Emma Kabanda
30 September 2008
opinion
Kigali — "After studying the performance of the economy, we came up with a target of Frw. 264.8 billion this year which is higher than that of last year," said Rwanda Revenue Authority (RRA) Commissioner General, Mary Baine, last January.
The previous year the tax body had collected Frw 248 billion against Frw 220 billion that had been projected. This is a commendable achievement on the part of the tax body and should be congratulated for its success over the years and the tax payers who make the collections possible albeit with some coercion. Should be rightly appreciated!
There is an easier way of increasing the tax collections while making Rwandans even richer; forget Adam Smith's theories; this is common sense theory, helping Rwandans create wealth. It is good the Government of Rwanda recognized that it's Rwandans who will be the engine of growth for their nation.
The challenge is how to spur their resourcefulness to make the vision a reality. I will make a humble proposal which is open for discussion.
In a situation where figures are scarce and unreliable as Electrogaz's water bills, I will take the liberty to say that the biggest number of Rwandans are employed in the agriculture sector.
The majority of people who really create wealth in the said sector are smallholder (is it tiny-holder?) farmers tilling between 1 to 4 acres of over cultivated land drained of all soil fertility.
The prospects of doing business in the agriculture sector beyond subsistence lie in engaging in production of high value crops that do not need large swathes of land, which must be accompanied by adding value to the produce which call for sizeable capital investment something that is not attractive given the cost of borrowing from banks. This will remain an economic activity for many Rwandans in the foreseeable future.
The second sector that utilizes the resourcefulness of Rwandans is the Government through its ministries, departments, authorities, parastatals, commissions and agencies. This is limited by its absorption capacity.
The NGO sector utilizes the resourcefulness of Rwandans but does not create sustainable wealth. The service sector though expanding, its growth is dependent on the development of other sectors that create wealth and is limited by the number of resources it can absorb; moreover, the nature and skills level required is limiting its entry.
The manufacturing sector, though young, is growing and chances of utilizing the resourcefulness of Rwandans are real though not in the immediate future. The mining sector, virgin as it is, calls for capital that is prohibitive to many Rwandans. The religious sector is crowded and also a parasite - so one reason it should be taxed.
The most reasonable and easy way to utilize the resources of Rwandans is to tap into their resourcefulness and spur them into proposing ways of creating wealth. We have the ideas, the skills and the will; what is lacking is means to apply these.
I want to suggest the Government establishes a national business incubation or hatchery centre, agency, authority or commission whatever the name, where we can submit business proposals for possible funding in line with the national economic objectives and the agency will study their viability especially turnkey and small scale businesses.
The Agency basing on the viability of these proposals would then guarantee loans from banks and control the finances of the businesses by hiring and seconding finance managers reporting to the agency for the duration the business is servicing the loan while the proposer manages other functions.
We all know that the biggest impediment to starting a businesses is demand for Collateral security by financial institutions which is a problem to persons who may otherwise have brilliant business ideas.
After the loan is serviced the business should be left to the proposer. It is important to mention that the proposer of the business need not handle cash at any stage ( sudden handling of cash when one is poor can impair judgment) but banks will directly pay suppliers of resources, utilities, machinery and services.
I believe Rwanda has enough honest people to manage such an Agency successfully. There will be job creation, competitiveness, wealth creation, creativity and increased taxes.
Rwandans will not line up for government employment but to pay taxes and win accolades for tax compliance. Simply put, the government should make many more Rwandans entrepreneurs by facilitating the starting of businesses so that more of them pay taxes. It is like feeding a cow so you can milk it!
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