BizCLIR

To attract and retain investors, a country must have laws and institutions that provide adequate investor protections. A sound corporate governance framework is vital for providing protections and recourse for investors whose rights have been compromised. Protection of foreign investors in particular is also important. Foreign investors and local investors should be treated equally and the government should ensure that neither has unfair advantages or additional burdens to bear. Furthermore, it is important that investors, both local and foreign, can in fact rely on these protections, and on the commercial legal framework in generally. Having a transparent and predictable commercial environment is imperative if investors are to feel welcome and secure in a decision to invest in Rwanda.

Rwanda’s Doing Business ranking for Protecting Investors is near the bottom of the world – 165th out of 178 countries surveyed. This ranking accurately reflects Rwanda’s lack of an effective corporate governance regime and culture of investor protections. The Law on the Organization of Commercial Establishments covers corporate governance to some extent, but it does not create a comprehensive corporate governance framework in line with international best practices, and it provides no effective means for enforcing the provisions it does include. Legal and institutional reforms underway, however, should place the country in a position to significantly improve its corporate governance regime and, as a result, its Doing Business ranking in the near future if these reforms are successfully implemented.

Although most businesses in Rwanda are of a size that does not merit advanced corporate governance procedures and protections, many public and private sector representatives believe that, as the economy advances, corporate governance will become a very important issue and, thus, is necessary to address and build on today. Furthermore, even the smallest businesses would benefit greatly from a culture that respects and implements corporate governance on the most basic level. Currently, most companies are owned by individuals and families, not shareholders, and many are informal. Nonetheless, good bookkeeping and basic business management are important to their success, regardless of their size. Many small businesses reportedly do not incorporate these practices into their business activities. Accordingly, Rwanda should support and encourage a culture of good business management, which will benefit the broader business community and lay the foundation for the more advanced corporate governance practices to come.