8 November 2018

Rwanda: Doing Business 2019 - What Are the Report's Implications on Rwanda?

analysis

The World Bank Group continues to tout Rwanda as one of the easiest places to do business.

Last week the Group ranked Rwanda 29th globally in the ease of doing business, maintaining its second position in Africa.

In its annual series of Doing Business reports, the Bank ranked Rwanda at 29 from the 41st rank in the previous year. This is an improvement of 11 places from last year.

The country, however, retained its second position in the region behind Mauritius.

The report predominantly highlighted that Rwanda did well in areas of Registering Property and Getting Credit, where it scored 2 and 3 ranks, respectively.

The World Bank representative in Rwanda, Yasser El-Gammal, cited that the country did well in registering property because it had established an efficient land registry where it takes 7 days to transfer property and costs only 0.1 per cent of the property value.

He praised the country for the impressive reforms implemented in the previous year.

Seven reforms - the largest number of reforms in the region - were implemented in the previous year.

"Having such a large leap is just an indicator of how serious you have taken this," El-Gammal told a small group of senior government officials and private sector representatives during the launch last week.

Through these reports, the World Bank makes it a point to push governments to take on the task of fostering environments where entrepreneurs and small and medium enterprises can thrive.

The reforms are a result of these efforts.

In brief, Rwanda is among those countries that are reforming their business regulations to excite the private sector and drive economic growth.

But, what are the implications of these reforms to businesses, investment and the entire economy?

Stephen Ruzibiza, the Chief Executive Officer of the Private Sector Federation (PSF), believes that these reforms create confidence in the investors.

"Paying tax online, contract enforcement, quick acquisition of construction permits and the recent indicator of getting electricity are some of the acts that benefit business management operations," he said.

While the government has started improving the acquisition of construction permits recently, the report ranked Rwanda at 106 - arguably the area Rwanda performed badly.

Last year, contract enforcement made easier by issuing new rules of civil procedure which limit adjournments to unforeseen and exceptional circumstances.

The government began facilitating more reliable power supply and transparency of tariff information, making it easier to access electricity.

Ron Weiss the Chief Executive Officer of Rwanda Energy Group (REG), said that they have improved the monitoring and regulation of power outages by beginning to record data for what is known as the annual system average interruption duration index (SAIDI) and system average interruption frequency index (SAIFI).

The two are widely accepted and recognised standards used by electrical utilities to measure and provide evidence of the reliability of their electricity distribution.

Businesses are winning

Francois Kanimba, an economic analyst, thinks that these reforms have a positive impact on the business environment, which is critical to promote private investment in each country.

"However, it is not the only determinant. There are other factors influencing investment decisions," Rwanda's former Minister of Trade and Industry said.

Kanimba argued that the reforms and the rules that the World Bank Doing Business reports promote are a basis for growth and promotion of small and medium enterprises (SMEs).

"For example, the less cost of starting a business it is in a country, the more likely many start up SMEs will be established and survive a few years later," he said.

This is true for Skyline Digital, a Kigali-based technology startup specialising in web platform and mobile application development.

Serge Mbaraga, one of its founders says that the reforms have made it easier for them to run operations on different aspects.

"Today, it easier for us to pay taxes and access loans than it was before. If you win a tender and you don't have money to pursue the business, it easier to take that contact to the bank and get the loan without hurdles," he says.

The entrepreneur point out that tax is no longer a big burden to small businesses as they can pay income taxes depending on the transactions the business made.

"If you did not make any transaction, the tax body will not run after you to pay the income tax," he explains, adding that all this is done on an online user-friendly platform.

Assumpta Uwamariya of Kalisimbi Wines Ltd which produces beetroot wine shares the same sentiments with Mbaraga.

When Uwamariya started her small-scale business in 2016, she did not have the capacity to pay taxes or collateral to acquire a loan from any financial institution.

"But there was a room for me to operate without paying taxes. I operated a year without paying taxes. Later, when I approached Bank of Kigali, I was given a loan of Rwf9 million," she recounts.

The female entrepreneur argues the changes in regulatory frameworks the government have done over the years have facilitated small businesses to thrive. But she says most small businesses are not aware of these reforms.

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