Start small but think big - supporting SMEs to grow and export (Part II)

Rwanda has substantially reduced the time and cost of filing tax returns, and moved up the ranking for paying taxes from 83rd in 2006 to 22nd in 2013. With VAT now filed quarterly, and an electronic filing system, payments required per year have fallen from 83 in 2006 to 22 by 2013, and the time spent filing taxes each year has fallen from 168 hours to 113.

Rwanda has substantially reduced the time and cost of filing tax returns, and moved up the ranking for paying taxes from 83rd in 2006 to 22nd in 2013. With VAT now filed quarterly, and an electronic filing system, payments required per year have fallen from 83 in 2006 to 22 by 2013, and the time spent filing taxes each year has fallen from 168 hours to 113.

Looking at SMEs, in particular, Rwanda’s efforts to support start-ups have clearly paid off. The number of businesses registered per year increased from 9,068 in 2011, to 11,228 in 2013, a 24 per cent increase in two years. Up to 9,350 businesses have registered so far in 2014. In 2013, 4,169 companies registered online, almost four times more than in 2012. So far in 2014, 7,600 businesses have already registered online, 81 per cent of the total.

These impressive regulatory improvements have encouraged new businesses to be established and the growth and success of businesses already operating.

Secondly, once operating, Rwanda has also been working to reduce the time and cost of moving goods across borders, one of the main ways in which SMEs can increase access to markets and improve their chances of success Rwanda has attached a high priority to improving the customs environment. Prior to reforms of customs procedures, customs clearance took several days, but with the introduction of an electronic single window system and one stop border posts, this is now a short process, and the amount of time it takes to export has been reduced tremendously.

Rwanda is also working with its neighbours along the Northern Corridor to tackle non-tariff barriers and the costs of transport. The Northern Corridor Integration Projects place emphasis on access to the Port of Mombasa to encourage exports and reduction in the cost of trading. A recent survey conducted by Rwanda and Uganda on the impact of the corridor reforms revealed a true revolution in the making. Clearance of cargo from Mombasa to Kampala has reduced from 18 days in 2012 to four days and from Mombasa to Kigali, the time has been reduced from 21 days to five days.

This is a substantial reduction in the time taken to clear and transport cargo leading to increased turnaround times for trucks transporting goods. All this is attributed mainly to shorter clearance procedures, elimination of multiple customs declarations/ duplicated procedures, elimination of roadblocks/checkpoints and multiple weighing along the transit routes. Currently, the leadership of the Northern Corridor countries is working on a wide variety of initiatives, including finalising the harmonisation of electronic cargo tracking system which will reduce the costs of security for goods being traded within the region, a regional railway development project as an alternative mode of transport, resulting in increased competition and reduced costs.

Thirdly and lastly, the Government of Rwanda has been addressing the structural challenges to SME growth – access to technology, access to finance, worker skills and access to market information. A number of schemes have been developed and disseminated in this regard.
In this article, we highlight a few of these schemes:

The Government of Rwanda, through the Ministry of Trade and Industry, has adopted a cluster approach to supporting SMEs in the same line of business. Over 20 unique SME product clusters have been identified and mapped country wide. Within this framework, an initiative which focuses on encouraging SMEs to process their outputs into higher value products through improving access to technology is the Community Processing Centre (CPC) programme. CPCs aim to provide appropriate technology and knowhow, access to finance and to identify and access profitable markets. Each CPC is supported by an expert in the field, and is provided with equipment and business development support. In May 2014, the first CPC became fully operational, based in the leather cluster.

Centred on the Star Leather Product Company in Gatsibo District in Eastern Province, the CPC has started production of high quality leather shoes and is currently training trainers to improve the skills of leather workers throughout the cluster. Work has advanced significantly in the development of CPCs in dairy, banana wine, Irish potatoes, wood and tailoring.
The last part of these series will be published next week.

The author is Permanent Secretary, Ministry of Trade and Industry

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