Seven lessons Africa can learn from Rwanda
The Rwanda Vision 2020 was introduced in 2000 as a 20-year development strategy to help Rwanda overcome various growth and development challenges. With the Rwandan population expected to reach 13 million by 2020, the vision aims to transform the country into a middle-income economy. This strategy has paved the way for fostering an entrepreneurial environment with the passing of 26 business regulation reforms since 2005.
The IFC and World Bank have just released the 2013 global Doing Business report that highlights Rwanda as one of the countries in the world that has made great strides to improve its business environment. Here is what we can learn from Rwanda.
1. Private sector development a priority
Rwanda has placed a high emphasis on developing its private sector. “Rwanda is among more than 35 economies where the executive branch has made private sector development a priority by establishing institutions whose main purpose is to design and implement business regulation reforms,” states the report.
“Rwanda’s commitment to private sector development has facilitated growth in exports, domestic investment and foreign direct investment inflows – and the implementation of effective fiscal policies supported by structural and institutional reforms.”
2. Improving access to credit
The country has implemented a number of improvements regarding access to credit. “In 2005 the public credit registry expanded its database of financial institutions and improved the content of its credit reporting system,” notes the report. “In 2009 a new secured transactions law was introduced, allowing a wider range of assets to be used as collateral and permitting out-of-court enforcement proceedings.”
“In 2010 the legislature passed a law regulating the distribution of information from credit bureaus. This led to the creation of the country’s first private credit bureau, which provides wider coverage than the public registry because it includes information from utilities. In addition, the public registry expanded coverage to loans of all sizes. In December 2011 the public registry stopped issuing credit reports, and now only the private bureau shares credit information. The public registry still collects information from regulated financial institutions but only for supervisory purposes.”
3. Reducing time required to start a business
There have been a number of changes made to improve the business registration process. In 2006, hundreds of new notaries were introduced to make starting a business faster, as prior to this there was only one notary for the entire country. This led to 77% more businesses registering the following year. However, entrepreneurs no longer needed to use the services of notaries in 2009. An overhaul of company law allowed the use of standard forms instead and an online system for publishing a company’s registration notice replaced requirements for physical publication, according to the report.
This, along with a “new one-stop shop” that streamlined business registration by reducing the number of interactions needed from nine to two, caused the time required to start a business to fall from 18 to three days and the cost to drop dramatically.
The effects of this have been tremendous. Prior to 2006, an average of 700 firms registered annually. However, 2010 saw 18,447 firms register – nearly reaching the goal of 20,000 for the year.
4. Transfer of property made simpler
Rwanda has also made it simpler to transfer property. “In 2008 it eliminated mortgage registration fees and shifted from a 6% transfer tax to a flat rate of 20,000 Rwandan francs (about $33),” states the report. “In 2010 the government decentralised the Office of the Registrar and Land Titles and created five branches throughout the country, purging the backlog of cases in Kigali. It also introduced strict time limits for some procedures. One was the issuance of tax clearance certificates, which had been the lengthiest part of the process.”
5. Trade between borders streamlined
Trading across Rwandan borders has also been made easier through several changes. According to the report, electronic customs declarations were introduced in 2005 and the customs authority reduced the waiting time for submission by introducing more acceptance points for customs declarations in 2007. Furthermore, the Rwandan government extended operating hours for border posts in 2008, and implemented an electronic data interchange system and risk-based inspections. Between 2006 and 2010, 39% more documents were cleared annually by customs officials.
“And in 2010 it streamlined trade documentation requirements and improved border cooperation,” says the report. “Results are clear. In 2006 exporting goods in Rwanda required 14 documents and 60 days. Today it takes only 8 documents and 29 days. The story is similar for importing.”
6. New company law
“The new company law adopted in 2009 introduced several concepts into Rwanda’s corporate legal system for the first time: minority shareholder rights, regulation of conflicts of interest, extensive corporate disclosure and directors’ duties.”
In 2005, the establishment of more commercial courts – along with the creation of the Business Law Reform Cell – made contract enforcement a reality for businesses. In 2008 lower commercial courts were created to further boost the court system and had fully cleared the case backlog in Kigali by the end of 2009.
A new insolvency law was passed in 2009 to increase efficiency of resolving corporate insolvencies. “But resolving insolvency remains the one area among all those included in the ease of doing business index in which Rwanda still has great room for improvement,” stresses the report. “Achieving widespread use of the law in insolvency cases has been among the greatest regulatory reform challenges in this area.”
7. Attracting skills to Rwanda
Non-Rwandan expatriate judges were hired in order to ensure that the right skills were available to aid the reform process.
“In addition, the government has provided incentives for Western-educated members of the diaspora to repatriate and has promoted an exchange of skills by opening the job market to immigrants from neighbouring countries, including Burundi, Kenya, Tanzania and Uganda,” states the report.