How Rwanda became a top investment climate performer
Figure 1 – View of the Kigali skyline, the center of Rwanda’s vibrant new economy
Rwanda has built a reputation as the “Singapore of Africa”
Once known as the location of one of the worst incidents of genocide and as one of the poorest countries in the world, Rwanda has now built a new reputation as the “Singapore of Africa” and one of the most economically progressive countries on the continent. While many factors have contributed to Rwanda’s success, a radically improved investment climate is playing a transformative role and provides and role model for other countries seeking rapid economic development.
Since the introduction of the Ease of Doing Business Index in the World Bank’s Doing Business 2006 report, Rwanda has implemented more business reforms than any other country.¹ The reforms have had tremendous impact taking Rwanda from near the bottom of the rankings in 2007 (158 of 190) up to 41st in 2018 and 29th in 2019, the second best ranking in Sub-Saharan Africa and better than nearly half of OECD countries.
From among the worst countries ten years ago Rwanda has climbed past even many of the world's rich countries
“Rwanda has adopted a very bold and ambitious approach to reforming its business environment…. We benchmark ourselves against the best performers in the world and we think big.”
—Louise Kanyonga, Head of the Rwanda Development Board's Strategy and Competitiveness Department.
Keys to Rwanda’s success
1) Unwavering commitment from the highest level
Rwanda’s success has been undergirded by a persistent reform agenda and a willingness to aim high. As Louise Kanyonga, Head of the Rwanda Development Board's Strategy and Competitiveness Department, recently said, “Rwanda has adopted a very bold and ambitious approach to reforming its business environment…. We benchmark ourselves against the best performers in the world and we think big.” ¹ Even when Rwanda had reached a top 50 Doing Business ranking, the reforms kept coming, with Rwanda implementing 22 new business reforms related to the index between 2016-2018, leading it to remain among the top 10 improvers for Doing Business 2019, despite its already lofty ranking. ¹ This commitment to reform has come from the highest level, with President Paul Kagame making investment climate improvement a top priority of his presidency.
2) A systematic reform pipeline
High level commitments to reform are not enough to achieve results. Rwanda has created a pipeline of specific reforms which are systematically implemented every year. This starts with the Rwanda Development Board, founded in 2007 as a consolidation of the Rwanda Investment Promotion Agency and 7 other agencies, with business climate reforms as a top priority.
The Doing Business Steering Committee, created in 2009 with representatives from all relevant agencies as well as from the private sector, leads the reform pipeline process. Under this committee is a technical task force with a mandate to carry out each reform. Under the task force are 6 working groups focusing on business entry, licensing reform, legislative changes, taxes and trade logistics, construction permits and property registration.² This systematic approach to reform and involvement of the private sector has helped Rwanda to implement a continuous progression of investment climate reforms which have directly led to radical improvements.
Essential elements to making doing business easy is reducing the amount of time spent, the complexity, and the cost of the necessary procedures which businesses must carry out. For this reason, countries which have implemented high quality e-government systems tend to also be the countries with the best investment climate. Rwanda is no different, with e-government platforms playing an essential role in its success. Here are examples from key indicators:
Starting a business: Introducing online business registration and payment has reduced the number of days it takes to start a business from 43 days to only 4 days today.
Dealing with construction permits: Rwanda’s new Building Permitting Management Information System has the time taken and cost to obtain permits reduced by over 10% and lets applicants track their application progress online, through SMS and email.³
Getting electricity: A new online application through the Rwanda Energy Group (REG) allows customers to apply for an electricity connection within 20 days, down from 34 days in 2017.⁴
Registering property: Rwanda is ranked 2nd in the world only to New Zealand for this indicator in Doing Business 2019. This was achieved by implementing an online land registry, online property transfer on the Irembo platform, and several other electronic services.⁵
² How Rwanda rose in 2018 World Bank Doing Business Report. The New Times.
³ How Rwanda rose in 2018 World Bank Doing Business Report. The New Times.
⁵ How Rwanda rose in 2018 World Bank Doing Business Report. The New Times.
⁶ How Rwanda rose in 2018 World Bank Doing Business Report. The New Times.
An improved investment climate has led to real increases in per capita income and rapid growth in investment in Rwanda.
From 2008 to 2018, private investments have grown by 60% and FDI has grown by nearly 40%.
Not only has Rwanda’s aggressive investment climate reform agenda dramatically increased the country’s Ease of Doing business ranking over the past decade, but this improved investment climate has delivered real economic results.
In 2018, it only took an average 7 days to register property down from 354 days in 2005. In that same time frame, the cost of starting a business has declined from the equivalent of 317% of annual per capita in 2005 to less than 15% in 2018.¹ The number of businesses registered each year has increased by nearly 2300% from 2006 to 2016, at a compound annual growth rate (CAGR) of 33%, higher than any other of the 100 countries with data for this period.²
The results have not only included the success in increasing administrative efficiency and reducing red tape and costs for businesses. An improved investment climate has also led to real increases in per capita income and rapid growth in investment in Rwanda, both domestically and through foreign direct investment (FDI). From 2008 to 2018, private investments have grown by 60% and FDI has grown by nearly 40%.³ Per capita GDP has been growing at an average of 7% per year from 2000 to 2017, putting Rwanda on the path to reaching middle-income status, though perhaps not quite as fast Kagame’s ambitious goal of achieving this status by 2020.⁴