Kigali: Rwanda remains the second easiest place to do business in Africa and is now 38th globally, according to the 2020 World Bank Doing Business report released today. The World Bank assessed 190 countries using 10 indicators in business regulations.
These include starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.
Rwanda ranked second in Africa after Mauritius and maintained first position in the East African Community. Rwanda is also the only low-income country in the Top 50.
The 2020 report also saw Rwanda’s global ranking drop 9-positions to 38th from 29th last year, mainly caused by the World Bank’s sudden change in methodology.
The new methodology introduced the assessment of “an active stock exchange” which was added into the protecting minority investor’s indicator in January this year. According to the World Bank, for an economy to be seen as having an active stock market, it has to show at least 10 companies listed and trading equities.
The Rwanda Stock Exchange (RSE) was officially launched in 2011 and has had eight company listings since. This abrupt change led to a 100-point drop in the indicator scores on ‘protecting minority investors’ compared to last year’s report where Rwanda ranked 14th globally.
Commenting on this year’s report, Clare Akamanzi, CEO of the Rwanda Development Board said:
“We continue to make bold and ambitious steps we have made to improve our business environment and further our vision of a private sector-led economic transformation. While we acknowledge this year’s Doing Business Report, we note with great disappointment the abrupt change in methodology which has affected Rwanda’s global rankings negatively. We will continue to engage the World Bank on this issue.”
On a positive note, Rwanda had reforms captured and reflected in 4 indicators which strongly impacted its regulatory business environment. These were:
1) In starting a business, Rwanda made starting a business easier by exempting newly formed small and medium-size enterprises from paying the trading license tax for their first two years of operation. This improved Rwanda’s ranking on the indicator from 51st in the 2019 Doing Business Report to 35th globally in 2020.
2) In dealing with construction permits, Rwanda went up by 25-points from 106th last year to 81st globally. This was attributed to reducing the time to obtain a water and sewage connection. Rwanda also improved building quality control by requiring all construction professionals to obtain liability insurance on buildings once in use.
3) In the getting electricity indicator, Rwanda improved the reliability of power supply by upgrading its power grid infrastructure. This led to the indicator improving from 68th to 59th globally.
4) The enforcing contracts indicator saw highest jump from 78th to 32nd globally. This was largely due to the new small claims procedure and reduction of court fees.
•Rwanda has the lowest cost together with Slovenia in ‘ease of doing business.” The ease of doing business score measures an economy’s performance with respect to a measure of regulatory best practice across the entire sample of 41 indicators for 10 Doing Business topics.
•The 17th edition of the World Bank Doing Business Report covers 12 areas of business regulation. The remaining two indicators which were employing workers, and contracting with government, were assessed but not ranked.
•In Getting Electricity, reforms implemented this year include: Introduction of free electricity connection. Rwanda Energy Group introduced free electricity connection for industrial and commercial clients who are located within 600 meters from the grid.
•In starting a business, a new law that exempts payment of trading license for startup businesses for the first 2 years was introduced. This reform has eliminated a procedure in starting a business, reduced the time taken to start a business by one day and reduced the cost of starting a business by Rwf 90,000.
•In dealing with construction permits, there was a removal of the requirement to request and obtain a geotechnical study for small scale, non-complex building projects that are for ordinary use. This reform eliminated one procedure, reduced the cost by Rwf 2 million and reduced the time to obtain a construction permit by 14 days. Other reforms include: removal of the requirement to obtain an environmental impact assessment, removal of the requirement to request and obtain a topographic survey and reduction in the time to obtain a water connection from 30 to 10 days, among others. While that these reforms in construction permits were not captured, the report captured the reduction in the amount of time in water connection and also the improved building quality control following Rwanda’s requirement that professionals obtain liability insurance on buildings once in use. (End)