Rwanda Business Culture
‘Wait here, Mom… I’ll get the right size comforter for you.’ I stood there confused. She ran a few stores down and returned with four king-sized comforters in various colors. Had she told me that her business had not what I was looking for, I could have gone looking somewhere else, and saved both of us a minute or two in this busy, ever-green, peaceful city of Kigali, Rwanda. I checked my shopping list, afraid to repeat the daunting process all over again on my next purchase, but this happened almost every time I made significant purchases.
It wasn’t long before I learned this level of cooperation between businesses was a normal part of doing business in Rwanda.
This was one of the first lessons about Rwanda’s business culture that I learned. In the 5 months since arriving in this gorgeous city, my family and I have all learned a lot and grown even more. I for one, feel like I have learned a lifetime of lessons about human complexity, trade-offs, trust, gratitude, and the diversity of human experiences from one place, class, and culture to another.
“The country is determined to become the future technology hub of Africa, and that is nothing short of impressive.”
In my opinionated observation, I am proud to say that this country provides many opportunities for investors. However, it’s an opportunity that foreign investors should evaluate carefully as Rwanda poses many contradictions. So, if you are considering coming to invest in this growing nation; pack all your things and come, by all means (just don’t forget to pack your big-boys’ pants, you will need them).
I noticed that folks here typically get along well and are very close-knit – a kind of brotherhood and community-orientation that is lacking where I’m from. On the other hand, this very quality often hampers time sensitivity.
Here’s what I mean and have witnessed: A Rwandan might have a meeting at 1pm and it is 30 minutes away. They may leave at 1pm, drive fast to somewhere other than the meeting, stop and talk to people they know (or don’t know), get back on the road driving in a hurry and maybe make another unnecessary stop before finally arriving at the meeting place at 3pm where they wait patiently until 5pm because that’s after the last scheduled meeting of the day.
I believe the word I’m looking for is prioritization. It’s not necessarily time, but how the culture prioritizes or don’t prioritize certain things at all, generally speaking of course.
So, expect that rather or not a person will demonstrate patience or timeliness is determined by what, if, and how they prioritize. This is a human truth I’m only now learning, rather than a cultural nuance.
Business is Growing, Not Booming
The business sector is growing and promising. The country is determined to become the future technology hub of Africa, and that is nothing short of impressive. It is, however, important to note that the Rwandan business industry still has some areas of opportunity for growth.
According to the National Institute of Statistics of Rwanda’s (NISR) Establishment Census, in 2020, there were more than 220,000 businesses in Rwanda (over 52,000 in Kigali alone), but more than 92% of these were unregistered microbusinesses. These types of businesses are likely to invest purely in product, location, and labor but no money at all in marketing, infrastructure, growth, or management… The contradiction: Many (and arguably all) of these business owners want to do more and earn more, but do not invest in growth.
Still, like the rest of the world, 2020’s pandemic brought about an influx of entrepreneurial endeavors. The number of businesses grew by nearly 22% between 2017 and 2020. However, the number of businesses that started after 2019 were nearly double (47%) that of the pre-pandemic period – even more impressive growth.
Heavy Burdens for Small and Local Businesses
Another surprising contradiction I experienced is regarding small business sustainability. The government conveys its support for doing business in Rwanda and has made great strides in this area, but the system makes it hard for small and local businesses – and quite frankly, its unsustainable.
I will make sense of this:
High Costs and Complex Regulations:
Businesses can pay as much as 50% of its income towards employment, income, VAT, and various other communal and local taxes.
On top of that, the government’s micromanaging of business expenses means businesses pay more in taxes than what is actually due because not all vendors participate in the government’s expense management system (EBM) which means expenses paid to non-participating vendors cannot be deducted and are counted as profit for tax purposes.
This puts smaller local businesses at a disadvantage in benefiting from foreign investments. Because smaller businesses are not equipped to participate in the micromanaged invoicing system, investors are inclined to do business with larger businesses which often means higher costs to the investor.
Incohesive Startup Processes
“…it doesn’t feel that way [simple] when you’re not sure you’re in compliance with the country’s and local government’s laws.”
One of the determining factors for coming to Kigali was the reported ease of starting and doing business here. However, after initial registration, the process gets dicey.
The processes for starting a business are unclear and disjointed. Primarily, there is no clear path defined for businesses to ensure they are meeting regulatory requirements. So while the process may actually be simple, it doesn’t feel that way when you’re not sure you’re in compliance with the country’s and local government’s laws.
The Rwanda Development Board (RDB) is supposed to be the link between entrepreneurs and investors and other regulatory agencies, but those on the frontline do not offer much clarity either.
High Internet Costs for Businesses
Internet in Rwanda’s urban areas work very well. Home internet is accessible and very affordable (as low as the equivalent of about $25 USD per month) as the country works to expand access to rural areas.
On the other hand, business internet plans offer much less bandwidth [than home plans] for more than 10 times the cost of home plans – making business internet inaccessible for some small businesses.
Misaligned Immigration Revenue Authority Policy & Practices
Rwanda has a wide selection of housing options – from modest to mansion. So when we arrived we thought it a good idea to save money by renting a large home with office space to launch our grassroots organization from. And we did… we found the perfect house and even paid a little extra for it.
Will you start your business from home?
Like me, you may think this is a great way to reduce your cost and level of complication during your transition and to spend time getting your bearings. The good news, the RDB would agree. The bad news, immigration and the revenue authorities would not!
So, while it may be perfectly legal to do business from your home, your visa might be denied on the basis that tax collectors cannot freely enter your home. At least that’s what happened to me.
So, I was forced to spend thousands more than I planned to rent, furnish, and fix office space I didn’t need for operational purposes.
An emerging digital economy has to get this part right. This era of technology is pushing everyone out of the office. It’s one of the primary benefits of operating a digital business. So, I was taken back by this contradiction which made starting my business here much more burdensome than necessary.
Businesses That Could Work
Speaking from my experience, some business models would work better than others in Rwanda’s current climate. For example:
- Businesses that are labor intensive, such as high value manufacturing (including farming locally unavailable food product) for local commercial distribution can make money.
- There is also a growing market for services and products sold to foreign-currency-earning individuals and entities such as tourists, and the government.
- Bars for locals, tourists, visitors, and expats.
- Real Estate would also work if targeting people coming to Rwanda in hopes of starting a business, investing, or relocating, but expect a high turnover on residential and commercial rentals to non-locals (This journey is not for the faint of heart).
- Real estate investments that cater to expat retirees.
Also, note that investors should gather information to ensure they can invest in ways that align with their values.
A Farming Business Model Applied to Non-agricultural Businesses
Drive to the countryside and you will understand the methods and means by which the majority of local business owners operate. On one hand, the country has strategized its farming method by encouraging many countryside farmers to operate in cooperatives, increasing their production and easing the process of capturing market share.
Still, the system needs work to increase strategic coordination and create a healthy competitive structure. It is not surprising to see neighbors growing and selling identical crops, after having probably shared resources to grow them. During harvests, these farmers will avail themselves to nearby market spots and help each other to sell their production.
Juxtaposition to the farming model is the small business owners in the city or business centers. It’s common to find multiple stores selling identical goods side by side by side. In fact, you can find an entire city block of stores all selling the same types of goods. If one doesn’t have what a customer is looking for, they’ll go to their neighbors to get it.
These stores are usually in market areas and malls which are indeed reminiscent of the agricultural villages where neighbors’ crops sit side by side, wrapped around the breathtaking typography of the countryside. You’ll find people out in hallways, on sidewalks, and in parking lots. Just like the fruit and vegetable sellers, they can be found soliciting and demonstrating the use and quality of their goods. And like the agricultural sellers, this goes on from sun up to sundown.
A Note for Investors
‘.After all, entrepreneurship is about solving problems.”
Rwanda is generally understood as being on the edge of a technological transformation, and that in itself is an amazing story. There are however some operating gaps and the country still has a lot to do to nurture growing, sustainable, and innovative business and investor-friendly economic and government support systems. If not the government, many of these gaps are additional opportunities that savvy and committed investors can capitalize on. After all, entrepreneurship is about solving problems.
Ultimately, my short span here has revealed three primary needs to progress this nation closer towards its goal of economic and technological transformation.
- The small and micro business owners of Rwanda who make up 92% of Rwanda’s businesses, require and deserve additional support to be included and engaged in Rwanda’s technological transformation.
- Government regulations need to align to national initiatives.
- Public and locally owned and operated private institutions must work together to advance Rwanda’s economic mission.
If you decide to do business in Rwanda, you will have a very rewarding experience and the opportunity to impact lives in ways you never thought possible – no matter what you choose to do. However, it is prudent that investors…
- Come with realistic expectations.
- Have the right people on the ground to support them.
- Choose a suitable business model.
- Have enough money to support their lifestyle and business through the learning curve.
Finally, investors should choose a business model that can flourish in Rwanda’s culture, regulations, taxation, and economic conditions. Take an insightful look at the business you want to launch. If your business model does not align with the opportunities on the ground, pivot or wait until it does. If it does align, Rwanda is a beautiful country with beautiful people and a booming tourism and expat community, all waiting to welcome you home!