Business challenges in the countryside

Rwanda is still as safe and secure as it has always been for almost decade now, even in the countryside. Rwandans are struggling day and night to kick poverty out of their homes, but the business environment is not yet so rosy, especially for the rural folks. The department of advocacy and institutions relations at Private Sector Federation is on a countrywide tour to dig out what exactly these business challenges are.

Rwanda is still as safe and secure as it has always been for almost decade now, even in the countryside. Rwandans are struggling day and night to kick poverty out of their homes, but the business environment is not yet so rosy, especially for the rural folks. The department of advocacy and institutions relations at Private Sector Federation is on a countrywide tour to dig out what exactly these business challenges are.

A two-man team; John Bosco Kanyangoga, the department director and Lucas Murenzi, the institutions relations manager are conducting interviews with business people. The PSF network of Business Development Services (BDS) centers across the country and the provincial and district federation presidents are facilitating the process.

The tour to cover the whole country kicked off early this month with Eastern Province in Rwamagana and Southern Province in Muhanga.

In an exclusive interview with Mr. Kanyangoga on Tuesday March 18, he said they had just visited Huye, Rusizi and Karongi. Next on the agenda, according to the director, before the end of March, will be Byumba, Rubavu and Ruhengeri.

Pressed on some of the key business concerns emanating from rural areas so far, Kanyangoga divided them into three categories; Infrastructure, taxes and access to finance concerns.

He said he witnessed very bad roads in the countryside that need re-grading or upgrading. “It is quite surprising that the road through the main streets of Butare has very big and deep potholes!” he wondered, and continued saying that “actually the road that connects Rusizi, Karongi and Kibuye is almost impassable”.

He added that people of Karongi district lack a modern market and are waiting for the district authorities to construct one. Kanyangoga said people are aware they pay taxes and fees expecting such services, but in vain.

In Huye, traders, especially wholesalers complain about cement shortage, attributing it to the monopoly enjoyed by CEMERWA. They say it leads to hiking of cement prices in the area. The advocacy director saw a big complex in the middle of Karongi town construction of which has been halted for months now allegedly because of lack of cement. He was told by the owner that he has the money but cannot find enough cement on the market.

Consumers of Electrogaz’s electricity in the countryside are so bitter with the poor services. They think they were forgotten by the parastatal (Electrogaz). They say they buy their own electric poles, connection cables and other appliances only to be surprised when Electrogaz claims ownership of such materials in the end. And, if say there’s power breakdown, it takes ages to fix the problem. Generally, business people attribute the high cost of doing business to exorbitant power tariffs.

On the concern of taxes, Kanyangoga said the business people are complaining about the unfriendly tax regime that renders growth of businesses, especially Small and Medium Enterprises difficult. Specifically, they complain about VAT advance payment.

Last year, PSF brought to the limelight the issue of district authorities charging taxes and fees outside the legitimate Rwanda tax code. Although RRA acknowledged and promised to deal with the issue, the advocacy director witnessed some district authorities bothering people with illegitimate taxes and fees.

Also, business people say some RRA officials in the countryside compute income tax basing on previous profits, which to them is very unfair. RRA officials are also accused of being very unfriendly. In Huye and Butare, business people reported to PSF officials that some RRA officials tell them that when they “close others will open”.

On access to finance, the PSF advocacy director explained that the there are financial institutions in villages charging very high interest rates on loans. Their credit lines hardly attract attention fromt applicants. And, they’re still using the traditional banking methodology of sticking on collateral security as a requirement even when an applicant presents a good business plan.  

People are also worried of the news that Bank Populaire has been transformed turned into a commercial bank. That the move poses a risk of the “peoples’ bank”, as it is commonly referred to, becoming highly profit-minded. Business people suggest that if the decision cannot be altered, at least the bank should continue to be a two in one; commercial and micro finance institutions (like it has for long been operating).

RAMA is an employees’ health insurance scheme for government, companies and staff associations. Business people urge RAMA to amend the laws and regulations of the scheme to also consider individuals who can afford the scheme.
 
Business people wonder why public institutions like Caisse Sociale du Rwanda (CSR), RIEPA, Rwanda Development Bank are not adequately represented at the grassroots—only active in Kigali and few districts near Kigali, yet they are meant to serve the entire nation.

Last year, the ministry of finance for the first time, contacted PSF—the umbrella organization of the private sector in Rwanda, for inputs to the 2008 budget. Kanyangoga says consultations were done among only business people around Kigali.
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