A friend of mine, Emmy is constructing a five star hotel somewhere in Kigali. Among the facilities will include three state-of-art restaurants and a conference hall.
However Emmy’s scheduled time for commissioning his hotel has been delayed for over a year due to bureaucracies.
Even after ‘due diligence’ with government authorities, construction on his hotel was halted for a period of over nine months with city authorities citing lack of the desired paperwork, a classic example of ‘red tape’ procedures.
Emmanuel Hategeka the Rwanda Private Sector Federation (PSF) Secretary General, recently traveled to the south and talked to Fidel Ndayisaba the Governor of the Southern Province about investment prospects in his area of domain.
Asked how business friendly his province was the Governor decried and strongly condemned bureaucracy and ‘red tape’ among public institutions. He was quoted by ‘Enterprise’ the PSF magazine saying, “a call or SMS is just enough” to have any business problem solved.
PSF in partnership with GTZ recently carried out a study dubbed, ‘Cutting the Cost of Red Tape for Business growth in Rwanda’, which according to findings Rwandan businesses in 2007 incurred ‘regulatory compliance’ costs of Rwf 55 billion (about $110m).
This according to the survey can be equated to approximately 3 percent of the Rwanda’s Gross Domestic Product (GDP).
To put this figure in context, Rwf 55 billion is more than half of the government’s education budget for 2008, almost equal to the health budget and five times the budget provided for under the Ministry of Industry and Commerce.
Enterprise which is proudly owned by the PSF argued that, gratuitous regulations that are intermittently confusing in nature should be scrutinized and assessed at all levels to determine their consequences in practice and the way in which they are implemented.
For example RDB reports say that the country has a deficit of hospitality facilities to a tune of 6,000 rooms. Why then was Emmy’s hotel project frustrated for over nine months, when the country has a vision to increase tourism receipts by attracting all kinds of conferencing revenues?
In many cases entrepreneurs queue for hours to have official papers processed, sometimes taking a day or even weeks. Such people always leave their business enterprises unattended in order to comply with these regulations.
Unmistakably a lot of man-hours and costs are incurred in the process.
From the report the taxation ‘compliance costs’ are said to be the most distressing with many establishments forced to hire experts to advise upon complicated tax issues.
A lot of paper work coupled with pointless delays is spent while complying with taxes. In addition conformity with import and export costs that rank highly mostly arises from set backs at the customs offices and the National Bureau of Standards.
Ultimately the amount of money lost in the process would certainly facilitate the growth of business and Rwanda’s economy at large. It is time for all stake holder and concerned institutions to wake up and address this issue eminently.
Procedural audits are needed for closely targeted reforms, to observe and track direct business interactions with government departments and agencies, step-by-step so as to uncover blockages at the points where they occur.
PSF should use this survey in continued dialogue to advocate for a more conducive business environment.