Rwanda plans influential business reforms in 2011

Rwanda will continue to implement business reforms in order to boost private investment that is needed to sustain the country‘s rapid economic growth. 
Rwanda transforming her business enviroment to attract private investments (file photo)
Rwanda transforming her business enviroment to attract private investments (file photo)

Rwanda will continue to implement business reforms in order to boost private investment that is needed to sustain the country‘s rapid economic growth. 

Currently, the country needs to achieve a sustained GDP growth rate of approximately 8 percent in order to achieve its development targets.

Rwanda maintained  reforms aimed at easing doing business, moving up 12 positions in the “Doing Business 2010” Report, the eighth publication of the International Finance Corporation (IFC) and the World Bank.

This year Rwanda was ranked the 2nd best reformer, only beaten by Kazakhstan. Last year it took the top spot.

The report benchmarks regulations that enhance business activities and as well as those that hamper business. It focuses on business regulation and protection of property rights.

Ranked at 58th overall in the world, Rwanda technically jumped from last year’s 67th position of the 183 countries surveyed in the report dubbed “Making a Difference for Entrepreneurs”. It was ranked 158th in the 2009 Doing Business (DB) report.

“We were inspired by the 2010 results to even do better especially on indicators that were more challenging,” Monique Nsanzabaganwa, the Minister of Trade and Industry said while commenting on the Doing Business findings.

While the business environment has progressively improved, Nsanzabaganwa said the country will continue to deepen the reforms to facilitate the business community

“We are reforming not because there is a Doing Business Report but the report itself is a yardstick to measure how we compare with regards what is happening elsewhere. We always aim to put our ambitions higher,” says Nsanzabaganwa who also doubles as the Chair for the Doing Business Steering Committee.

She says that the country still faces a big challenge of changing the attitude and culture in service provision, an issue the next round of reforms will be focusing on.

“It’s very critical because we may have the laws and the reforms in place but until it is adhered to; for people to get the service they deserve; then you really did not do much,” Nsanzabaganwa observed.   

In 2010, Rwanda introduced several reforms, where it now takes an average of three days to start a business compared to an average 45-days required by its African counterparts and 13 for the rich countries.

It now requires two procedures to open a business in Rwanda compared to about nine in Africa and five in the developed countries. While it takes just one day to check a company name, submit registration application and pay registration fee as low as Rwf25,000 ($40), it require between one to three days to finally pick up a registration certificate – allowing an investor to start their business immediately.

The report underlines Rwanda as taking the lead globally in facilitating the business community acquire construction permits, getting credit and trading across borders.

Government tackled access to credit by allowing borrowers the right to inspect their own credit report and mandating that loans of all sizes be reported to the central bank’s public credit registry.

Trading across borders is another area in which Rwanda made remarkable changes, says the report.  Rwanda reduced the number of trade documents required and enhanced her joint border management procedures with Uganda and other neighbours, leading to an improvement in the trade logistics environment.

According to John Gara, the Chief Executive Officer (CEO) of Rwanda Development Board 9RDB), his organisation will concentrate on improving Rwanda’s performance particularly on the closing business indicator measured by the World Bank’s Doing Business (DB) Report.  

“Rwanda has consistently done badly (closing business indicator).  Many of our businesses when they collapse they do not do it through the system –if they do not do it through the system it gives the impression that we do not have a system which works for the dissolution of companies,” he said.

While this year the country took the lead globally in facilitating the business community to acquire construction permits, getting credit and trading across borders, it lags on the closing business indicator.  

Yet since last year (May), the country has insolvency law that spells out legal provisions relating to commercial recovery and settling of issues arising from insolvency.

RDB intends to rollout a sensitisation campaign for the business community and the legal society to increasing awareness to encourage formal business closure by using the existing law.

“We are increasingly going to encourage companies to do it through the formal system.”Gara said.

Karim Tushabe, the legal consultant with RDB’s Doing Business unit, says that Rwanda has consistently been ranked the lowest mark under the closing business indicator because it is treated as a “none practice.”

“We are seen as a country which is not practicing insolvency,” he said.
For Rwanda to be recognised as practicing insolvency under the DB report, Tushabe says it has to show at least five companies have undergone through the process.

With the sensitisation of the various stakeholders about the law, the legal officer said this will help to make the law more operational.

According to the report findings, sub- Saharan Africa has the largest share of economies with little or no insolvency practice.  

Twelve of the region’s 46 economies— more than a quarter—have had fewer than five insolvency cases annually in recent years, the report says.

Other key reforms  implemented this year  include: launch of  operations of the country’s  first private credit reference bureau, streamlining property and company transactions, introducing online transactions such as tax calculation and setting up a “One Stop Centre” for construction permits.

According to the report, globally, doing business remains easiest in OECD high-income economies.

In Sub-Saharan Africa and South Asia the report finds that entrepreneurs have it hardest and property protections are weakest across the 9 areas of business regulation included in this year’s ranking on the ease of doing business.

Ends

 

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