Some of the recent businesses in Rwanda: Kigali Logistics PlatformRwanda has maintained the second position in the World Bank’s annual Doing Business report.
Rwanda ranked second after Mauritius which has maintained top position on the continent level for a couple of years.
However, a sudden a change in the methodology used by the World Bank to measure the ease of doing business in 190 countries is attributed for Rwanda’s decline by 9 places in 2020 World Bank Doing Business Report released on Thursday.
The 2020 report also saw Rwanda’s global ranking drop 9-positions to 38th from 29th last year, and according to Rwanda Development Board (RDB), this was mainly caused by the sudden change in methodology which required countries to have a buoyant stock exchange.
“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,” RDB explained in a statement.
“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,” it added.
Rwanda fell short of the mark considering that the Rwanda Stock Exchange (RSE), which was officially launched in 2011, has eight companies listed on the stock exchange –two, short of the required 10.
RDB says that 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.
Despite that, Rwanda remains the second easiest place to do business in Africa, ranked38th globally, according to the latest doing business report. The World Bank assessed 190 countries using 10 indicators in business regulations.
The indicators 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 CEO of RDB Clare Akamanzi said Rwanda was disappointed by the change in methodology but the country will continue to implement new reforms while at the same time engaging the World Bank on the new methodology.
“We continue to make bold and ambitious steps to improve our business environment and further Rwanda’s vision of a private sector-led economic transformation,” Akamanzi said.
“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,” she said in a statement.
Among other areas, the report found that Rwanda made some key reforms which strongly impacted the country’s regulatory business environment as reflected in 4 indicators, including starting a business, dealing with construction permits, access to electricity and enforcing contractor.
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.
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.
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.
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.