Q&A Interview: Inside Rwanda’s Thriving Private Sector – IMF F&D
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- Published: June 1, 2019
Role of the Rwanda Development Board (RDB)
- Vision: "to transform Rwanda into a dynamic global hub for business, investment, and innovation."
- Mandate:
- Promote investments and exports.
- Provide services covering a range of issues faced by the business community: negotiating contracts with the private sector, helping investors to secure concessions, and settling disagreements.
- Manage privatization of government assets and tourism promotion, including national parks.
- Outcome: Since RDB’s establishment in 2009, doing business in Rwanda has become easier and the private sector has contributed more to economic growth.
Key quantitative findings and indicators
- Aid reliance: "About 25 years ago, we were 100 percent reliant on aid, but today we are 86 percent self-reliant, which means that we depend on aid for only about 14 percent of our budget."
- Jobs: "On average, the private sector now creates about 38,000 jobs per year."
- Ease of Doing Business rankings:
- "29th easiest place to do business in the world and the second in Africa."
- "A few years ago, we were ranked at 150."
- Earlier phrasing: RDB recently won "the #2 spot regionally in the World Bank’s ease of doing business rankings."
- Company registration:
- You can "register a company in six hours."
- Annual registrations rose from "about 500 companies" to "about 13,000 companies a year."
- Investment flows:
- "Last year, by the time we closed our investment books, we had registered $2 billion worth of investments."
- In 2010, registered investments were "$318 million."
- Specific projects and private-sector activities:
- "Volkswagen is assembling in Rwanda."
- "Positivo ... is assembling laptops."
- "Andela ... is going to train about 700 local programmers."
- "A company that has begun refining our coltan."
- Costs and barriers:
- Legal document cost: estimated "about $400" for articles and memoranda of association.
- Tourism segment: MICE "is already accounting for about 10 percent of our tourism receipts."
Reforms and interventions to improve the business environment
- Focused sector strategy with Ministry of Economic Planning to identify sectors needing private-sector engagement and able to generate wealth and jobs.
- Concrete reforms implemented to simplify:
- Starting a business.
- Registering property.
- Filing taxes and accessing tax-related information.
- Digital solutions used to automate processes (example: business registration automation).
- Policy trade-off example:
- Eliminated requirement for articles and memoranda of association to reduce start-up costs and barriers, recognizing short-term costs to some private actors (e.g., lawyers) for longer-term private-sector growth.
Enabling factors: political will and leadership
- High-level support:
- "The Cabinet, a related steering committee, and the president himself have taken an avid interest" in reforms.
- President Kagame "has made himself available to us."
- Political backing allowed removal of entrenched steps that imposed costs, enabling scale-up from about 500 to about 13,000 annual company registrations.
Challenges constraining private-sector development
- Landlocked status: "The high cost of transportation, especially for imported goods, is evident in almost every sector of the economy."
- Overall cost of doing business remains high: need to reduce costs of financing, energy, and infrastructure.
- Structural issues persist despite reductions in red tape.
Strategies and sector positioning to mitigate constraints
- Position Rwanda as a knowledge and services hub to minimize reliance on transport-intensive sectors.
- Promote leisure tourism (e.g., mountain gorillas) and develop MICE (meetings, incentives, conferences, and exhibitions) to boost tourism receipts and make Rwanda a hub for regional and global events.
- Invest in service-based sectors to address disadvantages from being landlocked.
Q&A Interview: Inside Rwanda’s Thriving Private Sector – IMF F&D
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