandemic and the much-needed recovery process also allow 5 for an opportunity to restructure the natural resources sectors and nature-based tourism and A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda conservation specifically with a long-term sustainability view. As such an ambitious long-term 13-point proposal is made for Morocco (Cherkaoui et. al. 2020). To ascertain what, from a global perspective, the main recommendations pertaining to structural reform and response strategies are to support the natural resources sectors and thus also conservation and tourism, a detailed literature review was conducted. While the recommendations varied much, they can be classified in five themes. These are the following: 1. The need for a broad-based multi-sector recovery plan It is noted that the post-pandemic recovery plan must be used to develop a broad social- ecological safety net (Dinerstein et. al. 2020) as well as a robust food system (Gassner et. al. 2020; Roe et. al. 2020; Santana 2020; Yuan et. al. 2020). To mitigate the impact of the current and any potential future global food crisis there must be a transition to a greater reliance on the local production of nutritious food, and that on soils that are carefully tended to and protected through sustainable management (Poch et. al. 2020). More so as Covid-19 indicated how vulnerable food security is to disruptions in the food supply chain and its impact on livelihoods (Lal et. al. 2020). In low-income countries farmers have experienced severe problems in purchasing fertilisers as well, a need for which can be offset by improved soil health (Poch et. al. 2020). 2. The need for focused environmental education with respect to the human-animal interface The rise in negative perceptions pertaining to wildlife has gained much ground given the zoonotic nature of the disease. This must be countered through education as to the 4 https://www.wri.org/blog/2020/09/coronavirus-green-economic-recovery role of nature contributing to system-wide resilience and the improved management of human-wildlife interactions (Neupane 2020; White and Razgour 2020), especially since close to 75% of emerging infectious diseases in humans come from animals. A change in land use and the exploitation of wildlife increase infectious disease risk by bringing people and domestic animals near pathogen-carrying wildlife. The risk of exposure to zoonotic diseases is also increased by the disruption of naturally occurring ecological processes that keep diseases in check (OECD 2020). A high level of species diversity, which is a characteristic of healthy ecosystems, regulates the population of species that act as primary reservoirs of viruses, thereby curtailing the transmission of pathogens (UN-CEPAL 2020). 3. The need for rearticulating the role of strategic sectors in the wildlife sector: A much more nuanced approached towards wildlife trade is required (Roe et. al. 2020) whereby such trade is not necessarily considered just good or just bad, but asks for a context-specific strategy and intervention. Equally well should urban open spaces and nature zones in urban areas be re-appreciated and much should be done to elevate the status of open spaces in urban areas for both aesthetic and recreation purposes as well as their contribution to ecosystem services and biodiversity (Venter et. al. 2020). 4. The need for investment in the conservation and nature-based tourism sector: 6 Given the widespread wipe-out of nature-based ecotourism – see Box 1 and Annexure 1 (Cherkaoui et. al. 2020; Lindsey et. al. 2020), there has been a call for significant investment A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda in conservation (McCleery et. al. 2020). It is noted that governments have allocated almost $11 trillion, and rising, in economic stimulus and bailout plans during 2020. Conservation has yet to receive such a plan despite its obvious contributions to the Sustainable Development Goals (SDGs) of the United Nations and many more global treaties. Investments in natural capital – such as the restoration of degraded land, sustainable agricultural practices, efficient water irrigation systems – are ideally suited to tackle the on-going crisis because they can be deployed in a timely fashion, are transitional, provide stimuli to particularly vulnerable populations and are resilient to potential future lockdowns (Vivid Economics 2020). Box 1: The impact of Covid-19 management strategies on nature-based tourism in Africa  Mass reduction in photographic tourism, which generally contributes to between 50% and 80% of income to some wildlife authorities.  The extremely large decline (almost eliminated) in trophy hunting that accounts for between 20% and 68% of income to some wildlife authorities.  A rapid reduction in international aid and philanthropy whose contribution to some wildlife authorities’ budgets ranges between 32% and 58%. This reduction is because of the pressure placed on global resources for broad-based recovery.  A sharp decline in domestic expenditure in the wildlife sector because of the loss of income and unemployment. Source: Adapted from Annexure 1. 5. The need for the broadening of conservation areas: Given the interconnectivity of global system resilience and conservation, there is a need for the restoration and expansion of the global network of protected and conserved areas (Hockings et. al. 2020). Given this global context, we turn to a brief reflection on the importance of nature-based tourism in Rwanda. 1.4 Nature-based tourism and conservation in Rwanda: A snapshot 1.4.1 The Rwandan economy Rwanda’s per capita income increased from $268 in 2000 to $837 in 2019 (NISR 2020). This increase has been brought about by rapid economic growth, albeit from a very low base, of, on average, 8% per year over the entire period. The last few years saw an especially strong performance in the growth of the GDP which was estimated to be 12.5% in 2019 (NISR 2020). The accelerated growth in 2019 is attributed to robust performances across the major economic sectors, transformational tourism policies and strategies with particular focus on privatization of National Park assets as well as increased public investments implementing the First period of National Strategy for Transformation (NST1) (GoR 2020a). This performance deserves further 7 investigation. A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda The major economic sectors, namely industry supported by construction and services, trade and transport, have grown at 8-10% annually since 2006, and agriculture at 5.4%. Public investments increased from 4.9% in 2003 to about 9.4% in 2018 (NISR and World Bank 2020). Despite these achievements, being landlocked with one of the highest population densities in the world, the country still faces many challenges. Rwanda is also ranked 153rd globally in terms of its vulnerability to climate change (World Bank 2020b) – vulnerability that is exacerbated by Rwanda’s extensive hilly to mountainous topography. Poor farming techniques which lead to soil erosion, mud slides and soil fertility that is among the lowest in Africa (MacArthur Foundation 2017) also contribute to this vulnerability. Some 70% of the Rwandan population is rural, and 90% of croplands are located on the afore- mentioned extensive hilly to mountainous topography compounding the challenges (NISR and World Bank 2019). Furthermore, the rapidly growing rural population relies on smaller and smaller land holdings on which to generate an income from and for livelihoods purposes; this contributes to the rise in intensive production on these vulnerable hilly slopes, see also Section 2.2.1. The same crop production areas and the same population can to a very large extent be overlaid with the distribution of poverty, as over 90% of the poor live in rural areas, mainly in the southern, western and eastern provinces (NISR 2017). There have been some improvements though. According to the most recent Integrated Household Living Conditions survey, poverty as measured by the international poverty line fell from 77.2% to 55.5% between 2001 and 2017. Measured in terms of the national poverty line, poverty fell from 58.9% to 38.2% (NISR 2017). Poverty has also become less severe, with a shrinking gap between average consumption of the poor and the poverty line. However, despite Rwanda’s record in poverty reduction, the reduction in poverty stagnated between 2014 and 2017 owing to droughts, a slowing down of the structural transformation and rural to urban transition, and a weakening of the job-creation potential of Rwanda’s recent growth (NISR 2017). The bio-physical and climatological factors described above have therefore had a major impact on Rwanda’s sustainable development trajectory. The country’s economy is primarily dependent on natural resources, agriculture, nature-based tourism and associated services (MacArthur Foundation 2017). Rwanda embarked on a development strategy as is laid out in its NST1 (GoR 2017) seven- year plan and prioritised three pillars, namely economic transformation, social transformation and the transformational governance to reduce poverty, increase system-wide resilience and enhance sustainable economic development. The NST1 aims to lay the foundation for achieving upper- middle-income country status by 2035 and high-income status by 2050 (GoR 2020a). It is guided by the SDGs, the Africa Union Agenda 2063 and its first 10-year Implementation Plan 2014–2023, the East African Community Vision 2050, and the updated National Determined Contributions (NDC) to the Paris Agreement on climate change among other instruments (GoR 2020a). 1.4.2 Nature-based resources in Rwanda As part of the above-mentioned development strategy, GoR prioritised the tourism sector for growth and diversification and embarked on several strategies, policy measures and incentives to develop the sector (Gaudreault 2019). For the government, tourism is a driver not only for economic progress but also for social development with its capacity to produce economic and employment 8 benefits in related service, manufacturing and agricultural sectors, thereby promoting economic diversification (UNCTAD 2014b:34). Under the NST1 the tourism industry has been identified as a A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda priority sector to help transform the nation to reach the objective of becoming a middle-income economy (GoR 2017). Developing the hospitality industry and building the capacity of the private sector to provide high levels of service delivery has the potential to boost Rwanda’s service sector performance and productivity in general and its tourism sector. Pre-Covid-19 projections indicated that revenues from could have doubled to USD800m in 2024. Rwanda will reinforce its position as a high value, world-class tourism destination (GoR 2017). Thus, tourism will increasingly serve as an excellent source of foreign exchange earnings and induces significant income-multiplier effects (Ntibanyurwa 2008) with remarkable contribution to the development of the country for sustainability. The key nature-based assets (or natural capital) that Rwanda possesses include National Parks, forests reserves and sites of scenic and scientific importance that serve to support and strengthen other economic sectors by providing employment and which support local communities (MINIRENA 2014; MacArthur Foundation 2017). These nature-based assets include excellent tourism locations such as the Volcanoes National Park (VNP), home to the mountain gorilla that provides Rwanda with a world class iconic attraction. The other National Parks are the Nyungwe National Park (NNP), Akagera National Park (ANP) and newly created Gishwati–Mukura National Park (GMNP) (see Figure 2). Together these attractions offer tourists green scenic hills, tropical forests, woodlands, shrublands, farmlands and plantations, mountains, lakes, wetlands and rivers (NISR and World Bank 2019). These provide space and habitat for a range of species which includes antelope, zebra, buffalo, giraffe, hippopotami, leopard, golden monkeys, chimpanzees, golden cat and lions. Six hundred and seventy species of birds have been recorded as well (RDB 2020a). This beauty is further aided by the fact that Rwanda is reputed to be the cleanest country in Africa and its temperate climate enhances its attractiveness as an African destination (RDB and REMA 2017). Figure 2: Rwanda National Parks and wetlands 9 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Source: REMA (2015). 1.4.3 The economic importance of nature-based tourism and conservation Tourism and agriculture’s contribution to GDP Rwanda’s economic growth averaged 7.2% per year over the period 2010 to 2019 (NISR 2021). The GDP, however, contracted by 3.4% during 2020 because of the local and global lockdown. This illustrates the importance of the tourism and agricultural sectors, and thus nature-based resources, to the economy as well as the vulnerability of the people of Rwanda because of changes to these sectors. The susceptibility of the economy to these changes deserves further investigation. Rwanda’s predominantly nature-based economy depends heavily on agriculture, Figure 3: Composition of the Rwanda GDP: 2020 in tourism and industry for its economic current prices growth. This is indicated in Figure 3 with Taxes less subsidies agriculture contributing 26.3% to the 8.0% 26.3% Agriculture, forestry & shing GDP and the total services sector (trade Mining & quarrying and transport and other services), of 1.3% Manufacturing which tourism is a major contributor, 9.0% 32.0% Other industry 46.4% in 2020, it was 49.2% in 2019 before 9.1% Trade & transport the pandemic (NISR 2021). Tourism’s 14.4% Other services footprint, features prominently in all the major economic sectors. Source: NISR (2021). Tourism’s contribution to foreign exchange earnings As mentioned earlier, the NST1 (GoR 2017) proposed to develop and support sectors with high potential for growth and employment, and this includes tourism. Tourism was identified because of it being an important source for foreign exchange earnings. In the last two decades tourism receipts had consistently increased to reach $498 million in 2019, a 17% increase from 2018 and a 280% increase from 2006. In 2019 the revenues constituted 50.1% of all service exports (RDB 2019). These revenues are generated by more than 110,000 visits to National Parks – a 13.4% increase from 2018, see also Figure 4. It is thus not surprising that revenues from tourism were expected to reach over $800 million by 2024 (GoR 2017). Figure 4: Revenue from tourism: 2006 to 2019 500 498 450 424 425 400 381 350 324 $ million 293 305 300 282 251 250 200 200 186 175 10 150 131 151 100 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Tourism-based revenue: Million $ Source: RDB (2020). Tourism’s contribution to local development Given the importance of tourism and conservation activities it is recognised that this sector must play an increasing role in Rwanda’s sustainable development pathway going forward. The GoR has therefore adopted a policy whereby 10% of all park revenues are returned to the surrounding communities in a revenue-sharing model by funding community-based projects. This has greatly assisted in raising community awareness and support for conservation (RDB 2020a). It is therefore generally accepted that conservation and ecotourism constitute an important tool to sustainable and inclusive development of the communities surrounding tourist destinations. Local residents benefit directly from the tourism sector by i) contributing to the ecological integrity of the protected areas; ii) being integrated with ecotourism by providing tourism products; and iii) providing sustainable and alternative livelihoods for communities during the times of tourism fluctuation for household needs and local market. Tourism is also an important sector with respect to employment, which has been growing by 9% annually over the last 5 years, creating 10,000 jobs every year (RDB 2019). 1.5 Conclusion Given the importance of nature-based tourism and conservation in Rwanda and its contribution to economic development in addition to its contribution to biodiversity and system-wide ecological resilience and the enhancement of ecosystem services, the far-reaching impact on the sector of the Covid-19 pandemic must be investigated in detail. This is done using a natural capital accounting approach, see Chapter 2, by considering the importance of natural capital and what the major environmental issues are. The challenges posed by these issues are exacerbated by the pandemic and they have a direct bearing on the nature-based tourism and conservation sector. Chapter 3 therefore reflects on the economic impact of the Covid-19 pandemic on nature- based tourism and conservation and the livelihoods dependent thereon. Chapter 4 explores the measures that can be taken to advance an economic recovery within the nature-based tourism and conservation sector. 11 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Economics of the Environment 2 and Biodiversity: Natural Capital Accounting in Rwanda 2.1 Introduction The development of a prosperous economy as well as human well-being is accomplished by the careful and wise deployment of manufactured, financial, human, social and natural capital. Natural capital is arguably the least documented of these, yet it supports and underpins all forms of life and the other forms of capital (Peterson et. al. 2019). Natural capital can be sub-divided into three categories. The first is renewable natural capital that includes all forms of life that can renew themselves such as plants, mammals, fish etc.  The second comprises non-renewable natural capital. This includes fossil fuels and minerals. The third is environmental resources such as the sun and 13 the air. Together these three forms of natural capital offer a range of ecosystem services that are A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda often almost ‘invisible’ such as air and water filtration, flood protection, carbon storage, pollination of crops and habitats for wildlife (Wentworth 2011). These services stem from a complex process called ecosystem functioning, see also Box 2. Ecosystem functioning, as the term alludes to, is the way and degree to which an ecosystem that comprises various forms of natural capital functions as Box 2: Losing nature – losing our well-being During the previous century, the planet lost 50% of its wetlands and 40% of its forests, and approximately 85% of its agricultural land has been degraded due to unsustainable agricultural practices (Markandya 2015):  Around 60% of global ecosystem services has been degraded in just 50 years (Markandya 2015; WWF 2014);  Approximately 15 to 18 million hectares of forest are destroyed every year, almost the size of Belgium. This translated to nearly 2,400 trees that are being cut down every minute (European Investment Bank 2019);  While pollination services for crop production, mainly by insects and birds, were valued at an estimated $235bn-$577bn per year (IPBES 2017), the population of insects and birds have declined by more than 40% (BLI 2018; Sánchez-Bayo and Wyckhuys 2019);  There is also evidence that the decline in biodiversity and ecosystem is associated with increases in economic and social losses. For example, between 1981 and 2006, 47% of cancer drugs and 34% of all “small molecule new chemical entities” (NCE) for all disease categories were natural products or derived directly from them. As the natural resources decline, so also does the availability of the drugs. In Asia and Africa, 80% of the population relies on traditional medicine (including herbal medicine) for primary health care. As extinctions continue, the availability of some of these medicines is likely to be reduced, and new drug developments may be curtailed while prices are rising (Markandya 2015). an interactive system and unit. The healthier and more intact the natural capital, the healthier the ecosystem and therefore the more robust the ecosystem functions and the better are the ecosystem services that are derived from that system. Humans depend on these ecosystem services. The more intact an ecosystem and its natural capital, the more resilient the system. Conversely, the more degraded the ecosystem, the more vulnerable both the people and the entire system become. Neither the degree of resilience of a social-ecological system, nor the vulnerability of people depending on the system, is measured through conventional means. The standard or traditional indicator of economic performance, the gross domestic product (GDP), is a measure of the change in financial income during a specific period. As such it is a good measure for a change in income but does not make explicit either inputs from the environment to the economy or the cost of environmental degradation (Hein et. al. 2020). For example, in forestry, income derived from the sale of timber resources is counted, but not forest carbon sequestration. GDP, while valuable as an indicator of a change in income, is therefore inadequate and inappropriate as a measure of real value and specifically well-being. By excluding the contribution of ecosystem services, or the loss of these services in the case of degradation, their contribution to human well-being is often forgotten, undervalued, and/or ignored in decision-making. A system of natural capital accounts (NCA) has been developed (UN-SEEA 2012; UN-SEEA 2020) to rectify the omission of natural capital and the services derived from them from the standard method of measuring progress. NCA is defined as a method of assessing natural ecosystems’ 14 contributions to the economy in order to help governments better understand their economies’ reliance upon natural systems, track changes in natural systems that may have implications for industries, and A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda manage natural resources and ecosystems to ensure their economic benefits are sustained into the future (Lydia et. al. 2017). NCAs are therefore a documentation framework of the changes in the natural capital stocks and flows of a country. As such they therefore act as a source of information to assist in decision-making. NCAs do not only embody physical accounts, but also monetary accounts whereby the contribution of natural capital to the economy and human well-being is valued. Such monetary accounts can be used to inform policy decisions and can contribute to issues such as poverty alleviation. Conversely, not knowing the value of natural capital can result in losses that negatively affect the poor. For example, lack of information about the value of forests to maintain downstream water resources and soil retention can lead to the clear-cutting of those resources and the loss of ecosystem services all of which have a detrimental impact on livelihoods. Thus, many countries including Rwanda have made progress in constructing natural capital accounts (Vardon et. al. 2017; WWF 2014). 2.2 NCAs in Rwanda: A reflection Rwanda has made a strong commitment to green growth, which is embodied in its Green Growth and Climate Resilient Strategy (currently undergoing revision) (GoR 2011). This is also illustrated in its Fifth National Biodiversity Report to the Convention on Biological Diversity (GoR 2014). After the issuing of the Green Growth and Climate Resilient Strategy (GGCRS) and the submission of National Biodiversity Report to the Convention on Biological Diversity, in 2015 Rwanda embarked on the preparation of natural capital accounts. At the end of 2020, four accounts have been finalised, namely land, mineral, water, and ecosystem accounts. The most pertinent aspects to this paper will subsequently be discussed briefly. 2.2.1 Land accounts Land-based resources are the basis for nature-based tourism, conservation, agriculture and rural livelihoods in Rwanda. These resources also face many pressures stemming from population growth, the need for jobs, rapid urbanisation, as well as vulnerability to changes in climate, weather extremes and rainfall patterns. The land account (NISR 2018) has provided information about the land assets, changes in land use and land cover, land availability and productivity, as well as the potential for and constraints to agricultural growth. From the land cover account (see Figure 5) the following becomes clear:  Rwanda had experienced major land cover changes between 1990 and 2015 as indicated by a rapid decline in woodland and dense forest while croplands increased. Croplands (annual and perennial) have more than doubled in size from occupying 25% to 53% of the country. This increase was largely at the expense of sparse forests whose footprint shrank from 37% in 1990 to 11% in 2015;  The area of settlements has also doubled over this period, but it remains a minor feature in the landscape at about 1% of Rwanda’s overall area. Figure 5: National land cover: A comparative analysis: 1990, 2000, 2010, and 2015 3 000 000 15 2 500 000 Otherland Settlement A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Water Body Land Cover in Hectares Wetland 2 000 000 Annual Cropland Perennial Cropland Open Shrubland 1 500 000 Closed Shrubland Open Grassland Closed Grassland 1 000 000 Woodland Sparse Forest Moderate Forest 500 000 Dense Forest 0 National 1990 National 2000 National 2010 National 2015 Source: NISR (2018). 2.2.2 Mineral resource flow accounts With government intervention into the mining sector, 2018 mining contributed 2.4% to GDP with total export earnings reaching $346 million and target to $1.5 billion by 2024 by doubling the exports. Besides its contribution to GDP and exports, the mining sector employed about 54,000 people or about 2% of the total number of people employed. From the mineral accounts, the following has been deduced:  The mineral resource flow accounts (NISR 2019a) show a negative natural resource rent of $7 million between 2012 and 2016. Natural resource rent is a measure of the scarcity value of extractive resources such as minerals and is calculated as the surplus value after all costs, including normal profits, have been accounted for.  These negative rents were likely the result of any or a combination of factors, including the following:  Low commodity prices that do not fully reflect the value of the scarce resource;  System-wide inefficiencies leading to production that is too low;  High production costs (relative to the level of production);  Difficulty in the accessibility of the resource or low quality of the ore.  The negative rents reflect the fact that the sector is cash-strapped and illiquid. This liquidity constraint hampers the sector’s ability to honour its commitments with respect to safety, health and the environment, among others. Adequate protective measures and restoration are therefore not provided and undertaken. This results in considerable detrimental impacts that include soil erosion, biodiversity loss, life-threatening, mudslides and water pollution.  While mining is economically beneficial for Rwanda, there are deep concerns about its impact on the environment, degradation and the loss in biodiversity. Greening the mining sector is daunting, however, given the negative resource rents and the need for structural changes in the sector. The challenges have been exacerbated by the Covid-19 pandemic. It is therefore imperative that investments are made to support greening measures to the sector. 16 2.2.3 Water accounts A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda The water accounts (NISR 2019b) show both the use of water by economic sector, and the sources of water, namely surface water, rainwater or groundwater. This enables decision-makers to consider the distinct issues associated with each water source and the specific needs of different industries. From these accounts that the following has been deduced:  Rwanda, on average, receives a net inflow (rainfall minus evapotranspiration) of about 11.3 billion m3 per year. This volume arrives seasonally and with spatial variation. Water is therefore not always available where it is needed and in the required amount. To make these renewable water resources available where and when needed, it is necessary to capture water and store it in reservoirs as well as to enhance conservation in soils.  Based on water users, the agricultural sector uses 96% of water withdrawn from the environment (including both soil and groundwater), mostly for low value crops essential to the country’s food needs and the rural economy.  The annual water availability per capita was found to be about 1,000m3 per capita per year on average for the study period (2012-2015). With the future projection of population increase, this per capita water availability is expected to decrease.  The average water demand for 2012-2015 was 1.5 billion m3, excluding groundwater. This water demand is anticipated to reach 3.4 billion m3 in 2040 based on population growth expectations.  Considering the water availability and actual water withdrawal, Rwanda was classified as a “no water stress country”. However, when considering water availability and based on population needs, Rwanda is classified as an economically water stressed country mainly due to limited infrastructure to capture and store water. 2.2.4 Ecosystem accounts The ecosystem account differs from the previous accounts in as much as it investigates the flow of ecosystem services. For example, Rwanda has been endowed with abundant freshwater resources as indicated above, but the assurance of water supply is becoming more variable with elevated flooding, more frequent drought periods and declining water quality. This increase in vulnerability is the result of changes in ecosystems, its processes and functions as a result of land use and cover changes. The widespread unsustainable cultivation practices on the steep mountain slopes as well as mining reduce the ability of catchments to produce beneficial environmental services such as dry season flows, erosion control, soil stability and flood risk reduction. The ecosystem accounts for Rwanda (NISR 2019c) have shed light on some of the key natural resource management challenges facing the country. The ecosystem accounts introduce several new indicators that helped to focus on landscape processes that influence soil erosion, soil loss, base flow and quick flow. These indicators help describe soil erosion and water flows, which impact on economically important ecosystem services, including dry season water availability, flooding risk reduction, soil fertility and sedimentation avoidance. These ecosystem services, in turn, support hydropower, irrigation, drinking water and crop production. The ecosystem account highlights the following:  Huge displacement in the upper layer of soil through soil erosion means a potential decrease of ecosystem capacity to retain soil against water runoff. In 2015 approximately 158 million 17 tonnes of topsoil were eroded, with an annual average of 62 tonnes per hectare; see Figure 6 for national soil erosion distribution. The trend since 1990 shows that soil erosion A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda has increased by 54%.  While soil erosion does not necessarily imply total soil loss, as not all the displaced soil reaches the valley bottom and the streams, the displaced soil does imply a loss in soil nutrients and is a leading indicator of potential future soil loss.  Total soil loss (topsoil which finally reached the stream and was taken away) in 2015 is estimated to be 14 million tonnes, with an average of 5.5 tonnes/ha and has increased by 123.1% from 6.3 million tonnes in 1990.  The economic impact of the loss in topsoil based on market values, a proxy for its productive capability, is between $34/tonne (RwF30,000) and $57/tonne (RwF50,000). The loss of topsoil thus contributes to a societal loss of between $476 and $798 million per year (NISR 2019a).  Both soil erosion and soil loss impact soil fertility negatively, and this leads to an elevated dependency on chemical fertilisers to offset the loss in soil fertility. This has cost the government $40 million, almost 0.5% of the GDP in 2015 or nearly 2% of the national budget 2014/2015 (BNR 2015; MINECOFIN 2015). Taking a longer view, the cost of fertilisation has increased 630% when compared to 1990 (BNR 2015; MINECOFIN 2015). This financial increase is mirrored in the increased dosage from 4kg/ha in 2004 to 32kg/ha in 2017 (GoR 2017; MINAGRI 2018). Thus, not only is the country losing the productive values of fertile soil mentioned above, but it also does incur increased direct costs while the soil’s increased fragility reduces its water retention capacity and worsens water quality due to increased nitrification, and thus increases the cost of water treatment (REMA 2014). Figure 6: Soil erosion (tonnes per 900 m2): 2015 18 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Source: NISR (2019 ).  The quick flow has increased by 35% and has contributed to the intensity of soil nutrient loss, reduction in water quality, and flooding which causes further infrastructure and crop damage and a loss in life. In 2014, the Rwanda National Contingency plan for floods and landslides was estimated at $19.6 million (RwF13 billion) (MIDIMAR 2014). Almost 1% of the national budget for fiscal year 2014/2015 was therefore required to deal with disasters associated with quick flow.  Base flow has declined by 11% between 1990 and 2015. Base flow is important as it determines the availability and security of supply water, especially in the dry season. 2.3 A policy response to the challenges A decline in base flow signals the growing risk of seasonal water deficits, a trend which may grow in future. This decline in conjunction with the increase in quick flow is the direct result of the land use and cover changes as well as destructive mining practises, mining waste dumps, mine tailing dams and land degradation and the consequences thereof on water and related aspects (Barreto et. al. 2018, NISR 2019a; REMA 2015). As is evident from the NCAs, the main message is to improve Rwanda’s nature-based assets, support and extend its conservation areas (as they are important generators of ecosystem services), improve agricultural practices and restore degraded land. Rwanda has therefore instituted several policies and embarked on various processes to restore its ecosystem and biodiversity as well as improve land conservation. Rwanda’s Natural Capital Accounts have informed and contributed to the following key national policy and programs.  A Seven-Year Government Program: National Strategy for Transformation (NST1) 2017-2024  Establishment of Rwanda Water Resources Board (Adopted 2020)  Rwanda Green Growth and Climate Resilience: National strategy for climate change and low carbon development 2011 (undergoing revision)  Updated National Determined Contribution Plan on Paris Agreement and climate change UNFCCC, submitted May 2020  National Environmental and Climate Change Policy, adopted in 2019  National Land Use and Environment Master Plan 2020 -2050 (adopted May 2020)  Rwanda strategic plan for agriculture transformation 2018-2024  Rwanda National Forestry Policy 2018 The integration of these policies is indicated in Figure 7. From a bio-physical perspective there are two main aspects, namely conservation agriculture and eco-tourism through improved management of the National Parks; the following are the salient points: 19 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Agriculture conservation  Policy objective:  Combat hunger and climate vulnerability responsiveness.  Key ecological benefits:  Food provisioning;  Soil fertility;  Water quality;  Dry season water availability;  Flood control;  Erosion control;  Carbon sequestration;  Air quality improvement;  Contribution towards biodiversity conservation and promotion. National Parks  Policy objective  Being self-financed through competitiveness.  Key ecological benefits:  Reintroduction of species, especially those which are locally extinct;  Restoring and Expansion of existing natural wildlife habitat; Figure 7: Rwanda’s nature-based solutions: Model in agricultural land and National Parks Ecological ow Rwanda Agriculture Conservation and Biodiversity drivers Existing economic ow Potential but not yet started Food provisioning, Water quality, Soil fertility, Dry Locally extinct species reintroduction, season water, Pollination, Habitat restoration and expansion, Food control, Erosion control, Threats control, Community education Carbon sequestration Ecosystem and Biodiversity Conservation Combat Hunger and Climate Destination Vulnerability Responsiveness Competitiveness Conservation Agriculture Eco-tourism: National Parks Carbon credit market potential Tourism revenue Sustainable and high organic farming yield Foreign revenue Hotel, restaurants, Agricultural exports Ecotours companies, Local community economy National economy Agriculture sector: 23% of GDP Tourism sector: 10% of GDP Source: Own analysis. 20  Control parks threats; A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda  Improving community education mainly for local community adjacent to parks.  Direct measurable economic outcomes include the following:  High and sustainable organic farming products;  High agricultural export;  Tourism revenues;  Local economy boosted by local hotels, restaurants;  Carbon Credit: this is the potential sources of foreign revenue while financing agriculture conservation. In addition to the bio-physical response, the financial response to the above-mentioned policy directives is as follows:  Rwanda National Forestry Policy (MINILAF 2018a) This policy promotes in situ soil conservation through agroforestry and forest landscape restoration. In support of the Bonn Challenge, Rwanda has pledged to restore two million hectares and enhance its green growth while ensuring that forest is sustainably managed through full compliance with social and environmental safeguards. Its Investment Program for 2018-24 is estimated to be $95 million to achieve the following policy outcomes (MINILAF 2017):  Planting trees on a large scale to become more resilient to climate change;  Increasing forest productivity and reducing risks from climate change, pests and diseases;  Increasing ecosystem services values delivered;  Conducting rehabilitation, restoration, agroforestry, plantations at all scales and patterns to high standards; and  Increasing natural forests and woodlands in quality and scope through pressures and active management and protection.  Strategic Plan for Agriculture Transformation: 2018-24 (MINAGRI 2018) The policy of RwF2,776 billion (almost $3.317 billion) focuses on the following:  Irrigation – especially marshland and small-scale irrigation – which is taking up 25% of the total budget;  Efficient and inclusive market development comprises 16% of the budget. This area includes market infrastructure as well as subsidies to inputs markets;  Mechanisms for increased resilience output that include significant provisions for vulnerable groups (15% of the budget);  Land husbandry and cropland rehabilitation involving new radical terraces (32,000 ha), new progressive terracing (84,020 ha), agroforestry (from 22 trees per hectare in 2017 to 78 as a possible target by 2024), and soil restoration (13% of the budget);  Providing extension services that take up 6% of the total budget.  Rwanda’s Strategic Programme for Climate Resilience: 2019-2024 (MoE 2017) This policy requires $499 million to implement the following aims: 21  Agriculture-driven prosperity: A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Providing investment for new climate-resilient value chains; unlocking barriers to investment in agriculture; building climate-resilient post-harvest facilities and infrastructure; obtaining climate-smart insurance and linking such insurance to climate- smart agricultural research for projects.  Water security for strengthening resilience in the water sector: Strategic catchment planning for all level one catchments; groundwater study and mapping exercise; complete and automated hydrological network; catchment rehabilitation through agriculture; implementing the water-energy-food nexus through hydropower; large-scale resilient water storage; small-scale water infrastructure; rainwater harvesting.  Human settlement that is climate-resilient: Update the national land-use master plan to integrate future climate change; development of climate-responsive city-scale spatial development master plans; climate-smart storm-water management and drainage initiative in secondary cities; national waste management flagship project, including infrastructure development in secondary cities; strengthening climate resilience in Rwanda’s district roads; networks, and integrating climate-robustness into the Nyabarongo bridge design and construction.  Stable and sustainable landscapes: Integrated flood risk management project in north-western Rwanda; land stabilisation and landscape restoration in areas affected by mining; technical and management capacity development and training to facilitate end-user orientation. Based on the above policies and strategies, almost $3,911 million in total is needed over the NST1 period (2017-2024); or on average $651.8 million annually. Over the 2017-18 to 20-21 NST1 implementation period, the agriculture, environment and natural resources pillars received $737 million in total with $220 million allocated in 2019-20 (Figure 8 – see also Box 3). This declined by 21% to $172 million in the 2020/2021 year of allocation with agriculture being the hardest hit by this decline. In stark contrast the NST1 budget allocation for all pillars increased by 13% from 2019/2020 in 2020/2021. Figure 8: Resource allocations to the economic transformation pillar: 2017-2021 3 948 250 4 500 2 972 3 499 crease 4 000 13% In 200 3 500 $ million: Agric & Env & NR 48 -19 64 vid 2 548 Co pact 3 000 im $ million: All 150 21 % 60 2 500 de 34 cre ase 2 000 100 156 1 500 151 50 111 112 1 000 500 22 0 0 2017/2018 2018/2019 2019/2020 2020/2021 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Agriculture Environment and Natural Resources All pillars Source: Minecofin (2020). Since the NTS1 adoption, Rwanda has been recording a shortage of more than 70% of the required investment every year toward those green strategies (more than $430 million from 2017 to 2020). This annual deficit has now amounted to $1.8 billion. Despite the positive trend to shorten the gap recorded in the previous three years, COVID-19 has reversed the trend by further widening the gap by 7% in 2020 from 2019. External partners for specified pillars also contributed to the reducing the funding gap, namely the following:  Forest landscape restoration project in the Mayaga region (2019-2025), a six-year project total cost of $32.7 million and was partially financed by a grant from GEF and the UNDP ($7.2 million) and co-funding from the Government of Rwanda ($25.5 million) (REMA 2019).  Funding received from the Embassy of the Kingdom of the Netherlands for a four-year Landscape Restoration and Integrated Water Resources Management project for Sebeya catchment with the value of €20.8 million (almost $25 million) (IUCN 2019).  Additional funds are expected from the World Bank under the project called “Second Rwanda Urban Development Project” (World Bank 2020d). This World Bank project will fund rehabilitation works and other ecological restoration activities in the Gikondo wetland and Kibumba valley. The project component activities include evidence-based, sustainable wetland management, flood risk management and greenhouse gas monitoring (US$ 13.88 million, of which IDA US$ 4.9 million, GEF-7 US$ 6.7 million and PPCR US$ 2.28 million). In addition, NDF has committed to a total of 16.1 million Euros to finance Kigali wetland rehabilitation specifically targeting Rwampara, Rwintare-Rugende and Lower Nyabugogo. Despite these external contributions the funding gap remains large, and these challenges have been exacerbated by the response measures taken to deal with Covid-19. The key messages are thus:  Public finance (government budget) is still far away from covering this financial nature smart recovery plans gap;  Strategic plan to unlock funds including investment in financing green to shrink this $430 million annually investment gap in next years as well as covering the existing financial gap of 1.8 billion recorded in the past four years of NST1 implementation;  Private sectors and philanthropists are not engaged in this plan, and maybe strategic investment plans attracting them is still missing. It should also be noted that given the valuable information contained with the all the natural capital accounts, most notably the ecosystem accounts, these accounts should be regularly updated and expanded to include tourism and biodiversity accounts while also developing monetary accounts for them. The monetary valuation is necessary to assist in the development of indicators such as the Green GDP and the genuine savings rate to inform and assist monitoring through, among others, the NBSAP. 23 Box 3: Food insecurity in time of a pandemic A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Covid-19 has revealed the scale of Rwanda’s food insecurity during an emergency when food supply chain is disrupted (Lal et. al. 2020). In some countries food prices dropped during this time, such as Australia which could produce enough food for 75 million people, three times its own population (AFGC 2020; KPMG 2020) and food waste increase such as in USA where farmers dumped 14 million litres of milk each day and also vegetables like onions (WEFORUM 2020). This was not the case in Rwanda, as the Consumer Price Index for food and non-alcoholic beverage has increased by 17%. Some fruits, such as mangoes have doubled from almost 1$ (RwF1,000) to $2.7 (RwF2,500) and mandarin (citrus fruit) from $1.6 to $2.7 a kilogramme (Allafrica 2020). Furthermore, the rural areas where poverty is the most prevalent were hit the hardest by the rise in inflation compared to urban areas (NISR 2020). These locally reported price increases are supported by results published by the Global Alliance for Improved Nutrition (GAIN) which has shown that from 14 February (pre-pandemic) to 7 May 2020, out of 137 country-food combinations, 111 showed price increases. Price increases were the largest in Rwanda (19.5%), Tanzania (12.3%) and Mozambique (10.5%), with only minor increases (1-4%) in the other countries (GAIN 2020). Thus, a decrease of 21% of funding in conservation agriculture program has had the following impacts:  Degraded land restoration programs; this will exacerbate the food security crisis noted as food chain disrupted by Covid-19;  Job loss in land restoration projects has worsened financial crisis mainly in rural communities. As funds are diverted from conservation agriculture, Rwanda is losing its potential sustainable economy as the World Resources Institute research (WRI 2020) indicated. It is estimated that if Rwanda restores only 274,600 ha (or 20% of the country’s arable surface) such restoration could generate $147 million in annual economic benefits to national and local economies (MINILAF 2018b). This could also provide additional food addressing food insecurity concerns. More-over, restoration creates more jobs per dollar invested than most other industries. These jobs include foresters, botanists, technicians, and labourers; this would the best investment plan for Rwanda in responding to job creation for COVID-19 package relief. This approach was applied in Ethiopia, India, Australia and Pakistan as potential for rural jobs. In Pakistan, for instance, more than 60,000 unemployed labourers are being paid to set up tree nurseries, plant trees, and monitor forests (WRI 2020). 2.4 Conclusion Rwanda’s set of NCAs indicates that the country is in an advanced stage of rapid land use and cover transformation. This transformation implies the liquidation of its natural assets in the form of converting its intact natural capital to various forms of transformed areas, be it croplands and urban or mining areas and their large footprint of mining waste. Such land cover and use conversion leads to serious soil, water and livelihood concerns that are likely to have a long-lived impact. Soil erosion impacts agricultural productivity negatively, which leads to further land conversion and more land being set aside for agricultural use and increased fertiliser use at big cost. Such conversion and erosion have a further impact on both quick flow and base flow by increasing the former (leading to accentuated floods and droughts) and decreasing the latter (leading to water availability concerns), all while depleting the soil organic carbon and the carbon sequestration capability of the land. The change in land cover and use is therefore accompanied by a large environmental debt that has been acknowledged in the Strategic Plan for Agriculture Transformation: 2018-24 (MINAGRI 2018). Rectifying the large-scale degradation and restoring ecosystem services is estimated to cost almost $4 billion of which only a small portion has been secured. The country’s dependence on natural resources has been illustrated by the consequences of the Covid-19 pandemic that led to increases in food prices while suppressing revenues from mining, thus further deepening poverty. It is within this context that nature-based tourism and conservation have an elevated role to play, and, simultaneously, on which Covid-19 had a major impact, the 24 subject of Chapter 3. A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Covid-19’s Impact on 3 Nature-Based Tourism and Conservation 3.1 Nature-based tourism in Rwanda: A profile The total number of park visitors rose steadily from about 4,000 in the year 2000 to more than 111,000 in 2019, an increase of more than 2,800% over the period. This trend changed dramatically in 2020 because of the Covid-19 lockdown. The total number of visitors for 2020 declined to about 36,000, or approximately the same number as during the early part of the millennium, illustrating a year-on-year decrease of 67%; see Figure 9. This implies that all the gains made over the past approximately 15 years have been wiped away. 25 Figure 9: Total number of park visitors: 2000-2020 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda 120,000 100,000 80,000 60,000 40,000 20,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: RDB (2021). Notes: 2021* data reflects the ten months up to the end of October. The insert shows the % change in number of visitors relative to the year 2000. Over the period between 2009 and 2020 the proportionate share of visitors to the three main National Parks (VNP, ANP and NNP) remained very constant, with ANP being the most frequently visited (Figure 10). ANP had about 58,400 visitors in 2019 of which 24,300 were Rwandan residents and 27,500 foreign visitors. The total number of visitors to ANP declined to 16,800 in the first ten months of 2020. The VNP had 34,900 visitors in 2019 of which only 5,600 were Rwandan residents, but 28,100 were foreign visitors. The total number of visits declined to only 9,400 in 2020. The least visited NNP had 17,800 visitors in 2019 of which 4,600 were Rwandan residents and 12,400 foreign visitors. NNP only enjoyed 4,400 visits over the first ten months of 2020, see Figure 11.  This indicates that foreign visitors do have the financial means and inclination to travel to and visit VNP and NNP as they are the dominant group visiting these two parks. These parks are home to the gorilla and the golden monkey and other primates. ANP, however, is the most frequently visited park by Rwandan residents indicating its importance from a recreational as well as educational perspective. Figure 10: Total number of park visitors by park: 2009-2020 120 000 100 000 80 000 Number of visits 60 000 40 000 20 000 26 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Akagera National Park Nyunge National Park Volcanoes National Park Source: RDB (2020). Note: 2020* data reflects the ten months up to the end of October. Figure 11: Total number of park visitors by residence: 2009-2020 120 000 100 000 Number of visits 80 000 60 000 40 000 20 000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* Rwandan resident Foreign resident Foreign visitor Source: RDB (2020) Note: 2020* data reflects the ten months up to the end of October. It should therefore come as no surprise that game watching and safari tours in the ANP are by far the dominant activities. In 2019 these accounted for 46% of all the nature-based activities undertaken throughout Rwanda by the more than 111,000 visitors (Figure 12). This is followed by gorilla trekking and visits to the golden monkey in the VNP which comprised 16% and 8% respectively of all nature- based activities by the visitors. The canopy tour (7% of the total activity) was the dominant activity in the NNP. This illustrates the rich diversity of nature-based activities on offer by the various parks, albeit dominated by a few large park-specific entries. Figure 12: Distribution of park activity: 2019 1% ANP: Game Safari ANP: Camping 1% 1% ANP: Boat ride 8% ANP: Behind scene 5% ANP: Fishing & Other NNP: Primates NNP: Trails 16% 46% NNP: Camping NNP: Canopy NNP: Birding VNP: Gorillas 7% VNP: Mountain climbing VNP: Dian Fossey’s tomb 1% 4% VNP: Golden monkey 27 4% 4% VNP: Nature walk 2% A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda 1% VNP: Caves Source: RDB (2020). Note: VNP = Volcanoes National Park; NNP = Nyungwe National Park; ANP = Akagera National Park. 3.2 Contribution of tourism to Rwanda’s economy While most developing countries in Africa depend on high commodity prices for minerals, oil and other natural resources for their development, this is not the case for Rwanda (Diao et. al. 2014). Rwanda can be viewed as a non-renewable resource-poor country. This makes the economy reliant on renewable resources for its development (Diao et. al. 2014; Rutebuka et. al. 2018). Countries or regions with similar natural resources have adopted a tourism-based economy and have diversified their economies so that the non-extractive travel and tourism sector contributes both directly and indirectly to more than half of their GDP. This includes countries such as Macao and Seychelles (GoSc 2018; Sheng and Gu 2018; UNECA 2011). Rwanda realised the need to develop its nature-based tourism and conservation sectors, put in place policies and strategies such as the national export strategy and tourism policy to develop the economy and to contribute to the livelihoods of the Rwandan citizens (MINICOM 2009; MINICOM 2011). These policies have garnered rich dividends as can also be seen in Figure 13 with the revenue from tourism growing by 10% on average from 2008 to 2019 rising from $186 million to $498 million (RDB 2020a; UNCTAD 2014a). Revenue from tourism now far exceeds the combined revenue earned from the traditional export commodities, namely coffee, tea and minerals. The total revenue from these three traditional sources of income totalled $254 million in 2019, which is only 51% of that of tourism. Figure 13: Rwanda’s revenue from tourism compared to traditional export commodities 600 498 500 424 425 400 381 324 $ million 304 300 282 294 252 202 200 186 175 152 132 118 131 100 84 80 64 67 51 46 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tourism services Co ee Export Tea Export Mineral Export_3TS Sources: Data was extracted from BNR (Balance of Payment since 1998 to 2014, Balance of Payments BPM6 2010 to 2018 and Formal monthly exports 2019) Nielsen and Spenceley (2010); RDB (2019) and UNCTAD 2014a. It is not just in comparison to the traditional export commodities that tourism did exceptionally 28 well, but also in comparison to other services. Being landlocked with few mineral resources and a weakly developed industrial core, Rwanda imports most of its goods and services, except for the A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda services related to travel. As shown in Figure 14 (see also Annexure 2), tourism is generating the equivalent amount of revenue of all the other services sectors combined. Furthermore, the World Travel and Tourism Council (WTTC) data shows that visitor exports (the spending by foreigners) in proportion to all Rwandan exports have nearly doubled in last 20 years (18.7% in 1999 to 30.2% in 2019) (World Bank 2017; WTTC 2020a). This has led to an increase in the contribution of services to GDP. The WTTC (2020a) states that travel and tourism revenues contributed indirectly to national GDP 10.2% in 2019, which is a major increase from 2.9% in 1999 (see also Cornish 2020). Rwandan tourism was boosted further by the fact that the country had been awarded the privilege to host an increasing number of regional and continental conferences. Rwanda has also been named as a leading destination for tourism in Africa by World Travel Award (RDB 2018). By 2017 Rwanda also led the Eastern African countries with respect to the proportional contribution of travel and tourism to employment, GDP and total export earnings. In this regard it ranks 4th in Africa after Gambia, Namibia and South Africa (WTTC 2018). Evidence of the rise and importance of tourism in Rwanda is provided by, among others, the contribution of gorilla trekking to the economy. We turn to this next. Revenues from gorilla-based tourism Gorilla tourism specifically generated $107.3 million in 2019 (Table 1) which corresponds to 21.5% of total tourism revenues. The significance thereof is underlined by the fact that it only comprises 15.7% of the total number of visitors (RDB 2019). This translates to an average daily spending of $1,375 with the average length of the stay of 4.8 nights (RDB 2020b). The gorilla permits account Figure 14: Tourism’s contribution to Rwanda’s service export 600 Tourism with average Other services with annual growth rate of 506 average annual growth 498 495 492 500 10% since 2008 rate of 9% since 2008 425 427 424 381 400 324 $ million 304 294 285 284 282 300 252 235 234 222 202 186 185 175 200 166 100 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Rwanda Tourism Services Other services exports Sources: RDB (2019) and UNCTAD (2014a). for about 23% of the package in 2019 (or $24 million), which is by far the largest share of the total permit income of the protected areas, which is estimated to be $28 million (RDB 2020b). 29 Table 1: Revenues from gorilla-based tourism A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Year 2016 2017 2018 2019 Average tourism package price ($) 2,650 3,530 4,516 6,531 Average length of stay 5 5.3 5.1 4.8 Average daily spending ($) 529 664 883 1,360 Gorilla trekking volume 21,600 22,780 15,132 17,316 Gorilla trekking revenues ($ million) 57.3 80.4 68.4 107.3 Source: RDB (2019). 3.3 The impact of Covid-19 on tourism in Rwanda 3.3.1 Impact at a national level Services, of which nature-based tourism is a major contributor as noted above, contributed 46.4% of the Rwandan GDP in 2020, which is lower than its 2019 contribution which was 49.2% (NISR 2021). This reduction is due to the impact of the pandemic. Some of the specific impacts are the following:  The drastic decrease in services exports with that of the first quarter of 2020 being $180.9 million compared to $225.4 million in 2019 and for the second quarter $76.9 million compared to $224.8 million (BNR 2020). The services export declined by 52.2% for the year from $987 million in 2019 to $469 million in 2020, a level last seen in 2004; see Figure 15 (NISR 2021).  From a Rwanda policy target and projection perspective, a revenue of $627 million was targeted for 2020 (MINICOM 2009), and the Rwanda Seven Years National Strategy targeted a tourism revenue of $800 million by 2024 (GoR 2017; WTTC 2018). The likelihood of these targets being met is fading because of the pandemic and international travel restrictions. That these estimates were realistic is indicated by the fact that the number of foreigner visitors increased by 30% and 23% respectively for both January and February 2020 when compared to the same months in 2019 before the Covid-19 travel restriction; see Figure 16 and Figure 17 as well as Annexures 3 and 4.  The loss in income is in part attributed to the reduction in park fees for gorilla trekking in June 2020 whereby the RDB reduced the fees to $200 for Rwanda nationals and East African citizens and to $500 for foreign residents from $1500 to stimulate park visits (Rokou 2020; Rwanda Gorilla Tour 2020).  Revenue losses further stem from, among others, the cancellation of events which totals $42 million, almost 10% of tourism revenues collected in 2019 (Cornish 2020).  Using a continent and global perspective, the WTTC reported that by November 2020 51% of travel and tourism-related jobs were lost (WTTC 2020c). Also, the World Tourism Organisation showed that international tourist arrivals (overnight visitors) declined 65% in the first half of 2020 when compared to over the same period in 2019 (UNWTO 2020). This global trajectory with respect to a decline in tourism is further aided by an increase in video conferences, online 30 studying and other contactless solution mechanisms that intensified during the pandemic (CAPA 2020; WTTC 2020d). A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Figure 15: Services export and GDP/capita 1200 900 800 1000 700 800 600 $/capita $ million 500 600 400 400 300 200 200 100 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Services export: Current prices GDP per capita Source: NISR (2021). 3.3.2 Impact at a local level Reduction in revenue sharing National Parks in Rwanda are surrounded by areas with a high population density – the highest in Africa at 525 per km2 – and 80.2% of the population depends on agriculture (NISR 2017). Figure 16: Impact of Covid-19 on merchandise exports and foreigner visiting parks: 2019 & 2020 40% 30% Before 23% lockdown 20% March April May June July August September 0% % Change -20% -11% -12% -27% -28% January February -31% -40% -33% -34% -37% -40% -60% -61% -80% -100% -94% -100% -100% -100% -100% -98% Merchandise monthly change 2019-2020 Foreigner park visitors monthly change 2019-2020 Source: BNR (2020) and RDB (2020). Figure 17: Covid-19’s impact on park visits on a monthly basis: 2019 and 2020 16 000 40% 28% 14 000 20% 11% 31 Number of visitors 12 000 0% Monthly Change 10 000 -20% A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda -32% 8 000 -40% 6 000 -60% -88% -83% -85% 4 000 -94% -80% -100% -100% -88% 2 000 -100% 0 -120% September February January August October March April June May July Park visit 2019 Park visit 2020 Monthly change Source: RDB (2020.) The Rwandan government recognises the critical role played by communities surrounding Rwanda’s National Parks in the country’s conservation efforts. Since 2005 the government has adopted a revenue sharing policy which in the initial stages was limited to 5% of the park revenues given back to the communities by funding community-based projects. This amount was recently doubled to 10% of all park revenue. Between 2005 and 2019, the total amount for revenue sharing stood at $5.3 million and has funded about 690 projects (RDB 2019). As a result of the outbreak of the virus and the reduction in the number of visitors, it is anticipated that there will be an 80% decline in the income of the protected areas and hence the ability to contribute to revenue sharing (RDB 2020). Business prospects, employment and livelihoods Tourism and conservation activities in a National Park like VNP contribute in various ways to the livelihoods of about 70% of people around the park. Since January 2020, Covid-19 has affected tourism activities in VNP and 10,000 people including park staff, porters, hotels, artisans, food merchants, landlords, shops and bars. The tourism revenue sharing scheme constitutes the main source of income for communities around the parks, who were getting approximately $54.7 (RwF50,000/month) per household (RDB 2020). This is affecting families, education for children, sanitation, food security and the security of the park. The Porters Cooperative operating in Kinigi (VNP) is composed of former poachers, and if the situation continues, they may revert to poaching the park (Muhisimbi Cooperative pers. comm.). Large hotels such as SACCOLA and Wildness Safaris around VNP, Nyungwe Lodge around NNP and Kagera Lodge in ANP have closed their operations. The Director of the Rwanda Chamber of Tourism (RCT) said that the tourism sector had lost $38.2 million (RwF34.9 billion) in March 2020 (Byishimo 2020). In a breakdown of the loss, tour operators lost $22.5 million, hospitality industry $14.8 million, conference and events $1.1 million, and travel agencies $0.16 million. Byishimo (2020) also stated that in order to rescue the tourism sector support is required to assist the sector which is also struggling with debt mounting to $96 million. It is also estimated that 90% of tour operators, 99% of travel agencies, 67% for professional conference organisers and 82% of workers are currently laid off (PSF Chamber of Tourism 2020). Additionally, a survey conducted by Rwanda Chamber Tourism of the Private Sector Federation in April 2020 shows that by the end of March more than 3,800 workers lost their jobs in the tourism industry affecting hundreds of hotel staff and their families, which amounts to more than 10,000 people (PSF Chamber of Tourism 2020). Over 100 of cooperatives and small and medium-sized 32 enterprises (SMEs) involved in different activities have also been affected by the lockdown (RDB 2020). This includes women cooperatives, teenage mothers, widows and orphans whose daily A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda livelihoods were depending on tourism sector. 3.4 The impact of Covid-19 on biodiversity conservation: A summary Rwanda’s protected areas, as most across the world, also depended on tourism revenues for financing its management (Lindsey et. al. 2020). In addition to contributing towards the funding of park management, tourism is also a major contributor to the livelihood of communities living around protected areas (PAs). This is done by means of revenues sharing schemes, job creation and small business development that relies heavily on tourism activities (Nielsen and Spenceley 2020; Sabuhoro et. al. 2017). These sources of income have been compromised heavily because of the decline in tourism as elaborated above. Even if the functioning of PAs returns to normal, revenues will be under pressure due to the reduction in park fees which was necessary to stimulate the sector. This has led and will continue to lead to the suspension of community support projects, and law enforcement activities were sustained at much lower levels (EJN 2020). Further challenges arise from the fact that governments, philanthropists and development agencies had to reprioritise given the impact of the pandemic reducing the support to nature-based tourism. As a result, the much-needed funding for park management and the support services were not forthcoming. This exacerbates the pre-Covid-19 needs both in terms of staffing and budgets (Coad et. al. 2019; Lindsey et. al. 2020). These challenges, and the layoffs, have resulted in a decline in the ability to monitor and police the park. It is thus anticipated that activities inside the parks such as hunting, mining, forest logging and poaching have increased. Using Uganda as a case study, 822 snares were found in the Bwindi Impenetrable National Park during March-April 2020, compared to 21 in the same period in 2019. This incidence claimed the life of Rafiki the silverback gorilla (UNESCO 2020). The gains made by the International Gorilla Conservation Programme (IGCP) which has led to the rise of the number of gorillas to 1,063 and which has led to them being removed from the red list of critically endangered species, can now be reversed (The Guardian 2020). In addition, there has been a major disruption of community-based conservation awareness programs during the Covid-19 lockdown and thus the importance of such conservation is increasingly less emphasised. There is also an expectation that some habituated primates would lose the capacity for interacting with humans, especially as far as babies and less habituated groups are concerned. This will be worsened as threats from humans have emerged during the lockdown. The poaching threat would also lead to the groups avoiding humans, which ultimately could affect tourism. Those factors will require more re-habituation efforts (BBC 2020b). It is not just the gorillas that are being threatened by poaching. Misinformation and fears about bats being the cause of and spreading SARS-CoV-2 have led to the destruction of bat populations in, for example, Indonesia, Peru and Rwanda (IUCN 2020b; NRDC 2020). Most disconcerting is the fact that the great apes, which include gorilla and chimpanzees, are confirmed to be vulnerable to infection by the Covid-19 virus (USDA 2021). This will imply the implementation of further protocols and research as people resume interaction with them (IUCN 2020a). The transmission of Covid-19 from human to animals will also threaten their survival. On the other hand, suspending visitation will hamper the revenue contribution from tourism. This 33 economic loss will, in turn, impact negatively on the prospects of the conservation efforts to survive A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda as financial resources decrease. Further impacts involve the suspension of conservation research in VNP, NNP and Gishwati-Mukura in fear of the primates becoming infected by the virus (RDB 2020b). The delicate yet complex relationship between the need to generate revenue as well as human- gorilla contact is illustrated in Figure 18. Figure 18: The delicate and complex human-gorilla network of relationships - - (G) Poaching Community awareness Park management risk programmes and monitoring + - (G) Desired human Habituation 4 visits 1 + + + 5 2 + + 3 + Exposure Actual number Revenue (G) Development + to risk of visits assistance (G) - + - Revenue + External demands as a sharing + result of Covid-19 Source: Own analysis. Notes: The ‘+’ sign indicates a reinforcing relationship, thus the more of the one variable the more of the other, or the fewer of the one, the fewer of the other. The ‘-’ sign indicates a balancing relationship, thus the more of the one variable, the less of the other, or the less of the one, the more of the other. From Figure 18 we can derive the following relationships indicated by the numbers in the figure: 1. At the centre, the higher the degree of habituation the more likely contact will be, leading to more desired human visits feeding into higher habituation programmes (the blue loop); 2. More desired human visits lead to an increase in the risk of the animals being exposed to infections, and the higher such risk, the lower the actual number of visits. The lower the actual number of visits the lower the desired number of visits (the burgundy extension); 3. More desired human visits lead to an increase in the risk of the animals being exposed to infections, and the higher such risk, the lower the actual number of visits. The lower the actual number of visits the lower the rate of habituation and the lower the level of habituation, the lower the number of desired visits (the red extension); 4. The lower the actual number of visits and the degree of habituation, the lower the revenue. The lower the revenue the lower the ability of the park management to monitor the park and thus the higher the poaching risk and undesired human contact. The higher the poaching risk and undesired human contact, the lower the degree of habituation, the lower the desired number of visits (the green extension); 5. The lower the actual number of visits and the degree of habituation, the lower the revenue, 34 the lower the revenue sharing, and the lower the community awareness programmes. The lower the community awareness programmes, the higher the risk of poaching and undesired human contact and the lower the habituation, the lower the desired number of visits (the A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda pink extension). Additionally, the higher the external demands on resources due to the pressure forthcoming because of Covid-19, the lower the development assistance; the lower the development assistance, the lower the revenue, and the cycle continues (the black extension). Given the importance of nature-based tourism in Rwanda, and its contribution to conservation, a dedicated economic recovery plan is justified. To this we turn next. A Post-Pandemic Nature-Based 4 Tourism and Conservation Recovery Plan for Rwanda 4.1 The impacts of Covid-19 on the nature-based sectors: An overview Based on the information provided in Chapters 1–3, the impact of the Covid-19 pandemic on nature-based tourism, conservation and the protection of biodiversity and natural resources has been severe. Not only has it been severe, but it also exacerbated the existing pressures on the natural ecosystem and its capability to provide life-essential services to the people of Rwanda. An incomplete but representative list of the impacts is highlighted in Table 2. 35 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Table 2: Summary of the impacts of Covid-19 on the economy and the natural resources sectors Sector Existing pressures Covid-19 impact National GDP growth:  A drastic slowdown in the GDP economy  Robust and strong growth in recent growth from approximately 12% in years, but from low base with low GDP/ 2019 to a decline of 3.4% in 2020. capita.  Due to the almost total collapse in Foreign exchange: tourism, foreign exchange earnings were seriously compromised as  Rwanda is a non-renewable resource, indicated by a decline in merchandise landlocked country dependent on export earning declining by between tourism for its foreign exchange 30% and 60% per month in 2020. earnings.  Poverty deepened due to an almost Poverty: complete elimination of any revenue-  Poverty as measured by the sharing opportunity from natural international poverty line declined from parks, the reduction in tourism, 2001 till 2014, and then stagnated due an increase in food prices and a to droughts and slowdown in economic slowdown in mining exports. transformation. Land-based  Land fragmentation and conversion  Deepening poverty and the reduction resources from woodland and forests into smaller in the GDP growth and a decline of and smaller land parcels on steep $21 in the GDP/capita, is putting slopes for crop production. Croplands more pressure on the land from have more than doubled in size from a livelihoods perspective likely to occupying 25% to 53% of the country accelerate land conversion. leading to a loss in biodiversity and increased exposure of the soil. Mineral  The sector is highly illiquid leading to  Mining production has decreased resources an abysmal performance pertaining by approximately 60% during the to its responsibility concerning the first half of 2020 putting the sector health and safety of its workers and under further financial pressure and the environment, with large-scale reducing its ability to respond to the degradation and unmitigated soil safety, health and environmental erosion and life-threatening mud slides. challenges in the sector. Ecosystem Soil erosion:  An increase in soil erosion combined services  Massive displacement of soil through with an increase in quick flow but soil erosion. a reduction in base flow leads to increased vulnerability when the  The loss of topsoil contributes to a population are more dependent on societal loss of between $476 and $798 natural resources for food security. million per year.  The capability of the national Quick flow: government to address the  The quick flow has increased by 35% challenges has been seriously and thus contributed to the intensity compromised as is indicated in a of soil nutrient loss, reduction in water 21% decline in the allocation to the quality, and flooding which causes agriculture, environment and natural further infrastructure and crop damage resources pillars for the 2020/21 and a loss in life. budget year whereas the other pillars Base flow: show an increase of 13% dealing with the immediate humanitarian crisis.  Base flow, contributing to long-term 36 available water, has declined by 11% between 1990 and 2015. Almost $4 billion in total is needed over the A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda period 2017-2024 to address the soil-related challenges. Agriculture  Soil erosion and soil loss impact soil  A reduction in the capability to fertility negatively, which leads to an address the land-based challenges elevated dependency on chemical combined with an increase in food fertiliser to offset the loss in soil prices due to shortage in production fertility. The country is thus losing the and thus increase in imports and productive values of fertile soil and difficulties in accessing fertilisers. incurs increased direct costs. Nature-based  Large earner of foreign exchange  A drastic decrease in the value of tourism growing at about 10% a year with the services exports, mainly from tourism, number of visitors rising by 2,800% which declined from $987 million for over the past two decades with 2019 to $469 million for 2020. revenues far exceeding the revenues  The number of National Park arrivals of tea, coffee and mining combined, has declined by 67% to levels seen while the National Parks contribute about 15 years ago. to the livelihoods of 70% of the rural population adjacent to them.  10,000 people were affected through job losses.  Loss in income from development partners and philanthropic organizations due to the wide-spread needs.  Complete elimination of the revenue sharing programme of the National Parks. National Park  Because of limited resources, park All existing challenges remain, but in management management was constrained and relied addition, the following challenges have on external funding from development been introduced: agencies and philanthropists.  Reduced support from development agencies because of the increased pressure.  Human to primate Covid-19 infection increases the risk to the animals and thus reduces the contact with the animals, reducing the tourism income.  Reduced revenue sharing and park control as result of reduced income leads to increased poaching and undesired human contact, which leads to a decline in the degree of habituation. As part of NST1 the GoR responded to the pre-Covid pressures listed in Table 2 and estimated the investment requirement in nature-based restoration to be about $3.9 billion over the next four years (MoE 2017; MINILAF 2017; MINILAF 2018a; MINAGRI 2018). Approximately 70% thereof is yet unfunded. This funding gap is broadened in the estimated cost to deliver on Rwanda’s NDC. Approximately 53% of the NDC budget is nature-based, such as soil and water conservation, livestock, 37 fertilizer and composting and agriculture. The total NDC budget for these sectors is estimated to A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda be $5.83 billion (MoE and UNDP 2020). None of these are, however, specifically earmarked for the development of conservation. This significance of the requirement mentioned above is highlighted by the levels of internal resource deployment in the past, which have been recently estimated (BIOFIN 2017; BIOFIN 2019). From Table 3 the government’s real biodiversity expenditures have been variable over the time ranging from RwF7.5 billion in 2012/13 to a high of RwF16.4 billion in 2014/15. That is between 0.45% and 0.93% of the total GoR budget. When combining the GoR budget with that of non-governmental resources, the total biodiversity expenditure varied between 0.26% and 0.4% of GDP, which is very low (BIOFIN 2019). An estimation of the possible future expenditure patterns based on linear extrapolation is provided in Figure 19, including a finance need assessment (FNA). According to BIOFIN (2019:26) the finance needs were estimated over two timelines; 2018/19 to 2023/24 for NST 1 and 2018/19 to 2029/30 for period covering the SDGs. The aggregate finance needs for the NST 1 period were estimated at between RwF 37.5 and 41.0 billion ($46–51 million) and for the SDG planning period to 2029/30 between and RwF 82.6–91.2 billion ($103–114 million). The average annual additional amount needed was estimated between 6.9–7.6 billion RwF ($8.6–9.5 million). Given the wide-spread nature of the impacts of Covid-19, and the intricate connection among the various land- and resource use activities and sectors, the broad-based approach as identified in the GGCRS (GoR 2021), is highly applicable. A concerted effort on the recovery and the development of the nature-based tourism and conservation sectors is required given its important status with in GGCRS, but the inadequate support through normal fiscal resource allocation and the absence thereof in the NDC. We thus consider the potential impact of a hypothetical tourism bond for Rwanda. Table 3: Biodiversity expenditures as percentage of both budget and GDP: 2014 prices 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 GDP (RwF billion) 4,459 4,852 5,079 5,466 5,951 6,304 GoR budget (RwF billion) 1,372 1,667 1,705 1,762 1,809 1,861 GoR budget as % of GDP 30.8% 34.4% 33.6% 32.2% 30.4% 29.5% GoR biodiversity budget (RwF billion) 10.17 7.5 8.56 16.42 10.6 11.53 GoR biodiversity budget as % of the 0.74% 0.45% 0.50% 0.93% 0.59% 0.62% budget Non-GoR biodiversity expenditure 4.61 5.33 5.76 5.24 5.62 5.07 (RwF billion) Total biodiversity expenditure as % 0.33% 0.26% 0.28% 0.40% 0.27% 0.26% of GDP Source: BIOFIN (2017). Note: To align with national budgets, GDP for 2011 is considered 2011/12, etc. Figure 19: Real biodiversity expenditures and projections: 2011/12 – 2024/25 25 38 20 RwF billion (real 2014) 15 A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda 10 5 0 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 Total Expenditures (inc projections) Expenditures + FNA Source: BIOFIN (2019). 4.2 Hypothetical Rwandan tourism bond: A plausible scenario Indicated in Annexure 5 is a long list of potential financial instruments that could be developed in much more detail for specific use by Rwanda. Here, however, we provide a high-level analysis of the plausible implications of what is called herein a Rwandan Tourism Bond (RTB). This scenario is offered to initiate a discussion around the topic and not to propose a specific instrument. This bond combines some of the features of a sovereign green bond for capital raising (Annexure 5.1) with specifications with an environmental impact bond for capital deployment (Annexure 5.2). Capital raising Based on the success both France and the Seychelles has had with respect to green sovereign bonds (Deutz et. al. 2020), the issuing of such by the World Bank to the Government of Rwanda is proposed. In the case of the Seychelles the World Bank supported the Seychelles’ sustainable marine conservation, fisheries, and coastal ecosystems programme with what is called a blue bond (World Bank 2020a). The fishing industry ranks second in economic importance only to tourism for the island nation, and this blue bond is intended to help build a sustainable blue economy, assisting in the transition to more sustainable practices, and protecting ocean biodiversity. The 10- year bond has a coupon of 6.5% and will be redeemed in three equal instalments from its central budget using its anticipated increase in tax revenues from the fisheries sector and user fees from the tourism sector. Like this a green sovereign bond can be issued with respect to rescue and redevelop the nature-based tourism sector in Rwanda; see also Table 4 for a list of the proposed terms. The government of Rwanda is to deploy these resources on a loan and/or grant basis to the commercial Table 4: Rwandan tourism bond: Terms Item Value Notes Principle $250 million Comprising  $150 million: the expansion of conservation areas  $100 million: recapitalisation of the tourism and hospitality industry Coupon rate 6.5% As per the Seychelles example Term 10 years As per the Seychelles example Corporate tax rate 30% https://tradingeconomics.com/rwanda/corporate- 39 tax-rate A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Corporate taxable income as % of 20% Assumption total revenue Portion of the tax revenue used to 30% Assumption repay the bond Foreign visitors: Daily spent $1,360 Table 1 Foreign visitors: Number of days 4.8 Table 1 Foreign visitors: Income multiplier 2.7 Ntibanyurwa (2008) Foreign residents: Daily spent $200 Assumption Foreign residents: Number of days 2 Assumption Foreign residents: Income multiplier 2.7 Ntibanyurwa (2008) Rwandan residents: Daily spent 20 Assumption Rwandan residents: Number of days 1 Assumption Rwandan residents: Income 2.7 Ntibanyurwa (2008) multiplier Repayment principles 1. The GoR borrows the money from the World Bank at premium rate as per the Seychelles example. 2. The GoR makes the monies available to the private sector for use in the recapitalisation, expansion and upgrade of the tourism sector to reputable and accredited tax-bearing entities. 3. The GoR repay the debt from the tax proceeds on a pay-for-success basis as per an environmental impact bond as a combination of certain disbursement and industry performance targets are met. tourism sector in the anticipation that the tax revenue generated from such re-lending of the monies will enable the repayment of the bond. The deployment is to be done by means of environmental impact bonds. Capital deployment An environmental impact bond is a mechanism through which the beneficiary, the commercial tourism sector in Rwanda, enters into a contractual relationship with the Government of Rwanda on a pay-for-success basis. The beneficiary benefits from the fact that it is not required to repay the investor unless a predetermined metrics are achieved. If the pre-determined metrics are achieved, the investor receives its full principal and the return. If the metrics are not achieved, then the investor do risk at least a portion of their investment pending the disbursement scheme agreed to. Deutz et. al. (2020) lists several cases where environmental impact bonds have been successfully applied in Atlanta and Washington DC. It is proposed that the GoR considers the expansion of the conservation areas together with concessions and traversing rights as well as the recapitalisation of the tourism and hospitality industry. The selection of the beneficiaries within the tourism and hospitality industry is of the utmost importance. They will have to be reputable and tax paying commercial entities with a strong track record of advancing nature-based tourism. Provided that the identification, procurement and implementation of the bond are done well, then the revenue generated from such a bond and the repayment capability is illustrated in Table 5. From Table 5 it is 40 clear that, based on a corporate tax rate of 30%, and that 20% of the corporate revenue is taxable income; and that 30% of the tax revenue earned be used for repaying the loan, Rwanda would be able to repay the loan within ten years. A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Table 5: Rwandan tourism bond: The performance 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Growth in visitors1 Rwandan 50% 200% 15% 15% 15% 15% 10% 10% 10% 10% resident Foreign 15% 75% 15% 15% 15% 15% 10% 10% 10% 10% resident Foreign 10% 250% 15% 15% 15% 15% 10% 10% 10% 10% visitor Anticipated number of visitors to National Parks2 Rwandan 34,654 9,150 13,725 41,175 47,352 54,455 62,624 72,018 79,220 87,142 95,857 105,443 resident Foreign 8,440 4,786 5,504 9,632 11,077 12,739 14,650 16,848 18,533 20,387 22,426 24,669 resident Foreign 68,042 16,681 18,350 64,225 73,859 84,938 97,679 112,331 123,565 135,922 149,515 164,467 visitor Total 111,136 30,617 37,579 115,032 132,288 152,132 174,953 201,197 221,318 243,451 267,798 294,579 National income from tourism: $ million3 Rwandan 2 3 3 3 4 4 5 5 6 resident 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Foreign 10 12 14 16 18 20 22 24 27 resident Foreign 1,132 1,302 1,497 1,722 1,980 2,178 2,396 2,635 2,899 visitor Total 1,145 1,316 1,514 1,741 2,002 2,202 2,422 2,665 2,931 Tax revenue and bond repayment profile Company 286 329 378 435 500 551 606 666 733 profit4 Tax 86 99 114 131 150 165 182 200 220 revenue5 Balance: 250.0 266.3 257.8 244.9 226.8 202.4 170.5 132.0 86.1 31.7 Begin yr6 Accrued 16.3 17.3 16.8 15.9 14.7 13.2 11.1 8.6 5.6 2.1 interest7 Bond 25.8 29.6 34.1 39.2 45.0 49.5 54.5 60.0 33.8 repayment8 Balance: 266.3 257.8 244.9 226.8 202.4 170.5 132.0 86.1 31.7 0.0 End yr9 Cumulative 86 185 298 429 579 744 926 1,126 1,345 tax income10 Cumulative 25.8 55.4 89.4 128.6 173.6 223.2 277.7 337.7 371.5 41 bond A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda repayment11 Tax for the 60.1 129.2 208.7 300.1 405.2 520.8 648.0 787.9 973.9 fiscus12 Notes: 1. Growth in the number of visitors is modelled so that the total number of visitors in 2022 is approximately the same as that of the numbers in 2019, thereafter a growth of 15% and then 10% is assumed, which has been the annual growth over the past two decades. 2. The number of visitors of 2020 is multiplied with the growth rate for 2021 and subsequent years to develop a visitor profile. 3. The national income from tourism is determined by multiplying the number of visitors, with the average daily spent; the number of days and the tourism income multiplier as defined in Table 4. 4. The company profit is calculated as the company tax rate multiply by the national income. 5. The tax revenue is calculated as the tax rate multiplied by the company profit. 6. The opening balance of the bond at the beginning of the year is equal to the closing balance of the previous year with the exception with the first year. 7. The interest accrued is equal to the interest rate multiplied by the opening balance. 8. The bond repayment is the tax repayment times the bond repayment portion, i.e. the portion of the tax revenue that is used to repay the bond. 9. The closing balance at the end of the year is the opening balance, plus the interest less the bond repayment. 10. The cumulative tax income is the total tax revenue that could be generated over time. 11. The cumulative bond repayment is the total value of the bond repayment, inclusive of interest. 12. Tax for the fiscus is the residual or potential net gain for the government. The ability of the Rwandan tourism bond to finance itself is illustrated in Figure 20. The closing value of the bond is indicated as the blue line, with the red line indicating the potential cumulative tax income and the green line the cumulative bond repayment value. The area between the red and the green lines are the potential windfall to the Rwandan government. It could also constitute as an indicator of the potential error, or sensitivity margin, which is substantial. Figure 20: Rwanda tourism bond: Ability to finance itself 1400 900 $ million 400 0 -100 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Bond balance: End year Cumulative tax income Cumulative bond repayment 4.3 Recommendations and policy reforms Given the seriousness and depth of the impact of Covid-19 on the nature-based-tourism and conservation sectors, a dedicated recovery effort is required. More so since Rwanda is an agrarian and natural resource-based economy in which the ecosystem services derived from natural capital 42 is of high importance. The protection and conservation of the natural capital estate is thus essential, yet it is placed under further pressure through the dependency on the resources due to the absence A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda of tourism-based revenues. Given this elevated and increasing importance of the nature-based tourism and the conservation sectors from both a livelihood and biodiversity perspective as well as the importance of ecosystem services, a set of recommendations and policy reforms are offered below. This is presented in terms of: i) integrated land use planning, urbanisation, and disaster risk management, ii) actions required within the core protected areas, iii) actions outside of the core protected areas, and iv) financing options. Table 6: A nature-based tourism and conservation recovery plan for Rwanda: Recommendations and policy reforms Sectors Policy recommendations Institutions responsible Integrated land Rwanda has approved its Integrated National Land Use Master The Ministry in use planning, Plan, Rwanda’s second urban development plan (RUDP II) charge of Emergency urbanisation, is also on-going, and Rwanda has an active disaster risk Management and disaster risk management policy, to mention but a few. (MINEMA), Ministry management What is required is a multisectoral co-operative governance of Environment policy that considers feedback effects to allow the (MoE) and affiliated management of the natural capital both in- and outside agencies (REMA, RFA, Protected Areas (PAs) in a pro-active manner by considering FONERWA, RLMUA, the value of the ecosystem services it renders. RWB) and RDB Development of a policy framework to ensure a multisector Ministry of approach towards the development and enhancement of the Environment (MoE) following: and affiliated agencies i) Ecotourism and Payment for Ecosystem Services (PES), (REMA, RFA and and FONERWA, RLMUA), Ministry of Agriculture ii) An institutional response on key challenges such as land and Animal Resources degradation, drought, water, protected areas, forests, (MINAGRI) and RDB and nature-based tourism in accordance with the Green Growth and Climate Resilient Strategy (GGCRS). A broad-based multi-sector development plan to fast track soil protection and to combat soil erosion while restoring MINAGRI, MoE, REMA and RWB 43 watersheds and natural biota to enhance both below and A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda above soil carbon and biodiversity. The periodic update and expansion of the natural capital MINECOFIN/NISR, accounts to include tourism and biodiversity accounts, as well MoE, REMA, RWB, RFA, as the valuation of the impacts of environmental degradation RLMUA, and RDB which is to contribute to the development of Green GDP and genuine savings rate indicators for improved monitoring and reporting also in the NBSAP. PA core areas Facilitate the investment in conservation and nature-based RDB, MINECOFIN, MoE (to be read in tourism through the following: (FONERWA), BRD conjunction with i) Collaborative Management Partnerships (CLPs), and the section on financing) ii) An investment-friendly environment especially for foreign nationals with respect to the new PAs, including Gishwati Mukura. Development of “Brand Rwanda”, an initiative to articulate RDB, MoE, REMA, and and promote the value of conservation and tourism as RFA pertain in the objectives of the GGCRS for residents, visitors, and prospective visitors from abroad by identifying and communicating the importance of Rwanda’s natural capital and ecosystem services. Roll-out of revenue sharing schemes to communities and RDB and Districts near local landowners for co-management and maintenance of PAs the PAs beyond the VNP. Commercialisation of the PAs by, among others: RDB, PSF-Tourism i) Improving PA operational and management efficiency, Chamber and other partners (e.g. Africa ii) Reviewing and adjusting the entry fees, Parks) iii) Application of concession fees iv) Traversing rights for especially the Akagera National Park and the Gishwati Mukura Park. Buffer zones of Identify and remove explicit and implicit subsidies in mining MINECOFIN, MINAGRI PAs: and agriculture that incentivise land degradation. (RAB), RWB and Remnant forests Rwanda Mining Board outside PAs, (RMB) woodlots and Reduce the demand for wood from natural forests through the MININFRA (REG) plantations following: and MoE (RFA) and (to be read in i) Active sourcing and roll-out of energy efficient stoves MINALOC (Districts) conjunction with the section on ii) Incentives to move away from unsustainable firewood financing) and related fuel sources. Increase the use (e.g. through extension services, financial MINECOFIN and incentives) of conservation and regenerative agriculture, MINAGRI (RAB) agroforestry and silvo-pastoral systems. Increase the supply of timber by improving management MoE (RFA, REMA) and of the existing woodlot to increase their productivity; this PSF includes incentives to increase plantations and woodlots, R&D (including improved genetic material, extension of rotation age). This is to support both the commercial sector and the small outgrowers to prevent the premature felling of trees. As part of the multisectoral land use plan and strategy, MoE (RFA, RLMUA)) conduct mapping of areas potential for commercial forest and PSF plantation development in aligning with Rwanda’s NDC targets. Initiate certification (PEFC or FSC) of forest plantations and Rwanda Standards 44 woodlots. Board (RSB), PSF and RFA A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Financing Develop results-based payments for forestry under REDD+ MINECOFIN, MoE (RFA, (incl. cross- and future carbon market mechanisms under the Paris REMA and FONERWA) cutting issues) Agreement. While Rwanda has a small forest area being in a tropical zone the carbon sequestration potential per hectare is high. Develop guiding principles and procedures and implement a MoE (RFA, REMA), PES scheme for the following: MINAGRI (RAB) and i) Watershed protection, especially in the Congo-Nile Ridge RWB and RDB area, ii) Biodiversity conservation and restoration, including aspects such as pollinator strips, and iii) Above and below soil carbon. 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ANNEXURES Annexure 1: Impact of Covid-19 Management Practices on Nature-Based Tourism in Africa Funding Regional impact and Examples of funding supporting COVID-19-related sources for funding government wildlife authorities, NGOs threats to funding conservation and community-based conservation Photographic tourism  ~70 million visits per year to  ~50% (US$30 million) of Kenya Wildlife Service’s annual budget from  Closure of international 53 protected areas in tourism, supporting management in travel, which A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Africa worth US$10- 39 national parks and reserves could extend for 50 billion  ~80% of Zimbabwe Parks and Wildlife months, reduces  ~8.5% of Management Authority’s budget tourism continent’s GDP derived from tourism (including  Closure of  3.6 million direct trophy hunting) (ZimParks, personal domestic travel jobs on the communication) reduces tourism continent  ~80% of Kenya community and  Economic  ~24 million indirect private conservancies’ operating recession jobs budget from tourism, covering reduces future >60,000 km2, supporting >3,000 international rangers and >700,000 households travel (D.K., personal communication)  Fear of travel  -50% of Uganda Wildlife Authority’s during COVID-19 budget from gorilla-based tourism pandemic  ~80% (US$52 million) of South African reduces arrivals National Parks’ annual budget from tourism, supporting 19 national parks Trophy hunting  ~US$200 million  Supports budgets of 82 conservancies  Closure of annually, practised in Namibia covering ~20% of the international over an area of >1 country (162,000 km2), encompassing travel, which million km2 (refs.) ~189,000 community members (9% could extend for  ~552,000 km (43%) 2 of Namibia’s population) months, reduces of PA extent in lion  ~68% of Tanzanian PAs rely on income hunting range dependent from trophy hunting, covering  Economic trophy hunting 250,000 km2 recession (R. Feber, personal  ~38% of Zimbabwe’s state-owned PAs reduces hunting communication) are designated as hunting areas, Funding Regional impact and Examples of funding supporting COVID-19-related sources for funding government wildlife authorities, NGOs threats to funding conservation and community-based conservation as are large areas of community and  Fear of travel private land (ZimParks, personal during COVID-19 communication) pandemic reduces arrivals  Increase in blanket opposition to all wildlife trade International aid  ~US$833 million  ~90% (~US$3 million) of Northern  Economic from 2010-2016 Rangelands Trust’s budget supporting recession reduces to combat illegal 39 community conservancies across aid budgets wildlife trade, of 42,000 km2 (ref.)  Focus shifts to which ~US$609  ~25% (US$3.35 million) of Gorongosa humanitarian million to PA National Park’s 2019 budget from bi- and financial management and multilateral cooperation partners crisis relief estimated for the Philanthropy period 2000-2009  40% (US$120 million) of World Wildlife  Economic  Individuals for the whole Fund’s global budget from individual recession continent donors reduces  Corporations philanthropic  Makes up an  ~35% (US$12 million) of African  Foundations Wildlife Foundation’s 2019 budget spending 54  Zoos average of 32% of the management from individual donors, ~30% (US$10  Focus shifts to budget of PAs in million) from public sector donors humanitarian and financial A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Africa, up to 70-90%  ~32%, 25% and 23% of Africa Parks’ in some countries 2018 budget of US$50 million crisis relief  >US$6 million from donated by public institutions,  Zoo closures the Association individuals and foundations, limit income and of Zoos and respectively, supporting 15 parks conservation Aquariums across 105,000 km2 in 9 countries spending members to African  58% (~US$8 million) of Gorongosa (215 of 238 species in 2018 National Park’s 2019 budget from American zoos foundations, philanthropy and and aquariums donations closed as of 23 March 2020;  >US$11 million for Sheldrick Wildlife US museum and Trust in 2018-2019, donated by zoo community individuals, corporations, private requesting foundations and public charities, US$4 billion supporting PA management, lease fees, support) community education and outreach, and veterinary assistance across Kenya Domestic  Variable, but often  ~50% (US$30 million) of Kenya  Local economic expenditure low Wildlife Service’s budget from recessions reduce national government national budgets  Only 3% of African Parks’ 2018  Governments operational budgets from national shift focus to governments humanitarian and financial crisis response and healthcare infrastructure Source: Lindsey et. al. (2020). Annexure 2: Rwanda export by services and merchandise 100% 90% 80% 1055 125 147 177 270 193 254 387 483 573 600 559 599 944 996 64 62 69 92 65 63 98 70% Ratio to total export 60% 50% 40% 30% 103 120 202 241 420 341 387 474 517 578 589 788 808 930 917 993 47 51 41 48 46 76 20% 10% 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total services export Total merchandise export 55 Sources: RDB (2019). A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Annexure 3: Impact of Covid-19 on merchandise export: 2019 and 2020 120 0% -11% -12% 100 -10% -20% Monthly change 80 -28% -27% -33% -34% $ million -37% -30% 60 -40% -40% 40 -50% 20 -60% -61% 0 -70% January February March April May June July August September Merchandise 2019 Merchandise 2020 Monthly change 2019 and 2020 Source: BNR (2020). Annexure 4: Impact of Covid-19 on the export of the 3Ts: 2019 and 2020 12 80% 60% 10 40% Value Monthly change Va;ue in $ millions 8 -27% 20% 0% 6 -20% 4 -40% -60% 2 -80% 0 -100% January February March April May June July August September Value USD 2019 Value USD 2020 Value monthly change Source: BNR (2020). Annexure 5: A selection of financial instruments 56 A.5.1 Capital raising A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Towards mitigating disaster risk from climate change Rwanda is exposed to the impacts of climate change and natural disasters. The country is prone to floods in particular, but Rwanda is also exposed to droughts, wildfires, landslides, and other risks. Floods are regularly causing extensive damage and negatively impacting thousands of people’s lives having a significant impact on damages to crops and forests. In this context a Catastrophe or resilience bond could be considered, outlined below, but much more analysis is required. Catastrophe or resilience bonds Catastrophe bonds (CAT bonds) serve as a form of insurance instrument against natural disasters and are a type of resilience bond. The structuring of CAT bonds involves three main actors, namely a special purpose vehicle (SPV), an investor, and a sponsor. They play the following roles: 1. The CAT bond is usually issued by a SPV which is set up by insurance companies and/or investment banks. These companies are responsible for structuring the transaction, creating legal implementation frameworks, getting the bond to the market, and managing the funds in the collateral account. 2. Investors provide capital (principal), which is held in a low-yield collateral account for the term of the bond in exchange for regular coupon payments. While the type of investors can vary, ranging from individuals to large-scale pension funds, investors are generally looking for portfolio diversification as well as a return on their investment, and are willing to accept more risk (including the risk of losing their entire principal), in exchange for higher returns. 3. The sponsor, who can be a public entity or government, is equal to an insurance policy holder and is responsible for making regular premium payments. If there is no triggering disaster event during the term of the bond, the investor receives the principal at the bond’s maturity date and the sponsor’s regular coupon payments, plus interest from the collateral account. Combined this provides investors with a return on their investment. If, however, a triggering event occurs during the term of the bond, the investor loses all, or part of the principal invested. In this case, the funds are used as pay-outs to the bond sponsors. While the relationship between investors, issuers, and sponsors does not change, these bonds explicitly incorporate the value of reduced risk of asset losses thanks to a resilience project. In a first step, the issuer uses catastrophe models to financially assess if and by how much a certain resilience project would reduce asset losses in the case of a catastrophic event. The idea is that if a resilience project is in place when such an event occurs, it lowers the investors’ risk of losing their invested principal. As a result, the sponsor’s coupon payments are reduced as well, thus creating a resilience rebate. In a second step, the value of the reduced coupon savings is captured and used to finance resilience projects. In addition, CAT and resilience bonds provide the benefit of sponsors only being responsible for coupon payments, but not for repaying the bond principal. In this way, cities and municipalities can overcome concerns about debt capacity limits or credit rating impacts. Moreover, disaster risks are uncorrelated with the risks of other investments, allowing portfolio diversification, which in combination with attractive rates of return, makes these bonds appealing to investors. Lastly, co-investors like Multilateral Development Banks (MDBs) can apply a range of instruments to increase the reach of resilient infrastructure projects. For example, they can match the funds invested in resilient infrastructure projects to scale up and/or realize even more such projects. In addition, MDBs can provide technical assistance in selecting, planning, and implementing these 57 projects as well as results-based incentives if these projects extend to the local poor population in A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda return for concessional funding and grants. Green bonds With green bonds, investors do not have to choose between financial returns and climate benefits. Green bonds were created to provide a low-cost financing tool to address the infrastructure funding gap as well as the climate challenge. Green bonds enable investments in low-carbon and climate-resilient transport, water, power, and building projects while offering the same financial terms as traditional bonds. Their advantage is the focus on specific green projects and physical assets. It is not important whether the issuer itself is considered ’green’. As a result, green bonds can be issued by a range of interested parties. Overall, they can take the form of general obligation bonds, revenue bonds, project bonds, and securitised bonds. Green bonds in the form of general obligation bonds are backed by the issuer’s entire balance sheet and, as a result, have the same credit rating as the issuer’s other, non-green bonds. By contrast, green bonds in the form of revenue bonds are not backed by the issuer’s full balance sheet, but by specific revenue streams, such as water/sewer fees or tax revenues. Similarly, project bonds are backed by the financial performance of a specific green project and allow investors to gain exposure to green project risks and returns. Lastly, securitised bonds are bonds that are backed by a pool of smaller green projects. Such bonds provide another option for investors seeking exposure to the risk- reward profiles of green projects. The issuing process of a green city bond and segregation of proceeds involves the following steps: 1. Identification of qualifying green projects and assets. Projects and assets must follow established criteria for the use of bond proceeds, including green asset categories, as well as qualifying assets or projects within these categories. 2. Independent review. In addition to issuers’ self-labelling as a green bond, based on the projected use of the bond’s proceeds, an independent review and certification improves investor confidence in the quality of a green investment by providing reassurance about the environmental benefits of the investment. 3. Tracking and reporting. To ensure that all proceeds from the bond are invested into green projects, the issuer must establish dedicated reporting processes. The amount of the bond must equal or exceed cash on hand plus amounts invested in green projects and assets. 4. Green bond issuance follows the usual steps of conventional bond issuances and includes steps such as working with an investment bank to structure the bond and/or obtaining a credit rating. 5. Monitoring of use of proceeds and reporting. To confirm that funds are adequately allocated to green projects, the issuing city or municipality (or designated auditor) should at least annually prepare a public report. As green bonds offer the same yield, credit rating, and comparable price as conventional bonds, the green benefit is another bonus feature. For those investors who would like to address climate risks but are restricted from doing so by their mandates from asset owners, green bonds are a highly interesting investment vehicle. For those investors, on the other hand, who do not see climate change as their main priority, green bonds can still be an attractive investment opportunity because 58 they are not different from conventional, similarly rated bonds and may be used for portfolio diversification purposes. A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda Forest or agriculture bonds Forests or agricultural bonds are a principal protected fixed income instrument that pays a coupon to bondholders in the forms of cash, carbon credits, or both. The structure of the bonds is the following: 1. Investors buy the issued notes from the issuer; 2. Proceeds are used to buy verified carbon units (VCUs) from REDD+ projects that meet strict environmental, social and governance performance standards; 3. Projects must achieve specific milestones/results to receive payments for delivered REDD+ credits; 4. Investors receive annual coupon payments (in cash, carbon credits, or a combination of both); 5. Investors can retire carbon credits to offset their own carbon footprint or sell them in the carbon credit market; and 6. Companies buy the remaining carbon credit that investors opted not to receive, thus providing a price support mechanism, which ensures that the project can sell a minimum quantity of carbon credits every year until the bond matures. Managing commodity price risks As Rwanda aims to move up the value chain in various agriculture sectors, the Government could further explore managing the price risks faced by volatility in some key markets.  Coffee is a key export with about $75 million a year in revenues (2019 data from https://oec.world/en/profile/ country/rwa). The National Agriculture Export Board (NAEB) is a state-owned entity (SOE) that receives regular budget support from the Government of Rwanda. NAEB itself is exposed to commodity prices in fuel and fertilizer inputs into agricultural production provided to exporters. Rwandan coffee exporters that NAEB represents are exposed to international coffee and tea prices. As a result, the revenue and expenses associated with Rwanda’s fiscal budget are exposed to commodity price volatility through NAEB. A severe price shock on the price of fertilizer and coffee may result in additional budgetary support from the Government of Rwanda. This risk can be hedged through financial risk management tools to de facto insure the sector from international market volatility. The mining sector is a much larger segment, with Rwanda exporting $444 million in gold, for example. Such commodity price volatility can also be hedged assuming the sector follows a reform path to become sustainable and less damaging to the environment. A.5.2 Capital deployment Resilience bond, such as for forests Forest resilience bonds (FBR) build upon private capital and pay-for-success contracts to provide a fixed income security with stable cash flows. The FRB is a public-private partnership that enables private capital to finance much-needed forest restoration. Beneficiaries of the restoration work such as water and electric utilities, and state governments make cost-share and pay-for-success payments 59 over time (up to 10 years) to provide investors competitive returns based on the project’s success. A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda The FRB can achieve this by combining three main components: 1. Measuring of benefits conferred by restoration activities (also known as ecosystem services), 2. Contracting to convert benefits into payments from beneficiaries, 3. Financial structuring to turn beneficiary payments into cash flows for investors. By integrating all three essential components into a single collective action platform, the FRB offers a sustainable source of capital for scaling forest restoration. The primary sources of cash flow for FRB projects are derived from monetizing water, fire, and other ecosystem services created by forest restoration activities. What differentiates the FRB from other approaches to forest restoration is not only the use of investor capital to finance treatments but also the innovative cost sharing among beneficiaries. By bringing together multiple players to share the financial burden of forest restoration, the FRB creates compelling economics for beneficiaries while diversifying cash flows and providing a return for investors. Additionally, using investor capital can shift the initial funding responsibility from the public sector to private investors. Unlike typical pay-for-success models, that usually face smaller deal sizes and high transaction costs, FRBs allow for the following:  Larger, more replicable deals;  More manageable fees by decreasing transaction costs through standardized contracts & measurements;  A true fixed income security with stable cash flows;  Expansion and diversification of beneficiary group from typically one outcome funder to multiple public and private payers (e.g. utility companies, park operators, tourism companies, etc.). While the FRB represents a new approach to funding restoration, the investment structure itself is like infrastructure financing. An analogous example is the financing of a utility-scale solar generation asset, in which funds are raised based on contracted cash flows from the future power that will be generated. Results-based financing (RBF) Results-based subsidy payments from a subsidy provider (e.g., government, trust fund, or development bank) to businesses or households close the so-called viability or affordability gap but are provided only after measurable, pre-agreed results have been achieved and verified. By providing a subsidy, the project’s Net Present Value (NPV) increases and thus raises the project’s viability. This has several positive implications. First, RBF subsidies can enhance access to local finance institutions by demonstrating the financial viability of climate-smart projects. Being able to show a formal contract from a credible funding body confirming these subsidy payments (with the potential for providing further credit cover in addition to the project), demonstrates an enhanced cash flow and therefore reduces the credit risk of local service providers. Second, RBF incentives shift the financial and performance risks to a third-party service provider—municipal utility companies, private corporations, or NGOs. As the pre-agreed subsidy payments are triggered by the service provider’s achievement of concrete outputs and not actual costs, RBF directly addresses three of the main project risks: 1. Construction risks: Contractors are incentivized to deliver the pre-defined outputs on time 60 and within budget. Because outputs are clearly defined, and subsidy payments are linked to the achievement of these results, cost overruns can be avoided because the subsidy amount A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda is fixed and therefore does not cover additional costs; 2. Operation risks: Subsidy payments can be sequenced to reflect the various project milestones and provide incentives throughout the operations phase of the project; and 3. Counterparty risks: Structuring the project around the output verification by an independent agent assures that all parties involved in a transaction are focused on delivering verifiable results. Should the counterparty not live up to its contractual obligations or go out of business, subsidy grants would not be paid. Unlike in conventional, upfront, nonperformance related finance, an independent agent verifies the achievement of the targeted results. Consequently, RBF creates transparency and increases accountability in the project provision. In general, RBF schemes involve the following steps: 1. A service provider (public, private, or CLPs) self-finances and delivers predefined outputs and reports on the outputs delivered to an independent verification agent (IVA). 2. The IVA is responsible for verifying the predefined results and ensuring the sustainability of the outcomes. The IVA reports back to the funding bodies on the actual quantity of the outputs delivered; 3. Based on the verification reports, the fund providers release funds to the implementing agency; 4. The implementing agency in turn releases the funds or gives low-cost loans as subsidy payments to the service provider; 5. The IVA gathers information on output delivery throughout the course of the project and delivers an ex-post evaluation review to the funding bodies at its close. Environmental impact bonds (EIB) EIBs are an innovative finance technique to apply RBF contracts to green infrastructure projects. EIBs are tax-exempt, pay-for-success instruments, allowing governments to limit their losses if projects turn out unsuccessful, thus encouraging them to try novel climate-smart infrastructure solutions. However, EIBs are not really bonds because they are not a fixed-income borrowing instrument with a steady stream of repayments, nor can they be traded. Instead, EIBs are a form of public-private partners or Collaborative Management Partnerships (CLPs) with performance-based contracting. This type of contracting has shown to deliver superior results in areas such as road repair and maintenance because it gives vendors and contractors the flexibility to design new solutions. For example, by providing bonus payments to reward over-performance rather than penalizing underperformance, contractors are given the flexibility to manage their performance and take ownership of project outcomes. EIBs leverage the performance-based contracting approach and allow governments to partner with private sector investors. Together, they find environmentally friendly solutions to address specific infrastructure problems. A public partner and a private investor (e.g., local financial institution or pension fund) agree on a climate-smart investment project with well-defined, measurable performance metrics that represent financial, economic, and environmental results. The private 61 sector investor then provides equity financing to a service provider (such as a local utility or construction company) to build the asset and assumes equity-like risks (without receiving a share in A post-pandemic nature-based tourism and conservation: Recovery Plan for Rwanda the project). The project is strictly monitored by an independent intermediary who is external to the service provider. Upon achievement of pre-agreed results, the city or municipality reimburses the private investor its principal investment and pays an additional premium. By doing so, an EIB allows the investor to generate a return on investment and the public sector to only pay if the pre-agreed results have been achieved. If, however, the predefined targets have not been achieved, the private investor loses his capital. An EIB therefore makes it easier for public entities to manage the financial risks associated with green infrastructure by shifting them to the private sector. EIBs impose greater discipline and accountability on the project than may otherwise be the case. The enhanced efforts required at the beginning of the project to structure EIBs and define which criteria determine success can ensure that a project delivers the benefits sought by the community. While EIBs are still in their infancy, they could be implemented for climate-smart infrastructure in Rwanda because of the following reasons:  EIBs work within existing procurement processes and can be applied within traditional (Built-Operate-Transfer or Design-Build-Operate) models. In addition, they can be used for innovative full delivery procurement;  As institutional investors and local investors pre-finance innovative climate-smart infrastructure projects to meet sustainability and community investment goals, EIBs can be structured to fit domestic finances.