It is difficult to change the patterns of performance that have dominated society for ages, even more so when legal and institutional frameworks reinforce popular perceptions and the status quo. By reforming policies on paper, however, societies take one of the first steps in self-transformation. So it is with Rwanda.
The act of reforming the business culture for several years now has helped break down one of the legal barriers to Rwanda’s fast economic growth. Before the reforms, the country had limited ways of representing its economic interests after the pungent 1994 genocide. 17 years after the genocide which defined modern world view of Rwanda, the citizens seem eager to paint a different picture in people’s minds – especially those of potential investors.
Since the Doing Business reforms were enacted, Rwanda is on an upward trajectory. The country has gained recognition for being one of the safest and most transparent countries in Africa and a President who does all he can to court business leaders. The economic potential of the country is gaining attention. In fact, Rwanda was ranked in the top 20 global reformers in the Doing Business 2009 Report published by the World Bank.
There are numerous sectors showing growth and promise – notably construction, agriculture, tourism, ICT and retail.
Reforming business regulation takes leadership—more than many other reforms. Committed leaders as President Paul Kagame has often proved provide vision, energy and direction to improve business climates, often in the face of daunting challenges.
As a follow up to the wide-ranging reforms introduced in May 2010, four fundamental reforms making it easier to start a business, deal with construction permits, register property, and trade across borders were put in place this year to enhance doing business in the country.
In a media briefing in May 2011, the Chief Operations Officer of the Rwanda Development Board (RDB), Claire Akamanzi welcomed the reforms.
“The 2011 Doing Business results are a statement of our consistent efforts to empower our local and foreign entrepreneurs. We are determined to work alongside investors to make sure we do all we can to make Rwanda a great place to do business and unleash the country’s full potential, therefore we are relentless in ensuring continuous reforms like these ones”
“The new reforms will be reason for improving Rwanda’s position in the World Bank’s Doing Business ranking.”
Starting a business
On starting a business, free online registration was introduced. Those who register in person, the registration fees have been reduced from Rwf 25,000 to Rwf 15,000.
“The reason we reduced it is because we want more in the informal sector to become formalised,” she said during a press briefing to announce the reforms.
“More than 30 percent of our companies are SMEs and we want to encourage them to move away from informal businesses. We are making it easy for them”.
Registering property
On registering property, several requirements were eliminated and are now optional.
Notarisation of a sale agreement is eliminated. Instead, the signature of a sale agreement can be done at the registry upon submission.
Dr. Emmanuel Nkurunziza, the director general of the National Land Centre says: “What we are trying to do is make this requirement optional, particularly for commercial and industrial developers.”
“We can exempt them from that but we make sure they sign their agreements before the registrar or deputy registrar when they submit their application for transfer of property.”
A tax clearance certificate is also no longer required from a client. Instead, Rwanda Revenue Authority (RRA) will coordinate with the National Land Centre to provide information on clients’ tax status.
Construction permits
When it comes to dealing with construction permits, several application procedures were merged from 14 to only six, relieving clients of interaction with utility providers.
In a single application, a client can now apply for a construction permit, water connection, electricity and telephone. Inspections and invoices will also be issued simultaneously.
Cross-border trade
On trade across borders, only three out of eight documents necessary for customs declaration are needed. The three documents are the commercial invoice, the parking list, and the bill of landing or airway bill.
Those rendered optional include a certificate of origin, health certificate, transit cargo document, terminal handling receipt, and import license.
Peter Gapira, the Operations Manager of the Gorilla 1000 clearing agency that operates from Kigali International Airport and Gikondo expresses his gratitude about reforms in the cross-border trade.
“There has been a long process in import and export declaration, where goods would spend a long time in the warehouse and this drew complaints from investors and other business stakeholders,” Gapira said.
He highlights additional trade facilitating mechanisms pioneered by the Rwanda Revenue Authority (RRA), “like Blue Channel, where an importer is allowed to offload goods from his premises instead of offloading from the warehouse which involves other charges and processes.”
“There is another called pre-clearance, where taxes are paid when goods have not yet entered the country’s borders, and when they come, they directly go to the importer’s premises.
This also reduces the processes and other charges,” Gapira observes. He further commends the 24-hour border operations and use of scanners in warehouses and at border posts.
The Business Manager of a private equity company Fusion Capital Ltd says of the reforms: “As a financier, the reforms announced by RDB will greatly improve business.”
“Reduced procedures and documentation required for construction permits and import /export requirements will encourage more small and medium scale players,” Kageenu said.
“Improvements in the foreclosure process is also highly welcome.
In addition to helping financial institutions to fast liquidate securities held for non performing facilities, it will help build a more disciplined repayment culture with borrowers,” she adds.
According to RDB, the latest reforms underline the importance of cooperation between government institutions and agencies to overcome the constraints facing Rwanda’s private sector. For four years in a row, Rwanda has consistently registered impressive performance and this has helped it maintain its position as one of the easiest places to do business in Africa.
The Rwanda Development Board says it shall continue to foster existing partnerships, and build new ones among different doing business stakeholders and agencies ensure that business is at the heart of our development.
Gross domestic product expanded by an average of six percent a year during the last decade. With an expanding private sector and a new stock exchange since February 2008, the need for an efficient commercial dispute resolution will only grow.
The ancient Roman quote from Marcus Tullius Cicero still holds true: “To those who are engaged in commercial dealings, justice is indispensable to the conduct of business.”
Admittedly, reforming laws and regulations on paper does not automatically entail shifts in public opinion. However, when the Rwandan public and foreigners have the space to represent and advocate their entrepreneurial interests, they can show their economic potential. The reforms have since given investors this space.
Karim Tushabe, a legal consultant at the doing business unit of RDB says that since 1934, the Rwandan law had not yet been changed and since many of the Rwandan business are now competing on an internationally modernised level the laws too must be modernised in order to work in harmony.
Tushabe talks of the insolvency law and its importance. “For example, Rwandatel is now using this insolvency law to rebuild its business, how so? This law allows a business the opportunity to either reorganise or shut down their companies if they are unable to meet their debt.
Whereas before, they were no checking of poorly performing companies that were previously operating without clear rules and procedures”
“The new secured transaction law enables the transactions of loans to be broader than traditional loans whereby a house or land would have been considered security, but now even inventories, agricultural produce, even cars can be considered by law as collateral”
Mr. Charles Kaliwabo, the spokesperson of the Supreme Court says. “Laws have to change and our judges must be prepared to be able to carry out these laws in accordance with those we may do business with one day.”
Kaliwabo says there is an ongoing project to update the amategeko.net website around July to exhibit all new commercial laws.
Deputy Chief Justice Prof. Sam Rugege says that Rwanda has carried out major reforms in business laws for the last six years in a bid to make them up-to-date.
“The reform of business laws has been ongoing for six years now, producing around new 20 laws published between 2008 and 2010,”
“They form a large volume of legal text to go through, later on master. Since they are new and in many cases involve new concepts which were not part of the existing legal system, it has not been easy to get to grips with them,” Rugege says.
“The Judiciary must participate fully and play its role efficiently in the national effort to create an environment conducive to investment, both local and external, so that Rwanda can reach its Vision 2020 targets and improve the quality of life among our citizens,” he points out.
According to Lucy Mamganga Fye, the Senior Private Sector Development Specialist at the World Bank, the major reforms Rwanda has embarked on especially in the legal area of doing business have put the country on course to build a private sector which will become the main pillar of the economy.
She says that the reforms which have been implemented have for two consecutive years put Rwanda among the top business reformers under the World Bank Doing Business Report.
In 2011’s index, Rwanda was the most improved country in Africa – the second most improved country overall. It came in 58th in the world on the overall list, up from 70th last year.
Rwanda is also the fourth easiest place to business in Africa after Mauritius, South Africa, and Botswana. In the East African region, Rwanda ranks the easiest place to do business according to the World Bank report.
Over the last years Rwanda has won praise for its vision and lack of corruption.