The “Doing Business 2012” which was released, last week, by the World Bank, ranked Rwanda as the top business friendly nation in East Africa.
The report also ranked Rwanda at 45 globally, having jumped 13 notches to become the world’s second top reformer in creating a business friendly environment.
The WB Country Manger for Rwanda, Mimi Ladipo, said that this year’s report indicates an intangible improvement that the world could use to understand Rwanda better.
“Every year when the report comes out, Rwanda’s name gets mentioned. People who do not know about Rwanda or whose image goes back to only 1994, get to know the real image of Rwanda and understand the remarkable achievements that the government has had through this report.”
The report also ranked Rwanda as the third easiest place to do business in Africa after Mauritius and South Africa.
Among the questions raised included how the ranked countries benefited from their good rankings to woo actual investments in their respective countries, or in other words, how the rankings translated into actual investments.
Despite Rwanda’s favourable ranking, its regional counterparts like Kenya, Uganda and Tanzania still attract more Foreign Direct Investment (FDI) inflows.
Investment data shows that the country’s investment inflows totalled US$4.35b between 2000 and 2010.
John Gara, the CEO of Rwanda Development Board (RDB), said that: “The reforms we are carrying out are not just for the World Bank, we actually want to make it easy to do business in Rwanda whether it is just for one small local business or for foreign investors. Our flow of FDI may not be as high as some other countries, but the reforms have actually made the situation better than it was before.”
The country also registered a significant drop in reforms related to registration of property, where it slid from position 41 to 61.
Gara said that the poor performance was caused by a newly introduced Rwanda Revenue Authority requirement known as Capital Gains Tax for registering property, which was mentioned by WB as a new serious procedure that may affect the registration of property.
“There are some areas where we are not doing very well, particularly in areas like closing a business. This is where Rwanda was always ranked last in the world, but we moved from 183 to 165. There is a problem of businesses closing without going through the court process. But now that the law was put in place, the number of businesses closing legally through court is going to improve.”
Faustin Mbundu, the Chairman of Private Sector Federation, observed that when local businessmen witness the reforms, this ultimately increases their appetite to invest because they are assured of support.
“This report indicates that there is something worthy evolving in Rwanda; therefore, we can expect the number of foreign investors increasing, something that will generate opportunities for several Rwandans.”
In terms of access to credit by small businesses, the country moved 29 places to position eight globally on account of the improved banking practices, which helped keep tabs on loan defaulters and reduced nonperforming loans.
The central bank says it will increase lending to the private sector by 19.2 per cent this year but at a cheaper cost and at levels that do not increase inflation.
Robert Murillo, the co-author, Global Indicators and Analysis Department of WB-IFC, said that the performance by several Sub Saharan countries indicated that the region had come of age by tremendously improving its business climate for massive investment.
“We are pleased to count among the top chain reformers in the world, four Sub Saharan African countries, including two who emerged from a situation of conflict, meaning that even countries from conflict can perform well,” Murillo said.
“Trading across borders, through regional integration programs has paid off for Sub Saharan Africa in areas like the integration of electronic systems, data exchange and border corporation agreements. These have really broken down some of the barriers that affected trade in the region.”
However, Neil Gregory, the Chief Strategy Officer of the WB-IFC noted that many African countries still faced challenges in streamlining laws and regulations for small businesses to ease their taxation regime.
“African countries can make life easier for businesses by publishing regulations whether on the internet or putting up notices about the fees schedules and processes. This would be much easier for business people and would be done at a lower cost,” Gregory said.
Journalists from Southern Sudan urged Rwanda officials to share practices which can be adopted by their leaders to improve the business climate in the country.
Sudan was ranked 22nd in Africa in the ease of starting up a business.
“In Rwanda, all institutions get together every year and decide a plan for the following year, if you must do it together as a team and decide to reform boldly, you do not have to wait for a perfect start,” Gara said.
“What we do is that we get previous results, see where the constraints lie and then we focus on streamlining them and automating wherever necessary.”
He also emphasised the importance of engaging the private segment that helps to identify where the challenges lie.