From today, and for the next three weeks, Business Times will run a series on the new investment law launched by the government last year. The series by Dr. Elvis Mbembe, a law don at University of Rwanda’s School of Law and an advocates for economic and social rights, will examine the policy in view of helping Rwandans and investors understand it better to benefit from it, as well as present its shortcomings, if any:

The new Rwandan investment law came into force on May 27, 2015 after it was published in the official gazette.

This law, number 06/2015 of 28/03/2015, repeals the law number 26/2005 of 17/12/2005 that has been governing investment and export promotion in the country for the previous 10 years. Almost a year since the new law was enforced, it is timely to explore its main features, especially in relation to the admission, treatment and protection of foreign investments in Rwanda to inform the public, as well as current and prospective investors about this new legal framework.

To do so, comparisons need to be drawn with the old law to contrast key changes introduced by the new legal regime.

Generally, the first impression one gets when reading the 2015 Investment Law is that the new law is better structured than the one it replaced, mainly because its articles are comprehensively grouped and titled, which increases the accessibility of this legislation.

According to Article 1, the purpose of the new investment law is "to promote and facilitate investment in Rwanda”.

It appears from this provision that this law specifically focuses on the promotion and the facilitation of investment, both foreign and local, defined as the "use of tangible or intangible assets for profit-making purposes with the exception of all retail and wholesale trade”.

In this sense investment encompasses the creation or acquisition of new business assets including the expansion, restructuring, improvement or rehabilitation on an existing business enterprise.

Unlike the former law, which aimed at investment and export facilitation; export facilitation is not addressed indepth in the new law. Although investment promotion and export promotion can be considered as the two sides of the same coin, they are actually two different things. An immediate consequence of such a narrowing-down of the purpose of the investment law could be that, for instance, if a department at the Rwanda Development Board (RDB) – which is the Rwandan investment promotion authority (IPA) – was at the same time in charge of both investment and export promotion; with the new law that department should actually be discharged from that responsibility. Experts are of the opinion that the effectiveness of an IPA depends to some extent on the number of its mandates.

Accordingly, they seem to warn that a combination of two mandates like promotion of investment and promotion of export could be burdensome when it is entrusted to just one institution.

However it must be noted that, despite its removal from the purpose of the new investment law, export promotion remains preponderant in the undertone of the new legislation, especially in relation with the regime of fiscal incentives. For instance, under the section entitled ‘Special incentives for registered investors’, export-oriented projects are cited among those that are eligible for fiscal incentives.

Another noticeable change in the new law is the removal of the repressive tone against investors who were exposed to between three and six months of imprisonment and a fine between $1,000 and $2,000 in case they would deliberately provide inaccurate or false information to RDB; refuse or neglect to provide explanation requested from them by RDB; refuse to allow employees of RDB on official duty to enter or to conduct inspection in the buildings in which the investment operates; or do not respect any of the conditions related to certificate of registration (Article 35 of the old law).

The latter included, for instance, any failure by the investor to properly keep financial and accounting records, or to respond to ‘any questions’ from RDB in a period of five days. On this merit, the new investment law is more investor-friendly, especially if one comparies it with investment laws of other East African Community (EAC) partner states, such as Kenya, Uganda and Tanzania, where similar provisions are still in force.

In our next issue, we will explore specific changes introduced by this new legislation as far as admission, treatment and protection of investments are concerned.

To be continued next week

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