Rwanda tops region in investor protection – WB

The move by Rwanda to review investment-related laws, which culminated into the overhaul of company law in 2009, has paid off. The country has been ranked top in the East African Community (EAC) trade for having the strongest laws to protect investors.
Construction is one of the sectors that have attracted the highest number of investors in the recent past. The New Times / File
Construction is one of the sectors that have attracted the highest number of investors in the recent past. The New Times / File

The move by Rwanda to review investment-related laws, which culminated into the overhaul of company law in 2009, has paid off. The country has been ranked top in the East African Community (EAC) trade for having the strongest laws to protect investors. 

The World Bank Doing Business in the East African Community 2013 report ranked Rwanda seventh out of the 185 countries surveyed globally, followed by Burundi that ranked 49th. Kenya and Tanzania, which tied at 100th position followed, while Uganda at 139th, trailed its EAC peers.

“While many economies around the world have strengthened investor protection, Rwanda and Burundi have made huge progress since 2005, making them the biggest improved countries in sub-Saharan Africa,” the report said.

The report also noted that, the EAC has been more active than any other regional bloc surveyed in strengthening legislation to further protect and empower minority shareholders in Africa.

According to the report, regulatory reforms in favour of minority shareholders build investor confidence in domestic firms and the economy.

Another recent study by World Bank showed that regulating conflicts of interest is essential to empowering minority shareholders within the EAC, arguing that it boosts investments.

Eusebe Muhikira, the head of trade and manufacturing department at the Rwanda Development Board, said the government introduced reforms, especially in the commercial sector, to strengthen the legal framework.

“The new company law boosts investor protection and makes it mandatory for directors to disclose personal interest in any firm or deal they may be involved in,” Muhikira noted.

Stephen Sang, a business consultant, noted that if a country has poor regulations, equity markets do not develop, meaning that banks will be the only source of finance that companies require to innovate and grow.

In the past eight years, 60 per cent of economies in the EAC implemented at least one reform strengthening investor protections, according to the World Bank Doing Business in the East African Community 2013 report.

This is higher than in any other region in the world except Eastern Europe and Central Asia and a far larger one than in sub-Saharan Africa, overall.

At 60 per cent, EAC’s performance far exceeds that of the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (Comesa) and the Economic Community of West African States (Ecowas) blocs.

 

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