BUSINESS AND INVESTMENT CLIMATE SURVEY 2019

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BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

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Š 2019 Private Sector Federation – Rwanda The content of this report is subject to copyright and no part of this report can be reproduced in whole or in part without the prior permission from Private Sector Federation- Rwanda.


BUSINESS AND INVESTMENT CLIMATE SURVEY REPORT RWANDA 2019



BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Foreword Despite the economic downturn in 2013, Rwandan has successfully recovered and the economy has sustained an average economic growth of 10.6% over a period of five years. The private sector’s contribution to GDP is estimated at 85% with a gross capital formation of about 23% of GDP. Rwanda seeks to transform into a knowledge-based and service-oriented economy. Rwanda aims to achieve Middle Income Country (MIC) and High-Income Country (HIC) status by 2035 and 2050, respectively. Rwanda’s private sector has a crucial role to play in helping achieve these goals. The Private Sector Federation (PSF)—an umbrella organization of Rwandan businesses—is dedicated to promoting and representing the interests of the Rwandan business community. As the country’s flagship private sector institution, businesses in Rwanda look to PSF to facilitate solutions to business constraints and represent their interests during dialogues with the government. With a strong membership base, PSF has played a strong role in driving regional integration and promoting economic development in Rwanda. Although PSF aims to go beyond advocacy in its promotion of private sector interests, advocacy remains one of its core objectives. To create a robust evidence base for its advocacy efforts, PSF launched the first Business Investment Climate Survey (BICS) in Rwanda in 2008. The current study, BICS 2019-2021, marks the fourth edition of BICS. By directly asking Rwandan businesses about pertinent business challenges, BICS 2019-2021 highlights key areas in the Rwanda’s business environment that require intervention. BICS 2019-2021 thus enables PSF to tailor its efforts to fit the real needs of the private sector and can rely on data-backed evidence to inform its advocacy efforts. A survey of the private sector is also timely given to the government’s continued emphasis on a private sector-led economy. Findings from BICS 2019-2021 are expected to guide improved national economic policies and competitiveness of the business environment as well as improved Public-Private-Dialogue (PPD) on specific economic aspects and for specific sectors. I want to thank the almost 1000 Rwandan businesses who participated in this study. I also appreciate the Rwandan-German Development Cooperation for funding this study through its Eco-Emploi program. Finally, I would like to thank representatives from PSF’s various chambers and associations, government entities, and development partners who provided valuable inputs and ensured that BICS 2019-2021 adopted a collaborative process.

Ruzibiza Stephen Chief Executive Officer Private Sector Federation


Contents List of Abbreviations............................................................................................................................. iii

About BICS............................................................................................................................................. iv

Executive Summary............................................................................................................................... v

1. Background.................................................................................................................................... 1

2.

Approach and Methodology........................................................................................................ 3 2.1 Desk Review and Research..............................................................................................................4 2.2 Stakeholder Meetings........................................................................................................................4 2.3 Survey for Data Analysis...................................................................................................................5 2.4 Analytical Techniques and Outcomes...........................................................................................7

3.

Country Context............................................................................................................................ 9 3.1 Recent Economic Developments....................................................................................................10 3.2 Steady Improvement in Human Development Indicators.........................................................12 3.3 Significant Strides in Global Competitiveness.............................................................................14 3.4 Favorable National Strategies Underpin Improvements...........................................................21


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

4. Rwanda’s Business Structure.......................................................................................................... 24

5. BICS (2019 - 2021) Survey Findings............................................................................................... 29 5.1 Profile of respondents........................................................................................................................30 5.2 Perception and outlook.....................................................................................................................32 5.3 Ease of doing business/logistics.....................................................................................................34 5.4 Business Performance.......................................................................................................................34 5.5 Business Challenges..........................................................................................................................35 5.5.1 Overall National Business Challenges.................................................................................35 5.5.2 Province-specific Challenges................................................................................................38 5.5.3 Business size-specific challenges........................................................................................40 5.5.4 Sector-specific challenges.....................................................................................................42 5.5.5 Summary.....................................................................................................................................45 5.6 Tax administration and Legal issues...............................................................................................45 5.6.1 Tax Administration.....................................................................................................................45 5.6.2 Legal Issues................................................................................................................................47 5.7 Regulatory reforms and their impact..............................................................................................47 5.8 Finance..................................................................................................................................................49 5.9 Infrastructure........................................................................................................................................50 5.10 Trading across borders......................................................................................................................52 5.11 Human Resource.................................................................................................................................54

6. Recommendations and Way Forward............................................................................................. 55

Annexures............................................................................................................................................... 66 Annex 1: Extract from National and Regional Strategies related to Private Sector Development....66 Annex 2: List of Respondents.............................................................................................................................73 Annex 3: FGD Participants List............................................................................................................................74 Annex 4: BICS (2019 - 2021)- Survey Questionnaire.....................................................................................76 Annex 5: Summary of Sectorial issues (highlighted in FGDs and discussion with Chambers)..........91 Annex 6: References.............................................................................................................................................97 Annex 7: Distribution of Businesses by District/Province (2014-2017)......................................................100

The Private Sector Federation: Brief Profile.................................................................................................103

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LIST OF TABLES Table 1: Distribution of the Sample by Province and Sector ................................................................... 6 Table 2 : Response rate of the BICS 2018 Survey...................................................................................... 7 Table 3: Top Five Import and Export Partners for Rwanda....................................................................... 11 Table 4: Rwanda’s Performance on Human Development Dashboards............................................... 14 Table 5: Reforms pertaining to getting credit introduced in Rwanda.................................................... 17 Table 6: Reforms related to starting a business introduced by Rwanda.............................................. 20 Table 7: Reforms related to registering property introduced by Rwanda............................................ 20 Table 8: Infrastructure’s indicators in Global Competitiveness Report (2016-2018)........................... 21 Table 9: Distribution of Business Establishments Based on their Legal Status.................................. 27 Table 10: Categorization of Enterprise Size in Rwanda............................................................................. 27 Table 11: Total Enterprise Count Based on Various Sectors of Economic Activity ............................. 28 Table 12: Question on Challenges Related to Business Growth (in next 3-5 Years).......................... 36 Table 13: Top five business constraints identified by BICS surveys....................................................... 37 Table 14. Major challenges across business size........................................................................................ 42 Table 15. Value of Collateral needed for a loan (% of loan amount)26.................................................. 43 Table 16: Major challenges across the business sectors.......................................................................... 44 Table 17: Value of Collateral needed for a loan........................................................................................... 47 Table 18: Average Lending Rates of EAC and other Regional Countries.............................................. 51 Table 19: Access, total Installed capacity and cost of electricity across EACs.................................... 53 Table 18: Logical Framework- BICS (2019 - 2021) Key Issues Recommendatory Framework......... 61 Table 19: Logical Framework for supporting Reforms through Public Private Dialogue................... 63 Table 20: Institutional roles and partnership................................................................................................ 64

LIST OF FIGURES Figure 1: BICS Approach and methodology................................................................................................. 4 Figure 2: Sectorial contribution to GDP........................................................................................................ 10 Figure 3: Growth in GDP (2012-2018)............................................................................................................. 10 Figure 4: Domestic Import and Export (in USD million)............................................................................. 11 Figure 5: Purchasing Power Parity (PPP) adjusted GDP per Capita in USD......................................... 11 Figure 6: Growth of Real GDP per Capita in percentage.......................................................................... 12 Figure 7: Human Development Index Values of EAC Countries, 1990-2017....................................... 12 Figure 8: Rwanda’s Improvement on HDI Sub-Indicators 1990-2017.................................................... 13 Figure 9: Comparison of EODB Performance of Economies in the EAC 2015-2019......................... 15 Figure 10: Rwanda’s Ease of Doing Business Performance 2015-2019................................................ 15 Figure 11: Rwanda’s performance on Global Competitiveness Reports 2013-2018 .......................... 15 Figure 12: Rwanda’s performance on the World Bank’s Doing Business Indicators.......................... 16 Figure 13: Rwanda’s performance in Financial Market Development, the 8th pillar.......................... 16 Figure 14: Access to and cost of electricity trends in Rwanda................................................................ 18 Figure 15: Rwanda’s dealing with Construction Permits Performance 2015-2019............................. 18 Figure 16: Rwanda’s trading across Borders Performance 2015-2019.................................................. 19

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BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Figure 17: Rwanda’s starting a Business Score for the Last Five Years..................................................................19 Figure 18: Rwanda’s starting a Business Score for the Last Five Years................................................................20 Figure 19: The chart shows the five-year trend for infrastructural changes in Rwanda.....................................21 Figure 20: Five-year trend chart for labor market efficiency in Global Competitiveness Report....................21 Figure 21: Inward FDI stock as percentage of GDP average (FY 2012-FY 2017).................................................22 Figure 22: Number of Total Establishments and Business Oriented Establishments........................................25 Figure 23: Presence of formal and informal enterprises across the provinces in Rwanda..............................26 Figure 24: Distribution of formal enterprises across the provinces of Rwanda...................................................27 Figure 25: Number of respondents by Province..........................................................................................................31 Figure 26: Distribution of businesses surveyed by size............................................................................................31 Figure 27: Number of businesses surveyed by sector...............................................................................................31 Figure 28: Age distribution of respondents..................................................................................................................32 Figure 29: Education level of respondents...................................................................................................................32 Figure 30: Perceived attractiveness of Rwanda’s provinces as investment destinations.................................33 Figure 31: Perceived performance of the Rwandan economy..................................................................................34 Figure 32: Self-reported business performance in 2017 versus 2016....................................................................34 Figure 33: Comparison of business performance reported in BICS 2008, 2010 and 2018.............................35 Figure 34: Top 5 Overall National Challenges..............................................................................................................36 Figure 35: Major top ten challenges faced by businesses........................................................................................36 Figure 36: Major top five challenges faced by businesses in each province......................................................40 Figure 37: Key challenges in terms of specific tax and legal issues.......................................................................47 Figure 38: Factors affecting start-ups and business expansion..............................................................................48 Figure 39: The impact of recent regulatory reforms in businesses........................................................................49 Figure 40: Major Sources of Finance..............................................................................................................................50 Figure 41: Constraints to accessing finance..................................................................................................................50 Figure 42: Overall infrastructure challenges.................................................................................................................52 Figure 43: Challenges to trading across borders........................................................................................................53 Figure 44: Factors affecting recruitment and development of a competent workforce.................................53

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LIST OF ABBREVIATIONS

iii

BDS

Business Development Studies

BICS

Business and Investment Climate Survey

BNR

National Bank of Rwanda

BMZ

German Federal Ministry for Economic Cooperation

CGT

Capital Gains Tax

CTR

Corporate Tax Rate

EAC

East African Community

EBM

Electronic Billing Machine

ECR

Establishment Census Report

EDPRS

Economic Development and Poverty Reduction Strategy

EODB

Ease of Doing Business

EPPCF

Ethiopian Public Private Consultative Forum

EWTP

Electronic World Trade Platform

FDI

Foreign Direct Investment

FGD

Focused Group Discussion

FMD

Financial Market Development

FMD

Financial Market Development

GCI

Global Competitiveness Index

GCR

Global Competitiveness Report

GDP

Gross Domestic Product

GII

Gender Inequality Index

GIZ

Gesellschaft fĂźr Internationale Zusammenarbeit

HDI

Human Development Index

HDRO

Human Development Report Office

IBI

Imanzi Business Institute

ICT

Information and Communication Technology

IT

Information Technology

MFI

Micro Finance Institution

MINECOFIN

Ministry of Finance and Economic Planning

MSME

Micro, Small and Medium Enterprises

NST

National Strategy for Transformation

PPD

Public Private Dialogue

PPP

Purchasing Power Parity

PSF

Private Sector Federation

RDB

Rwanda Development Board

RRA

Rwanda Revenue Authority

SBDP

Skill and Business Development Programme

SDG

Sustainable Development Goals

SEZ

Special Economic Zone

TVET

Technical Vocational Education and Training

UN

United Nations

UNDP

United Nations Development Programme

USD

United States Dollars

VAT

Value Added Tax


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

About BICS

BICS 2019 - 2021

BUSINESS

INVESTMENT

CLIMATE SURVEY is a flagship study

AND

conducted

by

the

Federation

(PSF),

Private

Sector

involving

sector-

wide analysis of the economy, which highlights

major

What is the Objective?

What is BICS?

challenges

and

constraints for business growth, efficient business operations and enhancement of business activity in Rwanda. By doing

Flagship study carried out by PSF 4th Edition (2008,2010, 2013) Perception survey

BICS 2018- 2019

What does it do?

What is the Goal? • •

Enhancing business activities Evidence base for practical recommendations Private sector advocacy

Conducive environment for private sector growth Improve the overall business climate in Rwanda

Sector-wide analysis of the economy Identify major challenges and constraints for business growth and operations

so, BICS aims to provide an evidence base for practical recommendations

the study undertakes a comprehensive

Improving the business investment

for the Government to overcome

multi-method

environment and strengthening the

underlying constraints and improve the

both

qualitative

private sector requires partnerships with

overall business climate in Rwanda.

data—to provide an in-depth insight on

government initiatives as well as public-

Rwanda’s business environment (for

private dialogue. BICS contributes to

With the aim of contributing to the

detailed methodology of BICS please

this overarching goal by acting as a

improvement of Rwanda’s business

refer to Section 2: Approach and

facilitator and tool for greater private

environment and fulfilling its mandate

Methodology).

sector reform. In addition to acting as a

approach—analyzing

quantitative

and

of private sector advocacy, PSF is

tool for reform, BICS can anchor PSF’s

committed to building a strong, pro-

This is the fourth edition of BICS; earlier

recommendations for business reforms

active

advocacy

editions of the survey were carried

and create a platform for informed

platform. Beyond simple advocacy,

research-based

out in 2008, 2010 and 2013. BICS

dialogue

PSF aims to build a pact based on trust,

continues to be an important aspect

to

empathy and mutual support. BICS was

of data gathering with locally managed

complement

a response to PSF’s need for research-

research, data collection, and analysis

policies aimed at promoting a private

based advocacy and provides a tool

on the business environment. BICS has

sector-led growth as well as align itself

for evidence-based advocacy that can

evolved over time, which may not lend

with other business climate surveys to

anchor PSF’s advocacy efforts and

itself to direct comparisons between

make informed decisions. The reforms

recommendations to the Government.

studies due to changes in variables and

that BICS inspires will help businesses

adoption of different methodologies

grow and become more competitive,

BICS is a study based on perceptions

in calculation and presentation of

which will drive inclusive, sustainable

of people collected through interviews,

results. However, the current edition

economic growth, thus contributing to

surveys and focus group discussions.

of BICS provides trends for major

the achievement of the government’s

The study includes evidence and data

variables related to Rwanda’s business

vision of a private sector-led economy.

from surveys implemented over a

environment. From the onset, BICS

cross-section of businesses ranging

(2019 - 2021) adopted a collaborative

The Promotion of Economy and

from

micro-enterprises

the /

key

stakeholders

business reform

climate,

government

large

process, with the study representing

Employment Programme (Eco-Emploi)

enterprises. The survey assessed the

a collaborative effort between PSF,

has supported this edition of the BICS,

current business performance through

including all ten professional and

2018. Eco-Emploi is a joint Rwandan-

a wide array of questions relating to

promotional chambers and auxiliary

German Development Cooperation

the respondents’ business, sector and

associations,

entities

Programme with Technical Assistance

the environment in which they operate.

and development partners to ensure

by the Deutsche Gesellschaft für

It also sought to gauge the short-term

ownership

A

Internationale Zusammenarbeit (GIZ),

outlook of businesses by touching

participative process ensured that BICS

commissioned by the German Federal

upon

(2019 - 2021) reflected the views and

Ministry for Economic Cooperation

opinions of all key stakeholders.

(BMZ).

near-future

to

with

improve

expectations

pertaining to their businesses. Thus,

government and

participation.

iv


Executive Summary Fourth edition of flagship study. Business Investment Climate Survey (BICS) is a flagship study conducted by the Private Sector Federation. The current survey marks the fourth edition of the survey with previous surveys being conducted in 2008, 2010 and 2013. This fourth edition is supported by GIZ through EcoEmploi on behalf of the BMZ. Evidence to inform advocacy efforts. By identifying major challenges and constraints faced by Rwandan businesses, BICS enables PSF to better fulfill its mandate of promoting and representing the interests of the private sector. BICS directly asks Rwandan businesses regarding challenges and constraints they face in operating and growing their business, and as such highlights key areas in the business environment that require intervention. PSF is thus able to tailor its efforts to fit the real needs of the private sector and can rely on data-backed evidence to inform its advocacy efforts.

https://timedotcom.files.wordpress.com

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BICS to provide a robust and detailed evidence base on key areas in which policy change and actions are needed to improve the business environment. Aligned with government’s vision. A survey of the private sector is also timely given the government’s continued emphasis on a private sector-led economy. The findings of the BICS are expected to guide improved national economic policies and competitiveness of the business environment as well as improved Public-Private-Dialogue (PPD) on specific economic aspects and for specific sectors. Study based on perceptions. As a study based primarily on survey data, general weaknesses of survey studies also apply to BICS. First, because responses were gathered via self-report, they are susceptible


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

to social desirability effects and demand characteristics.1 The latter is particularly pertinent in the case of BICS as respondents familiar with BICS’ goal of identifying challenges and constraints for business growth and operation in Rwanda may have felt particularly compelled to over-report the challenges they faced. To mitigate validity concerns arising from reliance on survey data alone, we supplemented findings from BICS (2019 - 2021) with those from stakeholder meetings and FDG and corroborated findings with those from complementary studies.2

Steady improvement on human

Between 1990 and 2017, Rwanda’s HDI value increased from 0.250 to 0.524, which represents an increase of 109.6 percent. Rwanda is just shy of the 0.550 human development index value, which marks the lower threshold for countries to qualify for the medium human development category. In addition, Rwanda ranks 85 out of 160 countries on gender equality as measured by the gender inequality index, significantly outperforming its East African neighbors. development indicators.

Rwanda has made great progress.

Successfully recovering from the 2013 economic crisis, the Rwandan economy has sustained an average economic growth of 10.6% over a period of five years. The private sector’s contribution to GDP is estimated at 85% with a gross capital formation of about 23% of GDP.

Private sector considered primary agent of change in transforming

The blueprint for Vision 2050 highlighted diversified tourism, high value IT and tech services, and business and financial services among others as key sectors that can increase productivity and competitiveness while providing jobs for Rwandans, thus leading to “transformation for prosperity”. Rwanda.

Private sector needs to create job. Government

A. The Context

erated the importance of a private sector-led, service-focused, knowledge-based economy for Rwanda.

emphasizes

pri-

led economy. Vision 2020 sought to transform Rwanda from a low-income, agriculture-based economy to a knowledge-based, service-oriented economy with middle-income status by 2020 and emphasized the importance of the private sector in propelling Rwanda’s economic growth. The first National Strategy for Transformation (NST1), reitvate-sector

The Government of Rwanda has strongly emphasized the role and development of the private sector to create 1.5 million decent and productive jobs (214,000 annually) in the next 7 years (2017 – 2024) for accelerated economic growth and poverty reduction. Investment climate reforms em-

To sustain economic growth, the Government has priphasized.

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oritized investment climate reforms and investment in key productive sectors. The Government has implemented several reforms to facilitate private sector growth and continually strives to do more. Rwanda stars in World Banks’ Doing Business Reports. Priority given

to business environment reforms by the Government of Rwanda and continued efforts to promote Rwanda as an attractive business and investment destination have resulted in great improvements in Rwanda’s business environment. With an overall Ease of Doing Business score of 77.88, Rwanda ranked 29th out of 190 economies in the Doing Business 2019 report making it the only low-income country in the top 50 ranking. Rwanda has the best business climate in the EAC and the second best in Africa. Furthermore, the 2019 report explicitly identifies Rwanda as one of ten economies with the most notable improvement from the preceding year. Rwanda recorded a registered Foreign Direct Investment (FDI) worth USD 2.01 billion compared to USD 1.68 billion dollars in 2017. This is an increase of USD 331 million or approximately 20%, when compared to the investments registered by RDB in 2017. In the last 8 years, registered investments in Rwanda jumped from USD 398 million in 2010 to slightly over USD 2 billion in 2018. Increase in FDI.

ness environment, key challenges remain. According to the Establishment Census Report 2017, almost 93% of total businesses in Rwanda operate in the informal sector. For emerging markets, graduation of informal businesses to formal ones marks a key challenge. Such a transition requires an economy dominated by micro, small and medium enterprises to transform into an ecosystem with dominant large enterprises that create value and employment. Understanding of key constraints required for continued growth.

Despite significant improvements in Rwanda’s business climate, improvements on measures such as Ease of Doing Business reveal tan incomplete picture. To gain a holistic understanding of Rwanda’s business environment, it is important to engage with real businesses on perceived challenges and constraints affecting their business. Doing so ensures that stakeholders are aware of on-the-ground realities that allow for the introduction of appropriate reforms that can help correct failures and impediments in existing systems. Investment climate assessments such as BICS help provide a deeper understanding of existing constraints and help identify the most important aspects of the investment climate for productivity, private sector development and income growth.

the current study, findings from the survey were supplemented with qualitative data from stakeholder consultations and FGDs. Stakeholder consultations were carried out with Chairs of PSF Chambers, business owners, government officials, donor/development partners, in which semi-structured discussions were used to guide the conversation and ensure coverage of major topics extrapolation of relevant information. In addition, a total of ten FGDs spanning all five of Rwanda’s provinces were conducted. FGD participants included representatives from SMEs as well as larger companies, public sector stakeholders, development partners, and civil society members. The geographical spread of the FGDs helped ensure that the needs highlighted by discussions were not Kigali or specific district-centric but representative of Rwanda as a whole.

Approach and Methodology

To ensure that findings from BICS (2019 - 2021) were representative of Rwanda as a whole, a stratified random sampling method was adopted wherein three key strata were considered—business size, sector and province. To expand the reach of the survey and ensure maximum number of responses, the survey was disseminated online in addition to being implemented by surveyors on the field. In total, 981 complete responses were obtained from participants spanning all five provinces, over sixteen sectors and ranging from micro to large enterprises.

Stakeholder meeting and consul-

Survey design and implementation.

tations. To

Surveys were either implemented

B. BICS (2019 - 2021)

Sampling.

Overwhelming presence of the in-

Despite significant improvements in Rwanda’s busiformal sector.

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improve the validity of


http://www.psd-rwanda.org/

via in-person structured interviews or online via the KoBo toolbox. This represented the first time an online medium was used to implement BICS and as such, provisions were put in place to facilitate ease of responding such as allowing respondents to fill the survey in parts and setting up a help desk where questions could be clarified. After completing demographic measures pertaining to themselves as well as their business, respondents answered questions under nine sub-headings: investment climate profile, access to finance, cost and access to electricity, cost and access to land, cost and access to transport, cost and access to trade, tax administration, cost and access to labor force, customer service, value addition, digital platform, performance and outlook, and regulations and reforms. The survey contained a mix of open-ended questions that provided qualitative data and close-ended questions that provided quantitative data. Close-ended questions were either in a multiMeasures.

ple-choice format or a Likert scale. Likert scales were used to ask participants regarding the extent to which they considered various aspects of running a business in Rwanda to be problematic--responses could range from 1 (not a problem) to 7 (a major problem). In addition, 4 represented a neutral viewpoint. Using Likert scales provided a significant advantage over a simple not a problem/a major problem multiple-choice question as it allowed for more nuanced analysis. The survey yielded both quantitative and qualitative data that required separate approaches to analyze. Data analysis was conducted using IBM SPSS Statistics Version 20. Frequency analysis provided a useful metric to assess demographic data and close-ended questions in general. Moreover, bivariate frequency analysis and cross-tabulation methods allowed for useful assessment and comparison of challenges by province, sector or size of business. In some cases, Analysis techniques.

multiple response analysis method was also used to examine the most significant indicators across several responses. For some quantitative variables, descriptive statistics are also presented. Qualitative data was collated and analyzed for commonalities and themes that were used to garner overall trends. Low response rate for online survey. Even with the provisions put in place, the response rate for the online survey t was very low (2.22%). The low response rate may be indicative of the lack of familiarity of businesses in filling out online surveys as well as the lack of incentive provided for businesses to do so. Findings Profile of respondents.

The majority of respondents (62.8%) were from Kigali with the percentage of respondents from other provinces ranging from 6.6% (Northern Province) to 11.5% (Southern Province). the majority of businesses surveyed (55.6%) were mi-

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cro enterprises followed by small (31.7%), medium (11.3%) and large (1.4%). The distribution of business size in the current sample was representative of the private sector in Rwanda as a whole. The current sample included respondents from all nine of RDB’s priority sectors, namely ICT, mining, energy, tourism, manufacturing, construction, agriculture, finance and insurance. The highest representation was from the construction sector (13.7%), followed by ICT (11.9%), e-commerce/logistics (11.7%), tourism (11.7%) and trading (10.4%). Of the five provinces, Kigali was rated most highly as an investment destination with 52.6% of respondents rating it as very attractive and a further 33.1% rating it as attractive. The Southern Province was considered the least attractive investment destination by respondents of the current survey with Perception of provinces.

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10.9% rating it as unattractive. Some ground challenges in the Southern province such as low fertility for agriculture, higher poverty rate, and limited infrastructure (water and electricity) may have negatively influenced the province’s perceived attractiveness. Recent

business

performance.

When asked to compare the revenue of their business in 2017 to that in 2016, 31% of respondents indicated that it was higher, 48% that it was about the same and 21% that it was lower. Compared to results of BICS 2010, a smaller percentage of participants reported that business performance was lower than in the preceding year— 21% versus 34% in BICS 2010— while a greater percentage reported that business performance was about the same—48% versus 34% in BICS 2010. As for profit, the highest percentage of participants i.e. 45% reported that profits were higher in 2017 versus 2016 while

36% reported that it was about the same and only 19% reported that it was lower. Together, these results are indicative of healthy recent business performance. Of the twenty challenges participants were asked to rate in terms of how problematic they were, the following emerged as the top five challenges faced by businesses across Rwanda irrespective of location, size and sector of business: Top five national challenges.

• Tax rates (78.4%) • Competition with local businesses for customers (68.7%), • Local demand for product or service (65.7%), • Tax administration (58.9%) and • Access and cost of borrowing money (58.2%). Province-specific challenges. Challenges faced by businesses in each province largely resembled


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

the overall national challenges with tax rates, local market competition, cost and access to finance and local demand for products and services emerging as key challenges in all provinces. Some challenges, however, were found to be province-specific-level of education of workforce and procedures for obtaining business license and operating permits emerged as key challenges in the Western province and access and cost to water and telecommunication in the Southern province. challenges. In keeping with overall national challenges, tax rates emerged as a major challenge across the majority of sectors as did access and cost of finance. Some sectors were found to face key challenges besides the overall national challenges identified. For instance, the representatives from the Wood sector indicated competition with EAC and non-EAC businesses for cusSector-specific

tomers as major challenges while the creative industry indicated the level of education of workforce as a major constraint for growth. Business size-specific challeng-

The major challenges faced by both micro and small enterprises echoed the national business challenges. Specifically, tax rates, domestic competition and local demand for products or services emerged as key challenges for both micro and small enterprises. For medium access and cost of finance and availability of local suppliers emerged as additional challenges. For large businesses, tax administrative services and level of education of workforce stood out as major business challenges in addition to tax rates and domestic competition. es.

The majority of respondents in the current survey indicated issues pertaining to tax administration to be probTax administration.

Comparison with previous BICS. The table below compares key indicators from BICS studies so far. Percentage of business firms

2008

2010

2013

2018

1

Predicted Revenue Growth

37%

32%

-

45%

2

Access to & cost of finance as a major constraint

72%

53%

3.83

58%

3

Availability & cost of land as a major constraint

83%

64%

2.96

54%

4

Access to & cost of transport as a major constraint

81%

32%

2.78

52%

5

Access to & cost of electricity as a major constraint

64%

31%

3.22

52%

6

Access to & cost of labor force

52%

39%

-

42%

7

Tax rates/tax administration

77%

58%

4.59

66%

lematic. 67.9% of respondents indicated that level of Value Added Tax (VAT) was a problem while 64.9% indicated that level of corporate tax was a problem. Also, more than half of the respondents indicated that the unavailability of information on Rwanda’s tax system was a major constraint. Rwanda is transitioning from a no tax system to one with multiple taxes, as such tax is likely to remain a key challenge for businesses in the coming years. Additional challenges that emerged were: • Multiple taxes collected that include many local taxes for cleaning, security etc. • Inadequate information about tax regulations means that many businesses end up paying penalty fees, compliance fees—which become additional burdens for businesses • Frequent changes to tax laws and regulations and lack of outreach by the government means businesses are not well-versed with the latest developments in tax regulation Access to finance. Access to and cost

of finance is one of the major challenges faced by businesses irrespective of location, size and sector of business. The following is notable: • More than half of business surveyed indicated access to finance to be a major challenge for business growth in next three to five years. As per the rating, 36.7% of business indicated ‘access to finance’ as a major problem. • The top three constraints related to finance are first, interest

x


rate charged by banks and other lenders, second, requirement for collateral and third, level of perceived risk that financial institutions associate with startup business. Only 24.2% of survey respondents indicated that business start-ups and licensing requirement was problematic while the majority of businesses i.e. 55.4% indicated it as not a problem at all. Apart from registration requirement, compliance with various government requirements is coming out as a key challenge for start-ups and business expansion. Another major issue is related to the closure of businesses, which requires approval and clearances at different levels. Legal issues.

Contrary to previous studies, infrastructure challenges for business growth has subdued in recent years. Historical studies indicate access and cost of transportation as a major infrastructure challenge followed by access and cost of electricity, water and telecommunication. Compared to previous studies, access to and cost of telecommunication as an infrastructure challenge has gone down significantly while access to and cost of electricity and transportation continues to be a key infrastructure challenge for businesses across size, scale and sector. Infrastructure.

In terms of Human Resource, only 23.7% of businesses have indicated recruiting and developing a competent workforce as problematic while Human resource.

xi

more than half of the respondents indicated it to not be a problem. Compared to previous studies, the reporting has significantly improved as almost half of the respondents in previous editions of BICS indicated it to be a major problem. Barriers for export. In

terms of key barriers for exports, the top five barriers as per the survey findings are: packaging, linkage with foreign customers, cost of value addition to products, export market information and transportation

To promote private sector-led growth, Rwanda needs to leverage its key strengths such as agriculture, tourism and trade relations as well as improve the investment climate. cost to export/paper work needed by foreign authorities to export from Rwanda.

lem faced by smaller businesses. This problem is further exacerbated by frequent changes in tax laws and regulations. To mitigate this problem, it will be important to ensure that proper dialogue, discussions and dissemination of tax regulations are carried out to ensure awareness and understanding among the stakeholders. In addition, the following tax-related recommendations can be considered: • Develop a mechanisms to resolve and expedite tax disputes in a swift and fair manner • Evaluate and assess the local tax system i.e. understanding the different local taxes that are imposed at the local level • Uniform tax rates and compliance needs for enterprises in a sector • Revision of Tax Code to be best in the world rankings (eg. Estonia and Latvia) • Joint committee be formed (between MINECOFIN, RDB, RRA, BNR and PSF) eg. Ethiopian Public Private Consultative Forum (EPPCF)

Comparison with previous BICS.

The table below compares key indicators from BICS studies so far. C. Summary of Recommendations3

Tax-related issues have emerged as key challenges constraining business growth since the inception of BICS in 2008. As such, this is a key area where intervention is required. In particular, the lack of information on tax regulations resulting in non-compliance related penalties and legal actions has emerged as a key probTax.

Access to finance has also consistently emerged as a key challenge in BICS studies. High cost of finance, collateral requirement and short period of credit make it difficult—particularly for micro and small enterprises—to access credit. To improve access to finance in Rwanda, the following recommendations can be considered. Access to Finance.

• Strengthening access to credit by implementing a functional secured transactions system


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

The cost of electricity in Rwanda is amongst the highest in the EAC and adds to the cost of doing business in the country. Challenges on access and cost of electricity can potentially be mitigated by working with international agencies such as the International Renewable Energy Agency. The first order of business should be to assess existing and future requirements for electricity such that a proper plan for expansion and management of the electric grid can be made.

www.abahizi.com

• Larger range of debt and equity products should be made available across micro, small and medium-level enterprises • Incentives should be provided to commercial banks to engage in market downscaling initiatives • Technical assistance and training programs to train bank staff in medium and long-term lending, rural lending, project finance techniques, and provision of financing for start-up companies Electricity.

The survival rate of new businesses is low, with few surviving beyond the age of five. To tackle the issue of enterprise development, the following recommendations are proposed: Enterprise Development.

• Formulate a SME Business Forum eg. Singapore Business Forum • Focus on economic agglomeration • Roll out business development services (BDS) • Technical and vocational training system in line with the changing market mechanisms

Many challenges related to competition are prevalent in Rwanda’s private sector. These include lack of level playing field for VAT-registered businesses creating unfair competition and practices, lack of local demand or consumptions leading towards lower unfair market competition and difficulties local businesses face in competing with cheap imported goods. To address these issues, the possibility of establishing a Competition Authority of Rwanda—akin to the Competition Authority of Kenya—can be explored. This statutory body will have the mandate of promoting fair competition among enterprises in Rwanda and will act within the framework of the EAC Competition Act. Competition.

D. How to Improve Business Climate—What can be Done?

To promote private sector-led growth, Rwanda needs to leverage its key strengths such as agricul-

ture, tourism and trade relations as well as improve the investment climate. The latter will require indepth research and prioritization of issues, continued monitoring of issues, communication and outreach with relevant stakeholders as well as strong public-private dialogue and partnerships, and private sector support policies. Effective policies to improve the investment climate require the development of a sound evidence base on the problems and constraints to private sector investment. A conducive business investment climate provides firms (ranging from micro enterprises to multinationals) with the opportunities and incentive to invest productively, create jobs, reduces costs and risks of doing business, as well as barriers to competition. All of which strongly influence the role and impact of the private sector in social and economic development, economic growth and poverty reduction.

xii


1. Background The socio- economic growth of Rwanda has been impressive in the past decade with a growth rate of over seven percent a year. To sustain economic growth, the Government has prioritized investment climate reforms. Known for the best business climate in the East African Community (EAC)4 and the second best in Africa and achieving several laurels for reforms to facilitate private sector growth, the Government of Rwanda is continually striving to do more.

1


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

The Government of Rwanda has strongly emphasized the role and development of the private sector to create 1.5 million decent and productive jobs (214,000 annually) in the next seven years (2017 – 2024) for accelerated economic growth and poverty reduction. It also recognized the private sector as the key driver for integration with global markets to harness the country’s economic potential. Rwanda’s long-term national goals as stated in Vision 2050 and National Strategy for Transformation (NST) 1 and other regional strategies as stated in the African Union agenda 2063, EAC Vision 2050, have strongly emphasized the importance of the private sector and recognized the need for facilitating a favorable business investment climate and attracting a high inflow of foreign direct investments. Business growth constraints have reduced in severity since 2008; the average score of business constraints decreased from 4.4 out of 7 in BICS 2008 to 2.8 in BICS 2013.5 However, three areas continued to emerge as major business constraints across size, sector and location of businesses in BICS 2013, namely: • Tax rates: Tax rates constraints scored 4.59 out of 7. High tax rates are the net sum of all taxes, local district fees and tax fines that often constitute a large percentage of the businesses’ working capital. • Finance: Access and cost of finance was the second constraint with a score of 3.8/7. High interest rates (4.7/7), collateral requirements (4.5/7) and availability of alternative financing

(4.0/7) are the top three financing constraints • Energy: Access and cost of electricity scored 3.22/7. On average, increasing energy supply is the key to improving the access and cost of electricity constraint. It is the constraints that limit private sector investment and growth that also limits the benefits to Rwanda. However, the primary role in addressing many of these constraints rests with both the Government and the private sector. The Government continues to shift towards a private sector-led economic model. Nevertheless, accelerated growth requires ongoing macroeconomic stability, effective regulation and a supportive Government committed to improving the business environment. It is in this course that there are underlying constraints and themes that need to continually be addressed to enable the business community increase growth. To improve the business climate and foster economic growth, it is essential to partner with the Government and other stakeholders in their initiatives as well as hold productive dialogues that could yield reform measures. Recognizing the importance of effective public-private partnership in fostering economic transformation, the Government of Rwanda and the private sector are actively engaged in dialogue over various economic issues. Through its line ministries and in partnership with the private sector, the Government of Rwanda regularly conducts dialogue on important issues aimed at engaging the private sector and

increasing their participation in Rwanda’s economic development agenda. In this context, PSF in line with the Government development strategy and the support aligned by Government and development partners in several areas including access to competitive financing opportunities, export promotion and market access opportunities, economic policy and legal reforms, infrastructure development etc., has recognized its role in achieving reforms for growth. PSF seeks to establish a conducive environment for private sector growth and contribute to the emergence of a more competitive business investment climate framework and strategy. PSF aims to respond to the needs by conducting timely BICS to provide a robust and detailed evidence base on key areas in which policy change and actions are needed to improve the business environment. The findings of BICS are expected to guide improved national economic policies and competitiveness of the business environment as well as improved advocacy, lobbying and negotiations during public-private-dialogues (PPDs). BICS analysis will serve as an important basis for investment climate reforms linked to the country’s overall goals. Thus, PSF uses the evidence and engages its chambers and decentralized offices to leverage the PPD platforms to drive reforms. PSF will engage relevant Government institutions through PPDs to address private sector constraints. It is in this context that the fourth edition of the BICS study was carried out.

2


02. Approach & Methodology

3


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

This section outlines in detail the approach and methodology adopted to carry out BICS (2019 - 2021). It includes a description of all activities undertaken during the course of the study, which are in adherence with international best practices. Figure 1.

Figure 1: BICS Approach and methodology

BICS 2019-2021

2.1 Desk Review and Research

To have a sound understanding of Rwanda and its business and investment climate landscape, existing information on improving and promoting the business and investment climate were thoroughly reviewed. The review analysis entailed understanding the structural framework under which businesses in Rwanda operate, including the legal system, economic system and the financial system. Moreover, relevant policy documents, national statistics, and business climate and competitiveness reports developed by multi and bi-lateral agencies were also reviewed (Refer to Annex 6). Findings from the desk research helped 1) map out the current business and investment landscape; 2) identify the key gaps and explore initiatives to help bridge those gaps, and 3) develop an understanding of strengths and challenges as well as policy gaps to be further examined. 2.2 Stakeholder Meetings

Findings from the desk research were supplemented and validated through stakeholder consultations, FGDs and face-to-face interviews. Participation of stakeholders early in the process is an important aspect of BICS as multiple government, private and

public stakeholders have a key role in the effective implementation of the plan and a larger stakeholder buy-in of the report is crucial for the success of proposed reforms. Consultative meetings, FGDs and key informant interviews aimed to identify hurdles relating to government policies, regulations, hard and soft infrastructure, capacity of private sector as well as human resource constraints. It also engaged discussions on the impact of business investment climate constraints both at micro and macro level. A mix of quantitative (survey administration) and qualitative (FGDs) data was obtained to achieve research objectives. Surveys and focus group guides were subsequently developed. Finally, instruments were translated into Kinyarwanda to cater to all segments of the population. While face-to-face interviews helped identify the problems, FGDs revealed the root causes of the problems and explored ways to mitigate them. • Stakeholder Consultations: Consultations with Chairs of PSF Chambers, business owners, government officials, do-

nor/development partners and other key stakeholders were semi-structured discussions during which key questions were used to guide the conversation and ensure coverage of major topics and allow for the extrapolation of relevant information. Stakeholder consultations provided first-hand qualitative information and helped decipher ground realities. A complete list of stakeholder consultations carried out for this report is presented in Annex 2. • Focus Group Discussions: A total of ten FGDs were conducted, which spanned all five of Rwanda’s provinces. FGDs were conducted in Muhanga and Huye district in the Southern province, Rubavu and Rusizi district in the Western province, Musanze district in the Northern Province, City of Kigali , and Nyagatare district of the Eastern province. The geographical spread of the FGDs ensured that the needs highlighted by discussions were not Kigali or specific district-centric but representative of Rwanda as a whole. The FGDs supple-

4


mented information gathered from stakeholder consultations on market needs and expectations. FGD participants included representatives from SMEs as well as larger companies, public sector stakeholders, development partners, and civil society members. A complete list of FGD participants is presented in Annex 3. Of the ten FGDs conducted, six were sector-specific and four were general or mixed. Sector and issue-based FGD allowed for a richer discussion on constraints, while the mixed FGDs provided a holistic picture of crosscutting issues affecting the private sector. 2.3 Survey for Data Analysis

Data underpinning the main issues were collected through a quantitative survey that was implemented via a field survey as well as through an online medium. Field surveys were implemented through in-person interviews using structured questionnaires (see Annex 4) by trained surveyors. The survey was implemented in two phases---pilot survey and actual survey. Whereas, the online survey was deployed for the very first time to expand the coverage and increase the reliability of findings and outcomes from the field survey. Experienced and trained field researchers were key to the success of the BICS (2019 - 2021) research process. This was especially important because of the one-on-one survey administration method. BICS (2019 - 2021) recruited 18 field researchers who had experience in

5

carrying out similar surveys (such as SMEs Survey, Tourism product assessment survey, Business ecosystem survey). Before commencing the survey, training was provided to the enumerators as well as the technical team to equip them with the background and objective of the study, business climate criteria and survey questionnaire, practical issues to administer the survey and check for data consistency provided by respondents. • Pilot Survey: During the International Trade Fair held from 27 July to 15 August 2018, the survey was pilot tested. The pilot helped test the quality of the questionnaire, enhance the reliability of the survey and finalize the framework and concept for the actual BICS. Revisions and improvements to the questionnaire were further incorporated and the survey was rolled out throughout Rwanda. • Field Survey: The actual survey was conducted across all 30 districts of Rwanda and included respondents from different size and sector of enterprises. To ensure smooth monitoring and evaluation of survey activities, the fieldwork was started from Kigali city where most of Rwanda’s businesses are located and then followed up with surveys in other provinces. • Online survey: Using the KoBo Toolbox, the survey was expanded to cover a larger respondent size as the online survey was made available on mobile devices and laptops/computers.

Considering the length of the survey, the provision was made to fill the questionnaire in parts. The PSF database was a key component to carry out this online survey. The online survey adopted the same sampling method as per the physical survey and was carried out with the businesses associated with PSF. A help desk was set up to follow up on the online questionnaire, assist the business in filling the questionnaires and holding discussions with each respondent to clarify issue unclear to them. • Sampling Method: For BICS (2019 - 2021), stratified random sampling method was adopted, which is in line with the international best practices to deal with the heterogeneous population. In other words, stratified random sampling ensured there was adequate representation from selected groups in the population. For sampling the following three variables were taken into consideration: • Size: The survey considered the sizes of enterprises for sampling and analysis, which were— Small, Medium and Large— based on the definition of Rwanda Revenue Authority (RRA). • Sector: The survey was conducted across all key sectors, including ICT, Wood, Tourism, Ecommerce/logistics, and Creative industry • Geography: The survey was con-


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Table 1: Distribution of the Sample by Province and Sector

PROVINCES SECTOR

KIGALI NO.

Agriculture

%

SOUTHERN PROVINCE

NORTHERN PROVINCE

EASTERN PROVINCE

WESTERN PROVINCE

TOTAL

NO.

NO.

NO.

NO.

NO.

%

%

%

%

%

26

2.70

11

1.10

7

0. 70

20

2.00

4

0.40

68

6.90

106

10.80

11

1.10

0

0.00

5

0.50

12

1.20

134

13.70

10

1.00

1

0.10

0

0.00

0

0.00

0

0.00

11

1.10

101

10.30

1

0.10

6

0.60

1

0.10

6

0.60

115

11.70

Energy

2

0.20

0

0.00

2

0.20

7

0.70

0

0.00

11

1.10

Financial service

11

1.10

2

0.20

2

0.20

2

0.20

1

0.10

18

1.80

Handicraft

17

1.70

2

0.20

0

0.00

2

0.20

5

0.50

26

2.70

ICT

81

8.30

6

0.60

10

1.00

5

0.50

15

1.50

117

11.90

Infrastructure

2

0.20

1

0.10

0

0.00

0

0.00

0

0.00

3

0.30

Manufacturing

19

1.90

10

1.00

11

1.10

9

0.90

4

0.40

53

5.40

Mining

2

0.20

0

0.00

0

0.00

1

0.10

0

0.00

3

0.30

Service

75

7.60

8

0.80

2

0.20

5

0.50

7

0.70

97

9.90

Tourism

45

4.60

18

1.80

14

1.40

18

1.80

20

2.00

115

11.70

Trading

77

7.80

17

1.70

0

0.00

3

0.30

5

0.50

102

10.40

Wood

6

0.60

4

0.40

0

0.00

2

0.20

2

0.20

14

1.40

Other

36

3.70

21

2.10

11

1.10

11

1.10

15

1.50

94

9.60

Total

616

62.80

113

11.50

65

6.60

91

9.30

96

9.80

981

100

Construction Creative industries E-commerce/Logistics

ducted across all five provinces and 30 districts in Rwanda to gain holistic insight on Rwanda’s business and investment climate. The survey was administered across all strata (districts, sectors and size) by proportional allocation method. Each primary sampling unit from each of these three strata was selected using sample random sampling technique without replacement. Total sample size (n) was proportionally allocated accordingly. On the basis of this sample design, characteristics of all the target economic sectors were estimated to represent the characteristics of all the economic sectors distributed across the country.

Response Rate: The survey was administered to 3,895 establishments of which 1,103 establishments participated in the survey. The break-up of responses based on the survey administration approach is given in the Table 1. As can be seen, the response rate to the online survey was very low.

Sample Size: The total sample size considered for the BICS (2019 2021) was approximately 981 (this is derived after removing the 122 incomplete responses from the total of 1,103) based on the assumption that there are close to 190,288 private sector businesses of which only 13,566 are formal enterprises (Establishment Census, 2017). This sampling size taken on basis of the 89% response rate is adequate to conduct statistically robust analysis with acceptable levels of precision (at confidence interval of 95%).

The detailed distribution of the sample by province and sector is provided in Table 1. Response Rate: The survey was administered to 3,895 establishments of which 1,103 establishments participated in the survey. The breakup of responses based on the survey administration approach is presented in Table 2. As can be seen, the response rate for the online survey was very low. The low response rate may be indicative of the lack of familiarity of businesses in filling out online surveys as well as the lack of

6


incentive provided for businesses to do so. 2.4 Analytical Techniques and Outcomes

The business and investment climate in Rwanda was assessed both qualitatively and quantitatively. Data and information collected from both the qualitative and quantitative survey were reviewed, analyzed and interpreted to summarize key findings of the survey and provide recommendations accordingly. For the purpose of quantitative assessment, IBM SPSS Statistics version 20 was used. Numerical analyses were conducted mostly using frequency analysis. Further, bivariate frequency and cross-tabulation methods were also adopted. Significance of association between two variables or factors was derived from the use of bivariate frequency analysis. In some cases, a multiple response analysis method was also used to examine the most significant indicators across several responses. For some quantitative variables, descriptive statistical approach was also used. Quantitative Assessment:

The interpretations of the results obtained were analyzed based on quantitative design. The results

were assessed across five filters— sectors, risk, regions, time and cost to enable comparisons between business and investment climate across provinces, sectors and sizes of business. This exercise provided an unprecedented capacity to identify specific constraints that were affecting specific segment of the business population and recommend interventions to formulate the Business and Investment Climate Action Framework. • Based on Sector: Based on the literature review, priority sectors for investment in Rwanda were identified for conducting a sectoral analysis. Some of the sectors that were analyzed under this survey are—Agriculture, Construction, Mining, Infrastructure, ICT, Handicraft, Tourism, Financial services, Energy, Manufacturing, E-commerce/logistics and Wood, among others. This process helped identify the existing scenario of those sectors and map out the challenges that they face while doing business in Rwanda or while making an investment in Rwanda. Based on the mapping, low hanging issues with immediate actions were identified and recommendations are provided likewise.

Table 2 : Response rate of the BICS 2019 - 2021 Survey

7

S.NO

METHOD

ADMINISTERED

RESPONSE

RESPONSE %

1

Face to face interviews

1,048

1040

99.24%

2

Online survey

2,845

63

2.22%

Total

3,895

1,103

• Based on Time: The filter of time focused on identifying and categorizing not only the time constraint for each challenge businesses face but also the estimated time for solving this challenge. Based on the mapping of the challenges based on time, long term, medium term and short term recommendations are provided likewise. • Based on Cost: This filter helped understand the actual cost incurred by companies while conducting business in Rwanda. Since, the results were stratified based on size and sectors, it was easier to understand the spread of cost of doing business across various sectors and scale of business. The outcome helped to provide specific policy recommendations for interventions in easing the cost for doing business and investment in Rwanda. • Based on Business Risk: The outcomes of the research design were analyzed from a lens of risk rating per sector per region. The survey also asked questions relating to the gender, age and education level of the entrepreneur and so the results can also be broken down into these categories to show where specific constraints are faced by business leaders with differing education levels, different gender or different age groups. This step provided a perspective on how same risk was rated across various sectors, size of businesses, geographical location and segment of population. The risks are categorized as high


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

for the online survey, the response rate that was expected could not be achieved. Also, as the sample was large, only descriptive statistics and frequency analysis were used to derive the significant indicators of the study. Such analyses reduce bulk data into simpler form and provide a powerful summary that enables comparisons and do not affect the validity of the results. Some of the reference data used for the study is for 2016-2017 as the latest updated data for 2018 was not published or readily available during the timeframe of the study. risk, medium risk and low risk and recommendations are provided likewise. • Based on Region: The research design placed emphasis on covering various regions of Rwanda to understand the business climate across geographical location. The study was conducted across each of the districts in all the five provinces of Rwanda. This helped analyze the difference in business climate perception across the geography and produce recommendations that are region specific rather than being generalized recommendation. BICS (2019 - 2021) used findings from various reports sourced in the course of desk research as the starting point. The study focused on areas of need/issues highlighted by the previous reports conducted in the last 3-4 years and where interventions could have the biggest impact. Qualitative

The qualitative assessment covered the following aspects/issues: • The trend of investment climate in Rwanda over the period of time---the impacts created and evaluation of the process; • Changes in Rwanda’s business climate and the drivers of this change; • Persistent issues/challenges in doing business in Rwanda – the hindrances and reasons for it not being resolved; • Current business environment in relation to the competitiveness and technology advancements; • Challenges that arise with the opening up of the economy and regional integration.

Assessment:

Limitations of the study: The survey was conducted in two modes-physical survey and online survey. For the physical survey, although the sample size was assumed to be appropriate for representativeness of the population, the responses for some of the questions were missing. On the other hand,

8


3. Country Context

9


This section reviews the country context for Rwanda through four lenses: • Recent economic development • Human development indicators • Ease of doing business and global competitiveness • Recent national strategies 3.1 Recent Economic Developments

Covering a geographical area of 26,338 square kilometers and with a population of 11.8 million people, Rwanda is a small but emerging country. Rwanda’s Gross Domestic Product (GDP) (at current market prices) grew by 10.79% to USD 9.34 billion in FY 2017/18.6 The corresponding figure was USD 8.43 billion in FY 2016/17. The contribution of different sectors to Rwanda’s GDP is presented in Figure 2. As depicted in Figure 2, at 47% the service sector was the highest contributor to Rwanda’s GDP in FY 2017/18, followed by agriculture at 31%. The industrial sector contributed 16% and 7% of GDP was attributed to adjustments for taxes and subsidies on products.

The Rwandan economy has successfully recovered since the 2013 economic crisis and has been growing at an average economic growth rate of 10.6% over the last five years. The private sector’s contribution to GDP is estimated at 85% with a gross capital formation of 23% of GDP.7 Figure 3 depicts the growth in Rwanda’s GDP over the last five years. Rwanda’s GDP (in absolute terms) has grown by 66% from approximately 5.63 billion in FY 2012-13 to 9.34 billion in FY 2017-18.8 Figure 2: Sectorial contribution to GDP

Source: National Institute of Statistics of Rwanda (2017-18)

Figure 3: Growth in GDP (2012-2018)

Source: National Institute of Statistics of Rwanda (2017-18)

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Unlike many African countries, Rwanda is landlocked and limited in natural and mineral resources. Even so, Rwanda has managed to capitalize on its stunning landscapes and extraordinary biodiversity to grow in the field of tourism. In 2017, revenue from tourism (including hotels, restaurants and other services) constituted 7% of Rwanda’s GDP. In 2017, Rwanda also shared good trade relations with larger economies such as USA and Europe. According to the latest available data, Rwanda’s total trade amount in the third quarter of 2018 was USD 1,004.32 million—which represents an increment of 9% from the previous quarter.9

Table 3: Top Five Import and Export Partners for Rwanda TOP 5 DOMESTIC EXPORT PARTNER Country

Amount (USD Million)

TOP 5 IMPORT PARTNERS

Share (%)

Country

Democratic Republic of Congo

20.42

11.36

China

Kenya

18.36

10.21

United Arab Emirates

United States

16.51

9.19

Switzerland

13.59

Canada

11.38

Amount (USD Million)

Share (%)

151.79

20.54

68

9.21

Uganda

65.88

8.92

7.56

India

65.09

8.81

6.33

Kenya

49.83

6.74

Source: National Institute of Statistics of Rwanda (2017-18)

Figure 5: Purchasing Power Parity (PPP) adjusted GDP per Capita in USD

Table 3 provides the trade breakdown of Rwanda’s top five export and import partners. Purchasing Power Parity (PPP) adjusted GDP per capita measures a country’s economic output per person while considering the exchange rate. As shown in Figure 5, Kenya has the highest PPP adjustFigure 4: Domestic Import and Export (in USD million)

Source: National Institute of Statistics of Rwanda (2017-18)

11

Source: World Bank, 2017

ed GDP per capita among countries in the EAC. Rwanda ranks third with a PPP adjusted GDP per capita of USD 2,035. Burundi has the lowest GDP per capita with USD 770. In other words, a person’s contribution to GDP is USD 3,286 in Kenya, whereas the corresponding figure is USD 2,035 in Rwanda.

gard, a comparison of descriptive statistics indicates that Tanzania and Rwanda are the fastest growing economies in the EAC with growth rates of 3.9% and 3.6% respectively. Burundi, on the other hand, is experiencing a negative growth of -2.3%, which could be the result of the high inflation rate in the country.

Real GDP growth rate measures the pace of economic growth by considering inflation. In this re-

Rwanda’s long-term economic goals were articulated in Vision 2020, which sought to transform


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Figure 6: Growth of Real GDP per Capita in percentage

Source: World Bank, 2017

Rwanda from a low-income, agriculture-based economy to a knowledge-based, service-oriented economy with middle-income status by 2020. A private sector-led economy was one of six key pillars in Rwanda’s Vision 2020. The Government of Rwanda has put extensive efforts to pursue the goals and objectives of Vision 2020 and is now one of the fastest growing economy, with an average

annual GDP growth of around 7.2% in the last 6 years (20122018).10 3.2 Steady Improvement in Human Development Indicators

Human Development Index: In recent years, Rwanda has continued to make significant progress on several indicators of human development. The Human Develop-

Figure 7: Human Development Index Values of EAC Countries, 1990-2017

Source: Source: Human Development Report Office12

ment Index (HDI) is a summary measure for assessing long-term progress on three basic dimensions of human development: a long and healthy life, measured by life expectancy at birth; access to knowledge, measured by mean years of schooling and expected years of schooling; and a decent standard of living, measured by gross national income per capita.11 The Human Development Report Office (HDRO) at the United Nations Development Programme (UNDP) is responsible for the human development indices and indicators, which are closely aligned with United Nations’ (UN) Sustainable Development Goals (SDGs). Rwanda’s HDI value for 2017 was 0.524—which put the country in the low human development category—positioning it at 158 out of 189 countries and territories. Although Rwanda remains in the low human development category, between 1990 and 2017, Rwanda’s HDI value increased from 0.250 to 0.524, which represents an increase of 109.6 percent (see Figure 7). As Figure 7 shows, Rwanda is just shy of the 0.550 human development index value, which marks the lower threshold for countries to qualify for the medium human development category. Figure 7 presents Rwanda’s progress on each of the HDI sub-indicators between 1990 and 2017. Between 1990 and 2017, Rwanda’s life expectancy at birth (which corresponds to SDG3) increased by 33.3 years, mean years of schooling (SDG 4.3) increased

12


Figure 8: Rwanda’s Improvement on HDI Sub-Indicators 1990-2017

Source: Human Development Report Office12

by 2.3 years and expected years of schooling (SDG 4.6) increased by 5.5 years (SDG 8.5). In addition, Rwanda’s GNI per capita increased by about 108.4 percent. Introduced by HDRO in 2014, Gender Inequality Index (GII) reflects gender-based inequalities along three dimensions—reproductive health, empowerment and economic activity. Reproductive health is measured by maternal mortality (SDG 3.1) and adolescent birth rates (SDG 3.7); empowerment is measured by the Gender Inequality Index:

13

share of parliamentary seats held by women (SDG 5.5) and attainment in secondary and higher education by each gender (SDG 4.6); and economic activity is measured by the labor market participation rate for women and men. The GII is interpreted as a percentage and indicates the percentage of potential human development lost due to gender inequality. Lower values are therefore indicative of greater gender equality. In 2017, Rwanda had a GII value of 0.381, ranking it 85 out of 160 countries in the 2017 index.

Rwanda significantly outperformed its fellow EAC members on the gender inequality index. The next best performer—Burundi—had a GII score of 0.471 positioning it 114 out of 160 countries. In 2017, 55.7 percent of parliamentary seats in Rwanda were held by women, and 12.6 percent of adult women reached at least a secondary level of education compared to 17.0 percent of their male counterparts. For every 100,000 live births, 290 women died from pregnancy related causes; and the adolescent birth rate was 25.7 births per 1,000 women


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Table 4: Rwanda’s Performance on Human Development Dashboards DASHBOARD 1: QUALITY OF HUMAN DEVELOPMENT Quality of health

Quality of education

Lost health expectancy

Physicians

(%)

(per 10,000 people) 11.9

0.6

Hospital beds

Quality of standard of living

Pupilteacher ratio, primary school

Primary school teachers trained to teach (SDG 4.C)

Vulnerable employment

(pupils per teacher)

(%)

(% of total employment)

16

58

90

Rural population with access to electricity (SDG 7.1)

Population using improved drinking-water sources (SDG 6.1)

Population using improved sanitation facilities (SDG 6.2)

(%)

80.0

17.8

56.7

62.3

Share of employment in non agriculture, female SDG 8.3

Share of seats in parliament SDG 5.5

(% of total employment in nonagriculture)

(% held by women)

35.8

55.7

DASHBOARD 2: LIFE-COURSE GENDER GAP Childhood and youth

Adulthood

Gross enrollment ratio Sex ratio at birth

Pre-primary SDG 4.2

(male to female births) 1.02

Primary SDG 4.1

Secondary SDG 4.1

Youth unemployment rate SDG 8.5

(female to male ratio)

1.03

1.00

1.10

Population with at least some secondary education SDG 4.6

Total unemployment rate SDG 8.5

(female to male ratio)

1.40

0.70

1.17

Source: Human Development Indices and Indicators: 2018 Statistical Update12

TOP THIRD

of ages 15-19. Female participation in the labor market was 86.0 percent compared to 86.3 for men.

MIDDLE THIRD

third, middle third or bottom third of performers on each measure.

Human Development Dashboards:

3.3 Significant Strides in Global Competitiveness

HDRO also presents five human development dashboards, including the quality of human development, dashboard. Based on their performance on various measures, the human development dashboards group countries into three groups of approximately equal size—the top third, the middle third and the bottom third. Threecolor coding is used to indicate whether a country is among the top

To capture trends on key parameters such as access to and cost of finance, we reviewed Rwanda’s performance on The World Bank’s annual EODB reports, which examine regulations affecting eleven areas of the life of a business and the World Economic Forum’s Global Competitiveness Reports (GCR), which measure national competitiveness—defined as the

BOTTOM THIRD

set of institutions, policies and factors that determine the level of productivity. Rwanda’s performance was assessed for the past five years and its performance was compared with those of other countries in the EAC. Overall Performance: With an overall Ease of Doing Business score of 77.88, Rwanda ranked 29th out of 190 economies in the Doing Business 2019 report making it the only low-income country in the top 50 ranking. Rwanda has the best business climate in the EAC and the second best in

14


Africa. This represents a significant improvement from its score of 73.40 and 41st ranking in the preceding year’s report. Rwanda was the best regional performer in the EAC, outperforming Kenya (score 70.31, rank 61), Uganda (score 57.06, rank 127), Tanzania (score 53.63, rank 144), Burundi (score 47.41, rank 168), and South Sudan (score 35.34, rank 185). Figure 9 presents Rwanda’s EODB score and ranking for the past five years. As can be seen, Rwanda has made steady improvement on the EODB measure, with EODB 2019, covering the period from June 2, 2017 to May 1, 2018, reporting its best performance yet. Furthermore, the EODB 2019 report explicitly identified Rwanda as one of ten economies with the most notable improvement from the preceding year. Significant reforms relating to starting a business, getting electricity, registering property, getting credit, trading across borders, enforcing contracts, and resolving insolven-

Figure 10: Rwanda’s Ease of Doing Business Performance 2015-2019

Note. Numbers in parentheses represent rank/total number of economies studied.

Figure 11: Rwanda’s performance on Global Competitiveness Reports 2013-2018

cy elevated Rwanda’s performance in the latest EODB report. Below, we discuss the cost of doing business in Rwanda on parameters ranging from access to and cost of

Figure 9: Comparison of EODB Performance of Economies in the EAC 2015-2019

finance to cross border trade. Kenya, another member of the EAC, was also on the list of ten most improved economies. Its score of 70.31 represented an increase of 5.25 points from its score in the preceding year’s report. On GCR 2017/18, Rwanda ranked 58th out of 137 countries. It climbed six ranks up from the preceding year’s report, although, the overall score has remained similar and quite constant over the past five years. On average, Rwanda has scored 4.3 out of 7 on the global competitiveness index (GCI) over the past five years, which can be regarded as an above average score.

15


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Figure 12: Rwanda’s performance on the World Bank’s Doing Business Indicators in 2017 vs. 2019

Figure 13: Rwanda’s performance in Financial Market Development, the 8th pillar

Access to and Cost of Finance: With a score of 95 out of 100, Rwanda ranked third out of 190 economies on the Getting Credit measure of EODB, 2019. The

Getting Credit measure examines the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. Rwanda scored

8 out of 8 on the Depth of Credit Information Index and 11 out of 12 on the Strength of Legal Rights Index. Rwanda lost one point on the Strength of Legal Right Index because it lacks a notice-based collateral registry in which all functional equivalents can be registered. Unlike Doing Business, the GCR paints a different picture of Rwanda in terms of access to finance. For five consecutive years in the past, access to finance has consistently topped the five most problematic factors for doing business in the World Economic Forum’s Executive Opinion Survey. Figure 13 shows a five-year trend chart for Financial Market Devel-

16


opment (FMD), the 8th pillar in the Global Competitiveness Index (GCI). The chart shows the score for Rwanda on the scale of 1 to 7, with 7 being the most desirable score. The FMD (which measures availability and affordability of financial services, ease of access to loans, venture capital availability, soundness of banks, regulation of securities exchanges and legal rights index) has receded by 0.1% from 2017 to 2018. In the five years from 2013 to 2018, FMD in Rwanda has experienced sluggish growth. What can be understood from the information is that businesses in Rwanda have a moderately average access to financial services. Over the years, Rwanda has introduced a series of reforms that have strengthened the legal rights of lenders and borrowers under collateral and bankruptcy laws, and increased the scope, coverage and accessibility of credit information, which have helped increase entrepreneurs’ access to credit. Table 5 presents a list of such reforms that have been introduced in Rwanda since June 2, 2008. Access to and cost of electricity (trends): EODB report’s Getting Electricity indicator considers the procedures required for a local business to obtain a permanent electricity connection and supply for a standardized warehouse, as well as the time and cost to complete them. With a score of 77.72 out of 100, Rwanda ranked 68th out of 190 economies on Getting Electricity measure of Doing Busi-

17

Table 5: Reforms pertaining to getting credit introduced in Rwanda PERIOD IN WHICH REFORM WAS INTRODUCED

REFORMS PERTAINING TO GETTING CREDIT

June 2, 2008 to June 1, 2009

Secured transactions system was strengthened by allowing a wider range of assets to be used as collateral, permitting a general description of debts and obligations in the security agreement, allowing out-of-court enforcement of collateral, granting secured creditors absolute priority within bankruptcy and creating a new collateral registry.

June 2, 2009 to June 1, 2010

Improved 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.

June 2, 2010 to June 1, 2011

Private credit bureau started to collect and distribute information from utility companies and also started to distribute more than 2 years of historical information, improving the credit information system.

June 2, 2012 to June 1, 2013

Secured transactions system strengthened by providing more flexibility on the types of debts and obligations that can be secured through a collateral agreement.

June 2, 2013 to June 1, 2014

Access to credit improved by establishing clear priority rules outside bankruptcy for secured creditors and establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures.

June 2, 2014 to June 1, 2015

Credit bureau started to provide credit scores to banks and other financial institutions while the credit registry expanded borrower coverage, strengthening the credit reporting system.

June 2, 2015 to June 1, 2016

Rwanda made starting a business easier by improving the online registration one-stop shop and streamlining post registration procedures

June 2, 2017 to May 1, 2018

Rwanda made starting a business less costly by replacing electronic billing machines with free software for value added tax invoices.

ness 2019. Rwanda was the best regional performer in the EAC on the Getting Electricity measure. Figure 15 presents Rwanda’s performance on Doing Business report’s Getting Electricity measure for the past five years. According to data current as of May 1, 2018, obtaining a new electricity connection in Rwanda requires four procedures, 30 days and costs 2,083.3% of income per capita. Rwanda received a score of 5 out of 8 on the reliability of supply and transparency tariffs index, which encompasses quantitative data on the duration and

frequency of power outages as well as qualitative information on the mechanisms put in place by the utility for monitoring power outages and restoring power supply. As reported in EODB 2019, in the period from June 2, 2017 to May 1, 2018, Rwanda improved its monitoring and regulation of power outages by beginning to record data for the annual system average interruption duration index and system average interruption frequency index. Rwanda also made getting electricity more time and cost efficient by having the utility supply all connection material.


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Construction costs and manufacturing of raw materials: EODB report’s dealing with Construction Permits indicator considers the procedures, time and cost to build a warehouse and includes the building quality control index, which measures the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. With a score of 67.01 out of 100, Rwanda ranked 106th out of 190 economies on the Dealing with Construction Permits measure of EODB 2019. Rwanda was the best regional performer on this measure in the EAC. According to data current as of May 1, 2018, dealing with construction permits in Rwanda requires 15 procedures, takes 113 days and costs 12% of the warehouse value. Rwanda received a score of 14 out of 15 on the building quality control index. Figure 16 indicates that Rwanda had a significantly higher score and global performance on the Dealing with Construction Permits measure in Doing Business 2015 (Score 81.55, Rank 34/189) and 2016 (Score 76.34, Rank 37/189) but its performance fell sharply in EODB 2017 (Score 55.40, Rank 158/190). The fall is performance owes itself to Rwanda’s introduction of new requirements to obtain a building permit between June 2, 2015 and June 1, 2016 that made dealing with construction permits more cumbersome and expensive. Although Rwanda has continued to improve its quality control index

Figure 14: Access to and cost of electricity trends in Rwanda

Note. Numbers in parentheses represent rank/total number of economies studied.

Figure 15: Rwanda’s dealing with Construction Permits Performance 2015-2019

Note. Numbers in parentheses represent rank/total number of economies studied.

by implementing qualifications required for architects and engineers, and strengthening quality control during construction by introducing risk-based inspections, it has not improved its overall Dealing with Construction Permits score back up to 2015/16 levels. Cross-border trade: The Trading Across Borders indicator of EODB records the time and cost associat-

ed with the logistical process of exporting and importing goods. With a score of 74.98 out of 100, Rwanda ranked 88th out of 190 economies on the Trading Across Borders indicator of EODB 2019. According to the report, documentary compliance for export requires 30 hours and USD 110 and border compliance requires 83 hours and USD 183. For import, documentary compliance requires

18


48 hours and USD 121 and border compliance requires 74 hours and USD 282. As shown in Figure 17, Rwanda has steadily improved its Trading Across Borders score in the past five years. As reported in EODB, 2017, in the period from June 2, 2015 to June 1, 2016 Rwanda made trad-

ing across borders easier by removing the mandatory pre-shipment inspection for imported products. Moreover, in the period from June 2, 2017 to May 1, 2018, as reported in the latest EODB report, Rwanda reduced the time required to export and import by implementing the Single Customs Territory, risk-based inspections

Figure 16: Rwanda’s trading across Borders Performance 2015-2019

Note. Numbers in parentheses represent rank/total number of economies studied.

and online certificates. Figure 16. Starting and expanding business: With a score of 91.39 out of 100, Rwanda ranked 51st on the ease of Starting a Business measure of EODB, 2019. The ease of Starting a Business measure considers the number of procedures, time, cost and paidin minimum capital requirement for a small to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. Burundi, with a score of 94.84 and 17th ranking, outperformed Rwanda on the Starting a Business measure. As Figure 17 shows, Rwanda has steadily improved its Starting a Business score from 81.66 (Rank 46/189) in 2015 to 91.39 (Rank 29/190). The improvement owes itself to the series of business reforms Rwanda has introduced that have made starting a business easier in the country (see Table 6).

Figure 17: Rwanda’s starting a Business Score for the Last Five Years

Rwanda has also consistently performed well on the Registering Property indicator of Doing Business for the past five years. With a score of 93.70 out of 100, Rwanda ranked second out of 190 economies on the Registering Property measure of Doing Business 2019. According to the report, registering property in Rwanda requires three procedures, seven days and costs 0.1% of the property value. Table 7 presents a list of reforms introduced since June 1, 2012 that have made registering property easier in Rwanda. Note. Numbers in parentheses represent rank/total number of economies studied.

19


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Table 6: Reforms related to starting a business introduced by Rwanda REFORMS INTRODUCED BETWEEN (REPORTED IN DOING BUSINESS REPORT)

REFORMS PERTAINING TO STARTING A BUSINESS

June 2, 2012 to June 1, 2013 (DB 2014)

Rwanda made starting a business easier by reducing the time required to obtain a registration certificate.

June 2, 2014 to June 1, 2015 (DB 2016)

Rwanda made starting a business easier by eliminating the need for new companies to open a bank account in order to register for VAT.

June 2, 2015 to June 1, 2016 (DB 2017)

Rwanda made starting a business easier by improving the online registration one-stop shop and streamlining post registration procedures

June 2, 2017 to May 1, 2018 (DB 2019)

Rwanda made starting a business less costly by replacing electronic billing machines with free software for value added tax invoices.

Figure 18: Rwanda’s starting a Business Score for the Last Five Years

Business Policies and Legislation

Rwanda has steadily reformed its commercial laws and institutions since 2001. In the period between June 2, 2017 and May 1, 2018 Rwanda streamlined the process of starting a business by replacing its electronic billing machine system with new software that allows taxpayers to issue value added tax invoices. The free software, which is provided by the office of the Revenue Authority, allows taxpayers to issue value added tax invoices from any printer, eliminating the previous requirement to purchase and set up a special billing machine. Access to and cost of transport (trends): GCR shows Rwanda’s slow progress in Infrastructure, the second pillar in GCR that measures the quality of road, railroad, port, air transport, electricity and telephone in the past five years. From a score of 3.2/7 in 2013/14, Rwanda rose to a score of 3.4/7 in 2017/18.

Table 7: Reforms related to registering property introduced by Rwanda REFORMS INTRODUCED BETWEEN(REPORTED IN DOING BUSINESS REPORT)

REFORMS PERTAINING TO REGISTERING PROPERTY

June 2, 2012 to June 1, 2013 (DB 2014)

Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by implementing the web-based Land Administration Information System for processing land transactions.

June 2, 2015 to June 1, 2016 (DB 2017)

Rwanda made it easier to register property by introducing effective time limits and increasing the transparency of the land administration system.

June 2 2016 to June 1 2017 (DB 2018)

Rwanda made registering property easier by implementing online services to facilitate the registration of property transfers.

Table 8 shows that Rwanda has improved substantially in available airline seat kilometers and has improved moderately in air transport infrastructure and further deteriorated in port infrastructure. Rwanda’s EDPRS II has made substantial contribution to the improved conditionality of roads and infrastructure. Through EDPRS II, 2060.25 Km of District Earth Roads Class 2 (Feeder Roads) were upgraded from earth road to gravel, the condition of District Road Class 1 was maintained at 55.04%,

20


Figure 19: The chart shows the five-year trend for infrastructural changes in Rwanda.

Table 8: Infrastructure’s indicators in Global Competitiveness Report (2016-2018) INDICATORS FOR INFRASTRUCTURE Quality of overall infrastructure

2016/17

2017/18 4.6

4.7

5

5

N/Appl

n/a not

Quality of port infrastructure

3.2

2.9

Quality of air transport infrastructure

4.6

4.7

24.4

44

4.2

4.4

70.5

69.9

0.1

0.1

Quality of roads Quality of railroad infrastructure

Available airline seat kilometers (millions/week) Quality of electricity supply Mobile-cellular telephone subscriptions /100 pop. Fixed-telephone lines /100 pop.

Figure 20: Five-year trend chart for labor market efficiency in Global Competitiveness Report.

265 Km of integrated roads were created in regional urban areas with provisions for disabled persons, 13,935 Km of scheduled bus routes (rural, intercity and urban combined) were realized, 256 Km of quality footpath and pedestrian tracks were recorded and 1525.8 Km of unpaved roads were upgraded to paved status. Cost of labor force (Unskilled, Semi & Skilled): On GCR, labor market efficiency is the 7th pillar, which measures cooperation in labor-employer relations, flexibility of wage determination, hiring and firing practices, redundancy costs, effect of taxation on incentives to work, pay and productivity, reliance on professional management, country capacity to retain and attract talent and female participation in the labor force. As shown in the chart, Rwanda has maintained an above average score in labor market efficiency, and has also shown slow growth. For the year 2017, labor force as percentage of the population ages 15 – 64, is 90.66%, indicating a large reserve of labor force for businesses. 3.4 Favorable National Strategies Underpin Improvements

As the previous sections have demonstrated, Rwanda has made significant improvements in human development and made doing business easier in the country. Prudent macroeconomic management, effective use of foreign aid, and sound fiscal and monetary policies

21


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

have underpinned its strong economic performance and increased its resilience during a period of global economic turbulence.

Figure 21: Inward FDI stock as percentage of GDP average (FY 2012-FY 2017)

Much of Rwanda’s success can be attributed to its favorable longterm plans and inclusive policies in the last 10 years (Annex 1: Extract from National and Regional Strategies related to Private Sector Development). These include: 1. Five-year Economic “Five-year Economic Development and Poverty Reduction Strategies (EDPRS; 2008-12) and EDPRS2 (2013-18) that helped realize the Vision 2020 development plan; 2. NST1 comprising of 17 goals with around 170 targets and indicators, across a range of economic, social, and governance issues embracing the Sustainable Development Goals (SDGs); 3. In addition to the above, Rwanda has laid out Vision 2050 to reach upper middle-income status by 2035 and stresses upon five main pillars: quality of life, modern infrastructure and livelihoods, transformation for prosperity, values for vision 2050, and international cooperation and positioning. While the EAC Vision 2050 focuses on initiatives for job creation and employment. 4. Africa Union Agenda 2063 and its First 10-Year Implementation Plan (2014-2023) which is dedicated to the building of an integrated, prosperous, and peaceful Africa, driven by its own citizens, and representing a dynamic force in the international arena;

Source: World Bank, 2017

Rwanda has not only engaged local private sector players for growth but has also successfully attracted foreign investors. Rwanda Development Board (RDB) has encouraged investments in various sectors such as manufacturing, infrastructure, mining, information and communication technology, financial services, real estate and construction, agriculture and energy. Moreover, they have provided fiscal and non-fiscal incentives to promote investments. Rwanda is also attracting foreign investments through favorable provisions in its investment law, which was launched in 2015. Examples of investment-friendly provisions include faster and easier obtainment of investment certificates, fiscal and non-fiscal benefits, and openness to investments from the United States and China. In 2018, Rwanda recorded a registered Foreign Direct Investment (FDI) worth USD 2.01 billion compared to USD 1.68 billion dollars in 2017. This is an increase of USD 331 million or approximately 20%, when compared

to the investments registered by RDB in 2017. In the last 8 years, registered investments in Rwanda jumped from USD 398 million in 2010 to slightly over USD 2 billion in 2018 (RDB, 2018). FDI is a measure of foreign ownership of productive assets, while GDP measures the value of the total economic output. In this regard, FDI inflows as percentage of GDP measures the contribution of foreign direct investments to GDP. If we analyze the economic data of EAC, average FDI contribution to GDP of Rwanda is 3.30%. In other words, if the value of economic output is USD 100, the contribution of FDI is USD 3.30. The corresponding figure is similar among the nations including Tanzania and Uganda. Meanwhile South Sudan is experiencing negative contribution of FDI to GDP. Put differently, capital outflow is outweighing capital inflow in South Sudan. Rwanda continues to seek economic growth while also creating a haven for the private sector. It is promoting investments—both

22


local and foreign—by undertaking reform measures to develop a diversified, market-based and competitive economy. These include respect for property rights, currency convertibility, removal of bureaucratic barriers for business,

23

regional integration, liberalization of trade, and attraction of private foreign investments. Such initiatives have helped Rwanda become one of best place to do business and invest in Africa.


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

4. Rwanda’s Business Structure

24


Rwanda’s economy is still evolving in terms of commercial engagement, foreign investor participation and industrialization. Thus, there lies a huge potential across all sectors that is complemented by an attractive investment climate with low inflation, zero tolerance to red tape and outstanding peace and security. These opportunities are reflected in the increasing number of enterprises in Rwanda as depicted in Figure 22.

2. Wholesale and retail trade and accommodation and foodservices are the most predominant (77.8%) economic activities in Rwanda that saw more combined increase in urban areas (26.5%) than in rural areas (16.5%) from 2014 to 2017.

The Establishment Census Report (ECR), 2017 compares increase in total establishments to the increase in business oriented establishments from the year 1970 to 2014 as depicted in Figure 24. Concerning all establishments in Rwanda, an increase of 24% has been observed between 2014 and 2017. The report also states that the rise in the number of enterprises is greater in urban areas (29%) compared to rural areas (20%) in the same period. This is a result of two factors:

Formal Sector: For the purpose of this study, all businesses that have been registered at Rwanda Development Board (RDB) are considered formal enterprises. In addition, formal enterprises have the following characteristics: - Such enterprise have regular operational accounts; - Are registered at the Rwanda Revenue Authority (RRA).

1. Out of the total 45,052 enterprises that were formed between 2014 to 2017, 19,773 (43.9%) of them were established in the Kigali City, which is the core urban part of the country.

Formal vs. Informal Sector. For ease of understanding, formal and informal sector can be defined as follows:

Informal sector: All enterprises that are not registered with the RDB are categorized as informal enterprises. The above definitions are in line with the definition of formal and informal sector adopted by the Establishment Census Report, 2017

Figure 22: Number of Total Establishments and Business Oriented Establishments

Source: National Institute of Statistics Rwanda, Rwanda Establishment Census 2017

25

compiled by the National Institute of Statistics of Rwanda.13 There is an overwhelming presence of the informal sector in Rwanda. According to the Establishment Census Report 2017, almost 93% (167,180) of the total establishments (180,746) in Rwanda (180,746) are comprised of the informal sector. Here, only 180,746 enterprises out of the total 183,867 business oriented enterprises are taken into account. This may be because not all enterprises registered as legal establishments are performing business activities or are in operation. Therefore, they could have been omitted from both the formal and informal enterprise count, hence the gap. Figure 23 depicts the distribution of formal and informal sector across different provinces in Rwanda. Categories of Companies

According to Article 5 of the Company Act14, every company shall be incorporated to fall under the following categories of companies: 1. Private company: According to the Article 6 of the Company Act, a private company shall have the following characteristics: • restricting the right to transfer its shares and debentures • limiting the number of its shareholders to one hundred, persons employed or formerly employed by the company not included • Prohibiting any invitation to the public to subscribe for any shares or debentures of the company.


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Figure 23: Presence of formal and informal enterprises across the provinces in Rwanda

Source: National Institute of Statistics Rwanda, Rwanda Establishment Census 2017

Where two or more persons jointly hold one or more shares in a company, they shall be treated as a single shareholder. A company with one single shareholder (sole proprietorship company) shall be taken to be a private company. Most of the enterprises in Rwanda are registered as private companies.15 95.1% of total businesses in Rwanda are registered as private companies. The statistics are in keeping with Rwanda’s Vision 2020 that recognizes the private sector as one of the six main pillars for driving social and economic development. 2. Public company: According to Article 7 of the Company Act, every company shall be a public

company unless it is stated in its application for incorporation that it is a private company. Article 8 of the Company Act classifies companies into four types: • Company limited by shares • Company limited by guarantee • Company limited by both shares and guarantee • Unlimited company Types of Companies:

ified period of time. Two companies or more may decide to carry out together a given activity on a permanent basis. Table 9 explains the distribution of business establishments in Rwanda based on their legal status. Currently, there are 183,867 business oriented enterprises in Rwanda out of the total 190,288 enterprises. Characteristics of Businesses in Rwanda

A company limited by shares and by guarantee may be public or private. However, a company limited only by guarantee or an unlimited company shall not be public. Two companies or more may, within the context of partnership, decide to put together their efforts to carry out a given activity for a spec-

Enterprises in Rwanda are classified into four categories—micro, small, medium and large. This categorization is based on three parameters—net capital investments, annual turnover and number of employees. Table 10 provides details on the Based on size:

26


categorization of enterprises based on size. Based on Sector of Business

In Q3 2018, GDP at current prices was estimated to be 2,062 Billion Frw where service sector contributed 48% of GDP, Agriculture 28%, and Industry 17% while 7% was attributed to adjustment for taxes less subsides on products.16 The Rwandan economy continues to be agriculture-driven with semi-subsistence rain-fed farming and animal husbandry as the dominant sources of economic activity for most citizens. Operation:

The overall economic activity can be further classified based on various sectors. Table 11 classifies the enterprises based on various sectors and reveals that wholesale and retail trade (50.5%) and accommodation and food services (27.3%) are the most predominant economic activities in Rwanda because the two economic activities represent nearly 80% of all establishments. The remaining economic activities share about 20% of the total establishments and are scattered over the rest of economic activities. Based on Geographical Location:

Number of enterprises have drastically increased in the past five years. Kigali City has the highest proportion of establishments with 22.8% of all establishments followed by the East Province with 21%, the West Province (20.9%), the South Province (19.8%) and

Table 9: Distribution of Business Establishments Based on their Legal Status LEGAL STATUS

COUNT

Sole proprietorship

PERCENTAGE 175,291

95.3

3,402

1.9

Limited by guarantee

69

0.0

Limited by shares and by guarantee

58

0.0

424

0.2

4,561

2.5

62

0.0

183,867

100

Limited by shares

Unlimited None Not stated Total

Source: National Institute of Statistics of Rwanda, Rwanda Establishment Census 2017

Table 10: Categorization of Enterprise Size in Rwanda SIZE OF ENTERPRISE

NET CAPITAL INVESTMENTS (MILLION RWF)

ANNUAL TURNOVER (MILLION RWF)

NUMBER OF EMPLOYEES

Micro Enterprises

Less than 0.5

Less than 0.3

1 to 3

Small Enterprises

0.5 to 15

0.3 to 12

4 to 30

Medium Enterprises

15 to 75

12 to 50

31 to 100

More than 75

More than 50

More than 100

Large Enterprises

Source: Small and Medium Enterprises (SMEs) Development Policy 2010, Ministry of Trade and Industry, Rwanda)

the North Province (15.4%). Among those enterprises, more increase is observed in Kigali City’s Districts (Nyarugenge, Gasabo and Kicukiro) and in Rubavu, Rusizi, Musanze and Muhanga Districts.17 Details on distribution of enterprises per district are provided in Annex 7.

Figure 24: Distribution of formal enterprises across the provinces of Rwanda

This data reveals that although the percentage change in the number of enterprises across all the provinces is similar, the number of formal enterprises is remarkably Source: National Institute of Statistics Rwanda

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BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Table 11: Total Enterprise Count Based on Various Sectors of Economic Activity (Business oriented and Non-business oriented) ECONOMIC ACTIVITY

COUNT

Accommodation and food service activities Administrative and support services activities

51,868 1,408

Agriculture, forestry and fishing

563

Arts, entertainment and recreation

453

Construction

159

Education

4,046

Electricity, gas, steam and air conditioning supply

138

Financial and insurance activities

1,574

Human health and social work activities

1,497

Information and communication

1,150

Mining and quarrying

307

Manufacturing

14,195

Not stated

3

Other services activities

14,345

Professional, scientific and technical activities

1,243

Public administration and defense compulsory social security

126

Real estate activities

105

Transportation and storage

382

Water supply, sewage, waste management and remediation activities

645

Whole sale and retail trade; repair of motor vehicles and motorcycles Total

96,081 190,288

Source: National Institute of Statistics of Rwanda, Rwanda Establishment Census 2017

higher in Kigali City compared to other provinces. Out of the total of 13,566 formal enterprises in

Rwanda, 6,687 enterprises (49%) are present in Kigali City.  

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www.newsofrwanda.com

5. BICS (2019 - 2021) Survey Findings

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BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

The section below expands on findings from BICS (2019 - 2021). 5.1 Profile of respondents

The majority of respondents (62.8%) were from Kigali with the percentage of respondents from other provinces ranging from 6.6% (Northern Province) to 11.5% (Southern Province). Figure 25 presents a comprehensive breakdown of respondents by province. The distribution of the sample by province is in line with the percentage of formal enterprises in the provinces as per the Rwanda Establishment Census, 2017. Location:

As presented in Figure 26, the majority of businesses surveyed (545, 55.6%) were micro enterprises followed by small (311, 31.7%), medium (111, 11.3%) and large (14, 1.4%). That the majority of businesses in our sample were either micro or small is unsurprisSize and sector of business.

ing considering small and micro enterprises make up the vast majority of Rwanda’s private sector . Thus, the sample for the current survey was consistent with the larger private sector in Rwanda in its distribution of business size. Figure 27 presents the number of businesses surveyed by sector. The highest representation was from the construction sector (134, 13.7%), followed by ICT (117, 11.9%), e-commerce/logistics (115, 11.7%), tourism (115, 11.7%) and trading (102, 10.4%). Our sample included representatives from all nine of RDB priority sectors, namely ICT, mining, energy, tourism, manufacturing, construction, agriculture, finance and insurance. Age, gender, educational background and position in the business: The majority of respondents

were between the ages of 30-39 years old (38%), followed by 40-49 years (28.3%) and 25-29 (14.7%), see Figure 28. In terms

of gender, 676 of 981 respondents i.e. 68.9% of the sample was male. The high percentage of male respondents in the current sample is consistent with previous BICS surveys (the sample for BICS 2008 was 68% male and 32% female and that of BICS 2010 was 72% male and 28% female) and reflects the reality that women entrepreneurs in Rwanda face specific barriers in doing business that are compounded by cultural factors. As per qualitative interviews, major challenges faced by women entrepreneurs, included lack of collateral given that households headed by women had smaller land holdings than men, prevalence of cultural stereotypes, lack of self-confidence, lack of technical and managerial skills, lack of knowledge and information about market opportunities, and under representation of women in managerial positions amongst others. In the last few years, the Government has come up with

30


Figure 25: Number of respondents by Province

Figure 26: Distribution of businesses surveyed by size

programs to support women entrepreneurship such as the Business Development Fund, designed specifically to guarantee funding for women entrepreneurs. Further, the Government of Rwanda is committed to bolstering gender equality through greater economic empowerment for women. Currently, Rwanda has the highest number of

31

Figure 27: Number of businesses surveyed by sector

female parliamentarians—61.3% in the lower house and 38.5% in the upper house. Likewise, the majority of respondents were business owners (559, 57%), followed by Managing Directors/CEOs (161, 16.4%), and Operations Managers (133, 13.6%). Furthermore, in terms

of education level of respondents (see Figure 29), almost 42% had bachelor’s education while 38% had secondary education. Company age, registration and

The majority of businesses sampled in our survey were young with 570 i.e. 58.1% being between 1-5 years old and a furownership:


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

ther 184 i.e. 18.8% being less than a year old. 197 businesses (20.1%) were between 6-15 years, 22 (2.2%) were between 16-25 and only eight (0.8%) were older than 25 years. That the majority of businesses in our sample was young is reflective of the general trend in Rwanda’s private sector where the survival rate of new businesses is low, with few surviving beyond the age of five. This is in line with the issue of deregistration highlighted by the business registration desk at RDB. The number of businesses closing down could be higher as many companies do not go through the process as it is considered tedious and expensive. The majority of businesses in the current sample (937, 95.5%) were registered as a Limited Liability Company, 23 (2.3%) were registered as a Limited Partnership, 12 (1.2%) as a Public Limited Company and nine (0.9%) as a Commercial Partnership. The vast majority of businesses surveyed (917, 93.5%) were Rwandan-owned while 50 (5.1%) were foreign-owned, 13 (1.3%) were joint ventures and one (0.1%) was a franchise. 5.2 Perception and outlook Perception of provinces: Survey re-

spondents were asked to rate the five provinces of Rwanda on their perceived attractiveness as investment destinations. Figure 30 presents results. As can be seen, Kigali was rated most highly as an investment destination with 52.6% of respondents rating it as very attractive and a further 33.1% rating it as attractive. This makes

Figure 28: Age distribution of respondents

Figure 29: Education level of respondents

sense as Kigali is the commercial hub of the country and home to most of its businesses. Only 3.1% of respondents considered Kigali to be an unattractive investment destination. The Northern, Eastern and Western provinces popular for tourism and agricultural sectors also emerged as attractive investment destinations—26.1% of respondents rated the Northern Province as very attractive and 45.2% as attractive while 29.1% of respondents rated the Eastern Province as very attractive and 41.4% as attractive. 63.4% of the respond3ents viewed Western Province as an attractive investment destination.

Survey respondents rated the Southern Province, often associated with culture and higher education, as the least attractive investment destination amongst provinces with 10.9% of respondents rating it as unattractive. Some of the ground challenges in the Southern province such as low fertility for agriculture, higher poverty rate, and limited infrastructure (water and electricity) might have directly affected the province’s perceived attractiveness and image. Furthermore, limited hosting infrastructure in the Southern province has mean that the cost of internet in the province remains high. However, with 17.3% of

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BUSINESS SUSTAINABILITY The challenge of business sustainability can emerge from multiple issues. First, there are operational challenges where the businesses cannot handle the challenges that relate to their external environment and therefore run into trouble. These operational challenges could include not being able to keep in pace with the development of products and services provided by other players. For instance, the hospitality industry needs to keep pace with various changes that are needed with their products such as providing new technology for entertainment and communication services in rooms. Second, enterprises can find it very challenging to scale up as they need more resources to ensure they meet the increased volumes of business. These can come from challenges with capacity of management, finances or other resources. Third, there are challenges of managing administrative issues and the costs associated with it. Fourth, business entrepreneurs rarely factor in their own opportunity cost in computing profits and business sustainability. Over a period of time, people realize that there is a cost that needs to be included to compensate for such opportunity costs. They then realize that perhaps the business will not meet their opportunity cost in the future therefore requiring a revisit their business model. Finally and most importantly, the management of working capital finances presents a key challenge. When businesses start to grow, they needs more money to ensure that their growth is managed well. Working capital infusion becomes important and in the absence of financial tools that fund such working capital, there is tremendous pressure on businesses to raise more funds. Globally, in emerging markets, there is a trend of businesses getting into problems when they grow rather than when they are small. Singapore Business Forum (SBF) SME Committee: The SMEC was established on 7 December, 2011 by SBF as a key platform for SME engagement on business issues, and to help SMEs build capabilities and access markets. Senior Minister of State for Trade and Industry and Minister of State for Manpower serve on the Committee as Advisors, helping garner public sector support for SMEC’s initiatives.18 The SME Committee (SMEC) provides a platform for SMEs to discuss, research and analyze SME business issues with policymakers. It aims is to create a businessfriendly Singapore through informed perspectives and constructive resolution. SMEC’s team of researchers collects data and carries out analysis to lend weight to its findings and recommendations relating to the SME landscape.

respondents rating the Southern Province as very attractive and a further 40.2% rating it as attrac-

tive, the majority of survey respondents—57.5%—considered the Southern Province to be an

Figure 30: Perceived attractiveness of Rwanda’s provinces as investment destinations

attractive investment destination. The perceptions of the provinces reflect the need to diversify economic agglomeration from Kigali to these regions. Survey respondents were also asked to indicate how well they perceived the Rwandan economy to be performing, responses could range from worst, poor, average, good and excellent, Figure 31 presents the results. Roughly the same percentage of respondents indicated that the Rwandan economy was performing ‘good’ and ‘average’—together they made up 84% of all respondents. 5% of respondents perceived the economy to be performing ‘excellent’. On the other side of the scale, 5% indicated that the economy was performing ‘worst’ and an additional 6% that it was poor. Rwanda is striving to become an upper middle-income country by 2035. To achieve this goal, it will need to achieve an economic growth rate of 10% per annum. Perception of the economy:

“It is not surprising, therefore, that almost 70 percent of Rwandan respondents in a recent survey mentioned high economic growth as their first priority for the country (World Values Survey, Wave 6:2010–2014; Inglehart et al. 2014).” 311 respondents i.e. 31.7% of the sample indicated that they intended to make future investments in Rwanda. Of these respondents, the highest percentage—17.7%—indicated that they planned to invest in agriculture followed by ICT (16.5%) Perception of future growth:

33


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

and tourism (14.5%). These align with the top sectors identified by the Government of Rwanda and development partners to bring about economic growth and transformation in the country. 5.3 Ease of doing business/ logistics

Survey respondents were asked how long it took them to register their company. The majority of respondents—65.7%—indicated that it took them less than a week followed by 25.6% of respondents who indicated that it took them between 1-2 weeks. 5.5% respondents indicated it took them 2-4 weeks to register their business, 1.8% indicated it took them 4-8 weeks and 1.3% indicated it took them more than 8 weeks. In recent years, Rwanda has made it easier to start a business with the latest Doing Business report indicating that starting a business in Rwanda requires five procedures and four days on average. That the majority of respondents in the current survey indicated that it took them less than a week corroborates finding of the Doing Business reports.

Respondents were also asked to indicate how expensive they perceived registering a company to be. 48% of respondents indicated that the cost of registering a company in Rwanda was cheap or very cheap, 45.3% indicated that it was normal/standard and 16.7% rated it as expensive or highly expensive. Doing Business 2019 indicates that the cost of starting a business in Rwanda, as a percentage of per capita income, is 14.8% with no paid-in minimum capital requirement.

Figure 31: Perceived performance of the Rwandan economy

5.4 Business Performance

Recent business performance was measured by asking respondents to rate the performance of their business in 2017 on several key indicators as ‘higher’, ‘lower’ or ‘about the same’ as the performance of their business in 2016. Figure 32 presents the results for 2018 whereas Figure 33 compares results of the current survey with that of BICS 2008 and 2010.19 BICS 2008 asked respondents to compare business performance in 2008 versus 2007 while BICS 2010 asked respondents to com-

Figure 32: Self-reported business performance in 2017 versus 2016

pare business performance in 2010 versus 2011. When asked to compare the revenue of their business in 2017 to that in 2016, 31% of respondents indicated that it was higher, 48% that it was about the same and 21% that it was lower. Compared to results of BICS 2010, a smaller percentage of participants reported that business performance was lower than in the preceding year—21% versus 34% in BICS 2010—while a greater percentage reported that business performance was about the same—48% versus 34% in BICS 2010. As for profit, the highest percentage of participants i.e. 45% reported that profits were higher in 2017 versus 2016 while 36% reported that it was about the same and only 19% reported that it was lower. Together, these results are indicative of healthy recent business performance. Revenue and profit:

The majority of respondents—68%—indicated that Employees:

34


the number of employees in their business was about the same in 2017 as in 2016. A further 21% indicated that it was higher and only 10% said that is was lower than in 2016. These results suggest that the majority of businesses in Rwanda are either growing or have remained stable. The percentage of respondents indicating that the number of employees in their business is lower than in the preceding year has gone down since 2010— from 19% to 10%--while the percentage reporting that is higher has remained constant and the percentage reporting it is about the same has gone up—from 60 to 68%. Prices and Costs: Respondents were

asked to indicate whether the average price of their goods and services had been higher, lower or about the same in 2017 as in 2016. The majority of participants—53%--indicated that it had been higher, 35% indicated that it was about the same and 11% indicated that it was lower. The percentage of respondents indicating that the price of their goods and services increased from 40% in 2016 to 53% in 2018. When asked to compare unit costs, 47% reported that it was higher in 2017 than 2016, 43% that it was about the

Figure 33: Comparison of business performance reported in BICS 2008, 2010 and 2018

same and 10% that it was lower. 5.5 Business Challenges

To ascertain the most prevalent on-the-ground challenges, survey respondents were asked to rate various factors on the extent to which they considered them to be major constraints or challenges for their business growth in the next three to five years. To distill findings, challenges have been presented under four broad categories: national, provincial, scale of business, and sector of business. 5.5.1 Overall National Business Challenges

Respondents were asked to rate how problematic they expected various factors to be in constraining their

business growth over the next 3-5 (see Table 12). Figure 34 presents the top five highest ranked business challenges out of nineteen listed in the questionnaire, whereas Figure 35 presents the top ten. As can be seen, the highest percentage of participants, i.e. 78.4% considered tax rates to be a problem followed by competition with local businesses for customers (68.7%), local demand for product or service (65.7%), tax administration services-RRA (58.9%) and access and cost of borrowing money (58.2%). The majority of businesses also considered access and cost of land (54%), transportation (52.2%) and electricity (51.9%) as other key constraints for their business growth. Table 13 compares the top five business constraints identified by BICS studies conducted thus far. As can be seen, tax rates have been identified as a major constraint since the inception of BICS in 2008, as has access and cost of borrowing money and availability and cost of land. Consistent with findings of BICS 2013, the highest percentage of re-

35


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

spondents indicated that high tax rates were a constraint to their business; more than three-fourths of respondents indicated tax rates to be a challenge.. As Rwanda is gradually transitioning from a no-tax to a tax regime, and the Rwanda Revenue Authority (RRA) has enacted tax laws to facilitate the collection of taxes and enhance compliance with tax laws, tax is likely to remain a key challenge for businesses in the years to come. During FGDs, businesses revealed various fees levied at the local level such as cleaning fees, security fees, and parking fees as being burdensome to their businesses as they are levied in addition to corporate taxes and VAT. Further, the issue of multiple taxation was highlighted by many respondents as a key challenge. (Cross Reference Tax Administration) Multiple taxation has reduced the comparative advantage of locally produced goods. For instance, producers of wooden furniture are required to pay multiple taxes throughout the manufacturing process until it their products reach the end consumer. These include permission fees to cut trees, timber tax, tax for industrial park, and sales tax. Also, as the Rwandan wood industry cannot be sustained fully on Rwandan timber, Rwandan wood processers have to pay high taxes on imports. Multiple taxes have made wooden furniture manufactured in Rwanda more expensive in comparison to imported furniture, making local manufacturers uncompetitive both at the local and regional levels, especially compared to EAC counterparts. (Cross Reference

Table 12: Question on Challenges Related to Business Growth (in next 3-5 Years)

Figure 34: Top 5 Overall National Challenges

Figure 35: Major top ten challenges faced by businesses

Sector-specific challenges). Likewise, during FGDs, most businesses revealed paying multiple security fees as they needed

to pay for their own security arrangement and additional local security fees. Moreover, respondents seemed dissatisfied with the quality of security services. Businesses

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Table 13: Top five business constraints identified by BICS 2008

2010

2013

2018

Access and cost of transport

Availability and cost of land

Tax rates

Tax rates

Availability and cost of land

Tax rates

Access and cost of borrowing money

Competition with other local businesses for customers

Tax rates

Access and cost of borrowing money

Access and cost of electricity

Local demand for product or service

Access and cost of borrowing money

Construction support

Competition with other local businesses

Tax Administration Services (RRA)

Access and cost of electricity

Cost of value addition

Availability and cost of land

Access and cost of borrowing money

also indicated dissatisfaction with the flat fee charged for cleaning services that did not consider the scale of business. Also, businesses operating from core city areas complained about parking fees that were considered to be too high. Further, most businesses indicated dissatisfaction regarding the fact that many tax regulations were introduced or changed without any consultation with the business community. (Cross Reference Tax administration). Access to finance remains a key challenge for businesses. FGDs revealed that high cost of finance, collateral requirement and short period of credit were perceived as major constraints. Specific issues faced by businesses pertaining to tax and access to finance are expanded upon in later sections of the report. Rwanda made paying taxes easier and less costly for companies by fully rolling out its electronic filing system to the majority of businesses and by reducing the

37

the same as in New Zealand.

property tax rate and business trading license fee. Consequently, the country was ranked as one of the top 30 countries in ease of paying taxes in 2014. The introduction of online tax payment in 2014 was aimed at solving many problems such as removing long queues in our offices and also the burden of taxpayers spending more time and money in the process of filing tax returns. This is also reflected in the BICS (2019 - 2021) survey where online tax clearance (e-payment and e-filling) was ranked as the reform that had the greatest positive impact on the business operations in Rwanda. Rwanda was ranked second globally after New Zealand on the registering property index of Doing Business Report, 2018. Its high ranking was attributed to the fact that the country improved on its land dispute resolution mechanisms. It now takes only 7 days to transfer property and costs only 0.1 per cent of the property value,

Establishing Special Economic Zones (SEZ) in Rwanda is another major reform that has boosted the industrial growth in Rwanda. Firms in the Kigali SEZ already make an important contribution to Rwanda’s aggregate economic outcomes. By the end of 2016, the 44 operational KSEZ firms, for which tax data was available, jointly employed around 2% of all Rwanda’s permanent employees, and covered 2.5% of all VAT-reported sales. Besides, the proposed Bugesera Special Economic Zone, which was recently approved in 2018 has already started attracting industrial firms with Government sources revealing that more than 20 investors have already booked spaces in the area. Numerous reforms introduced in the recent years have eased the processes of starting a business in Rwanda. Reforms include reducing the time required to obtain a registration certificate, eliminating the need for new companies to open a bank account in order to register for VAT, improving the online registration one-stop shop and streamlining post registration procedures, and reducing cost by replacing electronic billing machines with free software for value added tax invoices. Despite the introduction of these positive reforms, a significant number of businesses surveyed in the current study reported not having seen significant impact on their business by these reforms. Interestingly, the other two major challenges identified by surveyed


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

respondents i.e. local demand for products or services and competition with other business for customers are indicative of increasing level of domestic competition in Rwanda. FGDs revealed that businesses registered with VAT found it difficult to compete with non-VAT registered companies. Businesses revealed that there is unfair local competition among VAT registered and not registered businesses. Moreover, bars, restaurants, guest houses operating in residential and unregistered areas were found to compete with formally registered businesses. Such practices create an environment of unfair competition where VAT registered businesses struggle to compete with their non-registered counterparts. Local demand for products and services emerged as a major business constraint in the current edition of BICS. FGDs revealed that regulatory restrictions, weak purchasing power of consumers, and low consumer demand underpinned this perceived constraint. The perception on local demand for products and services is expected to ease as the market evolves. When first introduced, some products and services are often perceived to be reserved for exports or expatriates. Nonetheless, with increased awareness, local demand for such products and services gradually increases in the local market as well. For instance, the increasing demand for local coffee and proliferation of good coffee shops across the country indicates the adaptation of coffee culture in Rwanda.

Moreover, easy availability of cheap international substitutes has compounded the issue of low demand for local products. In the hospitality sector, since many cities in Rwanda have more accommodation than required by the market, businesses are struggling to survive. The same is true for some agriculture products whose supply during harvest season significantly overshoots their demand, leading to low prices; the lack of a wellformed post-harvest infrastructure and the lack of a diversified and developed value chain exacerbate this problem. Furthermore, due to VAT charged on locally processed agricultural products, demand for such goods is limited, hence the position of the Rwandan processing sector has been marginalized. Further, since local products are not considered to be of similar quality and standards in comparison to imported products, it is difficult for local producers to compete in the market. For instance, findings from qualitative interviews revealed that beers produced in Uganda were considered preferable over local Rwandan products. 5.5.2 Province-specific Challenges

Figure 36 summarizes the major challenges faced by businesses in each of Rwanda’s five provinces. For the most part, growth challenges faced by businesses in each province resembled the overall national challenges with tax rates, local market competition, cost and access to finance and local demand for products and services emerging

as key challenges in all provinces. While there was significant overlap in business challenges across provinces, some challenges were found to be province-specific. For example, level of education of workforce and procedures for obtaining business license and operating permits were found to be prominent challenges in the Western province but were not among the most significant challenges in other provinces. Qualitative data from FGDs give some insight into this survey finding; during FGDs, hoteliers from the Western province revealed that they faced delays in obtaining occupancy permits for lodges and guest houses. Since tourism is a major industry in the Western province, delays experienced in obtaining hotel permits may explain why procedures for obtaining business license was considered a major business challenge in the province. Moreover, businesses perceived RDB’s stringent requirement for restaurants to be problematic. Furthermore, access and cost to water and telecommunication were perceived as the top challenges faced by businesses in the Southern province but did not feature among the most significant business challenges in the other provinces. Even though the cost of basic utilities are same across the country, additional cost arising due to remoteness of the region or business firm or limited availability of service providers often increases the cost. For instance, transportation and storage cost are additional cost to access water. These findings offer

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UNDERSTANDING COMPETITION The discourse around competition is one that requires deeper analysis as it has emerged as one of the key challenges in BICS (2019 - 2021). The issue of perception around competition can be viewed through the following lenses: • The existence of competition is a perception and one that is easy to attribute blame to given that it does not require hard data and facts to back up. • The proliferation of competition is also on account of absence of a level playing field, where there are businesses who are subjected to taxes and other regulatory compliances and there are those who do not need to follow them. The cost of compliance and taxes at times can be perceived as one that brings about unfair competition. ( Cross Reference Tax Administration ) • The fear of competition also stems from the fact that in case one has to look at closing down the business due to excessive competition, it is an expensive decision to make as the investments on opening the business is far cheaper than closing the business. • The global discourse around competition has also increased as many countries are pursuing protectionist policies; at the same time, there are discussions around how to manage regional competition.20 • With the advent of e-commerce and global players into the trade space, local players have to compete with such portals that use low cost social media and other digital platforms besides similar other local players. • The challenge of competition arises from the fact that in case of paucity of data, there would be general oversupply in the system. The absence of real time data that are linked to construction and business permits creates this data gap which then leads to oversupply. For instance, in case of the hospitality industry, there is no online-updated data on rooms under construction in a particular town or city. Therefore, a new investor who is planning on starting a hotel business will not be able to understand the playing field and this lack of information dissemination creates oversupply in the market. (Cross Reference Trading across borders) • The issue of competition is a historic one and also one that is global. This perception is higher in developing countries that are graduating out of an economy dominated by agriculture. In an agrarian economy, the economic model is first sustenance and thereafter barter. The advent of monetization comes at the later phase and this brings about the challenge of managing pricing. In a market where there is oversupply, the tendency then becomes to reduce pricing at the cost of quality thereby eroding margins. The erosion of margins then leads to blaming competition on challenges of sustainability of business. • The understanding of competition is also dependent on what stage the entrepreneurial ecosystem has developed to. In absence of strong history of trade and business that built of strong entrepreneurial systems, it takes time for the ecosystem to develop and during the teething phases handling competition becomes one of the big issues. It is important to understand that business in a free market can only exist in an environment of free competition where there are no entry or exit barriers, no regulation on pricing and strong anti-competition laws relating to forming cartels and monopolies. Therefore, it is important to explore immediate, short term and long term measures to combat this challenge of perception around competition. Here are some of the recommendations to deal with these issues:

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• Importance of Data and Business Development Services (BDS): In developing countries, it is very rare to undertake extensive business plans and feasibility studies before starting the business as the cost and time for such processes are seen to be the barriers in doing business. People under peer pressure or in search of opportunities like to start a business as quickly as they can. In this regard it is crucial that businesses have the right set of data to make decisions. The data should encompass information relating to the potential target market that the business intends to serve, as well as the number of the existing players. It becomes extremely important that people can take informed decision on starting a business. Accordingly, a BDS could be formed within PSF that can provide information through its dedicated unit or through a division at the Imanzi Business Institute (ISI)21. • Ease of closure of business: Perceptions on closure of business in Rwanda is well known to be more difficult and expensive compared to opening of businesses. In a free market, it is not only important to make it easy to open business but also close business. In case of the ease of closure of business, risk taking abilities increase at the same time the cost implications are dramatically reduced. (Cross Reference 5.6.3 Regulatory reforms and their impact) • Need for a level playing field: To counter the challenges regarding level playing field, there has to be uniform rules relating to licensing, compliances and taxes to all players in a particular category of a particular industry. For instance, in the hospitality sector, all hotels based on rooms or revenue should attract similar government taxes and compliance needs. This will ensure that there is a level playing field and ensure fair competition. (Cross Reference Overall National Business Challenges) • Regulatory framework in long run: Currently in Rwanda, issues relating to competition are handled through Ministry of Trade and Industry. There is Competition and Consumer Protection Policy in place, but in the long run, it will be important for Rwanda to formulate the Competition Act as per the guidelines of the EAC Competition Act. A statutory body can be formed to create Competition Authority of Rwanda on the lines of the Competition Authority of Kenya that will be within the framework of the EAC Competition Act. It is highly recommended that PSF create a Working Group in this regard, which will work with the MINICOM towards building the legal, institutional and operational framework to build the right competition and business ecosystem for Rwanda. A Harvard Business Review article September 2018, analyses why competition is a best practice. A research that looked at 71 emerging economies and identified 18 that achieved rapid and consistent GDP growth over the past 50 and 20 years. They include the usual Asian giants—China, South Korea, and Singapore—but also less obvious countries including Ethiopia and Vietnam. There are some clear lessons here for all economies, not just emerging ones. Allowing and indeed encouraging domestic competition brings results not just for the firms that survive it, but also for the economy as a whole. The successful large firms in the outperforming economies act as catalysts for change through investment and building capability among their suppliers. Many of these suppliers are small and medium sized companies that tend to be less productive than the larger firms, but are nonetheless critical for employment. By bringing them into the ecosystems, the larger competitive firm help instill management and operational best practices, and can accelerate and encourage technology adoption.22


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Figure 36: Major top five challenges faced by businesses in each province

KIGALI

NORTHERN 

    

Access and cost to finance Availability and cost of land Tax rates Tax administration services Local market competition

 

Tax rates Local market competition Tax administration services Local demand for product or service Access and cost of finance

WESTERN  

  

Level of education of workforce Procedure for obtaining business license and operating permits Local market competition Tax rates Local demand for product or service

EASTERN  

SOUTHERN  

 

preliminary evidence that certain business challenges may be felt more acutely by businesses in certain regions of Rwanda versus others. 5.5.3 Business size-specific challenges

Table 14 provides top five business challenges segregated by size of business. In terms of business scale or size, the three major business challenges for both micro and small enterprises echo the national business challenges. Specifically, tax rates, domestic competition and local demand for product or service emerged as key challenges for both micro and small enterprises. For medium-scale enterprises, the top two challenges were similar to micro and small enterprises while the third challenge was access and cost of finance. However, some

 

Local market competition Local demand for product or service Access and cost to finance Tax rates Access and cost of electricity

Tax rates Local demand for product or service Access and cost of water Access and cost of telecommunication Access and cost of electricity

challenges stand out as more pertinent in some type of businesses versus others. For instance, for largescale businesses, tax administrative services and level of education of workforce stood out as major business challenges apart from tax rates and domestic competition. In terms of unique challenges, medium-scale enterprises indicated availability of local suppliers while large-scale enterprises indicated level of education of workforce as a major business challenge. Certain challenges faced by medium-scale enterprises came to light through FGDs. For instance, while the hospitality sector has experienced growth, local suppliers are yet to catch up in terms of quantities, types and standards of items.23 Similarly, in the retail sector, retail industries such as retail supermar-

kets face problems such as poor packaging and lack of consistency in the supply of products from local producers and suppliers.24 Access to Finance has remained a key challenge for micro, small and medium enterprises (MSMEs) as banks have been highly risk averse; seeking adequate collateral and significant documentation. Due to limited skills set and resources, majority of MSMEs are unable to develop bankable business plans or formal proposals required for acquire credit from formal banking channels. The current collateral requirement of Rwandan banks— on average over 275% of loan value—is among the highest in the region and among low-income countries.25 Table 15 presents the value of collateral required for obtaining credit in EAC and other

40


key economies of Africa, the collateral requirement is lowest in Egypt at 86% and Mozambique at 92%, while Tanzania (264%) and Burundi (267%) also have similarly high collateral requirements. (Cross Reference Finance) Since significant number of MSMEs in Rwanda are in the startup and early growth stage of their business life cycle, accessing finance to these businesses is further challenging and daunting task. Moreover, alternative source of financing such as; capital markets, private equity and venture capital are in early stages of development. (Cross Reference Finance) The survival rate of enterprises is very low in Rwanda, which has constrained economic development and employment creation. According to Rwanda Skills and Business Development Programme (SBDP)28, only 35% of firms survive after three years and 70% of these enterprises never grow beyond self-employment. Furthermore, the report indicates that 68% of jobs created since 2011 came from an increase in the number of firms rather than their growth. SBDP has set a target to increase the survival rate of enterprises from 35% to 60% by 2020. During FGDs, many micro and small businesses cited the existing tax regime as a key challenge. Most of Rwanda’s micro and small businesses are either categorized under the flat or lump sum tax regime. According to existing income tax regulations, businesses with annual turnover between FRW 2 mil-

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BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

lion to 12 million need to pay a flat tax rate. Businesses with annual turnover between FRW 12 million to FRW 5O million fall under lump sum tax regime. Further, business with annual turnover of over FRW 50 million fall under real tax regime. Under the flat rate tax regime, businesses must pay a specific flat amount of annual tax due depending on their annual turnover. Nonetheless, many businesses have complained the rates to be high as often their annual turnover are on a lower side and they end up paying higher taxes every year. Further, the service of agents collecting local taxes on behalf of RRA was perceived as a major challenge. (Cross Reference Tax Administration) 5.5.4 Sector-specific challenges

Table 14. Major challenges across business size BUSINESS SIZE

MAJOR CHALLENGES

Micro

• Tax Rates • Local market competition • Local demand for their product or service • Access and cost of finance • Tax administration services

Small

• Tax Rates • Local market competition • Local demand for their product or service • Access and cost of transportation • Access and cost of electricity • Tax administration services

Medium

• Tax Rates • Local demand for their product or service • Local market competition • Access and cost of finance • Tax administration services • Availability of local suppliers

Large

• Local demand for their product or service • Tax rates • Level of education of workforce • Local market competition • Tax administration services

Table 16 summarizes challenges faced by different sectors of the Rwandan economy. In keeping with the overall national challenges, tax rates emerged as a major challenge across the majority of sectors as did access and cost of finance. Apart from the major national challenges, some challenges were found to be more problematic in some sectors versus others. For the agriculture sector, in addition to tax issues, local demand for products and services and local market competition, availability of local suppliers and availability and cost of raw materials emerged as challenges. During FGDs, representatives from the agriculture sector revealed that taxes and tariffs on new land legislation were excessive while inadequate interpretation of agricultural taxation (for exports)

42


Table 15. Value of Collateral needed for a loan (% of loan amount)26 Countries Value of Collateral Required %

Rwanda 275

Kenya 188

on some products were hindering many businesses. Further, businesses revealed that farmers exempted from income tax are being subjected to a withholding tax on goods sold to formal businesses. In addition, FGDs highlighted availability and cost of land as well and cost and access to finance as major business constraints for the agriculture sector. Although agriculture is the largest sector of the Rwandan economy, it receives very little direct credit from financial institutions due to the sector’s perceived vulnerability. Further, businesses also revealed that lack of local suppliers, and availability and cost of raw materials is restricting their processing capacity, value addition and quality of packaging. Challenges of the tourism sector closely resembled the overall national challenges. In addition to the challenges listed in Table 16, cost and access of skilled labor was seen as problematic in the tourism sector. Representatives from the tourism sector revealed that there

Tanzania Uganda 264

Burundi

159

267

Nigeria 139

was a short supply of trained human resources in the sector such as hotel managers, tour guides, chefs, cooks, waiters, as well as service personnel and technicians. Also, the sector was found to have gaps in soft skill competencies, especially in international languages such as English, French, Spanish, and Chinese. Moreover, the lack of diversity of tourism products was seen as a constraint since almost 90% of the industry’s earnings are driven by gorilla tours. Further, in terms of taxation, businesses revealed that they are losing their competitive edge due to the addition of VAT on complimentary products and services provided by them to business partners such as international tour operators, travel agents, media, airlines, and travel writers. For the wood sector, availability and cost of land and competition with EAC as well non-EAC countries emerged as key challenges constraining business growth. In addition to these challenges, stringent Government regulations

AVAILABILITY AND COST OF LAND As there is limited availability of land, there is difficulty to acquire it as well as high cost associated with acquiring it. With the increment of economic activities, the cost of land across the country especially in the urban areas is on a continuous rise. This trend has led to increasing cost of land to do business while has also encouraged businesses to migrate towards non-residential or industrial areas. Therefore, the government has been trying to ensure rational allocation and optimum utilization through land use plan, development of special economic zones, construction plans of the provincial and district industrial parks, land information system, easy availability of the construction permits etc. However, these initiatives have made the process long and complex. The initiative such as online portal by Agriculture Ministry to provide information about land is a welcome step, the portal is expected to minimize the transaction cost and information gap.

43

Zambia 237

Ethiopia 234

Egypt

Mozambique 86

92

aimed at controlling deforestation has meant that local supply of timber is low. At the same time, taxes on imported timber is very high. Although timber is used as a raw material, it is not exempted under EAC remission scheme. Since the cost of both locally sourced and imported timber is high in Rwanda, the cost of production of locally produced wooden products is also high. Further, FGDs revealed that business in wood sector is facing various challenges throughout the whole value chain from forest plantations to the production and sale of the end product. Also, the sector lacks modern equipment to produce products that meet international standards, hence, lack of consumer confidence in local products is still a major challenge faced by the sector. This has meant that Rwandan businesses producing wooden products find it difficult to compete with businesses from the EAC and beyond. During FGDs, representatives from the ICT sector mentioned that network issues for distribution of ICT services was a key constraint to businesses in the sector. Further, high cost of internet services, low level of awareness of citizens, lack of local content and services in local language, weak telecommunication infrastructure in rural areas and small number of digitally literate citizens are major


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

challenges to the sector’s growth. Also, the cost for hosting in Rwanda is still high, resulting in companies hosting their servers abroad. In addition, low level of electricity penetration especially in rural areas has meant that supplying ICT services in rural areas continues to be a major challenge. Moreover, in the ICT sector, businesses revealed major gaps in soft skills and a need for systematic training programs in this regard. Furthermore, inadequate development of e-payment mechanisms and lack of access to online products emerged as another challenge faced by the sector. In terms of other priority sectors of the Government, the creative sector indicated the level of education of workforce as the foremost business challenge followed by tax rates and competition with EAC. Also, survey findings indicated that procedures for obtaining a business license was perceived as a key challenge in the sector. FGDs further substantiated the survey findings as the majority of businesses highlighted the delay by the Government to issue licenses as one of the biggest challenges the budding industry is facing. Also, the industry faces funding challenges to produce marketable film projects along with lack of necessary equipment to produce quality work. Moreover, businesses strongly feel that lack of film culture has limited the growth of film industry in Rwanda. Through FGDs, it also became evident that the low purchasing power of Rwandans to procure products and services from the creative sector has presented a major challenge

Table 16: Major challenges across the business sectors SECTOR

CHALLENGES

Agriculture

• Local demand for product or service • Local market competition • Tax rates • Availability of local suppliers • Availability and cost of raw materials

Construction

• Tax rates • Tax administration services • Local market competition • Access and cost of transport • Procedure to obtain business license

Creative Industry

• Level of education of workforce • Tax rates • Competition with EAC • Procedures for obtaining business license • Access and cost of finance

E-commerce/Logistics

• Tax rates • Local market competition • Local demand for product or service • Tax administration services • Availability and cost of land

Energy

• Local demand for product or service • Local market competition • Tax rates/Tax administrative services • Access and cost of finance • Distribution of profit repatriation

Financial Services

Handicraft

ICT

• Tax rates • Local demand for product or service • Local market competition • Access and cost of finance • Competition with non-EAC/international business for customers • Access and cost of transport • Access and cost of communication • Access and cost of electricity • Local market competition • Procedure for obtaining business licenses and operating permits (work permits, import/exports permits) • Availability and cost of raw material • Tax rates • Demand for local product or service • Local market competition • Tax administrative services • Access and cost of finance

Infrastructure

• Access and cost of water • Access and cost of finance • Availability and cost of land • Competition with the East African Community (EAC) businesses for customers • Availability and cost of land

Manufacturing

• Availability and cost of land • Tax rates • Local demand for product or service • Local market competition • Access and cost of electricity

Mining

• Environment policy and regulations • Access and cost of electricity • Obtaining construction permits • Availability and cost of raw material • Tax rates

44


Services

• Tax rates • Local demand for product or service • Local market competition • Availability and cost of land • Access and cost of electricity

Tourism

• Tax rates • Local market competition • Local demand for product or service • Tax administration services • Access and cost of finance

Trading

• Tax rates • Tax administration services • Local market competition • Availability of local supplies • Local demand for product or service

Wood

• Availability and cost of land • Competition with non EAC • Local market competition • Competition with EAC • Access and cost of finance

to Rwanda’s creative industry.29 Likewise, the challenges faced by the e-commerce sector were similar to other sectors in the economy. As per the FGDs, the novelty of e-commerce to customs officers has meant significant delays in clearing items in order to determine the value and the origin. Also, there is a lack of trust among consumers wIth regard to these service. In addition, the current postal service is not efficient enough to support e-commerce, while express courier is too costly and time consuming. Further, due to absence of local trusted infrastructure for online payments processing system, most of the online payments still rely on global systems like Pay Pal. The handicraft sector indicated few stand out challenges, one of the biggest challenges faced by firms engaged in the handicraft sector being lack of availability of raw materials. In addition, poor transportation infrastructure of raw materials and of finished prod-

45

ucts in the rural areas was found to aggravate the short supply of raw materials.30 Furthermore, historically handicraft products have been considered as low-value products and hence it is necessary for the handicraft sector to transition from informal to formal industry.31 Also, inadequate support for marketing and promotion has lowered the capacity of Rwandan handicraft enterprises to compete with other regional counterparts. 5.5.5 Summary

Businesses of all sizes, sectors and provinces reported similar challenges with only few distinctions. The major challenges were found to be tax rates, domestic market competition, demand for product or service, access and cost of finance, and tax administration services. In terms of scale, both micro and small enterprises indicated similar challenges in terms of tax rates and domestic market competition. Some challenges stand out as more important to some provinces than

others. For instance, the greatest challenge for Kigali city seems to be tax rates and market competition while in contrast Northern and Western provinces indicate cost and access to finance, procedure for business licensing and level of education of workforce as major challenges. Some sectors face key challenges outside the major overall challenges identified. For instance, the wood sector has indicated competition with EAC and non-EAC businesses for customers as challenges while the creative industry has indicated the level of education of workforce as a major constraint for growth. 5.6 Tax administration and Legal issues 5.6.1 Tax Administration

Respondents of the current survey were asked to rate the extent to which they considered tax administration and legal issues to be a challenge for their business. The majority of respondents—66.3%—indicated that tax administration and legal issues were problematic. The findings are a result of numerous variables nonetheless, as highlighted in Doing Business 2017, Rwanda made paying taxes more complicated by introducing a requirement for companies to file and pay social security contributions on a monthly instead of a quarterly basis. In terms of specific tax and legal issues related to their business, 67.9% of respondents indicated that level of Value Added Tax


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

(VAT) was a problem while 64.9% indicated that level of corporate tax was a problem. Also, more than half of the respondents indicated that the unavailability of information on Rwanda’s tax system was a major constraint. Further, in keeping with previous BICS studies, RRA’s customer service continues to be perceived as a key challenge by businesses. Interestingly, filling in tax returns was not one of the top challenges pertaining to taxes faced by businesses unlike in previous editions of BICS. This finding may lend itself partly to the fact that paying tax was made easier by the Government through the introduction of mandatory electronic filling in 2016. During FGDs, respondents revealed that lack of information about tax regulations meant that many businesses ended up paying penalty and compliance fees— which became additional burdens for businesses. Moreover, frequent changes to tax laws and regulations and lack of outreach by the Government meant that businesses were not well-versed with the latest developments in tax regulation. Only VAT-registered businesses are obligated to use electronic billing machines (EBMs) that generate invoices that indicate the amount of tax levied in accordance with tax regulations. However, some businesses are resistant to the use of EBMs and engage in malpractices such as under invoicing, non-issuance of EBM receipts and fraudulent refund claims. Businesses engaged in such mal-

practices are hindering fair market competition. As per FGDs, many respondents indicated that the existing VAT rate i.e. 18% is not an issue, the major issue is with disparity and settlement of VAT. Since business are not allowed to deduct expenses arising from transactions without EBM receipts, businesses are required to pay higher taxes. Similarly, the validation of receipts is another issue flagged as problematic by businesses. In the event of malfunction of EBMs, businesses need to issue hand written bills and get proof of malfunction from RRA before conducting additional transactions. The businesses often have to close down their operations as repair and maintenance is only available in selected areas. Furthermore, since many small traders from outside Kigali were affected due to fraudulent VAT invoices in 2016, many small businesses still fear repetition of such an incident. On a positive note, RRA is in the process of replacing EBMs with an internet-based software, which is likely to resolve most issues raised by surveyed businesses. Nonetheless, RRA needs to be mindful of additional costs such as training costs associated with the implementation of the new technology. Often, such costs are considered to be additional burdens by many small-scale businesses, especially in rural areas where access to the internet and other support infrastructure are limited. Likewise, businesses across sectors were concerned about the proposed proper-

ty tax, which will be an additional tax burden and increase their cost of doing business; businesses wanted the Government to adopt a clear and more systematic mechanism of valuing property without the introduction of biases. Also, traders shared no systematic way of price evaluation at Customs Offices for imports making the process lengthy and non-transparent. This has caused delays in clearing processes hence, increasing the cost and loss to importers. Further, as per FGDs, customer service of RRA is perceived as a major challenge. Lack of consultative process and lack of responsiveness from RRA seem to be key areas of concern for businesses of all sizes and sectors. Most businesses were concerned as RRA were thought to be seizing their business assets without proper consultation and information. Also, issuing the Quitus fiscal (tax clearance) is an issue while the delay in VAT refunds has exacerbated the challenge. Comparing Rwanda’s key tax rates with that of other EAC countries, Rwanda’s tax structure is on par with the majority of its EAC neighbors. The Corporate Tax Rate (CTR) of Rwanda for resident and non-resident corporations is a flat 30%. For resident corporations, the CTR is on par with the majority of EAC countries. However, the CTR in Rwanda for non-resident corporations is the lowest after that of South Sudan.32 In terms of Capital Gains Tax (CGT), the tax in Rwanda is on the higher side compared to other EAC countries such as Kenya,

46


Burundi and Sudan. VAT is on par with most EAC countries except Kenya.33 Nonetheless, in terms of withholding tax, the tax rate in Rwanda is more expensive than in Tanzania and Kenya, and approximately on par with Uganda and Burundi. The higher withholding tax in Rwanda is constraining competitiveness of local enterprises.

Figure 37: Key challenges in terms of specific tax and legal issues

5.6.2 Legal Issues

In terms of legal challenges, 24.2% of survey respondents indicated that licensing requirements were a significant hindrance to while 55.4% did not identify it as a problem. In terms of factors affecting start-ups and business expansion, a significant number of businesses indicated district and local-level registration as a key problem. Apart from registration requirements, compliance with various Government requirement—such as compliance with environmental requirements, health and safety regulations, and compliance with Rwanda Bureau

of Standards (RBS)—emerged as a key challenge for start-ups and businesses looking to expand.

ness with payment by credit/visa card is the two highest reforms that has impacted postively towards business operations.

5.6.3 Regulatory reforms and their impact

Various regulatory reforms have been undergone in recent years, to understand its impact in business growth, respondents were asked about their impact to their businesses. As per the survey findings, Online tax clearenace (E-payment and E-fIlling) along with Online registraton of busi-

Since the introduction of the online business registration system in 2011, over 4,000 businesses registered using just the online service until 2013. Consecutively, the number of procedures to register a business dropped to 2 procedures from 8 procedures in the year 2009.35 This also resulted in the time and required to register a business, hence making it

Table 17: Value of Collateral needed for a loan TAX

KENYA

TANZANIA

UGANDA

BURUNDI

RWANDA

SOUTH SUDAN

30%/37.5% (Resident Corporations/ Non-Resident Corporations)

30%/ 30%+10%) (Resident Corporations/ Non -Resident Corporations)

30%/30%+15% (Resident Corporations/ Non-Resident Corporations)

30%

30%

10%/20%/25% (small businesses, medium size businesses and large business respectively)

5%

5%

15%

15%

15%

10%

Interests

25% (Bearer Instruments

10%

15%

15%

15%

10%

Royalties

5%

15%

15%

30%

15%

10%

Capital Gains Tax

5%

30%

30%

15%

30%

10%/20%/25% (On the basis of size of business)

16%

18%

18%

18% (standard rate)

Corporate Tax

Withholding Tax(Only for resident ) Dividends

VAT

Source: Respective tax authorities of listed countries

47


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

easier for businesses to start their operation. The Single tax identification number which was also introduced in the same process has been ranked third in terms of reforms that have had positive impact on business operations. The online system connects to the Social Security Fund of Rwanda (SSFR) and Rwanda Revenue Authority (RRA) with a single TIN number that reduces the client interaction from two procedures to one36, hence saving time and cost in business operations. Rwanda made paying taxes easier and less costly for companies by fully rolling out its electronic filing system to the majority of businesses and by reducing the property tax rate and business trading license fee.37 Consequently, the country was ranked as one of the top 30 countries in ease of paying taxes in 2014. The introduction of online tax payment when introduced in 2014 was aimed at solving many problems such as removing long queues in our offices and also the burden of taxpayers spending more time and money in the process of filing tax returns.38 This is also reflected in the BICS (2019 - 2021) where online tax clearenace (E-payment and E-fIlling) was ranked as the reform that has had the topmost positive impact on the business operation in Rwanda. Rwanda scored the second position globally after New Zealand when it comes to the aspect of registering property in the Doing Business Report, 2018. It was attributed to the fact that the coun-

TAX RATES AND ADMINISTRATION The issues relating to taxes also emerge from perception as discussions on taxes gained much interest within peers of the community, especially in today’s world of social media and online networks. (Cross Reference Tax Administration) The issue relating to taxes can be divided into categories---— one of perception and other, the reality in challenges of implementation. The challenges can be further divided into those that are system related, technology related and human related. Also, it becomes important to ensure that these issues are well understood and necessary action be taken to undertake rectification. Further, some of these issues need to be addressed through training and other capacity building measures. Since this has emerged as the single largest challenge to resolve, it is recommended that a joint committee be formed between RRA, PSF and concerned at MINECOFIN on the lines of Ethiopian Public Private Consultative Forum (EPPCF) to ensure that these issues discussed and resolved in short and medium term. The Government is committed to improve the tax regime by making it more pragmatic and easy. For instance, as opposed to raising taxes and increasing the difficulty of tax payers, the 2018/2019 budget targets tax efficiency, increased compliance and an expanded tax bracket. Similarly, the RRA is focused on administrative reforms to boost efficiency and the government has been trying to modernize the tax laws (VAT law, Investment Promotion and Facilitation law, Mineral Tax law, Gaming law and Income Tax law). However, there is a need for elaborate explanation of the tax laws, awareness on compliance among taxpayers and an efficient tax organization/ authority. There is also a need to study the different local taxes that are imposed at the local level. Estonia Policies on Ease of Tax Payment: Estonia has the best tax code in the OECD. Its top score is driven by four positive features of its tax code. First, it has a 20 percent tax rate on corporate income that is only applied to distributed profits. Second, it has a flat 20 percent tax on individual income that does not apply to personal dividend income. Third, its property tax applies only to the value of land, rather than to the value of real property or capital. Finally, it has a territorial tax system that exempts 100 percent of foreign profits earned by domestic corporations from domestic taxation, with few restrictions.34 Latvia, its neighbor ranks second. These are rankings of OECD countries by Washington DC based think tank The Tax Foundation. Rwanda can adopt such models to facilitate ease in taxation system and overcome is biggest barrier in terms of business and investment climate.

Figure 38: Factors affecting start-ups and business expansion

try improved on its land dispute resolution mechanisms. It now takes only 7 days to transfer property and costs only 0.1 per cent of

the property value, the same as in New Zealand. 39 Establishing

Special

Economic

48


Zones (SEZ) in Rwanda is another major reform that have boosted the industrial growth in Rwanda. Firms in the Kigali SEZ already make an important contribution to Rwanda’s aggregate economic outcomes. By the end of 2016, the 44 operational KSEZ firms, for which tax data was available, jointly employed around 2% of all Rwanda’s permanent employees, and covered 2.5% of all VAT-reported sales.40 Besides, the proposed Bugesera Special Economic Zone, which was recently approved in 2018 has already started attracting industrial firms with Government sources revealing that more than 20 investors have already booked space in the area.41 Numerous reforms in the recent years have eased the processes to start a business in Rwanda. Reforms such as; reducing the time required to obtain a registration certificate, eliminating the need for new companies to open a bank account in order to register for VAT, improving the online registration one-stop shop and streamlining postregistration procedures, and reducing cost by replacing electronic billing machines with free software for value added tax invoices. On the other hand, a signifciant number of survyed busineses have not seen any impact on their business by the reforms yet. 5.7 Finance

Access to and cost of finance is one of the major challenges faced by business of different sizes across sector and provinces. More than

49

Figure 39: The impact of recent regulatory reforms in businesses

half of business surveyed have indicated it to be a major challenge for their business growth in the next three to five years. As per ratings, 36.7% of businesses indicated ‘access to finance’ as a major problem for their businesses, which is a significant improvement over previous surveys. In the current survey, only 45.5% of surveyed businesses had applied or used loans or any line of credit in the past two years. The survey clearly indicates that commercial banks are the most preferred source for accessing formal finance followed by saving circles and micro finance institutions (MFIs). Likewise, borrowing from friends and family members still remains a key source of informal finance especially for micro and small-scale businesses which lack adequate collateral to access formal credit. The interest rates charged by MFIs, however, is higher compared to those charged by commercial banks; the interest rate charged by such institutions is about 2 to 3% per month. Compared to previous studies, access to credit from informal sources such

as friends and family members have declined significantly. In term of constraints pertaining to access finance, the top three constraints were interest rates charged by banks and other lenders, requirement for collateral, and financial institutions’ high perceived risks associated with start-up businesses. In keeping with previous studies, both high interest rates and requirement for collateral to access loans continue to be perceived as major constraints across all business sizes, sectors, and provinces. Based on the current market scenario, it is unlikely that issues pertaining to interest rates and credit expansion will ease in the near future. The ratio of credit to GDP for both banks and MFIs combined reduced slightly from 24.1% in 2016/2017 to 23.1% in 2017/2018. Further, the number of borrowers in the banking sector decreased to 247,253 (-5.9%) in 2017/28 from 261,871 in June 2017. This reduction was mainly attributed to tight credit conditions implemented by banks as a


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

strategy to address high non-performing loans (NPLs) and weaker credit demand. Despite steep competition amongst banks, the spread rate of commercial banks has remained on the higher side— the spread of commercial banks went down to 9.33% in 2017/18 from 9.42% in the previous year. The lending weighted average rate in 2017/2018 stood at 17.15% while the deposit weighted average rate was 7.82%.

Figure 40: Major Sources of Finance

Figure 41: Constraints to accessing finance

Table 18 shows that bank lending interest rate, in general, is higher in Rwanda compared to its EAC counterparts and other regional economies. In EAC only Uganda’s interest rate is higher than Rwanda’s while Tanzania has almost equal interest rate. Other EAC countries’ interest is lower than that of Rwanda’s. Besides EAC, Zambia’s interest rate is higher than Rwanda while Rwanda’s interest rate remains higher than that of Nigeria (prime rate) and Ethiopia. On a positive note, the access to credit is expected to strengthen in the future. As indicated in Doing Business 2019, Rwanda strengthened access to credit by enacting a new insolvency law. An automatic stay is now imposed on secured creditors for a period of 6 months and the law provides reliefs from such stay when the assets are perishable or are not needed for the reorganization of the company. 5.8 Infrastructure (box story)

Contrary to previous studies, infrastructure challenges for business growth have reduced in perceived

severity in recent years. Previous studies had highlighted access and cost of transportation as a major infrastructure challenge followed by access and cost of electricity, water and telecommunication. Access to and cost of transportation: As a landlocked country, Rwanda faces high cost of transportation and increased time for transportation. The cost of transportation is dependent on the policies of neighboring countries and the network of roads. Due to the distance from the sea port, freight costs with current mode of transport naturally become costly and time-consuming. The Government is exploring the oppor-

tunities for regional connectivity and in the meanwhile investing in developing the infrastructures. It is expanding the road network and investing in the new Bugesera international airport at the same time exploring the railway and water connectivity. The Government is planning of construction of four ports in Lake Kivu. As infrastructure projects require large investments, the Government has welcomed the private sector and FDI in these sector (Cross Reference Trading across borders). Further, Rwanda does not have control over the transportation in other countries that provide Rwanda access to seaports. There are

50


Table 18: Average Lending Rates of EAC and other Regional Countries Country Lending Interest Rates42(%)

Rwanda 17.15

Kenya 12.61

Tanzania 17.53

Uganda 20.51

Burundi

South Sudan

16.3

Nigeria

16.55

16.69*/30.93**

Zambia

Ethiopia

23

13.5

*Prime/**Maximum

challenges of roadblocks created at the same time much corruption from petty corruption to extraction based on cartel based behavior. Compared to previous studies, access to and cost of telecommunication as an infrastructure challenge has reduced significantly

while access to and cost of electricity and transportation continues to be a key challenge for businesses across size, scale and sector. Likewise, electricity outages continue to be a key problem—80% of businesses indicated that they face power outages in their business establishment, which repre-

ACCESS TO FINANCE In any developing country, the challenge of access to finance remain as countries have just moved to monetized economy from sustenance based and barter economy. The challenge of access to finance is for both capital costs and working capital costs. While capital can be available for capital costs due to mortgage or creation of collateral, working capital access remains a challenge. In a society where entrepreneurship is a developing culture, there also exists gaps in the informal finance sectors leave alone the formal sectors. With limited monetization of assets, developing capital markets it becomes difficult to find avenues of finance. There are various ways to manage these challenges. For instance, Kenya strengthened access to credit by implementing a functional secured transactions system. The new law regulates functional equivalents to loans secured with movable property, such as financial leases and fiduciary transfer of title.43 Similarly, Egypt and Arab Republic introduced a new law that broadens the scope of assets which can be used as collateral to secure a loan. This basically ensured that the range of movable assets is increased.44 There has to be more products available across micro, meso, small and medium levels of enterprises in both debt as well as equity. Access to finance has been a focus area and the Government has been exploring different mechanisms to mobilise funds for the capital growth. These include: • mobilization of savings to develop loanable funds for long term investments;

51

• developing the Capital market master plan for raising funds in the domestic as well as in the EAC markets, • development of agriculture financing and insurance scheme to mitigate farmer and investor risks • Financing support to export oriented enterprises, through the establishment of the Export Growth Facility and Development Bank of Rwanda. • Transformation of SACCOs into the Cooperative Bank and • Issuance of long term bonds for large infrastructure projects, etc. Ethiopia’s Approach to Increase Access to Finance: Incentives should be provided to

commercial banks, to engage in market downscaling initiatives. Successful examples of international best practices showed that the combination of dedicated liquidity (through lines of credit) with tailored technical assistance packages proved to be effective in successfully reaching the missing middle segment.45 For instance, in Ethiopia, institutions like the Development Bank of Ethiopia are currently well placed to play the wholesaler role in providing dedicated liquidity for SME finance to financial intermediaries. Kenya Strengthens Access to Credit: Kenya

has strengthened access to credit by implementing a functional secured transactions system. The new law regulates functional equivalents to loans secured with movable property, such as financial leases and fiduciary transfer of title.46 Adapting such models in Rwanda’s context shall aid in increasing the access to finance in the country.

sents a significant increase from previous years. In 2013, businesses reported 10 power outages per month on average. Likewise, access and cost of water also remained as a challenge as almost half of the respondent indicated it as a key challenge. According to Rwanda Utilities Regulatory Authority (RURA), the number of water customers increased by 7.6% from 191,684 to 207,408 in the year 2017/18. The challenge of water supply is higher in urban areas largely due to higher water demand compared with supply along with existing old network with limited capacity to supply water. Moreover, RURA has recently increased the water tariff citing increased investments required for increasing access of water services and performance, and maintenance of auxiliary water network. Also, the new tariff has categorized customers based on the usage into residential and non-residential places. Understanding the importance of reliable power supply, Rwanda has significantly increased the access to electricity in recent years, Rwanda is only trailing behind Kenya in the EAC region. The total installed capacity only slightly increased to 208.68 MW from 208.3 in 2017/2018 while the number of users grew significantly by 46.5% as of June 2018, from a growth of 36.5% in 2016/2017,


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

the imbalance in demand and supply of electricity is likely to disrupt adequate supply of electricity. The FGDs revealed that periodic rise of electricity costs added to the perception of seeing electricity as expensive and a constraint to business growth as it has increased the production cost making the local products expensive and uncompetitive at local and regional level. The challenges of less power as well as costly power is affecting the business sector especially the local manufacturing industries. Similarly, in terms of cost of electricity in comparison to EAC for commercial purpose, the cost of electricity is only higher than Uganda and is par with other EAC states. The new electricity end-user tariff is expected to provide some relief, as per new tariff, large industries (non-residential) pay RWF80 KWH, while Medium and Small Industries pay RWF 87 and 110 KWH respectively. Nonetheless, since most of the SMEs fall under residential tariff, the cost of electricity is on a higher side compared with other EAC countries. For customers consuming more than 50 Kw, the price increased from 189 Rwf to 210 Rwf i.e. without VAT the cost per Kw/h is almost USD 25 cents. 5.9 Trading across borders

Out of the surveyed businesses, only 4% of businesses are involved in foreign exports while only 10.3% of them are engaged in importing goods from outside Rwanda. In terms of cost, only 12.5% business perceive the cost

Figure 42: Overall infrastructure challenges

ACCESS TO AND COST OF ELECTRICITY Access to and cost of electricity: Rwanda has been able to generate electricity from its limited hydro and thermal sources which has impacted on the increasing cost of electricity in comparison to other African countries like Kenya or Uganda. The total installed capacity in 2018 was 218 MW and there is a dire need to increase the current capacity. Several projects to build new power plants are underway which will add around 400 MW on the existing national grid by 2024. The Government has made investments to enhance the electricity generation and encouraged the private sector and foreign investors to enter the sector. Due to limited technical and financial resources there is a challenge to explore and adapt newer technologies for energy generation.

of obtaining trading license as expensive while almost half respondents perceive the cost to be moderate i.e. standard. Likewise, amongst the respondents who are involved in exports, less than 3% have indicated that they have not been able to export their product due to the existing regulations. Due to the removal of various tariff barriers, the major challenge to intra-EAC trade is not tariffs but Non-Tariff Barriers (NTBs). Various NTBs continue to pose serious challenge to regional trade and integration in East Africa; this has resulted in high trading cost in the EAC thus making businesses uncompetitive, and transferring the additional cost to the consumers. On a positive note, EAC has developed EAC NTB Act which provides legal ground for resolu-

tion of NTBs and has established EAC time bound programme on elimination of identified NTBs. Further, out of 112 identified NTBs, 87 have been resolved todate48. Since elimination of identified NTBs relates to existing laws, the required legal reforms might be unresolved or delayed which could lead towards higher cost and time for intra-EAC trading. In terms of transportation, Similar to previous study findings, the length of time it takes for imported containers arriving in Mombasa and Dar es Salam to reach Kigali poses a major challenges for businesses involved in import and export activities. Based on the reporting by a small number of businesses, on an average it takes 7.9 days to transport cargo to Kigali

52


from Mombasa. While in terms of Custom clearance, it takes on an average 8.5 days for customs clearance at Mombasa port. The study findings are in tandem with previous findings, and have shown some improvement as well. According to a survey conducted in 2014, the trip from Kigali to Mombasa with containerized product took 96.17 hours (4 days) while the trip from Mombasa-Kigali accounted for 221 hours (9.2 days)49. Measures such as fast track implementation of the single customs territory and adaptation of single customs territory by partner states is key to reduce transit time moreover, effective operation of One stop Border Posts is a must. For the businesses involved in international trade, access to international market information and access to international market standards stood out as the two major challenge for their business. Compared with historical studies, the findings are distinct as exchange rate fluctuations and electronic cargo tracking systems were the key challenges in the past. The launching of the first Electronic World Trade Platform (EWTP) in Africa is expected to boost cross-border electronic trade and vacuum the gap for international trade and market access. Further, the agreement with Alibaba group will help Rwandan MSMEs to reach international markets including China through Alibaba’s online marketplaces. In a positive development, Rwanda Standard Board’s quality testing laboratories have acquired an international accreditation which

53

Table 19: Access, total Installed capacity and cost of electricity across EACs Kenya Access to Electricity (% of Population until 2018 unless stated otherwise ) Total Installed Capacity (MW) Electricity Tariff, US cents per Kw/h

Uganda

Rwanda47

Tanzania

South Sudan

Burundi

73%

23% (2017)

49.60%

32.8% (2016)

9% (2017)

8% (2017)

2,351

873.9 (2017)

208.68

1457.1

30 (2017)

45 (2017)

0.15

0.1

0.14 to 0.16

0.14

0.14

0.43

Source: Respective regulatory bodies of listed countries (latest available figure in public domain)

Figure 43: Challenges to trading across borders

Figure 44: Factors affecting recruitment and development of a competent workforce

includes Microbiology laboratory, food, agriculture and Mycotoxin & Inorganic chemistry laboratory50. The new accreditation is expected to ease the current challenge of accessing international market standards as busi-

nesses will be able to access such testing in Rwanda itself. In terms of key barriers for exports, the top five barriers as per the survey findings are; tax rates, linkage with foreign customers, cost of value ad-


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

dition to products, export market information and transportation cost to export/paper work needed by foreign authorities to export from Rwanda. Both length of time taken to obtain export certification and custom clearance has gone down significantly as a challenge largely due to the implementation of Single customs territory, risk-based inspections and online certificates. 5.10 Human Resource

In terms of Human Resource, only 23.7% of businesses have indicated that recruiting and developing a competent workforce as a problematic while more than half of the respondents have indicated not be a problem. Compared to previous studies, the reporting has improved significantly as almost half respondents had indicated it to be a major problem in the previous studies. Almost half respondents have indicated skills level of school drop-outs as a major problematic factor for recruitment and development of competent workforce followed by cost of relevant training. Similar to previous studies, the difficulty with the cost of relevant training for the businesses continues to be a major challenge for the recruitment and development of a competent workforce. Likewise, the local availability of relevant training continued to be a major challenge for developing a competent personnel. Echoing with the survey findings, FGDs with various sectors revealed inadequately educated workforce as a major constraint especially in

Singapore Skills Development: Singapore

represents a very successful model of Foreign Direct Investment (FDI) related skill development. In early industrialization era, the country focused on developing basic primary and secondary education to complement its labor-intensive economy. As the FDI started pouring into more capital-intensive and skill-intensive industries, the government devised education and training policies focusing on specific technical skills required by investors. Since the 1980s, the technical and vocational training system has been deepened, while the university system was reformed and expanded.51 As a result of these integrated skills policies and their responsiveness to economic change, Singapore has developed one of the most highly qualified workforces in the world. Integrating FDI with skills development policies requires sophisticated institutional structures. Singapore’s successful skills development model is the result of a systematic and concentrated national effort that brought diverse government agencies together. Interconnected management allowed different functional agencies to share information and identify gaps. This model can also be adopted in Rwanda at the operational level, where the public agencies (including the federal and provincial government) and the PSF can play a coordinated role in devising policies in accordance with the nature of Rwanda’s economy. Through the

high growth sectors such as; hospitality, energy, E-commerce, creative industry, ICT sector amongst others. Businesses also revealed lack of professional providers of adequate demand oriented training and need for improvement in higher education system and Technical Vocational Education and Training (TVET) as per the need of the private sector. In addition, business reported many who have received vocational training were mostly school drop outs or with primary education only thus have lower general knowledge and cognitive skills. Further, as per the respondents, the lack of skilled human resource is leading to un-

Imanzi Business Institute, PSF and other relevant stakeholders can manage the technical and vocational training system and ensure that the curricula is adapted to changing circumstances and strategies of the economy. This approach shall ensure a steady flow of information and encourage a common approach to skill development in Rwanda. Canada and Singapore’s Migration Policies

Access to skilled workers is a key factor for many investment decisions. No economy can expect to meet all the current and future skill requirements associated with a given FDI project, particularly, if the investment involves higher levels of technology in a competitive marketplace. In the absence of adequate local skills, flexible migrant entry is essential to a project’s viability. Yet, achieving a balance between the legitimate interests of investors to have their staff, and the national interest of citizen job protection, training, and advancement, is not an easy task.52 Countries like Canada and Singapore that are highly dependent on the entry of high-skilled migrants to help boost their skills base have succeeded in balancing the labor market mobility as well as keeping their country’s attractiveness as an investment location by devising focused migrant entry. Rwanda can adopt such migration policies to allure FDI to the country as well as broaden its skill base.

healthy practices such as poaching from other establishments; giving unnecessary rise to wage inflation and compromise in service delivery. On a positive note, despite the high cost of training and culture of not offering training, many respondents were willing to invest in human capital provided low risk of employee turnover. On a positive note, only 39.2% of respondents have indicated employee retention as an issue which was a key challenge earlier. In previous studies, almost half of the respondents had indicated difficulty in retaining staff once they are trained.

54


6. Recommendations & Way Forward

55


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

There are several broad and challenging issues that constrain private sector growth in Rwanda which are complex to resolve and cannot be reformed overnight. The Government and the private sector collaboratively have put in efforts, but the investment climate needs to be further improved in order to achieve the goals and vision of economic growth. Some of the key recommendations to help meet the goals are:

56


ISSUES

RECOMMENDATIONS

Tax

Tax: Develop a mechanism to resolve and expedite tax disputes in a swift and fair manner

Lack of information about tax regulationsleading to unnecessary penal fees and legal actions

to preserve the integrity and fairness of the tax system. It is important that in order to address issues related to taxes, there is a need to understand, evaluate and assess the local tax system i.e. understanding the different local taxes that are imposed at the local level. Similarly, proper dialogue, discussions and dissemination of tax regulations to be carried out to ensure awareness and understanding among the stakeholders.

Frequent changes regulations

in

tax

laws

and

Lack of level playing field for VAT registered business entities Fear of proposed property tax, an additional cost burden for doing business Delay in VAT refund a major issue Lack of consultation with the business sector and below par customer service at RRA Local taxes levied at local level such as parking, security and cleaning is an additional burden Flat or lump sum tax rate regime hindering small scale businesses Multiple taxation constraining comparative advantage of locally produced goods

Thus, it is recommended that a joint committee be formed comprising of RRA, PSF and concerned at MINCOFIN on the lines of Ethiopian Public Private Consultative Forum (EPPCF) to ensure that tax issues are discussed and resolved in short and medium term. This initiative will be focused on dialogues aimed at improving tax administration and enhancing the cordial relationship between the RRA, Private Sector and its other stakeholders. This will also serve as a 1) platform for key counterparts in tax administration to meet periodically to discuss and resolve tax administration issues in a timely and friendly manner; 2) respond to inquiries from the businesses on all aspects of tax procedures and administration and 3) help in improving the environment for private sector involvement tax administration, work together to identify synergies and avoid duplication of effort in respect of existing activities on tax matters by Identify and adopting good practices in taxation. Some immediate issues that could be discussed are: • Uniform tax rates and compliance needs for enterprises in a sector- For instance, in the hospitality sector, all hotels based on rooms or revenue should attract similar Government taxes and compliance needs. This will ensure that there is a level playing field and ensure fair competition. • Revision of Tax Code to be best in the world rankings (eg. Estonia and Latvia)

Access to Finance High cost of finance, collateral requirement and short period of credit are key issues in terms of access to finance Rwanda has one of the highest collateral requirement amongst the low income countries at over 275 percent of the average loan value. The average lending rate in Rwanda is expensive than Kenya, Burundi and South Sudan Borrowing from friends and family members still remains a key source of informal finance especially for Micro and Small scale businesses which lacks adequate collateral to access credit and business plan

Electricity The high cost of electricity is increasing the cost of doing business, the cost of electricity in Rwanda is amongst the highest in the EAC region The challenges of less power as well as costly power is affecting the business sector especially the local manufacturing industries.

57

Access to Finance: Availability of affordable formal credit has been one of the constraints facing the business sector. Specifically, high cost of finance, collateral requirement and short period of credit are key issues. Therefore, below are recommendations to resolve the key issues: • A larger range of debt and equity products should be made available across micro, small and medium levels of enterprises. • Implementing a functional secured transactions system that will help in promotion of credit which will require a new law to be formulated to regulate functional equivalents to loans secured with movable property, such as financial leases and fiduciary transfer of title. • Incentives should be provided to commercial banks to engage in market downscaling initiatives to compensate for the high cost of operation. • Due to lack of opportunities for raising private equity inadequate local bank expertise, knowledge, and experience in project finance techniques has limited affordable finance opportunities. PSF in collaboration with the Government and other stakeholders can partner to seek donor assistance to set up technical assistance and training programs to train bank staff in medium and long-term lending, rural lending, project finance techniques, and provision of financing for start-up companies.

Electricity: The challenges to electricity is not only about cost and availability but also reliability and uninterrupted supply so that the business enterprises need not look out for alternative sources (often more costly). Therefore, there is a need to understand the existing and future requirements so that a proper preparation plan for expansion and management of electricity can be made. This plan will help in either building the capacity to produce more power (implement power purchasing agreements for exports) or managing the gap (electricity imports) Challenges on access and cost of electricity can be mitigated by taking support from international agencies like the International Renewable Energy Agency to structure working Group to conduct PPDs. Dialogues should be around a comprehensive and coordinated policy statement and program for the energy sector which the PSF can support the Government to come up with. The focus of the Government’s energy policy should be to promote activities that will increase access to electricity and provide a quality and cost effective service while simultaneously ensuring the financial viability of economic agents engaged in providing energy services and protecting the environment.


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

ISSUES

RECOMMENDATIONS

Enterprise Development

Enterprise development: Most of the enterprises in Rwanda are small and inherited

According to Rwanda Skills and Business Development Programme (SBDP)53, only 35% of firms survive after three years and 70% of these enterprises never grow beyond self-employment. The survival rate of new businesses is low, with few surviving beyond the age of five

Competition Lack of level playing field for VAT registered business entities thus creating unfair competition and practices. Unfair competition between formal businesses and the ones which are not registered and operating in residential areas Lack of local demand or consumptions leading towards lower unfair market competition Local products are not considered of similar quality and standards compared to foreign products Competing with imported cheap substitutes a big challenge for local businesses Absence of strong eco-system to support business growth, lack of supporting MSMEs, suppliers, Government policy.

Human Resource Development Skill level of school drop-outs is a key problem for recruitment and development of competent workforce Cost of relevant training along with availability of relevant training continued to be a major challenge for development of competent personnel. Inadequately educated workforce as a major constraint especially in high growth sectors such as; hospitality, energy, E-commerce, creative industry, ICT sector amongst others.

with high cost of production and low economies of scale. This has resulted in the low survival rate of the businesses. PSF can collaborate with the key stakeholders to carry out the business ecosystem mapping to strengthen the firm capabilities by supporting learning and innovation. The focus should not be in creation of multiple enterprises but in the development of a strong, competitive and innovation driven enterprises that can manage potential challenges and risks in the business. PSF can formulate a SME Business Forum similar to the Singapore Business Forum to provide advisory and business development services to the enterprises through its dedicated unit or through a division at the Imanzi Business Institute. BDS can be provided in the areas of sectoral assessments, business plan development, market assessments for export, market access, strengthening management systems, and scale up.

Competitive Businesses: Majority of the business in Rwanda are small, lack the economies of scale making it less competitive in comparison to other countries, concentrated in the non-tradable sector with limited export presence and are mostly informal due to high cross- cutting costs and lower productivity. There needs to be an enabling environment for emergence of a vibrant, competitive and innovation led business that responds to agility to emerging challenges and opportunities. Allowing and indeed encouraging domestic competition brings results not just for the firms that survive it, but also for the economy as a whole through innovation and economies of scale for increased productivity. Ensure legal reforms that will help in reducing non-tariff barriers and create a level paying field for all businesses. A statutory body on the lines of Competition Authority of Kenya can be formed e.g. Competition Authority of Rwanda that will be within the framework of the EAC Competition Act. It is highly recommended that PSF create a Working Group on this regard, which will work with the MINICOM towards building the legal, institutional and operational framework to build the right competition and business ecosystem for Rwanda. To improve Rwanda’s export competitiveness and compensate for the high costs PSF can integrate and facilitate firms to receive the Government assistance provided through different entities such as RDB’s investment promotion, RRA’s import tariff exemption and RSBs support for the standards upgradation and certification).

Rwanda needs to invest on its human capital to boost both its quantity and quality. Since, returns on this type of investment happens over a period of time, there needs to be a broad set of policies to support human capital formation, on the job training and building innovate capacity for skills adjustment of the overall workforce. The focus of the stakeholders should be on providing quality and technical education (workforce skills) based on the current need of the industry (total factor productivity) so that there is high absorption rate and returns for people who are undertaking/have undertaken these trainings. Fresh graduates require better skill set training to help them transition and make them industry ready. Engagement of the private sector will also play an equally important role. The business should be involved not just for providing internships and jobs but also in policy making and providing trainings. In this manner, education can be aligned to the evolving needs of the businesses to develop competitive human capital. PSF can be the centre for collection and dissemination of information on the skill providers and the opportunity and better scope will encourage people to participate. Imanzi Business Institute can act as a promoter and provider of capacity building of the Rwandan Business Community with a view to develop employability-enhancing and employability-generating skills which will uplift human capital and to align skills development to meet the needs of businesses which includes both.

The issues and agendas raised from the BICS study should be further supported by research and evidence to support the adoption and implementation of reforms. Support to Reform Process:

• Continued policy support for private sector engagement: The Government of Rwanda has put in a strong emphasis on the participation and role of the private sector in its key policies, strat-

egies, visions and plans. This has provided the private sector with a lot of opportunities to prove itself as an accelerator to economic growth, creator for markets and jobs and a pathway

58


to self-reliance. However, there are several bottlenecks they face which prevents them from becoming the powerful force that is expected of them. Therefore, the private sector (represented by PSF) must continue working with the Government and the development partners to achieve greater impact through supportive and transformational policies to help improve the business climate. • Prioritization of issues: As the issues faced by the private sector are varied, broad and complex; it is crucial to prioritize the issues to its specificity and utmost requirement with a thorough analysis so that discussions may be held with the relevant stakeholders to identify priority issues, understand the issues in detail and recommend reform measures to correct the failures and impediments in the system. Resolving these requires cross Government actions, stakeholder co-ordination and technical/ financial support from the donor partners. • Continued monitoring of issues and perception of stakeholders: Investment climate assessments or surveys like the BICS help provide a deeper understanding of the existing constraints as well as identify most important aspects of investment climate for productivity, private sector development and income growth. However, they are not just limited to identify the constraints but also support in tracking changes over

59

time, facilitating the comparison of data between countries, regions, sectors etc as well as capturing the perception of the stakeholders with regards to investment climate. Therefore, the BICS should be a regular exercise with a standard methodology in place that will inform the private sector on its overall position and immediate future plans. • Issue diagnosis to solution design: Surveys usually have the tendency to highlight only the problems rather than provide solutions. Therefore, it is recommended that the findings/ issues raised through the survey should be looked into greater depth to be able to design and recommend solutions that are ready for advocacy and implementation. The PSF conducted BICS to some extent has provided the basis for developing recommended solutions for implementation, but needs focus on evidence-based research, impact results and regular dialogue with the concerned stakeholders. • Leveraging Public – Private Dialogue Platform (PPD) for Private Sector Reforms: The findings of the BICS presents several challenges constraining private sector growth and using a PPD platform will be a powerful tool to bring reforms or recommend measures for improvement. In the past, the findings have been used by the Rwanda Public Private Dialogue (RPPD) Forum to raise and resolve various issues. Therefore, it is recommended that all stakehold-

ers including the development partners continue leveraging the RPPD to bring success. Strengthening PPD platform: While the PPD platform may be an effective medium, in order to make it powerful, the PPD platform must be established as a nationally owned institution – both by the private and the public sector. The analysis suggests a proper structure and process for the operation of the PPD platform, a renewed mandate and support for PPD mechanism to improve the impact of the PPD on reform which include:

• Nationally aligned issues and priorities: The interest, objectives and mandate of the PPD platform must be strongly aligned to the goals and priorities of the Government for economic and private sector growth. The commonality of the objectives will help in establishing a platform that supports/coordinates a single vision and provides a better process to provide assistance for private sector development programs. • Strong and Sustainable Secretariat: Ensuring the Secretariat which is to provide overall operations support of the PPD including regular monitoring and evaluation should be adequately staffed, resourced through contributions from the public and private sector, support from interested development partners preferably housed under the private sector to ensure lead, yet be independent


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

and sustainable. Sustainability of the Secretariat will entail strategizing resources and finding ways to ensure maintenance. • Carefully analyzed issues for dialogue and discussion: As a dialogue platform, the secretariat must ensure that the agendas raised and proposed through the PPD must be well researched and backed by evidence to support the larger national economic interest. The analytical measures to the issues and reform recommendations must be measurable, time bound, visible, tangible and linked to objectives. For the PPD platform to serve as an implementer, the issues must not only be analyzed but also prioritized. Only then would issues important for reforms be formally adopted; prevent flooding of reform action; solve contentious issues in a fair and transparent manner and achieve success and establish trust.

Technical Backstopping by interested development partners: To support private sector programs of the development partners and to ensure coordinated reform efforts, interested development partners can step in with technical support. These could areas could be: • Anchoring thematic areas: The support could be extended to the thematic working Groups to tackle specific issues and agendas of expertise at the national and district level to facilitate private sector reform development • Supporting the PPD with resources and issue analysis support. This technical support is crucial as the PPD is yet in its nascent stage and is limited in research and analysis, unable to fully strategize and sustain itself. • Establishment of a donor committee - a platform where all

PSD reform efforts are anchored and coordinated to avoid duplication and generate maximum impact Communications and Outreach:

Findings of the BICS survey should be disseminated widely among the relevant stakeholders with this objective that the constrains identified follow a sequence of identification to reference for solution design. Stakeholders including think tanks, research organizations, bilateral and multilateral organizations should be engaged in the communication plan in order to increase the impact of the survey as well various other follow up action plans that arise as a result of the dissemination. It is important to disseminate information not just on the constraints but also on the success stories and progress as the reform process moves ahead to support the enactment process as well as build the confidence of the private sector.

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61

• Number of incentives provided to commercial banks

• Number of trainings provided to bank staff

• Formulation of new law for a functional Secured Transaction System

• Incentivizing commercial banks to engage in market downscaling

• Dialogue and discussions through PPDs anchored and supported by international agencies like International Renewable Energy Agency

• Energy sector plan to manage demands and future requirements

• Demand and supply gap analysis of power

Activity 3: Electricity

• Working Group anchored by international reform institutes

• Number of reform measures recommended to address the high cost and interrupted supply of power

• Drafting of an energy sector plan and policy

• Number of surveys/ studies/ notes/ reports completed

• Number of banks and its staff trained

• Formulation of new law on Secured Transactions

• Development of access to finance products across all levels of enterprises

• Training and capacity building programs for bank staff in medium and long-term lending, rural lending, project finance techniques, and provision of financing for start-up companies.

• Number of debt and equity products made available micro, small and medium enterprises

• Number of enquiries received from private sector

• Number of notes/ publications on tax awareness

• Number of meetings/dialogues consultations held

• Number of recommendations made for improvement

Activity 2: Increase access to finance

• Stakeholder awareness through dialogue, discussions and dissemination of tax regulations

• Establishment of a mechanism (consultative forum) to address the tax issues

• Mechanism establishment

• Number of surveys/ studies/ notes/ reports completed

Activity 1: Expedite tax reforms

• Studies and assessments related to taxation system and the challenges

OUTPUT INDICATORS

OUTPUT

Improved reform through adoption implementation of recommended changes

Improved access to finance, promotion of credit and increasing credit based on movable assets

Improved reform through adoption implementation of recommended changes

OUTCOME

• Number of recommendations adopted for reform implementation

• Energy sector plan and policy endorsed and adopted

• Number of commercial banks operating in down markets with the provision of the incentives

• Number of credits against movable assets

• Secured Transaction System functional

• Number of new debt and equity products accessed

• Number of entities implementing reforms

• Number of private sector enquiries responded

• Number of recommendations adopted for reform implementation

OUTCOME INDICATORS

Increased access to affordable and reliable supply of power

Increased availability of affordable formal credit

Improved taxation administration and system and strong coordination between relevant stakeholders

IMPACT

• Improved quality of power (PPAs signed for energy procurement or export)

• Reduced and effective cost of power

• Reduced cost of finance, collateral requirement and longer tenure of credit

• Increased government revenues through increased tax base

• Cost savings to the private sector through improved tax administration

• Increased awareness and understanding among the stakeholders

IMPACT INDICATORS

Strategic Objective: Expediting reforms in key national challenges identified in BICS (2019 - 2021) to create a favorable business environment.

LOGICAL FRAMEWORK

Table 18: Logical Framework- BICS (2019 - 2021) Key Issues Recommendatory Framework


• Number of innovative and learning products identified and developed

• Formulation of SME Business Forum to provide advisory and business development services to the enterprises

• Number of enterprises that received facilitation/ integration support through PSF

• Number of reform measures recommended by Competitive Authority

• Competitive Authority established and operational

• Contributed to the drafting of new laws and/ or revisions/amendments to legal provisions

• Number of recommendations for reform

• Number of enterprises receiving BDS services

• Number of business development services (BDS) provided

• Number of advisory services provided to entities through SME business forum

• Information collection and dissemination on skill providers, opportunities and scope to encourage participation of people

• On the job training and innovate capacity building for skills adjustment of the overall workforce.

• Development of policies to support human capital formation

• Number of people participated in the skill development programs

• Number of persons/ employers/ entities reached out and provided with information by PSF

• Number of information dissemination activities and campaigns organized/completed

• Number of skill development programs launched by government and private sector

drafting on human capital

Activity 6: Building human resource • Number of policies drafted/ contributed to

• Enterprise integration and facilitation by PSF to receive government assistance provided through different entities

• Setting up a competition authority

• Drafting and contributing to legal reforms

Activity 5: Improving competitiveness of businesses

• Number of notes/ reports/ publications on ecosystem mapping completed

• Business ecosystem mapping to strengthen capabilities of enterprises

• SME Business Forum established

• Business ecosystem mapping completed

Activity 4: Enterprise Development

Provision and adoption of quality and technical education

Improved reform through adoption implementation of recommended changes

Improved capabilities of enterprises through adoption and implementation of innovative and learning products

• Number of persons from entities reached out to and provided with information by PSF absorbed/ employed

• Number of trained participants by government/ private sector who are industry ready/ employed

• Number of legal provisions adopted and implemented

• Reduced time and costs to enterprises through PSF support

• Number of enterprises who received government facilities/incentive provisions through PSF support

• Number of reform measures recommended by Competitive Authority adopted and implemented

• Number legal provisions drafted/revised/amended adopted and implemented

• Number of recommendations made through BDS adopted and implemented

• Number of recommendation made through Forum adopted and implemented

• Number of entities implementing recommendations provided through BDS

• Number of entities implementing recommendations made through Forum

• Number of innovative and learning products launched and adopted

Improved human capital formation

Level playing field created for all businesses

Reduced cost of production and higher economies of scale

• High absorption rate and returns for trained/ capacitated personnel

• Cost savings through government facilities/ incentives

• Increased investments

• Increased exports

• Increased competitiveness of enterprises

• Cost savings

• Improved survival rate of businesses

BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

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63

• Laws/ regulations/ policies/ drafted

• Number of recommendations made for improvement

• Number of PSD strategy developed for GoR

• Research Studies

• Contribute to the drafting of legislations, laws, policies

• Support in developing PSD strategies for the GoR

• Publish communication notes/ publications

• Engaging relevant stakeholders (think tanks, chambers, business associations) in advocacy and outreach

• Developing Communications strategy

• Communications Strategy

• Number of communication materials drafted

• Number of stakeholders identified and reached out

• Business Investment Climate Survey

• Conducting Business Investment Climate Survey

• Strategy report

• Technical support received

• Staff & Resources commitment from PSF, GoR & BMOs

• Meetings held for dialogue

• PPD Operational processes and guidelines established

• Number of meetings/seminars consultations/ trainings/ held

Activity 3: Communications & Outreach

• Sustainability Strategy Support

• Support to Secretariat

• Operationalization of RPPD

Activity 2: Strengthening RPPD

• Consultations and meetings

• Providing advisory services to entities

• Number of surveys/ studies/ notes/ reports completed

Activity 1: Reform Support through research and evidence

• Number of entities receiving advisory services

OUTPUT INDICATORS

OUTPUT

Improvement of perception and confidence of private sector on private sector reforms

Improved impact of the PPD on reform

Renewed mandate and support for PPD mechanism

Improved reform through adoption implementation of recommended changes

OUTCOME

Improved confidence • Number of entities implementing reforms

• Improved perception of the business community

• Cost covered for Secretariat (%)

• Mandate established

• Number of entities implementing reforms

• Number of recommendations adopted for reform implementation

OUTCOME INDICATORS Improved business investment climate

IMPACT

• Cost savings to the private sector

• Increase in employment

• Increase in formal businesses

• Increase in private sector investments

IMPACT INDICATORS

Strategic Objective: Development of the robust and sustainable Private Sector to bring about economic transformation through job creation, income generation and innovation

LOGICAL FRAMEWORK

Table 19: Logical Framework for supporting Reforms through Public Private Dialogue


Ministries

a

3

2

c

b

Government

1

Media

Think Tanks and Research Organizations

Chambers and Associations

Private Sector Federation

Private Sector

Embassy of Switzerland

Trade Mark East Africa

GIZ

USAID

DFID

World Bank Group

Belgian Co-operation

Donor Community

Water and Sanitation Corporation Limited

Rwanda Energy Group

Rwanda Utilities Regulatory Authority

Rwanda Standards Board

National Institute of Statistics of Rwanda

Other Institutions

Rwanda Revenue Authority

Rwanda Development Board

National Bank of Rwanda

Key Institutions

Ministry of Trade and Industry

Ministry of Finance and Economic Planning

PARTNER INSTITUTIONS

SN

Table 20: Institutional roles and partnership

Supporting outreach and awareness creation to reach targeted groups and ensure the issues are prioritized, visible and fast tracked.

Partner to provide research and analysis support for private sector issues to improve private sector general technical analysis capacity.

Identify constraints related to the private sector across areas (agriculture, commerce, crafts, finance, ICT, industry, liberal, tourism, women, and youth); provide recommendation backed by research to lobby with the government for reform.

Supporting private sector development by developing programs and working on areas that are aligned to private sector priority and government objectives; providing financial and technical assistance to build the capacities of the government and the private sector expertise to strengthen the reform process.

serving as a provider of information and implementing reform programs

• Partner in dissemination and reform events

• Opinion and advisory partner in reform recommendation and implementation

• Technical research partner

• Cost share with government and donor community for issue specific programs and activities

• Awareness and communications outreach

• Coordinating unit for donor community and government

• Regular monitoring and evaluation of reform issues raised

• Identifying and undertaking research

• Focal person for private sector issues

• Creating awareness and communications to ensure inclusion of priority issues

• Financial and staffing support to assist in reform implementation

• Capacity building initiatives for both government and private sector – research & analytical support for evidence-based research; trainings, learning opportunities sharing of international good practice through training events

• Anchoring and leading specific reform agendas based on their expertise

• Donor coordination unit to avoid duplication of programs

• Support in technical reform notes

• Partnership with private sector in providing recommendations to issues identified by the private sector

• Participating/ representing in joint working groups and committees

• Support in technical reform notes

Developing mechanisms to discuss issues at higher level to resolve private sector issues.

Facilitating private sector growth and increasing competitiveness through resolution of sector specific issues under their domain;

• Partnership with private sector in providing recommendations to issues identified by the private sector

• Focal point of coordination for private sector and donor community

• Cost share in capacity building efforts (training, exposure, research)

• Support in technical reform notes

• Legal and policy reform

PARTNERSHIP AREAS

Supports private sector development by participating in key committees and taking decisions under their domain.

Supports the resolution of private sectors issues through decision making on recommendations made on legal and policy level; providing direction and making legislative changes.

ROLES OF INSTITUTES

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OUTPUT ASSUMPTIONS: • BICS issues are further researched • Acceptance of the recommendations for reform by the Government • Full support, ownership and capacity by the Government, Private Sector to reform process and PPD. • No disruption in communications and outreach Outcome Assumptions: • All proposed recommendations (legal regulations/ policies/ strategies/ processes) are adopted and enacted • Enactment and implementation of reforms lead to cost savings for the private sector. • Priority of the government does not shift • Government implements and sustains reforms • Government and private sector allocate resources, manage and sustain PPD platform efficiently Impact Assumptions: • Political process is not disruptive of the reform implementation process. • Well informed stakeholders provide positive feedback. • Each new investment is productive and create formal jobs.

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Vision 2050

NST1

1

2

• promote local construction materials in collaboration with the private sector in line with the ‘Made in Rwanda’ policy

• Accelerate urbanization – promote local construction materials in collaboration with the private sector in line with the ‘Made in Rwanda’ policy

• Industrialization- Growing exports by 17% annually by continue to promoting ‘Made in Rwanda by working with the private sectors; establish and expand home grown industries working with private sector;

• double tourism revenues by developing the hospitality industry and building capacity of private sector to provide high levels of service delivery and accelerating growth by attracting big events and working with private sector; construct ports in Lake Kivu working with the private sector; Agro processing industries will be facilitated to access raw materials working with farmers and the private sector through improving the framework of contract farming and setting up of industrial blocs among others • E) Increase productivity: Strengthen the commercialization of crop and animal resource value chains by increasing private sector engagement, increasing investment in agriculture sector through PPPs; Work with the private sector to increase the surface of consolidated and irrigated land and promote agricultural mechanization; scale up PPP involving private service providers in adding value to agricultural produce; private sector investment to increase productivity of livestock farmers • F) Sustainable management of natural resources: Continue to strengthen forest management and ensure their sustainable exploitation working with the private sector

• The priorities of NST-1 include efficient private services; and improved productivity though diversified tourism, manufacturing driven by competitive local industries, business and financial services, IT and technology- all of which will be underpinned by high quality services in public and private sectors

• The main lesson from previous strategies are: improving Rwanda’s exports, increasing the level of domestic savings as a foundation for investment, Attracting foreign and local investment to improve competitiveness, Using public private partnerships to unlock business potential

• Though economic growth average is positive and resilient, Rwanda did not meet targets in different sectors. Agriculture was affected by crop diseases and climate change effects, mining and manufacturing too was adversely impacted, growth in hotels and restaurants was very low, exports have diversified but performance weak (in both traditional and nontraditional sectors). Major underperforming areas affected included mining, agro processing, manufacturing and horticulture. Cross border trade was also affected by non-tariffs barriers in DRC and Burundi.

• Weak domestic saving and its mobilization is a constraint on the domestic capacity to generate financing for private sector investment.

• Rwanda is a high urbanizing country, however, few of the population live in urban areas. Urbanization needs to be accelerated for its transformational potential and its association with higher productivity, and higher income opportunities.

• Rwanda is a member of regional economic blocks, these markets can be tapped through increased intra Africa trade and removal of non-trade barriers.

• Vision 2050 stresses upon the engagement of all sectors (including private sector) to realize its success

• To transform to high income country, average annual growth of 10% is needed

• Citizen satisfaction with public service delivery at 67.7%, private sector can step in to improve this

• Public and private cooperation for global positioning

• Transformation for prosperity with diversified tourism, high value IT, business and financial services, and employment of modern scientific technology and innovation

• NST1 serves as the implementation Instrument for the remainder of 2020 and first four years of Vision 2050. Vision 2050 focuses on five priorities which underpin the NST-1.

• Modern infrastructure and livelihoods require efficient public and private services

National Strategies

ROLE OF PRIVATE SECTOR

• Vision 2050 is all about ensuring high standard of living for Rwandans with emphasis on quality of life, modern infrastructure and livelihoods, specific transformation for prosperity and international cooperation and positioning

WHAT DOES IT SAY ABOUT BUSINESSES?

Annex 1: Extract from National and Regional Strategies related to Private Sector Development

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67 • 2. Social transformation by eradicating poverty which involves creating jobs and the involvement of PS in the same

• 3. Transformational Governance Pillar: Strengthen partnerships between government, private sector, citizen, NGOs and FBO to fast track national development • Citizen satisfaction with public service delivery at 67.7%, private sector can step in to improve this

• promote local construction materials in collaboration with the private sector in line with the ‘Made in Rwanda’ policy

• Accelerate urbanization – promote local construction materials in collaboration with the private sector in line with the ‘Made in Rwanda’ policy • Industrialization- Growing exports by 17% annually by continue to promoting ‘Made in Rwanda by working with the private sectors; establish and expand home grown industries working with private sector; • double tourism revenues by developing the hospitality industry and building capacity of private sector to provide high levels of service delivery and accelerating growth by attracting big events and working with private sector; construct ports in Lake Kivu working with the private sector; Agro processing industries will be facilitated to access raw materials working with farmers and the private sector through improving the framework of contract farming and setting up of industrial blocs among others

• E) Increase productivity: Strengthen the commercialization of crop and animal resource value chains by increasing private sector engagement, increasing investment in agriculture sector through PPPs; Work with the private sector to increase the surface of consolidated and irrigated land and promote agricultural mechanization; scale up PPP involving private service providers in adding value to agricultural produce; private sector investment to increase productivity of livestock farmers

• High potential to build on major investments already undertaken such as Rwanda Air, hotels and ecotourism facilities, country wide fiber optic, 89% financial inclusion rate, expanding road network, SEZs and ICT. Further, existing reserves in energy generation, value addition and processing of mineral products present viable investment opportunities. Agriculture has not yet reached its full potential and investments in climate resilient techniques for farming coupled with improvements in developing value chains can yield significant gains in growth and poverty reduction.

• Formulation of NST1 has been guided by the need to develop Private Sector as the engine/ driver of economic growth

• 1. The overarching objective of the Economic Transformation pillar is to accelerate economic growth and development founded on the Private Sector with objectives of creating jobs, accelerating urbanization, establish a knowledge-based economy; promoting industrial development, export promotion and expansion of trade related infrastructure; increase agriculture and livestock quality, productivity and production.

• A) To create jobs- develop priority sub-sectors with high potential for growth and employment (creative arts, tourism); develop strategic partnerships with private sector companies in the implementation of Work Place Learning; scale up the no of TVET graduates with skills relevant to labor market by working with the private sector; mainstream employment planning into all key sectors of the economy and strengthen the coordination of the National Employment Programme.

• B) Accelerate urbanization – promote local construction materials in collaboration with the private sector in line with the ‘Made in Rwanda’ policy

• C) Knowledge-based economy- operationalize innovation fund to support firms in innovation and technology industry; support the establishment and operationalization of new of new and existing Centers of Excellence with a focus on STI; promote R&D

• D) Industrialization- Growing exports by 17% annually by continue to promoting ‘Made in Rwanda by working with the private sectors; establish and expand home grown industries working with private sector; identify and develop priority value chain; A big shift in Rwanda’s export outlook will be oriented towards services export, including in high-tech areas such as Financial Services/Fin-tech/e-payment, BPOs, Legal, Security services, and other professional services; double tourism revenues by developing the hospitality industry and building capacity of private sector to provide high levels of service delivery and accelerating growth by attracting big events and working with private sector; construct ports like in Lake Kivu working with the private sector; the private sector will be attracted to invest in mineral processing and value addition; Agro processing industries will be facilitated to access raw materials working with farmers and the private sector through improving the framework of contract farming and setting up of industrial blocs among others

• E) Increase productivity: Strengthen the commercialization of crop and animal resource value chains by increasing private sector engagement, increasing investment in agriculture sector through PPPs; Work with the private sector to increase the surface of consolidated and irrigated land and promote agricultural mechanization; scale up PPP involving private service providers in adding value to agricultural produce; private sector investment to increase productivity of livestock farmers


3

Rwanda Vision 2020

• Greater participation of private sector through public private partnership ventures • Increased investments needed to achieve the growth objectives from both public and private sector. Total investments expected to reach 30%of GP by 2020 with private sector taking a huge proportion; Domestic investments are expected to expand, but this will need a stronger financial sector to mobilize the necessary savings to finance those investments.

• Need to expand and diversify economic base from agriculture (71.6% of labor force as of 2010) which is on a subsistence level with low productivity.

• Increased transportation costs for imports and exports due to its landlocked geography. Lacks a link to regional railway networks, hence most trade by road. Poor quality of road meaning high transportation costs leading to inflated prices of domestically manufactured products, and increased prices of raw materials for manufacturing.

• One of the six pillars to achieving Vision 2020 (Rwanda attaining the status of middle income) is vibrant and viable private sector for development conducive for economic growth and ensure emergence of vibrant middle class entrepreneurs.

• PSD: Stimulate private sector, particularly in regard to promotion of exports and competitiveness with broadening and deepening the financial sector such as banking, insurance, capital market and application of IT; Capacity building of public sector human resources so that they can grasp the needs of private sector and translate them into policies and strategies; Increased population require a sustainable number of jobs to be created in the private sector; Transformed economy will require increasing investments in industries and services; Need to foster productive entrepreneurship to perform its traditional role of creating wealth, employment and vital innovations through opportunities for profit. Focus on private sector development and government will desist from providing services that private sector can deliver efficiently and competitively

• To decrease its aid dependency: Macroeconomic stabilization policies conducive for private sector development and fiscal consolidation strategy aiming to expand the domestic resource base and lessen aid dependence. Also, increase tax base and attract foreign investors.

• Strong governance reforms of doing business, but needs to reduce the infrastructure-related costs i.e. electricity and energy production. Continuous investment in energy and transport to reduce the cost of doing business.

• Need to develop technical and vocational skills that match labor market needs, improvements in quality of education and health for an efficient and productive workforce/ knowledge based society

• Implementation of Vision 2020 is within the ambition of state, private sectors, CSO, NGOs, decentralized authorities, grassroots communities, faith-based organization and development partners

• Rwanda’s exports (composed only of tea, coffee and minerals) have not been able to cover imports needs.

• 3. Transformational Governance Pillar: Strengthen partnerships between government, private sector, citizen, NGOs and FBO to fast track national development

• 3. Transformational Governance Pillar: Strengthen partnerships between government, private sector, citizen, NGOs and FBO to fast track national development • A significant step up in energy investment with increased private sector participation to meet the targets for increased manufacturing and industrialization.

• 2. Social transformation by eradicating poverty which involves creating jobs and the involvement of PS in the same

• 2. Social transformation by eradicating poverty which involves creating jobs and the involvement of PS in the same

• Rwanda economy currently characterized by internal (budget deficit) and external (balance of payment) macroeconomic disequilibria, low savings and investment rate, and high unemployment and underemployment.

• F) Sustainable management of natural resources: Continue to strengthen forest management and ensure their sustainable exploitation working with the private sector

• F) Sustainable management of natural resources: Continue to strengthen forest management and ensure their sustainable exploitation working with the private sector; Tree species planted will be increasingly oriented towards commercially viable ones to support development of the wood industry

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69

1

AU Agenda 2063

• Create shared and inclusive growth

• Create jobs, eliminate poverty and increase entrepreneurship

• Private sector to claim half of the GDP in the bloc

• Private sector to have capacity to prioritize, design and implement and monitor development activities in an accountable manner

• Private sector involvement in education so that the human capital is raised in quality and quantity

• Mobilize internal resources through public-private partnerships

• Transformed Economy: Stresses upon Africa to finance and manage its own growth through entrepreneurship and decent jobs; Africa to become high income bloc with formal private sector growth; macroeconomic stability, diversified and inclusive growth with private sector claiming half of the GDP;

• Infrastructure: Diverse infrastructure to support Africa’s accelerated growth; expand access of ICT

• Trade: Continental economic integrity for sustained trade, exchanges of goods, services, free movement of people and capital through CFTA growth in Intra-Africa trade (40% of total exports in Rwanda) and help Africa use trade as an engine of growth, job creation, poverty reduction and SD; enhance resilience to external shocks; improve competitiveness of Africa’s industrial products;

• Expensive trading costs: manufacturing tariff and non-tariff costs are higher vis-à-vis regional partners than with rest of the world. Due to document preparation for export/import and settling of payments in Africa relatively expensive, Africa one of the most expensive regions for trading internationally

• Connectivity: through newer and bolder initiatives to link the continent by rail (high speed rail network connecting major cities), road, sea and air. Transportation infrastructure deficiency changing with new rail line. However, maritime transport and intra-African trade constrained by aging fleet, high freight cost and poor inland transport; poor connectivity between mainland continent and African island states; limited port capacity along with port inefficiencies

• Cost of exports: Africa has high cost of exports even higher in landlocked countries, compounded further by long processing time, limited port capacity and limited access to trade finance; volatility of commodity exports and large price fluctuation in global markets; Challenges of manufacturing sector: lack of appropriate policies, rigid labor laws, inadequate power supply, expensive transport, low labor productivity and lack of innovation, political instability

Regional Strategies

• Mobilization of sustainable financial resource from the state, donor community and private sector

Export processing zones, coupled with the industrial reforms will enable country to consolidate its niche and take advantage of growing regional cooperation

• For regional economic integration, Rwanda will pursue an open, liberal trade regime, minimize barriers to trade and implement policies for FDI. Further, policies to promote competitive enterprises, exports and entrepreneurship.

• A rapid improvement in ICT with fibre optic network coverage across the country, mobile telephone network coverage; Economic zones for ICT based production; ICT a tool for selfemployment, innovation and job creation; a tool for improving service delivery in both private and public sector

• Financial sector must be able to provide capital for PSD. Government aims to promote local business through the introduction of industrial parks and export processing zones in which foreign operators can partner with local businesses.

• Foster PSD as a catalyst, ensuring infrastructure (specially, transport and energy), human resources and legal frameworks are geared towards stimulating economic activity and growth of private investments.


EAC Vision 2050

• Macroeconomic stability with higher savings and investment rates as well as a conducive business environment, effective institutional capacities, so that it will make EAC a haven for private sector investment and thereby spur high and sustained economic growth rates, increase production capacity and widen the exports

• Indicative Strategies for national level: develop macroeconomic sectorial polices for a competitive private sector growth; develop policies for PPP in investment of transport systems; proved incentives- taxes, regulatory environment to encourage private sector investment; ratify adopt treaties for CFTA

• Africa union not a member of WTO, hence weaken its voice in negotiations

• Creative economy major contributor to economic growth and global trade in Africa

• ICT: need to put in place policies and strategies that will lead to transformative e-applications and services in Africa; improve physical infrastructure; cyber security. Increased investment in ICT realized to have enormous amount of returns and the potential to revolutionize access to markets and services.

• One of reasons of conflicts are inadequate efforts to address challenges of poverty and inequality; and one of ways to overcoming risks is to build partnerships and institutions to help disruptive changes and fragilities

• Flagship programmes for PSD: Establishment of Annual African forum to bring together Africa’s political leadership, private sector academia and civil society; Pan African ENetwork: transformative e-services, improve physical infrastructure and cyber security

• Long term job creation requires skills development consisted with emerging development opportunities in infrastructural development, industrialization and manufacturing; Management of human capital development

• For PSD: build on the creation of AU private sector forum, building capacities to overcome market and institutional failures and pursue sustainable business practices, investment in infrastructure markets including ICT, transport and power, strengthen innovation capabilities and value chains

• Rwanda: One of the best business climates in Africa

• PSD: Coordination of economic activities and resource including effective supervision of financial institutions as well as fiscal policies that provide incentives to private sector; Support to entrepreneurial class to facilitate private-sector led growth; Working age population increasing which can be the market driver for private sector; Critical factor of success depends upon capable development state with a vibrant private sector; Prerequisites: ensure stakeholders have a representation. At the national level for stakeholder relationships, private sector need to align national plans to Agenda 2063 perspectives and plans; Implementation of Agenda requires private sector development reforms and increasing the capacity of their institutions; Private sector participation in monitoring; National Financing strategy includes Private investment

• Africa’s PS: growing as countries liberalize markets, promote entrepreneurship, offer incentives and encourage open competition but still at an infant stage compared with other continents; a large and growing informal segment which is a dominant source of women employment; dominance of SME in both formal and informal sectors, medium scale enterprises missing; absence of limited inter-firm linkages between formal and informal economies

• Key measures for expanding trade and investment: Remove tariff and non-tariff barriers to trade as well as poor infrastructure, limited port capacity, limited access to finance, lack of exploitation of supply chain potential, paucity of productive capacity, governance issues and political instability. Fast track the establishment of CFTA and transition to a continental Customs Union with a Common External Tariff Scheme

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71 • Encourage private sector participation in activities relating to intraregional research and transfer of technology

• Role of SMEs (which account for 60% of employment in the region) for EAC growth and diversification strategy and hence transform these SMEs to business entities; A regional programme on Industrial Upgrading and Modernization to transform SMEs into viable business entities. The programme will build on the successful experiences of the ongoing industrial programs in the region focusing in boosting the performance of private sector producers through value addition, promotion of industrial linkages and the creation of conducive environment for technology upgrade and innovation. • Sources of financial implementing of EAC vision 2050 will be linked to outcome of Third Intl conference of financing for development- emphasis on public private partnerships -1. Establish conducive environment to support private sector participation in investments for development, investment in infrastructure and public investment to harness appropriate partnerships

• EAC is increasingly creating a business friendly environment, world’s fastest reforming region with stable political and economic environment, harmonized tariff, greater market access to all regions in Africa, Middle East and Asia and preferential market access to the US, EU and other developed countries. Partner states are according automatic recognition to goods already accredited in other Partner States as it cross the borders.

• EAC exposed to events occurring outside the region and the price uncertainties in the world market. Delivery of products to the landlocked states depend upon smooth transit across Kenya and Tanzania. The delivery process is subjected the region is subject to internal requirements and procedures which together with inefficiencies at the ports and along the transport system have impacted negatively on the smooth delivery of products sometimes leading to delays in delivery, which may manifest as artificial shortages.

• EAC exposed to events occurring outside the region and the price uncertainties in the world market. Delivery of products to the landlocked states depend upon smooth transit across Kenya and Tanzania. The delivery process is subjected the region is subject to internal requirements and procedures which together with inefficiencies at the ports and along the transport system have impacted negatively on the smooth delivery of products sometimes leading to delays in delivery, which may manifest as artificial shortages.

• Rwanda: In Rwanda, real GDP growth increased in 2014 due to recovery in agriculture and service sectors and strong growth in industry (Rwanda is top 20 fastest growing economies in the world and the main sources are agriculture, industry and services). As of 2014, Rwanda has low unemployment rate (2), equal literacy rate (2008) - 77.1 for moth men and women. Prioritization of 10 international transport corridors, railway master plan passing through Rwanda. The proposed railway is envisioned to open up markets, reduce transport costs and offer great business opportunities. Rwanda to become a middle income country by 2020 with priority areas-structural economic transformation, HR development and integration to regional and global economy

• Attracting value chain FDI require targeted trade reforms, efficient infrastructure and incentives to support value added technology.

• Infrastructure to be interconnected and efficient with high speed and multimodal transport systems through infrastructure network improvements; remove non-tariff barriers in regional transport; free movement of good and service; free flow of investments and standardized system for licensing regional operators; railway lines will be upgraded. CFTA: Aid intra trade by combining free trade areas of the three economic blocs and build on the goals of regional trade expansion and access to expanded market. Fully functional EAC single customs territory with free circulation of goods. Increase in value added exports for positive balance of trade all over the world, elimination of tariff and non-tariff barriers, harmonized standards for good in conformity with WTO standards

• Tap into diversified private sources to fund the regional projects. Establish Private Sector Fund for contribution

• Infrastructure and transport network that is efficient and cheap both for movement of people, goods for regional competitiveness; energy and information technology that is easily accessible to citizens; and industrialization that is built on structural transformation of the agricultural and manufacturing sectors through high value addition and product diversification based on comparative and competitive advantages of the region.


• Liberalize financial sector and allow more banks and other financial institutions from EAC and abroad to increase competition, reduce intermediation costs, and enhance access and usage of financial services by a wider population and SMEs. Intra-regional banking and financial services undertaken under a Single Market in Financial Services will avail products and services for free movement of good, people, capital, labor and service- liberalize economic activity and stimulate economic activity investment

• Tourism, trade and services development is one of the pillars of the Vision 2050. Tourism, trade and services development are three areas playing a critical role in the economy of EA region. Vision prioritizes joint intervention in tourism products that are competitively priced, cost effective and have a high return on investment/ Invest in tourism support infrastructures such as ICT, accommodation and transport. Destination EA with uniform rates for nationals of EAC and ensuring the production and distribution of promotional materials as a means of marketing

• Principles and Common Values: Nurturing and promoting private sector led growth as it is an imp driver for socio economic transformation including jobs and wealth creation; also key in producing and marketing sophisticated goods and services and latching on to global value chains. PS at the centre of implementation of Vision 2050.

• Threats: corruption, weak competitive global positioning, political and social instability

• Opportunities: Development of private sector, expansion of trade and market access for manufactured products,

• Weakness: Insufficient road infrastructure, unbalance distribution of economic and social infrastructure; landlocked geography, weak accountability in services delivery, unemployment,

• Strengths: Diversified economy offering a variety of business and investment opportunities, business friendly environment; harmonized tariff within EAC; free movement of person, goods and services in the region;

• Within ICT, trend of falling prices and high penetration in mobile telephony and broadband internet. Broadband ICT had increased ICT penetration in EAC. Communication technology has spurred product innovation in financial sector. Aspirations: Build EAC ICT capacities to encourage innovation and increase competitiveness; free movement of people, goods and services. ICT penetration 80% by 2030; 95 by 2050. Develop and implement ICT programmes that are consistent with national and regional aspirations- access to communication infrastructure and services; ensure availability of rich and diverse ICT content and applications; and build competence, confidence and security in the information society

• To realize sustained growth, Partner States Need to maintain macroeconomic stability, namely low inflation and low budget deficits; deepen financial sectors to mobilize domestic savings; develop stable institutions and conducive business climate that promotes private sector participation and Public Private Partnerships; improve competitiveness and diversify exports and eliminate anti-export biases; and overcome the bottlenecks in infrastructure, human capital, peace and security. Also sustained, inclusive economic growth is a key requirement to eradicate poverty and hunger and achieving the 2030 SDG. Job creation initiatives to provide for current and future needs of the bulging youth; increased partnership between public and private sector for economic transformation. Sustainable productivity by strengthening of regional cooperation and increasing public and private investment in sustainable agriculture and rural development. Vision 2050 delivery mechanism to focus on follow up of public private cooperation. EAC, being private sector driven, established for engaging key stakeholders including PD in matters relating to regional integration. Improve service delivery capacity and efficiency by clarifying the roles of stakeholders and developing a legal instrument delineating the functions and roles if national bodies;

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Annex 2: List of Respondents S.NO

ORGANISATION

NAME

DESIGNATION

1

Ministry of Finance and Economic Planning

Dr. Emmanuel Twagirimana

Sector Investment Program Officer

2

Ministry of Trade and Industry

Cedric Bimenyimana Arnaud

3

Ministry of Gender and Family Promotion

Sarah Mukantaganda

4

Ministry of Agriculture

Emmanuel Shyaka

5

Rwanda Development Board

Leon Kajuga Kayigi

Division Manager

6

National Bank of Rwanda

Christian Nyalihama

Economic Research

7

Rwanda Revenue Authority

Agnes Kanyangeyo Denis Mukama

Deputy Commissioner for Planning and Research Department Head of Research, RRA

8

National Institute of Statistics of Rwanda

Ivan Patrick Kayitare

Informal Sector Quarterly National Accounts Statistician

9

National Industrial Research and Development Agency

James Kagaba

Division Manager

10

National Council for Science and Technology

Kallisa Felly

Senior Analyst at National Commission for Science and Technology

11

Development Bank of Rwanda

Eric Rutabana

Chief Executive Officer

12

Rwanda Bankers’ Association

Vincent Bayingana

Executive Assistant

13

Chamber of Agriculture and Livestock

Kamere Pierre Munyura Eric Mbonigaba Kayitesi Regina

1st Vice Chair Person Chamber Coordinator

14

Chamber of Industry

Claudine Mukeshimana Edouard Ndayisaba David R. Munana Butera Frank

Chamber Coordinator Energy Private Developers- Vice Chair Rwanda Association of Buildings and Public Works Contractors

15

Chamber of Commerce and Services

Olivier Nizeyimana Akumuntu Joseph

Chairman Coordinator

16

Chamber of Financial Institutions

Eric Rutabana

Chairman

17

Chamber of ICT

Clement Uwajeneza Alex Ntale

Chairman Chamber Director

18

Chamber of Liberal Profession

Patrick Ganza

Women Access to Finance Officer

Director

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19

Chamber of Tourism Rwanda

Aimable Rutagarana Ariella Kageruka

Chairman Director General

20

Chamber of Arts, Crafts and Artisans

Annet Benegusenga

Chairperson

21

Chamber of Young Entrpreneurs

Pacifique Uwineza

Director

22

Chamber of Women Entrepreneurs

Jeanne Francoise Mubiligi Agnes Samputu

Chairperson Director

23

World Bank Group

Armin Lalui

Program Coordinator

24

Embassy of Sweden

Therese Andersson Elisabet Montgomery

Second Secretary/Programme Officer Senior Programme Manager

25

Belgian Development Agency (ENABEL)

Dirk Deprez Sofie Geerts

Resident Representative Local Economic Development Advisor

26

Promotion of Economy and Employment Programme (Eco-Emploi)

Ellen Kallinowsky

Principal Technical Advisor

27

Trademark Africa

David Butera

Programme Manager - Business Competitiveness at TMEA

28

USAID (PSDAG Project)

Jean Louis Uwitonze

PPD Expert

29

DFID

Bernis Byamukama

Private Sector Development Advisor


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Annex 3: FGD Participants List FGD No : 01 Location : Huye Title : General Businesses Participants : 1. Emmasus Hostel (NGOMA); 2. Centre Mendenyuve (NCCMA) ; 3. Coffee (Huye); 4. Kovaowve (Huye); 5. Saromfoge (Huye); 6. Casa Hottb (Huye); 7. Le Bon Saharitain Pharmacy (Ngoma) ; 8. Lavedette Ltd (Huye) ; 9. Sihomana Council (Huye); 10. Electronic Shop (Ngoma); 11. Huye Guster Market Ltd. (Ngoma); 12. Habitalils Arvs Barth (Huye); 13. Sabico Ltd (Ngoma); 14. Mumufaca Ltd (Huye); 15. Umubyeyi Valentine (guineuilline); 16. Hutryuralugaso Leopond.

FGD No : 02 Location : Rubavu Title : General Businesses Participants : 1.Gahutu J. Pierre (Café-restro); 2. Niyibizi J.de Dieu (Alimentation); 3. Hategekimana J. D’amour (Café-restro); 4. Mugisha J. Claude (Super market/Night Club); 5. Babane Joselyne (Bar; Alimantation; Secretariat); 6. Nshimiyimana J. Bosco (Nettoyage a sec); 7. Mukamana M. Louise (Alimentation); 8. Ntakirutimana Jmv (Depot y’ifarini na Kawunga); 9. Nzabonimpa Evariste (Depot ya Kawunga); 10. Uwimana Mathieu (Boulangerie); 11. Iyakaremye Elie (Ivunjisha ry’amafaranga); 12. Nyirasafari Rosette (Alimentation); 13. Afua Djuma (Depot ya Kawunga); 14. Nizeyimana J. D’Amour (Boulangerie); 15. Ntaganda Justine (Ivunjisha ry’amafaranga); 16. Ndere Jeaninne (Ivunjisha ry’amafaranga).

FGD No : 03 Location : Title : Tourism Businesses Participants : 1.Wings Travel (RATA); 2. Vazquee Tourist (RTTA); 3. Dream Place Ltd (RATA); 4. Diskisndane Iddy (RTTA); 5. Eagle Ride (RTTA); 6. A step into nature tours (RTTA); 7. Kassim Mist (RTTA); 8. Hkks Imtre; 9. For Trek Africa Sa (RTTA); 10. African Mountain (RTTA); 11. African Mountain (RTTA); 12. Links Travel (RATA); 13. Bersedo Travel (RATA); 14. Atarah Travel (RATA); 15. NziAfrican Mountain (RTTA); 12. Links Travel (RATA); 13. Bersedo Travel (RATA); 14. Atarah Travel (RATA); 15. Nzito Travel (RATA); 16. Niyindoreba (Jeannine); 17. Birding Safari Rwanda (RTTA); 18. Ngab Ronald (RITA); 19. Wild Nature Discovery (RTTA); 20. Gorilla Aas Tours (RTTA); 21. African Unique Shops (RTTA); 22. Exclusive Rwanda (RTTA); 23 TAAS Ltd. (RATA); 24. Palm Breeze Tours (RTTA); 25.Messenger (RATA); 26. Robusm Mugicle (PSF); 27. Goucrrnors Safaris (RTTA); 28. Wild Nature Discovery (RTTA); 29. Global Links (RTTA).

FGD No : 03 Location : Title : Tourism Businesses Participants : 1.Wings Travel (RATA); 2. Vazquee Tourist (RTTA); 3. Dream Place Ltd (RATA); 4. Diskisndane Iddy (RTTA); 5. Eagle Ride (RTTA); 6. A step into nature tours (RTTA); 7. Kassim Mist (RTTA); 8. Hkks Imtre; 9. For Trek Africa Sa (RTTA); 10. African Mountain (RTTA); 11. African Mountain (RTTA); 12. Links Travel (RATA); 13. Bersedo Travel (RATA); 14. Atarah Travel (RATA); 15. NziAfrican Mountain (RTTA); 12. Links Travel (RATA); 13. Bersedo Travel (RATA); 14. Atarah Travel (RATA); 15. Nzito Travel (RATA); 16. Niyindoreba (Jeannine); 17. Birding Safari Rwanda (RTTA); 18. Ngab Ronald (RITA); 19. Wild Nature Discovery (RTTA); 20. Gorilla Aas Tours (RTTA); 21. African Unique Shops (RTTA); 22. Exclusive Rwanda (RTTA); 23 TAAS Ltd. (RATA); 24. Palm Breeze Tours (RTTA); 25.Messenger (RATA); 26. Robusm Mugicle (PSF); 27. Goucrrnors Safaris (RTTA); 28. Wild Nature Discovery (RTTA); 29. Global Links (RTTA).

FGD No : 04 Location : Rusizi Title : General Businesses Participants : 1.Rwararhoze Thadde(Magasin); 2. Dushimumuremyi Celvate (Quincallerie); 3.Gasore Idrissa (Barico Co Ltd); 4. Ngabonziza Emmanuel (Tech Repalair); 5. Mbarubukeye Ernestin (Bureau d’ Exchange); 6. Nyirabgingo (Zirakamwa Ltd); 7. Igiraneza Eraste (High Internet); 8. Ntihiniyurwa Emmanuel (Megavet); 9. Bisengimana Felix(Muvura); 10. Usabyimbabazi Jacques (Alimentation); 11. Gahunga J.Claude (Quincallerie); 12. Nzayisenga Pascal (High-Speed Internet); 13.Muhire J.Pierre (Electronic Shop); 14.N.Hitimana Fortine (Eden House); 15. Qudrat Ally (Hashi Energy); 16.Mushengezi Evaliste (Hotel Carrefoul); 17. N.Nsabimana Judithe (Quincallerie); 18. Ndagijimana Pascal (Bar); 19. Kamuzinzi Godefroid (Hotel Rubavu); 20. Habiyeremye J.Pierre (CCVR); 21. Habiyaermye J.Pierre (Shop New Vision); 22. Niyibizi Placidie (High Technol System); 23. Uwimana Patricie (Hotel Keheda); 24. Muhoza Lambert (Sports Games Rwanda); 25. Muhammed (INRACH Company Ltd); 26. Mutimura (Leon); 27. Kagwesajye Agnes (Multi Service).

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FGD No : 05 Location : Musanze Title : General Businesses Participants: 1. Nyranezhefres; 2.Nzamwita Vincort; 3.Habarure Ma Felicicu; 4. N.Habineeza Specusey; 5.Kamugista Soovent; 6. Turasint; 7.Hammimana Cleatin; 8. Batanjurwa Gregoise; 10. Niyonzima ; 11. Tujisihme Olive; 13. Serushago Jean; 14. Noli Kuluaurour; 15. Nyirabahizazakya; 16.Rutayisile J.B.; 17. Nsengimana Potia; 18. Semgobo amnespaom; 19. Sekimoniyo Pascal; 20. Ngrabatware Charles.

FGD No : 06 Location : Nyagatare Title : Participants : Gato Aldolah (CBN); 2. Mugiranie A. Autus (House of Artitus); 3. Bahati Benjamin (CBN); 4. Harijamkzn (TMJL); 5. Miringiyimana (Imbonjacu); 6. Umukundua (Transport); 7. Sana grace (Transport); 8. Gasang Charles (Quarry); 9. Nlabakiriralto (Ohorh); 10. Njluranga Jotu (Transport); 11. Ntagamite Bomaq (TCM); 12. Mlabonimpa JB (Obvcanco); 13. Ntombua Vedaste; 14. Umjimana Clei (Jibu); 15. Mohungu (Innocent); 16. Mahoro Joseph (Food Store); 17. Nba Yisaba Jdbiev (Friendship); 18. Umucyo Vision (Nyagatare Co. Ltd); 19. Mukun R. James (Diplomat Hotel); 20. Nshimij Mana (Diplomat Hotel); 21. Shyaka Fred (Nyagatare); 22. Uwurerwa Aale (Nyagatare); 23. Uringaniye Donatea (Nyagatare); 24. M. William (Karayazu)

FGD No : 07 Location : Title : Liberal Professions Group Participants : TM Consult (ROPC); 2. Finalink Con (OCCAR); 3. CLB Consult Ltd.; 4. RWAFFA; 5. Garza Patrius (OSA); 6. Institute of Enfield (IER ASS); 7. Rwanda ROAR Association (ROAR); 8. En. Nyininkia (RIA); 9. Runuya Fean (RIA); 10. Arasha Rutiwanga; 11. Nshidiyitana Chois (IRPV).

FGD No : 08 Location : Title : Agriculture Participants: 1. Lbonezeseul Colb (NSAR); 2. FERA (PSF); 3. Feficorwa; 4. Nyirakaminga; 5. Ferwacapi; 6. Nkundumuvifa (Safi Price Ltd); 7. Shrenpunu Jelande (RPFA); 8. Ferwacothe; 9. PSF/RCAL; 10. RP/A Christine; 11. Kinau Carava Plant; 12. ACPER; 13. RHID; 14. CEPAR; 15. RCCF (Federation); 16. NDFFR (Federation); 17. Mugepasi Business Ltd.

FGD No : 09 Location : Title : Muhanga Participants: 1. Splend Hatal; 2. Hdora Rz (Butique); 3. Aja Colliae Restlay ally; 4. Halayalivenue Augustin; 5. Nirambana Lawrence; 6. Nsesbivi Penslain; 7. Hupapasii Fecilite; 8. Duzinismica Eelestin; 9. Wenezai (PST); 10. Nyuwia M. ; 11. Mugi Spucta Telis; 12. Horosankhusi Bropard; 13. Uusingasife Primitiva; 14. Kab. Alyase; 15. Miyaya Tresia (PSE); 16. Moresava Theirse (PSE); 17. Tvsatter Vsajhaot; 18. Nangstiye Jheoy; 19. Nwatrana Beois.

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BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Annex 4: BICS (2019 - 2021)- Survey Questionnaire The private sector has been a cornerstone, striving in transforming and contributing to the economic resilience of Rwanda. However, in spite of the major contribution to Rwanda’s economic growth, the private sector at large, still face challenges that hinder their businesses. In response to the above background, PSF wants to develop a Business Investment Climate Survey which provides a robust and detailed evidence base on key areas in which policy change and actions are needed to improve the business environment. We would like to request your kind cooperation and participation in this regard. We would assure you that the details shared about your organization will be kept confidential and will be used only for the learning purpose. As an interviewee you can choose not to participate in the survey. Finally, we are confident that your contribution would play a key role in developing policy recommendations to the concerned stakeholders. General Information 1. Where is your business situated? (please specify) Province 2. Owner’s/ Managing Director’s gender (Please tick one) Male

Female

3. Age group of Managing Director/Owner (Please tick one) Less than 25 years

40-49 years

25- 29 years

50-59 years

30 – 39 years

60 years and above

4. Level of Education of Managing Director/Owner (Please tick one) Completed Primary

Completed Master’s degree or higher

Completed Secondary

Vocational Education

Completed Bachelor degree

No formal education

5. Which best describes your position at the Business? (Please tick one) Business Owner

Marketing Manager

Managing Director/CEO

HR Manager

Finance Manager

If Other (specify)

Operations Manager 6. What is your sector of business operation? (Please tick one) Agriculture

Financial services

Construction

Energy

Mining Manufacturing Infrastructure

E-commerce/ logistics

ICT Wood Handicraft

Others (Specify)

Tourism 7. What is your company scale? (Please tick one) Microenterprise (1 – 3 Staff /annual turnover less than 0.3 million RwF / net capital investment less than 0.5 million RwF) Small enterprise (4-30 staff / annual turnover between 0.3 to 12 million RwF / net capital investment between 0.5 to 15 million RwF )

76


Medium Enterprise (31-100 staff / annual turnover between 12 to 50 million RwF / net capital investment between 15 to 75 million RwF ) Large Enterprise (More than 100 staff / annual turnover more than 50 million RwF / net capital investment more than 75 million RwF) 8. What is the total number of employees in your company? ………………………… 9. What is the proportion of Full time and Part time in your organization? (Please specify) Full time (%)

Half time (%)

10. If your company/business have any additional outlets/branches in Rwanda, how many branches does your company have? (Please tick one, and skip if not applicable). 1 4-5 2-3

Above 5

11. If your company/business also operate from any foreign location outside Rwanda, in which country are your foreign locations? (Skip if not applicable) 12. What is your company registered as? (Please tick one) Limited Liability Company

Commercial Partnership

Public Limited Company

Other (Specify)

Limited Partnership 13. Company ownership (Please tick one) 100% Rwandan owned

Joint Venture

100% foreign owned

Representative of foreign company

Franchise Other (Specify) 14. When did your company come into operation? (Please tick one) Less than a year

16-25 years

1-5 year

More than 25 years

6-15 years 14.1. What was the initial capital investment when you started your business? (In RWF) …………………………………………………….. 15. Is your organization a part of any business association/organization? (Please tick one) Yes

No

16. If yes, what business association/organization are you a member of?

Investment Climate Profile 17. How would you rate various provinces of Rwanda as an investment destination? (Please rate accordingly) and why? Rating Province Unattractive

Limited Appeal

Attractive

Very Attractive

Remarks

Southern Province Western Province Northern Province Eastern Province Kigali City 18. Do you have any plans to invest further in any province of Rwanda? (Please tick one)

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BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Yes (Go to q19)

No

19. If yes, which sector do you plan to invest in? (Tick where applicable) Agriculture

Financial services

Construction

Energy

Mining Manufacturing Infrastructure

E-commerce/ logistics

ICT Wood Handicraft

Others (Specify)

Tourism 20. In your opinion, please rate the following principal drivers that influence your decision to consider future investment in Rwanda? For each statement, please circle a number on a scale of 1 to 7, where 1 = “Less affecting driver”, 4= Neutral and 7 = “A major driver”. Driver impact Factors

Least Affecting Driver

Neutral

Major Driver

Rent or owner working space availability

1

2

3

4

5

6

7

N/A

Transport infrastructure & accessibility

1

2

3

4

5

6

7

N/A

Incentives provided by the government

1

2

3

4

5

6

7

N/A

Costs of operations

1

2

3

4

5

6

7

N/A

Regulatory environment (ease of setting-

1

2

3

4

5

6

7

N/A

Access to neighboring markets

1

2

3

4

5

6

7

N/A

Size of the national (country) markets

1

2

3

4

5

6

7

N/A

Political stability

1

2

3

4

5

6

7

N/A

ICT infrastructure

1

2

3

4

5

6

7

Cost of renting property/office space

1

2

3

4

5

6

7

N/A

Electricity and Water

1

2

3

4

5

6

7

N/A

Track-record of the location in attracting

1

2

3

4

5

6

7

N/A

Labor availability/skills

1

2

3

4

5

6

7

N/A

R&D environment

1

2

3

4

5

6

7

N/A

Security

1

2

3

4

5

6

7

N/A

Natural Resources

1

2

3

4

5

6

7

N/A

Rule of Law

1

2

3

4

5

6

7

N/A

Tax levels

1

2

3

4

5

6

7

N/A

up and operating a business in terms of procedures, time, hassle, and cost)

similar operations

Other factor (Specify) ……………………………………

1

2

3

4

5

6

7

21. On a scale of 1 to 7 where 1= not a problem, 4=neutral and 7= a major problem, How problematic would you say business start-up and licensing requirements are to your business? Scale of problem Not a problem

Neutral

A Major Problem

1 2 3 4 5 6 7 N/A

78


22. How problematic are the following factors for start –up and expanding businesses? For each statement, please circle a number on a scale of 1 to 7, where 1 = “Not a problem”, 4= Neutral and 7 = “A major problem”. If the question is not relevant to your business please tick N/A (Not Applicable). Scale of problem Factors

Not a problem

Time spent trying to understand the

Neutral

A Major Problem

1

2

3

4

5

6

7

N/A

Requirements

1

2

3

4

5

6

7

N/A

Compliance with Rwanda Bureau of

1

2

3

4

5

6

7

N/A

1

2

3

4

5

6

7

N/A

1

2

3

4

5

6

7

N/A

Registering land or property

1

2

3

4

5

6

7

N/A

Registering investments

1

2

3

4

5

6

7

N/A

Accessing investment incentives

1

2

3

4

5

6

7

N/A

Other (please specify) ……………………………

1

2

3

4

5

6

7

licenses required Compliance with health and safety regulations and

Standards (RBS) Compliance with environmental requirements District and local registration requirements

23. In order of importance, which of the above constraints should be addressed? i. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ iii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 24. What was the time taken to register your company? (Please tick one) Less than 1 week

4-8 weeks

1-2 weeks

More than 8 weeks

2-4 weeks 25. Please rate the cost of registering company in Rwanda. (Please tick one) Very Cheap

Cheap

Normal Standard Expensive

Highly Expensive

26. How much did it cost you (in RWF) to register the company? (Please tick one) 0-15000

250,001 – 1,000,000

15,001-50,000

1,000,001 and more

50,001 – 250,000 27. If your company has a trading license, what was the time taken to obtain a trading license for your company? (Please tick one) Less than 1 week

4-8 weeks

1-2 weeks

More than 8 weeks

2-4 weeks 28. Please rate the cost of obtaining trading license in Rwanda. (Please tick one) Very Cheap

Cheap

Standard Expensive

79

Very expensive

Highly expensive


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

29. Has your company applied/used any loan or line of credit in the past two years? Yes

No (Go to Q.no.30)

30. If no, what was the main reason why this establishment did not apply for any line of credit or loan? (Please tick all that apply) No need for a loan - establishment had sufficient capital

Size of loan and maturity were insufficient

Application procedures were complex

Did not think it would be approved

Interest rates were too high

Other (Specify)

Collateral requirements were too high 31. Which sources of finance (credit) have you used (since you started your business) to provide funds for your business?

Please tick any that you have used

What is the rate of interest? % p.a.

Borrowed money from friends and family Savings circles Savings and credit cooperatives Micro-finance institutions Commercial bank loans Development banks Leasing Other (please specify)……………………………… 32 On a scale of 1 to 7 where 1= not a problem, 4=neutral and 7= a major problem, How problematic would you say it is to access finance for your business? _____ Scale of problem Not a problem

Neutral

A Major Problem

1 2 3 4 5 6 7 N/A 33. When applying for this most recent line of credit or loan what was the main reason why this establishment chose this financial institution? (Please tick all that apply) Personal relationship with the institution

Proximity of institution

Interest rate offered

Reputation of institution

Collateral requirements

Only option available

Maturity offered (total duration)

Proximity of institution

Have other products with this institution (e.g. savings or transaction accounts)

Others (Specify)

34. In your own opinion, if you want to get a loan from a financial institution, how important are the following factors? (Rate from 1 to 5, with 1 being least important and 5 very important): 1 2 3 4 5 Convenient location of financial institution Quick disbursement of loan (quick processing of loan application) Quality of service of financial institution’s staff Quality of service of financial institution’s staff Low interest rate/cost of borrowing Convenient repayment period Absence of requirement for immovable property as collateral Availability of other financial services from same financial institution 35. How problematic are the following factors in constraining your access to finance? For each statement, please circle a number on a scale of 1 to 7, where 1 = “Not a problem”, 4= Neutral and 7 = “A major problem”

80


Scale Factors

Not a problem

Neutral

A Major Problem

Interest rates charged by banks and other lenders

1

2

3

4

5

6

7

N/A

Collateral(security for the loan) requirements

1

2

3

4

5

6

7

N/A

Detailed business plan or investment plan requirements

1

2

3

4

5

6

7

N/A

Level of perceived risk that financial institutions associate with start-up

1

2

3

4

5

6

7

N/A

Level of understanding of your business by banks

1

2

3

4

5

6

7

N/A

Amount of information on available financial products

1

2

3

4

5

6

7

N/A

Availability of financing (from banks and guarantee schemes)

1

2

3

4

5

6

7

N/A

Availability of alternative financing sources (Private Equity, Venture Capital)

1

2

3

4

5

6

7

N/A

Other (please specify).........................

1

2

3

4

5

6

7

36. In order of importance, which of the above financial issues should be addressed? i. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ iii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 37. Do you use electricity in your establishment? Yes

No (go to Q.no.44)

38. Do you face power outage in your establishment? Yes (Please go to 39)

No

39. If yes, approximately how many times in a typical month does your establishment experience power outages?............................................. 40. What has been the effect of power outage for your company?( please tick) Increased production cost due to loss of production

Lower employee productivity

Increased production cost due to usage of generator

Others (Specify)

High cost of alternative energy 41. Does your enterprise own or share a generator? Yes

No

42. How long did it take for you to acquire electricity for the establishment? Less than 1 week

4-8 weeks

1-2 weeks

More than 8 weeks

2-4 weeks 43. Please rate the cost of electricity in Rwanda? (Please tick one) Very Cheap

Cheap

Normal Standard Expensive

81

Highly Expensive Don’t know


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

44. What is the kind of space that your establishment is based on? 1.

Leased Property (Please go to Q45)

2.

Acquired Company Property (Please go to Q46)

3.

Personal land

4.

Economic Zone

5. Others (Specify) 45. If leased, why did you chose to lease a property? 1.

High cost of owning a property

2.

Tedious procedures to acquire land

3.

Ease in leasing property

4.

Not applicable to my company

5. Others (Specify) 46. If acquired, how did you acquire land for the company? 1.

No need for a loan - establishment had sufficient capital

2.

Loan from a bank

3. Other (Specify) 47. Please rate the average time in acquiring land in Rwanda for the sector you operate in. 1 month 3 months 6 months One year More than one year 48. What are the top three hurdles in acquiring land/office space in Rwanda? Lack of availability of land

Land Tax and land fees are very high

Stringent rules and regulations to acquire land

Others (specify)

Application procedures are too complex Transfer fees are too expensive 49. Please rate the cost of acquiring land in Rwanda.(please tick one) Very Cheap

Cheap

Normal Standard Expensive

Very expensive

Highly expensive

49.1. Do you use transport facility for your establishment? Yes (Please go to Q50)

No

50. If yes, what is the primary use of the transport facility? (Select all that apply) 1.

For procurement of raw materials

2.

For import of products

3.

For export of products

4.

For distribution of finished goods

5. Others (Specify) 51. Which form of transport facility do you use? (Select all that apply) Land Air Sea 52. How accessible is the transport facility? (Tick one)? 1.

Easily available upon request

2.

Available but need to wait for few days

3.

Available but need to wait for more than a week

4. Others (Specify)

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53. Please rate how expensive is the current transport facility that you use for the operation of your company. Very cheap

Cheap

Normal Expensive

Very expensive

54. Please rate the quality of transportation service you are availing compared to the cost? Poor

Fair

Good

Very Good

Excellent

55. Does your company trade outside Rwanda? (Please tick one) YES Please go to Q55.1)

No

55.1/56. If yes, please provide an estimated average time and cost associated with exporting goods.

Length of time (days)

Cost of percentage of consignment value)

Obtaining export certification and bill of lading Obtaining customs clearance Obtaining letter of credit (LC) Transporting goods to Mombasa (per ton) Transporting good to Dar es Salaam (per ton) Port and terminal handling (per ton) Transport by air (average) 57. Is there any output you do not export due to regulations? (please tick one) Yes (go to Q.58)

No

58. If yes, what is the output and regulation? 59. Do you import goods from outside Rwanda? (please tick one) Yes (go to Q.60)

No

60. Please provide an estimated average time and cost associated with importing goods.

Length of time (days)

Cost (percentage of consignment value)

Customs clearance at Mombasa port (per ton) Customs clearance at Dar es Salaam port (per ton) Transport to Kigali from Mombasa (per ton) Transport to Kigali from Dar es Salaam (per ton) Transport by Air (average) Customs clearance from document submission to approval Health and standards clearance by RBS/Health Authorities 61. Is there any input you do not import due to regulatory restrictions? If yes, which and why? Yes

If Yes, Which and Why

No 62. How are the following factors while trading across borders? For each statement, please circle a number on a scale of 1 to 7, where 1 = “Not a problem”, 4= Neutral and 7 = “A major problem”. If the question is not relevant to your business please tick N/A (Not Applicable) Severity Factors

83

Not a problem

Neutral

A Major Problem

Access to International market information

1

2

3

4

5

6

7

N/A

Access to International market standards

1

2

3

4

5

6

7

N/A


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Length of time taken to obtain customs clearance

1

2

3

4

5

6

7

N/A

Length of time taken to obtain export certification

1

2

3

4

5

6

7

N/A

Packaging products for export

1

2

3

4

5

6

7

N/A

Application of customs tariffs and charges

1

2

3

4

5

6

7

N/A

Availability of cargo tracking systems

1

2

3

4

5

6

7

N/A

Efficiency of the ports in Mombasa and Dar es Salaam

1

2

3

4

5

6

7

N/A

Application of transport laws in EAC countries

1

2

3

4

5

6

7

N/A

Other (please specify).........................

1

2

3

4

5

6

7

63. In order of importance, which of the above constraints should be addressed? i. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ iii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 64. How significant are the following (and other) barriers to exporting for you? For each statement, please circle a number on a scale of 1 to 7, where 1 = “Not a problem”, 4= Neutral and 7 = “A major problem”. If the question is not relevant to your business please tick N/A (Not Applicable) Severity of barriers Barriers

Not a problem

Neutral

A Major Problem

Products are not suitable for exports

1

2

3

4

5

6

7

N/A

Transportation to export

1

2

3

4

5

6

7

N/A

Paper work needed by foreign authorities to export from Rwanda

1

2

3

4

5

6

7

N/A

Paperwork needed by Rwandan authorities to export from Rwanda

1

2

3

4

5

6

7

N/A

Quality standards required in export markets

1

2

3

4

5

6

7

N/A

Linkages with foreign customers

1

2

3

4

5

6

7

N/A

Export market information

1

2

3

4

5

6

7

N/A

Quality & Price competitiveness in foreign markets

1

2

3

4

5

6

7

N/A

Monetary Policy (Money supply and interest rates)

1

2

3

4

5

6

7

N/A

Corruption at the central level

1

2

3

4

5

6

7

N/A

Corruption at the local level

1

2

3

4

5

6

7

N/A

Efficiency level of both the central and local level

1

2

3

4

5

6

7

N/A

Procedures to obtain business licenses & operating permits (work permits, imports/ export permits)

1

2

3

4

5

6

7

N/A

Economic uncertainty

1

2

3

4

5

6

7

N/A

Regulatory uncertainty

1

2

3

4

5

6

7

N/A

Customs and trade regulations

1

2

3

4

5

6

7

N/A

EAC businesses for customers

1

2

3

4

5

6

7

N/A

Competitiveness of labor costs

1

2

3

4

5

6

7

N/A

Access to and cost of electricity

1

2

3

4

5

6

7

N/A

Competition with Non-

84


Access to and cost of water transport

1

2

3

4

5

6

7

N/A

Access to and cost of internet

1

2

3

4

5

6

7

N/A

Availability and cost of SEZ for SME’s

1

2

3

4

5

6

7

N/A

Availability and cost of land

1

2

3

4

5

6

7

N/A

Access to and cost of raw materials

1

2

3

4

5

6

7

N/A

Cost of value addition to products

1

2

3

4

5

6

7

N/A

Local demand for the products and services

1

2

3

4

5

6

7

N/A

Inadequately educated workforce

1

2

3

4

5

6

7

N/A

Tax rates

1

2

3

4

5

6

7

N/A

65. In order of importance, which of the above factors what are the three major problems for businesses in Rwanda? i.) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ii.) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ iii.) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 66. On a scale of 1 to 7 where 1= not a problem, 4=neutral and 7= a major problem, How problematic would you say tax administration and legal issues are? _____ Scale of problem Not a problem

Neutral

A Major Problem

1 2 3 4 5 6 7 N/A 67. How problematic are the following specific tax and legal issues on your business? For each statement, please circle a number on a scale of 1 to 7, where 1 = “Not a problem”, 4= Neutral and 7 = “A major problem”. If the question is not relevant to your business please tick N/A (Not Applicable) Severity of barriers Barriers

Not a problem

Neutral

A Major Problem

Filling in tax returns

1

2

3

4

5

6

7

N/A

Level of taxes on business –Corporation tax

1

2

3

4

5

6

7

N/A

Level of taxes on business –Value Added Tax (V.A.T)

1

2

3

4

5

6

7

N/A

Time spent dealing with tax issues

1

2

3

4

5

6

7

N/A

Available information on Rwanda’s tax system

1

2

3

4

5

6

7

N/A

RRA’s customer service

1

2

3

4

5

6

7

N/A

Enforcing business contracts

1

2

3

4

5

6

7

N/A

Enforcing intellectual property right

1

2

3

4

5

6

7

N/A

Other (please specify).........................

1

2

3

4

5

6

7

68. In order of importance, which of the above constraints should be addressed? i. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ iii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 69. Over the last 12 months, how many hours did your senior management spend in dealing with tax administration and other legal issues requirements? _______ 70. Over the last 12 months, how many times was this establishment visited by, or required to meet with tax

85


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

officials?________ 71. What is the labor mix in your company based on age group? Age group

Below 16 years

16-25years

26-35years

36-45years

46-55 years

56-

65 years 65+ (%) 72. What is the labor mix in your company based on sex? Sex

Female (%)

Male (%)

73. What is the labor mix in your company based on skill set? Skill set Unskilled Semi-skilled

Skilled

(%) 74. On a scale of 1 to 7 where 1= not a problem, 4=neutral and 7= a major problem, How problematic would you say it is for you to recruit and develop a competent workforce? ____ Scale of problem Not a problem

Neutral

A Major Problem

1 2 3 4 5 6 7 N/A 75. How problematic are the following factors in the recruitment and development of a competent workforce? For each statement, please circle a number on a scale of 1 to 7, where 1 = “Not a problem”, 4= Neutral and 7 = “A major problem”. If the question is not relevant to your business please tick N/A (Not Applicable) Severity Factors

Not a problem

Neutral

A Major Problem

Hiring and firing workers as per employment law

1

2

3

4

5

6

7

N/A

Available incentives for employees (e.g. medical coverage)

1

2

3

4

5

6

7

N/A

Level of skills of school drop-outs

1

2

3

4

5

6

7

N/A

Attitude of school drop-outs

1

2

3

4

5

6

7

N/A

Local availability of relevant training

1

2

3

4

5

6

7

N/A

Cost of relevant training

1

2

3

4

5

6

7

N/A

Employees retention (Employees leave for other companies once they are trained)

1

2

3

4

5

6

7

N/A

Other (please specify).........................

1

2

3

4

5

6

7

76. In order of importance, which of the above constraints should be addressed? i. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ iii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ CUSTOMER SERVICE 77. On a scale of 1 to 7 where 1= not a problem, 4=neutral and 7= a major problem, How would you say it is for your business to offer exceptional customer service to your customers? Scale of problem Not a problem

Neutral

A Major Problem

86


1 2 3 4 5 6 7 N/A 78. How problematic are the following factors in offering exceptional customer service to your customers? For each statement, please circle a number on a scale of 1 to 7, where 1 = “Not a problem”, 4= Neutral and 7 = “A major problem”. If the question is not relevant to your business please tick N/A (Not Applicable) Severity Factors

Not a problem

Neutral

A Major Problem

Level of employee skills

1

2

3

4

5

6

7

N/A

Level of management’s expertise in customer service

1

2

3

4

5

6

7

N/A

Availability of pay and other incentives to encourage good customer service

1

2

3

4

5

6

7

N/A

Rwandan’s cultural traits and attitudes

1

2

3

4

5

6

7

N/A

Cost of relevant customer service training

1

2

3

4

5

6

7

N/A

Local availability of relevant customer service training

1

2

3

4

5

6

7

N/A

Level of experience and exposure of employees

1

2

3

4

5

6

7

N/A

Nature of hiring practices

1

2

3

4

5

6

7

N/A

Other (please specify).........................

1

2

3

4

5

6

7

78.1 In order of importance, which of the above constraints should be addressed? i. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ iii. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Value Addition 79. Have you ever diversified your products for creating a value added product? Yes

No (go to Q.80)

80. If no, why have you not tried to formulate value addition products/services? (Select all that apply) Lack of skilled labor force Lack of capital

Lack of market for value added products

Stringent policies and regulations for value addition product

Lack of information on value addition Lack of Technology

Tariff/Non-tariff barriers on value added products/services

Others (Specify)

Digital Platform 81. Do you use digital economy (ecommerce/online banking/internet/ATM) for any operational/business transaction? Yes (go to Q.82))

No (go to Q.83)

82. If yes, what kind of platforms do you use? 83. If no, why do you not use the digital economy? Don’t know what digital economy is

Don’t know what digital economy is

Know what digital economy is but do not know how to use it know how to use it No access to internet

Don’t need it

Others (specify)………………………………………… Performance and Outlook

87

Know what digital economy is but do not


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

84. Financial Information ((Please tick which box corresponds to your level of activity for each of the following areas

Less than RWF 0.5 million

RwF 0.5 million to 15million RwF 15 million to 75 million Above RwF 75 million

What was the range of your total revenue in 2017? How much capital investment did you make in 2017? What was the value of your exports (if any) in 2017? 85. Please answer the following questions related to your past, current and future performance as a business. Please tick either lower, about the same or higher. If the question is not relevant to your business please tick N/A (Not Applicable). Lower

About the same

Higher

N/A

How did your revenues (turnover sales) in 2017 compare to your revenues in 2016? How does your number of employees now compare with your number of employees this time last year? How does the average price of your goods or services compare now to the same period a year ago? How do you expect your average price of goods or services to change over the next 12 months? How have your unit costs changed over the past 12 months? How do you expect your unit costs to change over the next 12 months? How will your capital investments in 2017 compare with your capital investments in 2016? Were your total exports in 2017 lower or higher than in 2016? Were your profits in 2017 higher, lower or about the same as in 2016? How do you think your profits in 2017 will compare with your profits in 2016? 86. How problematic will the following factors be in constraining the growth of your business over the next 3-5 years? For each statement, please circle a number on a scale of 1 to 7, where 1 = “No impact”, 4= Neutral and 7 = “A major impact”. If the question is not relevant to your business please tick N/A NOT A PROBLEM PROBLEM

FACTORS

NEURAL

A MAJOR

Local demand for your product or service

1

2

3

4

5

6

7

N/A

Competition with other local businesses for customers

1

2

3

4

5

6

7

N/A

Competition with the East African Community (EAC) businesses for customers

1

2

3

4

5

6

7

N/A

Competition with non-EAC/international business for customers

1

2

3

4

5

6

7

N/A

Level of education of workforce

1

2

3

4

5

6

7

N/A

Access and cost of borrowing money for the business

1

2

3

4

5

6

7

N/A

Tax rates

1

2

3

4

5

6

7

N/A

Tax Administration Services (RRA)

1

2

3

4

5

6

7

N/A

Procedures to obtain business licenses and operating permits (work permits, import/ exports permits)

1

2

3

4

5

6

7

N/A

Environment policy and regulations

1

2

3

4

5

6

7

N/A

Access and cost of electricity

1

2

3

4

5

6

7

N/A

Access and cost of water

1

2

3

4

5

6

7

N/A

Distribution of Profits (repatriation of funds)

88


Access and cost of transport

1

2

3

4

5

6

7

N/A

Access and cost of telecommunication

1

2

3

4

5

6

7

N/A

Availability and cost of land

1

2

3

4

5

6

7

N/A

Obtaining construction permits

1

2

3

4

5

6

7

N/A

Availability and cost of raw materials

1

2

3

4

5

6

7

N/A

Availability of local suppliers

1

2

3

4

5

6

7

N/A

Others (please specify)………………………………………

1

2

3

4

5

6

7

N/A

REGUALTION AND REFORMS 87. To what extent have the following reforms impacted your business’ bottom line? For each statement, please circle a number on a scale of 1 to 7, where 1 = “No impact”, 4= Neutral and 7 = “A major impact”. If the question is not relevant to your business please tick N/A (Not Applicable) SCALE REFORM

NO IMPACT

NEUTRAL

A MAJOR IMPACT

One Stop Construction Centre for Construction Permits and Land

1

2

3

4

5

6

7

N/A

Transfers

1

2

3

4

5

6

7

N/A

card/visa card

1

2

3

4

5

6

7

N/A

Single Tax payer Identification Number (TIN) linking Social Security Fund and Rwandan Revenue authority

1

2

3

4

5

6

7

N/A

Establishing the Kigali International Arbitration Centre (KIAC) and commercial courts

1

2

3

4

5

6

7

N/A

Establishing Special Economic Zones (SEZs)

1

2

3

4

5

6

7

N/A

Online tax clearance (E-payment and E-filling)

1

2

3

4

5

6

7

N/A

Custom border reforms: extending opening hours of custom border offices, one stop border posts, electronic single window and the blue channel

1

2

3

4

5

6

7

N/A

Setting up a credit reference bureau

1

2

3

4

5

6

7

N/A

Company law requiring greater corporate disclosure, director liability and shareholder access to information

1

2

3

4

5

6

7

N/A

Combining application for location clearance and a building permit in a single form and introducing a single application form for water and sewerage and electricity connection.

1

2

3

4

5

6

7

N/A

Other (Please Specify)

1

2

3

4

5

6

7

N/A

Online Registration for Businesses with payment by credit

88. What government policy regulation is the biggest hurdle for the sector that your business operates in? 89. How do you think the Rwandan economy is performing? Worst

Poor

Average Good

Excellent

90. Is there any particular action(s) PSF could take to improve your business situation, increase the likelihood of you investing further in Rwanda, or increasing the likelihood of you recommending a friend or colleague to invest in Rwanda? 91. Is there any particular action(s) the government could take to improve your business situation, increase the

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BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

likelihood of you investing further in Rwanda, or increasing the likelihood of you recommending a friend or colleague to invest in Rwanda?

Thank you for your cooperation! Optional Information Name of the organization…………………………………………………………………………………………… Contact No…………………………………………………………………………………………………………………. Email Address…………………………………………………………………………………………………………….

90


Annex 5: Summary of Sectorial issues (highlighted in FGDs and discussion with Chambers) SN

Sector

Area

Issues

1

Wood

Laws on Felling

To minimize or control deforestation in Rwanda, the Government has passed stringent laws on tree felling which have affected supply of timber as raw material locally.

High Taxes and charges

There are inconsistencies in regards with taxes levied on locally produced timber. Each districts levies taxes on timber differently and exorbitantly.

High Taxes on Imported Timber

Timber supply in Rwanda is insufficient. Imported timber, mostly from DR Congo is highly taxed which renders locally produced furniture products more expensive than imported finished furniture products from Asia and Middle East.

Competition

Competition from good quality timber furniture imports from UG, KE & TZ -Competition from comparable steel products from China, Malaysia, Indonesia, Turkey Local competition is dense because they all produce the same things Local demand – most of middle and high class of Rwanda prefer well finished wood products and therefore consume imported goods.

Others

High price of rent and electricity Poor wood genetics from planted wood. Competition from imported goods Lack of more advanced technologies /equipment Access to finance for investment Lack of standards

RECOMMENDATIONS • Review the import duties on wood • Support through BDF, BRD or other challenges the import of adequate, modern wood manufacturing equipment • Develop wood economy standards, especially the dry wood sales requirement •Continue the support of Made in Rwanda initiative •Train on wood handling techniques; •Promote the cultivation of more wood types in Rwanda

2

Creative Industry (film)

Not enforcing the intellectual property law Lack of adequate funding Lack of coordinated of the sector promotion strategies Lack of skills Lack of local content Lack of local content Huge competition for imports Fair remuneration is still an issue

Recommendations - Intellectual property laws should be enforced - Provide seed funds, and incubation funds for promising startups; - Continue to the promotion of Made in Rwanda fashion industry - Create talent and innovation detection and nurture them. - Improve privacy and data protection policies/legislation 3

Tourism

Cost and access to labor force

Lack of capacity among tourism companies and associations, Need of training in various practical languages for tour operators Lack of diversity of the tourism product - around 90 per cent of the industry’s earnings are driven by gorilla tours

91

Lack of skilled workforce

Most training providers train in skills which do not respond to employers’ needs. This is very constraining for technical skills. Despite reviewing technical content in curricula, practice remain an issue. Finally lack of soft skills is a major barrier which affects service delivery. There is both the issue of training with certification and lack of enough training in certain competencies such as culinary art, to this end, the cultural (perception) barrier is still an issue too.

Low demand for product

Despite increase in arrivals, the profitability of the sector is going down, mostly due to the increasing numbers of facilities targeting the same segment. Local tourism has not taken off.

High prices compared with other EAC Countries

From tourism products (Gorilla permits, park fees, etc.) to amenities (accommodation, transport, etc.) Rwanda is by far the most expensive destination. This affect both the number of arrivals but also the length of stay, which in return affect hotels occupancy and profitability. A vicious cycle to break.


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Regulations/ Reforms

Lack of harmonization / standardization of fees for licensing Tour operators Inaccurate tourism regulations Gorilla permit high costs Need of update of air ticketing regulations and policies Need of review and update of cross borders air ticketing coding and regulations Delay in issuing occupational permit

Licensing issues

The new requirements have put a strain in the already meager resources have industry players. Many of the requirements could only be met with financial costs when profitability in the sector is very low.

Investment Profile

Competitions with Air agencies(Rwanda AIR) in ticketing Lack of Price standardization/ categorizations of fees within Tourism chamber Lack of close cooperation with RDB (Tourism) and tourism chamber in technical matters Lack of pricing benchmarking of tourism products within EAC Countries Need of trade fairs of tourism products /Regional and international Marketing of tour products Limited items of tours products / inadequate diversification and lack of innovations in Tour Chamber

Tax administration

Corporate Income tax on gorilla permit revenues; IBM applied on all inflows of tours agencies; Lack of tax exemptions (VAT 18%) on some tourism products; Lack of gradual tax penalties; Unfavorable tax regimes on complementary services, staff feeding and the reverse VAT; Reduction of bank interest rates; high tax and penalties; Change in VAT collection machines which require investment in new infrastructure. Besides, the sector face issue of high VAT on their services while unable to claim VAT from agriculture inputs.

ICT reforms

Lack of real communication with RDB (Tourism) and tourism dealers. E-Payment not developed within the sector

Access to finance

- The cost of finance remains a significant challenge to the sector. Many firms reported having issues to service their loans, due to high interest rates or short repayment period. Lack of loans and credit (Long term and short term) to finance tourism products Limited air routes and expensive air fares Limited air routes and expensive air fares

Small market

Small markets are affected when Rwanda is positioned as high-end destination. Control unregistered business • Difficult/stringent requirements by RDB for the restaurants • Discrepancy in travel expenses fee for state employees (different rates for different cities) • Very late payments on government contracts/service

Recommendations - Adopt and recommend a dual training system. This is a system when certification and training are provided jointly with the private sector. This will tackle both the issue of skills but also the mismatch. - Train hotel owners on pricing strategy, seasonal packaging and hotel management - Create new tourism activities such as developing entertainment alternatives and strengthening linkages with recreational, cultural and sporting services; this will increase the length of stay. - Strengthening partnerships with local services operators to stage awareness-raising campaigns to co-create solutions. This might include financial institutions and regulators; - Reinforcing the institutional and regulatory framework related to tourism education and capacity-building; - Designing a framework to monitor and continuously improve quality in services delivery; - Improving access to finance, particularly for small- and medium-sized enterprises (SMEs); and reviewing sector repayment period - Promote tourism and its professionalism to break away wrong perceptions and specifically market the local tourism

92


4

ICT

Inadequate use of ICT at border points to support trade facilitation measurers and import export management • The ICT sector is facing a challenge of limited skill sets • Absence of R&D and other investments in the research • Access to finance • Issues of privacy and data protection • ICT Penetration, ICT awareness and Literacy rate at community level remains at very low level with citizens living in rural areas having a limited digitalization, interconnection, etc. • Limited ICT educational facilities and training capabilities • Lack of standards and packaging • Lack of effective measures for the promotion of ICT uptake. • Lack of ICT startup/incubation funds • Underutilization of global ICT open platforms and resources • Lack of coordination among industry players • Lack of coordinated investment in talent and skills detection • Lack of more pragmatic, forward-looking, innovative, world oriented ICT development strategies.

Recommendations: • Provide seed funds, and incubation funds for promising startups/innovations; • Continue to develop the country ICT infrastructure but with more focus on inclusion and innovation • Make mandatory ICT starting from the primary schools along with Math and Science courses; • Create talent and innovation detection in ICT and nurture them. Schools competition could be one of the means. • Invest in R&D and/or research centers on future of ICT, not for Rwanda but for the globe focusing on AI, IoT, Big Data, Blockchain, etc. • Create linkages between talents and employers/the private sector • Improve privacy and data protection policies/legislation • Intellectual property laws should be enforced Creative Industry

- Not enforcing the intellectual property law - Lack of adequate funding - Lack of coordinated of the sector promotion strategies - Lack of skills - Lack of local content - Lack of local content - Huge competition for imports Fair remuneration is still an issue

Recommendations - Intellectual property laws should be enforced - Provide seed funds, and incubation funds for promising startups; - Continue to the promotion of Made in Rwanda fashion industry - Create talent and innovation detection and nurture them - Improve privacy and data protection policies/legislation Industrial sector

5

E-commerce/Logistics

Delay of payments in different industries due to online payments which are not synchronized with immediate transfers to update tax accounts within RRA; Lack of innovative technologies in different factories E-Payment not developed within many sector including industry, tourism Network issues for distributors of ICT services

Electronic Billing Machine (EBM)

VAT registered persons have been obliged to use EBM that generates invoices indicating the tax as agreed by the tax administration. But, there is resistance by some taxpayers to use EBMs as required by law. This has affected and still affects the amount of VAT collected. For eg, there are cases of understatement of prices on most of the goods sold by taxpayers that use EBM, non-issuance of EBM receipts and fraudulent refund claims. Others

- Internet cost is still high - Logistic costs and challenges - Cybercrime and fraud is still a serious challenge Lack of trust by buyers - Internet penetration in the countryside - Integrated payment systems - Trade finance issues - Weak marketing abilities/techniques - Inefficient or unprofessional sales platforms - Inefficient and expensive postal services - Sellers not conversant with international trade laws and requirements (e.g. standards, labelling, etc.)

93


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

Logistics

- Infrastructure network - Information flow integration - Transport efficiency and costs - Bonded and non-bonded warehousing - Bulking and de-bulking - Material Handling - Clearing houses facilities

ISSUES WITHIN EACH CHAMBER 1

Chamber Agriculture Livestock

of and

Tea Production

Huge potential but relatively underdeveloped Pricing mechanism for green leaf is impacting on planted and harvested tea areas due to the prices received by farmers as well as the wages obtained by pluckers leading to shortages of pluckers, longer plucking rounds, and hence lower leaf quality

Coffee Production

Poor harvest handling like using traditional means has decreased the quality of Rwandan coffee in international market

For businesses, there is a lack of access to a port

Though the area under coffee production is increasing, the coffee production is decreasing due to unexpected climate change and variability in current years and also the improper use of chemical fertilizers by coffee farmers

Encouraging solid market channels and adding value to coffee supply chain

Setting cherry prices in a balanced way

2

Chamber of Industry

Overall

There are difficulties in accessing capital financing due to lack of collateral and the volatility of the sector (Agriculture). Agriculture, the largest sector of the country’s economy, receives very less direct credit.

Overall

Unexpected changes and decisions made by the government in the name of the Task force; High price of electricity and water; Roads in bad conditions; High and unharmonized tax rates; high interest rate; access to land ownership;

Mining

Heavy Modalities and conditions of controlling and inspecting mining operators; Low capacity in negotiating mining contracts; Delay in delivering legal documents/licenses to Mining operators; Lack of data on estimates of mineral deposits; Lack of a final map showing all the permits for the mining; ; Lack of development of electronic reporting (mining sector); High capital investment in Mining as all equipment are to be imported; Lack of national institution for controlling and regulating Mining price fluctuations; Lack of regulations / standards in expropriations exercises in mining domains

Manufacturers

Steel

Cheap foreign imports, substandard products, increased case of production (electricity cost, access to finance, transport cost, access to raw material), and substandard products

Agro processing

Inadequate raw material; inadequate laboratory; certification and tax process; access to affordable land and electricity; unfair competition due to informal trade and govt rules; lack of public transport in SEZ; access to finance; access to market

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Overall

SMEs

Energy

Plastic ban and increased cost of packing; shortfall of electricity; transport challenges due to landlocked nature; logistical constraints; skill shortfalls; taxation; inadequate incentives SMEs struggle to use online markets for e-commerce due to data costs, customs regulations, weaknesses in postal services and interoperability with international money transfer

Energy Private Developers

• Complicated and bureaucratic Power Purchase Agreement (PPA) negotiation between REG and investors: negotiations take too long (about two years) thereby heightening the risk of losing investors • The sudden cancellation of PPA negotiations by REG causing enormous loses to private companies. • Absence of a timely and clear road-map for grid and off-grid connections from REG to allow private sector demarcation for off-grid investments. • Import duty of 25%, applied for solar energy products Inadequacy of national energy supplies

3

Chamber Commerce Services

of and

Public Transporters

• Scarcity of coins for change which collect a steep price to get • Inequality in the treatment of companies where some are subjected to rules and regulations while others are not • Bus stand parking prices are changed frequently without notice • Relocating of companies to city side bus stands • Refusal by RURA to enter an MoU with ATPR • Bus inspection which takes a long time and the use of an inspected bus is fined heavily. • Filling passenger’s full identification on the ticket while the transporters can’t demand identity proof (identity card) from the passenger. Moreover, if the passenger gives a false name, the company is slapped with a fine of 200000rwf per passenger. • Issue with speed governor’s provider where speed governors’ loose connectivity which leads to a bus not being identified online and also every time there is an update of the system the companies are charged with extra fees which is unnecessary.

Importers, Wholesalers

• Withheld membership fees by PSF (HQ) this would increase the association response time Poor supply chains and long processing times at the port due to inefficiencies in terminal handling procedures, difficult and time consuming customs transit transport requirements, and poor truck access.

Retailers

• High tax rates and fees (patent, cleaning, etc.) • Packaging materials issues – price, quality and availability • Parking fee on your own business building whether yours or rented • Lack of equity in taxation (different fees, taxes yet trading the same products) • Lack of industries • The supply of merchandise is very difficult • Inequality and untimely payment on govt tenders • 8. Issues related to starting a business (laissez faire)

Regional Transporters

95

• In case of trafficking, RRA punishes the companies by fining and sizing the caught truck while the driver is set free. This is an issue as most trafficking is done by drivers without the knowledge of the owner.


BUSINESS AND INVESTMENT CLIMATE SURVEY – RWANDA 2019

4

Chamber of Financial Institutions

Banks

NBR’s key challenge has to do with the weak environment for effective supervision, instances of regulatory forbearance, and a shortage of human capital that has been compounded by weak internal governance in some financial institutions. Most notably, there is a need to: (i) enhance further NBR’s autonomy and supervisory powers; (ii) upgrade the accounting, auditing and payment systems, and the legal framework; (iii) deepen the money and foreign exchange markets; and (iv) develop an AML/CFT framework beginning with the enactment of a comprehensive AML/CFT law. Credit risk is the main source of vulnerability as banks are highly exposed to a few large borrowers Potential difficulties in coping with the second order effects from a prolonged decline of foreign aid inflows Financial instruments needed to increase bank lending; greater use of structured finance products providing the potential to move from collateralized loan products to other forms of security for debt finance Information asymmetry: banks never have full information about their potential clients’ capacity and willingness to repay

Insurance

At an early stage of development; lack of commercially viable crop insurance products

Microfinance

Constrained by skills, lending capital and appropriate financial products. In the long-term there is need to develop wholesale finance markets for banks to lend to MFIs, helping the banks to take advantage of the outreach capability of MFIs and for the MFIs to benefit from the deposit mobilization capacity of the bank

5

Chamber of Women Entrepreneurs

Forex Bureaus

Unregistered operators;

Women Trade

Access to Land: Inability of women in translating de jure land rights into de facto rights hampering their ability to access credit.

in

Training: Need for financial literacy trainings to women in trade so that they can increase skills on issues of raising capital, loans and loan-servicing, record-keeping and monitoring the financial progress of their businesses and projects; Helping to introduce IT in operation of businesses so that Women in Trade (WIT) compliance to regulations are improved. Provision of Information: Connecting WIT to the customs system through AEO or the e-Single window; Encourage the provision of information (related to tax, market) through the usage of telecommunications Investments in safer and secure infrastructure at border crossings; Initiatives to improve policing and prosecution of corruption, harassment and violence at border crossings; Establishment of ‘Safe Zones and Markets’; Include women in the design process for trade facilitation activities; and Administration of border trade regulations towards WIT should consider Right of appeal against Customs and other agency rulings and decisions

6

Chamber of Young Entrepreneurs

Taxation

Lack of collateral for women for accessing loans due to perceptions of high business failures

Taxation

Lack of collateral for youth for accessing loans due to perceptions of high business failures Lack of understanding of RRAs tax procedures younger upcoming businesses leading high fees for non-compliance

7

Chamber of Arts, Crafts and Artisans

• Lack of enough raw materials • High cost of available raw materials • Lack of industries to process production • Lack of capacity or understanding of available technologies • Low demand of made in Rwanda products • High taxation • Lack of markets • Electricity and transport issues

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Annex 6: References African Development Fund (2017). Skills and Business Development Programme (SBDP): Appraisal Report. . Retrieved from https://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/ Rwanda_-_Skills_and_Business_Development_Programme__SBDP_.pdf African Union Commission (2015). Agenda 2063. Addis Ababa: African Union Commission. Retrieved from United Nations: http://www.agenda2063.au.int/ Bizimungu, J. (2018, December 3). Bugesera Special Economic Zone Attracting Investors before Completion. Retrieved from The New Times: https://www.newtimes.co.rw/business/bugesera-special-economic-zone-attracting-investors-completion Bizimungu, J. (2018, November 11). News: Rwanda jumps 11 places in World Bank Doing Business Report. Retrieved from The New Times: https://www.newtimes.co.rw/news/rwanda-jumps-11-places-world-bankdoing-business-report Deloitte (2018). International Tax: Kenya Highlights 2018. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-kenyahighlights-2018.pdf?nc=1 Gatete C. (2016). The Rwanda We Want: Towards Vision 2050. Kigali: MINECOFIN. Retrieved from http://www.minecofin.gov.rw/fileadmin/user_upload/Hon_Gatete_Umushyikirano_Presentation_2016.pdf Government of Rwanda (2017). 7 Years Government Programme: National Strategy for Transformation (NST1) (2017-2024). Kigali: Government of Rwanda. Retrieved from http://www.minecofin.gov.rw/fileadmin/user_upload/NST1_7YGP_Final.pdf International Finance Corporation (2014). Secured Transactions and Collateral Registries: A Global Perspective. Washington DC: World Bank Group. Retrieved from https://www.ifc.org/wps/wcm/connect/ b47a1f0045c2be1baa42bb9916182e35/The%2BRole%2Band%2BRelevance%2Bof%2BSecured%2BTransactions%2Bin%2BMENA%2BAFRICA%2BAlejandro%2BAlvarez%2BDe%2Bla%2BCampa.pdf?MOD=AJPERES Ministry of Economic and Financial Planning (2009). Company Act, Kigali. Retrieved from http://businessprocedures.rdb.rw/media/Companies%20Act%20-%20Official%20Gazette%20n%C2%B0%2017%20 bis%20of%20270409.pdf Ministry of Finance and Economic Planning (2007). Economic Development and Poverty Reduction Strategy I: 2008-2012. Kigali: MINECOFIN. Ministry of Finance and Economic Planning (2013). Economic Development and Poverty Reduction Strategy II: 2013-2018. Kigali: MINECOFIN. Retrieved from http://www.minecofin.gov.rw/fileadmin/templates/ documents/NDPR/EDPRS_2.pdf Ministry of Trade and Industry (2016). Rwanda AGOA Action Plan. Kigali: MINICOM. Retrieved from https://agoa.info/downloads/national-strategies/6212.html

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Ministry of Trade and Industry (2017). Rwanda Private Sector Development Strategy. Kigali: MINICOM. Retrieved from http://www.minicom.gov.rw/fileadmin/minicom_publications/Planning_documents/Private_Sector_Development_Strategy.pdf Ministry of Trade and Industry (MINICOM) (2010). Small and Medium Enterprises (SMEs) Development Policy. Retrieved from http://www.minicom.gov.rw/fileadmin/minicom_publications/policies/SME_Devt_ policy_V180610.pdf Murenzi, S. V. (2014, July). Rwanda Road and Transit Time, Cost and Distance Survey along the Northern and Central Corridors. Kigali: Ministry of Trade and Commerce. National Institute of Statistics of Rwanda (2018). Establishment Census 2017. Kigali: NISR. Retrieved from http://www.statistics.gov.rw/publication/establishment-census-report-2017 National Institute of Statistics of Rwanda (2018). Formal External Trade in Goods [Data file]. Retrieved from http://statistics.gov.rw/publication/formal-external-trade-goods-report-september-2018 National Institute of Statistics of Rwanda, Development Indicators (2017). Gross Domestic Product Third Quarter, 2018 [Data file]. Retrieved from https://data.worldbank.org/indicator/ny.gdp.pcap.pp.cd Nsengimana, S., Tengeh, R. K., & Iwu, C. G. (2017). The Sustainability of Businesses in Kigali, Rwanda: An Analysis of the Barriers Faced by Women Entrepreneurs. Sustainability, 9(8), 1372.Retrieved from https:// www.mdpi.com/2071-1050/9/8/1372 Organisation for Economic Co-operation and Development (2018). Regional Competition Agreements: Benefits and Challenges. Retrieved from https://one.oecd.org/document/DAF/COMP/GF(2018)1/en/pdf PC Tech Magazine (2011, September 27). Rwanda: Govt Introduces Online Payment of Taxes. Retrieved from PC Tech Magazine: https://pctechmag.com/2011/09/rwanda-govt-introduces-online-payment-of-taxes/ Private Sector Federation (2008). Business and Investment Climate Survey 2008. Kigali: PSF Rwanda. Private Sector Federation (2008). Cutting the Cost of Red Tape. Johannesburg: SBP. Private Sector Federation (2013). Business and Investment Climate Survey. Kigali: PSF Rwanda. Private Sector Federation (March 2011). Business and Investment Climate Survey 2010. Kigali: PSF Rwanda. Steenbergen, V., & Javorcik, B. (2017, August). Analysing the Impact of the Kigali Special Economic Zone on Firm Behaviour. Retrieved from International Growth Center: https://www.theigc.org/wp-content/uploads/2017/10/Steenbergen-and-Javorcik-working-paper-2017_1.pdf Tashobya, A. (2019, January 6). Rwanda’s Quality Testing Lab Acquires Global Status. Retrieved from The New Times: https://www.newtimes.co.rw/news/rwandas-quality-testing-lab-acquires-global-status The New Times. (2010, June 1). National: RDB Unveils Online Business Registration. Retrieved from The

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New Times: https://www.newtimes.co.rw/section/read/20401 The United Nations Development Programme (UNDP), Human Development Index Values (2017). Gender Inequality Index (GII), [Data file]. Retrieved from http://hdr.undp.org/en/content/gender-inequality-index-gii The United Nations Development Programme (UNDP), Human Development Index Values (2018). Briefing Note for Countries on the 2018 Statistical Update Rwanda. Retrieved from http://hdr.undp.org/sites/default/ files/Country-Profiles/RWA.pdf The United Nations Development Programme (UNDP), Human Development Index Values (2018). Human Development Indices and Indicators 2018 Statistical Update, [Data file]. Retrieved from http://hdr.undp.org/ sites/default/files/2018_human_development_statistical_update.pdf9 The World Bank (2014). Doing Business 2015: Going Beyond Efficiency. Washington, DC: World Bank Group. DOI: 10.1596/978-1-4648-0351-2. License: Creative Commons Attribution CC BY 3.0 IGO. Retrieved from https://openknowledge.worldbank.org/handle/10986/21171 The World Bank (2016). Doing Business 2016: Measuring Regulatory Quality and Efficiency. Washington, DC: World Bank Group. DOI: 10.1596/978-1-4648-0667-4. License: Creative Commons Attribution CC BY 3.0IGO. Retrieved from https://openknowledge.worldbank.org/bitstream/handle/10986/23372/Doing0business00efficiency000Rwanda.pdf?sequence=1&isAllowed=y The World Bank (2017). Doing Business 2017: Equal Opportunity for All. Washington, DC: World Bank. DOI: 10.1596/978-1-4648-0948-4. License: Creative Commons Attribution CC BY 3.0 IGO. Retrieved from https://openknowledge.worldbank.org/bitstream/handle/10986/25607/109906-WP-DB17-PUBLICRwanda.pdf?sequence=1&isAllowed=y The World Bank, World Development Indicators (2017). Purchasing Power Parity (PPP) adjusted GDP per Capita in USD, [Data file]. Retrieved from https://data.worldbank.org/indicator/ny.gdp.pcap.pp.cd The World Bank (2018). Doing Business 2019: Reforming to Create Jobs. Washington, DC: World Bank Group. License: Creative Commons Attribution CC BY 3.0 IGO. https://openknowledge.worldbank.org/ bitstream/handle/10986/28788/WP-PUBLIC-DB18-RWA.pdf?sequence=1&isAllowed=y The World Bank (2018). Doing Business 2019: Training for Reform. Washington, DC: World Bank Group. License: Creative Commons Attribution CC BY 3.0 IGO. Retrieved from http://www.doingbusiness.org/ content/dam/doingBusiness/country/r/rwanda/RWA.pdf United Nations (2011). Best Practices in Investment for Development: Case studies in FDI. Geneva: United Nations. Retrieved from https://unctad.org/en/Docs/diaepcb2010d5_en.pdf United Nations Development Programme, Human Development Index Values of EAC Countries (2018). Human Development Data (1990-2017), [Data file]. Retrieved from http://hdr.undp.org/en/data Weiss, K. (2018). Mirror, Mirror on the Wall, Who Has the Best Tax System of Them All? Retrieved from Austrian Economics Center: https://www.austriancenter.com/itci-2018-best-tax-system/

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Annex 7: Distribution of Businesses by District/Province (2014-2017)1

1 Ministry of Trade and Industry (MINICOM), The Republic of Rwanda. (2010). Small and Medium Enterprises (SMEs) Development Policy. Retrieved from http://www.minicom.gov.rw/ fileadmin/minicom_publications/policies/SME_Devt_policy_V180610.pdf Nsengimana, S., Tengeh, R. K., & Iwu, C. G. (2017). The Sustainability of Businesses in Kigali, Rwanda: An Analysis of the Barriers Faced by Women Entrepreneurs. Sustainability, 9(8), 1372. Retrieved from https://www.mdpi.com/2071-1050/9/8/1372

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Footnotes 1

2 The World Bank’s annual Ease of Doing Business reports and the World Economic Forum’s Global Competitiveness reports provided particular useful supplementary data.

21 Imanzi Business Institute (IBI) is a private sector led initiative spearheaded by PSF for capacity building of the private sector through regular training, research and innovation geared towards employability enhancing and employability generating skills. In the long term, Imanzi Business Institute aims to be a world-class knowledge center that will provide exemplary skills, learning and development opportunities. IBI aims to help Rwanda achieve its vision of becoming a knowledge based private sector led economy by uplifting human capital so as to align skills development to meet needs of businesses.

3 All recommendations summarized in bullet points are expanded upon in the main report

22 https://hbr.org/2018/09/the-best-performing-emergingeconomies-emphasize-competition

4 The East African Community (EAC) is a regional intergovernmental organization of six partner states: Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda.

23 Kigali hotels, supermarkets ask suppliers for variety, volume

5 Respondents rated constraints on a scale of 1 (not a problem) to 7 (a major problem)

25 Rwanda Private Sector Development Strategy 20132018, Ministry of Trade and Commerce

6 “Gross Domestic Product—2017/18.” National Institute of Statistics of Rwanda (2017-18)

26 Secured Transactions and Collateral, Registries: A Global Perspective, IFC, September 2014

7 Ibid,pg 9

28 African Development Fund, Skills and Business Development Programme (SBDP), Appraisal Report, 2017

8

Demand characteristics refer to a type of response bias where participants alter their responses—either consciously or unconsciously—in line with what they believe to be the purpose of the study. The presence of demand characteristics in survey studies negatively impacts the validity of conclusions that can be drawn from such studies.

Ibid,pg 9

9 “Formal External Trade in Goods” National Institute of Statistics of Rwanda (2018)

29 How the cultural and creative industry is gaining ground in Rwanda

10 Ibid, pg 9

30 Kigali women’s handicraft fair boosts Made-in-Rwanda drive

11 The United Nations Development Programme (UNDP). (2018). Human development indices and indicators 2018 statistical update. Retrieved from http://hdr.undp.org/ sites/default/files/2018_human_development_statistical_ update.pdf 12 The United Nations Development Programme (UNDP). (2018). Briefing note for countries on the 2018 statistical update Rwanda. Retrieved from http://hdr.undp.org/sites/ default/files/Country-Profiles/RWA.pdf 13 Establishment Census Report, 2017, National Institute of Statistics of Rwanda, page 32. 14 http://businessprocedures.rdb.rw/media/Companies%20 Act%20-%20Official%20Gazette%20n%C2%B0%20 17%20bis%20of%20270409.pdf 15 Rwanda Establishment Report 2017 16

National Institute of Statistics of Rwanda, Gross Domestic Product Third Quarter, 2018.

17 Establishment Census Report 2017 18

https://www.sbf.org.sg/business-advocacy/sbfcommittees/sme-committee

19 BICS 2013 did not report the relevant results on business performance and is therefore not included in the comparison. 20 https://one.oecd.org/document/DAF/COMP/GF(2018)1/ en/pdf

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24 Rwandan producers lose out on retail chain market

31 RWANDA AGOA ACTION PLAN 32 Deloitte (2018) 33 Deloitte (2018) 34 https://www.austriancenter.com/itci-2018-best-taxsystem/ 35 World Bank, Ease of Doing Business Report Rwanda, 2012. 36 https://www.newtimes.co.rw/section/read/20401 37 World Bank, Ease of Doing Business Report Rwanda, 2014. 38 https://pctechmag.com/2011/09/rwanda-govt-introducesonline-payment-of-taxes/ 39 https://www.newtimes.co.rw/news/rwanda-jumps-11places-world-bank-doing-business-report 40 Steenbergen V. and Javorcik B., Analyzing the impact of Kigali Special Economic Zone on Firm Behaviour, 2017. 41 https://www.newtimes.co.rw/business/bugesera-specialeconomic-zone-attracting-investors-completion 42 Central Bank of the respective countries. On the basis of latest available report of 2018 43 http://www.worldbank.org/content/dam/doingBusiness/ media/Annual-Reports/English/DB2019-report_webversion.pdf Page 18


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44 ibid 45 http://documents.worldbank.org/ curated/en/805371468247458154/ pdf/943650WP0Box380nt0Feb01002015040Web.pdf Page 6

New Times, ttps://www.newtimes.co.rw/news/rwandasquality-testing-lab-acquires-global-status 51 https://unctad.org/en/Docs/diaepcb2010d5_en.pdf 52 ibid

46 http://www.worldbank.org/content/dam/doingBusiness/ media/Annual-Reports/English/DB2019-report_webversion.pdf page 18

53 African Development Fund, Skills and Business Development Programme (SBDP), Appraisal Report, 2017

47 Non-residential tariff for Industries, tariff varies based on scale of industries (small, medium and large)

54 The Private Sector Federation (PSF)-Rwanda was established in 1999 as a fusion between the then Chamber of Commerce and Industry and the employers’ organization. Initially, PSF grouped together 14 associations that were sector specific. The number grew to 23 associations representing 17 specific business associations and six provincial business associations. Later on, PSF leadership undertook a restructuring exercise aimed at achieving greater levels of efficiency within all its working sites.

48 Elimination of non-tariff barrier to trade in East Africa, Trade Mark East Africa 49 Rwanda Road Transit time, cost and distance survey along the northern and central corridors, Safari Vincent and Theodone Murenzi, July 2014. 50 “Rwanda’s quality testing lab acquires global status”, the

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The Private Sector Federation: Brief Profile THE PRIVATE SECTOR FEDERATION (PSF)

of Rwanda is a professional organization established in 1999 to represent and promote the interest of the business community. It is an umbrella organization, replacing the former Rwanda Chamber of Commerce and Industry54, composed of ten professional and promotional Chambers, eight of them representing business sectors and two cross-cutting in nature. The Federation has representatives in five provinces and thirty representatives at district levels. As the country’s flagship business institution, PSF has played a key role in enabling the private sector to respond to Rwanda’s vision for its future. Therefore, private enterprises look to PSF to represent their interests and address/ facilitate solutions to business constraints that they face during dialogues with the government.

103

To align the Federation’s work with dynamics of the time, a review of strategic plans occurred early 2012 to come up with the new three-year PSF Strategic Plan (June 2012June 2015), with the following mission vision, and values. Mission: To advocate effectively and

reinforce members’ businesses. Vision: For profitable businesses for a prosperous Rwanda Core values: • Trust Empathy: results, and accountability • Ownership: Member-driven, bottom-up and independent • Service: Member-focus, clear offering and sustainable • Collaboration: Shared vision, clarity of roles and responsibilities • Openness: Transparency, frequency and diffusion Its strategic priorities include to: 1) Provide efficient and pro-active advocacy; 2) Capacity building

&entrepreneurship promotion; 3) Strengthening membership base; 4) Strengthening communication among Member Institutions; 5) Upgrade PSF execution system for a sustainable Federation. Since its establishment, the PSF has been successful not only in registering a strong brand and membership base but in delivering pioneer Business Development Services (BDS), advocacy and demonstrated strong roles at the national and regional level. However, the business sector is yet to mature to become the economic engines of Rwanda. While Vision 2020 and EDPRS call for a private sector led economy, the business sector and PSF realize that to be able to drive that growth, a strong Private Sector Federation must be sustainable. PSF members and leaders have expressed their willingness to support the Federation based on performance to make it more self-reliant.



105