Limited access to long term financing, high risk perception of the country and absence of a bankruptcy law have been singled out as major obstacles to doing business by the private sector.
This is in addition to high cost of borrowing and limited access to infrastructure.
“There are still a number of issues ; risk perception- Rwanda is still perceived a higher risk country(abroad); we need to work on that at the national level to reduce that rank to be able to get long term resources,” Robert Bayigamba, the Chairman of Private Sector Federation (PSF) the annual development partner’s meeting last week.
While there are various (international) financing schemes out there, the Chairman said the private sector cannot easily access them due to the high perceived risk.
“We should work together to change the perception of the risk of doing business in Rwanda,” he said, while expressing frustration over the existing perception about bankruptcy around the country which gives no room for business to recover and return to business.
“Here (in Rwanda) when you have been bankrupt, you are blacklisted; it’s finished and you cannot start afresh, you can’t borrow any more.”
According to the Chairman, this perception is limiting private sector growth yet in developed countries a company can still return to business despite having filed for bankruptcy earlier.
“When you experience bankruptcy, you know where you had problems. 90 percent of the well known business people, even in Rwanda, when you discuss with them, they say ‘‘when I started I made mistakes, I failed, then I started a fresh,” he said.
Bayigamba also urged the Rwanda Development Board (RDB) to strengthen support to local investors.
“Recently, we had a meeting with two operators (travel agency) and I was surprised they have never met RDB/Tourism department officials. How can RDB push the internal agenda if there are no consultations? ” the Chairman told Business Times in a separate interview.
However, John Gara, the Chief Executive Officer (CEO) of RDB, defended his organisation, saying that it’s committed to promoting local investors.
“Our main focus in terms of supporting business is actually our own private sector; they are the people who walk in everyday, they are the people who need the aftercare department, they are the people who have these concerns, whether it is electricity or getting licenses. There are regular customers,” Gara told Business Times in an interview.
He explained that foreign investors also attract attention as they are often large scale investors.
“Whether their businesses stay or not, they are the one who are going to stay and reinvest, and they are the ones who, most probably, care most about our country,”
The CEO also mentioned that this year local investments might surpass Foreign Direct Investment (FDI) in the country.
“That is partly because, last year, we had two big investors Tigo and Methane gas (Lake Kivu project) which really pushed it up. We are still compiling statistics, but so far our local investment is doing really well,” he observed.