Burundi took the biggest leap, globally, over the past one year in making it easier for a business to start, while Rwanda maintained its position as East Africa’s most business-friendly country.

The World Bank’s Doing Business 2013 report ranks Burundi as Africa’s most improvement country in easing the cost of doing business, with the country having removed three requirements that investors previously needed before setting shop in the country. An investor no longer needs to have company documents notarised; to publish information on itself in a journal; or to register the new business with the ministry of trade and industry. The country was ranked fifth among the top ten reformers in the world.

Rwanda, which was placed at position 52 in the world and four in Africa, got a special mention in the report, with the Bank dedicating a chapter on the country.

Rwanda ranks behind Mauritius, South Africa and Egypt on the continent. Of note, the global lender said, has been the commitment by Rwandan authorities to implement business reforms.

“The government has worked to meet the needs of entrepreneurs by streamlining regulatory processes involved in starting, operating and closing business…the government entitles involved in the process have had clearly defined roles and responsibilities , and they have respected the goals set in initial implementation strategy documents,” notes the report.

Burundi’s performance in the ranking points to a growing effort by the government to bolster the country’s attractiveness as an investment destination and boost the country’s economy, which has over the years grown at slower rate compared to her neighbours.

The IMF expects Burundi’s economy to post an annual growth rate of 4.5 per cent this year, compared with Uganda which is set to grow at 4.2 per cent, Kenya at 5 per cent and Tanzania 6.7 per cent.

In the overall ranking, Burundi climbed 10 places, the largest rise by an East African country, to position 159, an improvement from position 169 in the 2012 rankings. The country was ranked at position 177 out of 185 in 2011.

Regionally, Uganda’s better ranking above Kenya grabbed the headlines as the Pearl of Africa put in more reforms compared with her biggest trading partner. Uganda improved its mortgage laws, making it easier for entrepreneurs to access the title registry through digitisation of records. This makes it easier for banks to accept stamp duty payments, the report said. Uganda was placed at position 120, up from the 123 position it registered in 2012, while Kenya slipped from 109 to 121.

Rwanda marginally slipped from position 45 in 2011 to position 50 in 2012. Tanzania was ranked at position 134 in 2013, down from 127 in 2012 and 125 in 2011.

The continued success of Rwanda and the emergence of Burundi — the two smallest economies in the region, the report noted, has to do with the personal commitment by top leadership in the countries to address the challenges facing investors in the two countries.

“The president of Rwanda made business regulation reform a priority, as did the leaders of more than 35 other countries, including economies that have made some of the biggest improvements in the ease of doing business, such as Burundi, Colombia and Georgia,” states the report.
Rwanda has established a permanent agency — the Doing Business unit — that is responsible for advising other government agencies on how to improve the business climate as well as co-coordinating efforts from both the private and public sector geared towards improving the investment climate in the country. The doing business committee, under which the Doing Business unit falls, reports directly to President Paul Kagame.

Across the border in Burundi, the reforms implemented in the country have borne fruit, with foreign direct investment – into the country rising to about $100 million last year from $20 million in 2009.

But the challenges for Burundi remain power shortages, inadequate skilled human capital, high transport costs and poor credit information on borrowers.

The country has an installed capacity of only 42 MW of electricity, and is currently experiencing a 15 MW deficit due to a fall in water reserves in its main hydroelectric dam. But with only three per cent of the population having access to electricity, and demand expected to grow at 13 per cent every year, the government estimates the country needs to add an extra 270 megawatts over the next five years to meet demand.

The country is currently negotiating for a $210 million concessionary loan to build two hydroelectric dams with a combined output of 50MW. It had also signed a deal with an unnamed Swedish company to build a 12MW hydroelectric plant and has also agreed to a deal with a Chinese firm for the construction of a 10 MW hydro plant. The three plants are set for completion over the next three to five years.

According to the 2013 World Bank report, only 0.26 per cent of all Burundian adults have access to a credit reference bureau. This compares relatively badly to advanced economies like the UK where 100 per cent have access.

The low penetration could be because unlike its EAC peers, Burundi lacks a credit reference bureau and relies more on the public registry, which unlike credit agencies, does not collect utility payments records.

The low penetration of credit rating means borrowers with a good repayment history are not able to negotiate for lower interest rates on their loans, which in effect makes the cost of borrowing high.