RWANDA: WHERE IMPRESSIVE ‘DOING BUSINESS INDICATORS’ LEAD TO UNIMPRESSIVE FOREIGN INVESTMENT

Rwandan leaders and bureaucrats are forever informing the world that they have the best ranking in East Africa in terms of doing business indicators. They are also emphatic in proclaiming that, in this respect, Rwanda is third best on the African continent.

One of my readers is asking a probing question that distinguishes processes and outcomes: do Rwanda’s impressive rankings lead to actual investment? Put in another way, do the indicators translate into a bigger share of foreign investment for Rwanda than its East African neighbours?

Let us explore this matter step by step.

The World Bank’s 2013 Doing Business report that covers a total of 185 nations world-wide ranks the East African Community countries as follows:

* Rwanda: 52nd;
* Uganda: 120th;
* Kenya: 121st;
* Tanzania: 133rd;
* Burundi: 159th.

http://www.doingbusiness.org/reports/global-reports/doing-business-2013

Within the broader continental context, only three countries in Africa have a better ranking than Rwanda:

* Mauritius – 19;
* South Africa – 38;
* Tunisia – 50;
* Rwanda – 52.

When it comes to rankings, therefore, Rwanda is a star performer both within East African and broader African contexts.

DO RWANDAN RANKINGS TRANSLATE INTO A BIGGER SHARE OF FOREIGN INVESTMENT?

According to the latest World Investment Report, foreign investment flows into East Africa for the year 2012 were as follows:

* Uganda – US$1.721bil;
* Tanzania – US$1.706bil;
* Kenya – US$529mil;
* Rwanda – US$160mil;
* Burundi – US$1mil.

http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=588

So what have we here?

The best ranked country in East Africa – Rwanda – in fact attracts the least amount of foreign investment (US$160mil), except for Burundi (US$1mil). Tanzania which is the worst ranked in East Africa in terms of doing business indicators, except for Burundi, attracts a lion’s share of foreign investment (US$1.706bil). Uganda is the best performer, having attracted US$1.721billion in 2012.

DOING BUSINESS INDICATORS IS ONE THING & ATTRACTING INVESTMENT QUITE ANOTHER

The World Bank’s Doing Business Report is currently facing severe criticisms from all angles. Its usefulness is under question from governments, academics, trade unions, civil society, and even from within the World Bank Group itself. The sustained criticism has led, for example, to the suspension of one of the indicators – ’employing workers.’ A battle continues to gather momentum involving various stakeholders, not least the Bank’s staff who have built the ir careers on what is turning out to be at best a questionable exercise. Helper’s permanent loans.

Rwanda is a perfect illustration of the limitation of Doing Business report. Its impressive rankings notwithstanding, Rwanda does very poorly in attracting foreign investment. This is also true in terms of developing great domestic firms. More energy is spent on singing about impressive rankings than designing and executing strategies of attracting investment. At the very least, Rwandan leaders and bureaucrats should tone down their rhetoric – which is evidently much ado about nothing.

David Himbara

David-Himbara