The Rwanda Private sector has proposed strong penalties to be levied against government entities which don’t pay entrepreneurs on time thus causing a major shock in sector’s role in the economic development.
This is one of the major issues that was raised at a private sector pre-budget forum this Wednesday, to discuss the role of the sector in the proposed budget 2020/21 which they suggested, needs to be revisited to have a significant role of private players.
“The delays in payments are affecting the private sector that is why we need this to be considered among many issues that are affecting our role as private sector to attain the national strategic plan towards 2024,” said Paul Frobisher Mugambwa the Associate Director Tax Services at Pricewaterhouse Coppers- an international consultancy firm.
Normally when government contracts private enterprises to implement a project like a road construction, the payment is supposed to be done in percentages of work done depending the type of contract and duration.
Each percentage is supposed to be paid 45 days after the submission of a payment request. However, private contractors say that this duration has not been respected which in turn affects their performance and the whole chain of labor.
On the contrary, entrepreneurs argue that payment delays come with consequences including; failure to pay the labor force and taxes on top of bank fines caused by delay in loan servicing.
From delays in tax declaration and payment, the entrepreneurs said that the taxman throws heavy fines amounting to 60% of the charges.
This is not a new issue in Rwanda and it has been brought to the attention of government including the president.
At the Parliament Public Accounts Committee (PAC), the same issue has been indicated in the Auditor General’s Reports indicating that execution of projects funded and managed by government has continued to remain low and no one was held accountable for it.
For example, last year PAC heard in a hearing that Karongi cross border market remained defunct and had been constructed as a substandard structure and with poor materials.
However, it was said that line ministry is yet to be summoned to explain the issue.
To revert all this, the Rwanda financial segment represented by Celestine Rwabukumba, the CEO of Rwanda Stock Exchange said that there must be a total overhaul of how government does engage the private sector in doing business by creating a 100% Private Public Partnership in its investments.
Rwabukumba argues that government doesn’t have to directly be involved in the projects and investments. It should rather help the private sector especially banks to de-risk the money invested.
This was the first time the private sector meets to discuss their challenges in a pre-budget consultative meeting.
According to Private sector federation (PSF) officials, the outcomes of the meeting will be forwarded to the ministry of finance within two weeks.