Rwanda is set to join a handful of African countries with national startup acts aimed at supporting the entrepreneurship and business ecosystem in the country.
This is coming at a time when the Ghana Revenue Authority (GRA) is said to demand tax deposits from start ups even before they establish their businesses and make a pesewa.
Startup Acts are an emerging legislative instrument to package strategic incentives and interventions to accelerate the formation and sustained scale of innovative and high-growth firms.
With a law that sets out government’s policies for startup growth, the government seems to be taking a more proactive role to drive startup growth and the country hopes that the Startup Act will spur the development of the tech-based services industry.
Rwanda’s technology sector has been growing steadily, from being the first country in the world to transport blood using tiny unmanned aerial vehicles (drones) and building broadband infrastructure, to attracting leading firms such as Andela and digitizing government services.
The deliberate efforts to promote Information and Communication Technologies and other startup initiatives has put Rwanda on a positive trajectory recognized internationally.
For instance, in 2016 the Global Information Technology Report by the World Economic Forum ranked Rwanda first in government success in terms of ICT promotion.
But much of that success has not come smoothly. Entrepreneurs have struggled to stay in business, and attracting more investments into the startup ecosystem has been a puzzle.
Alex Ntare, the Chief Executive of the Rwanda ICT Chamber believes the startup act will be key to unlocking a number of things from access to finance for startups to access to markets.
“But most importantly it will create a more predictable business environment for stakeholders including investors, government which has been supporting entrepreneurship and job creation,” he noted.
The Act
The government hired Innovation for Policy Foundation (i4Policy) to draft a national Startup Act with the objective of reforming the business environment, supporting startup growth infrastructure, and brand Rwanda as a hub for investment.
i4Policy’s recent continental benchmarking study identified only three Startup Acts – Tunisia, Senegal, and Democratic Republic of Congo – and 17 Small Business Acts across Africa.
Since the first Small Business Act in Africa, passed by Ghana in 1981, governments across the African region have been increasingly legislating to support entrepreneurship.
In the last three years, Startup Acts have become a popular mechanism to package reforms.
Rwanda has embarked on the process, after already passing a number of laws supporting businesses, such as the Investment Code.
Innovation for Policy Foundation’s study highlighted governance, financing, markets, supports, human capital, culture, and infrastructure as key challenges African entrepreneurs face.
Angelos Munezero, the acting director-general of Innovation and Business Development at the Ministry of ICT and Innovation, the Startup Act is aligned with the country’s vision to support formation of high growth firms.
The focus on high growth firms is based on a conviction that there will be increased employment, new and improved services and the Act will support the digital transformation agenda towards a sustained and developed country.
Once in place, Rwanda’s Startup Act will improve the general business environment for startups, and bolster startup growth infrastructure, to make it easier for an entrepreneur to navigate the process from having an idea to market validation to startup and growth.
The Act, which is being developed through a dialogue process which includes startups, government and investors, will further position Rwanda as a leading hub for tech-enabled startups globally.
Munezero highlighted that a draft for public consultation and review will be available by end of November.
“This is a policy reform process, and we are in the process, now, of listening to our citizens, our entrepreneurial ecosystem and our Government counterparts to identify the most pressing challenges and proposals for reforms and intervention,” he said.
Ghana
In Ghana, there is simply no Start up Act even though there are many tech startups doing great and driving the country’s vision towards are cashless society.
A tech start up owner in Ghana, told Techgh24 that when he went to register his new business, he was subjected to an interview, after which the Ghana Revenue Authority (GRA) officials estimated that his business will make GHC100,000 net profit every year so he should make a tax deposit of GHC25,000.
According to him, after a long deliberation with them, they demanded that he made a down payment of GHC10,000 against his future earning – so if he is unable to make enough that year, whatever will be left will be his tax credit with the GRA.
According to the start up owner, that was because there is no Start up Act in Ghana that incentivices new businesses like his, so the tax man demands money from start ups which are yet to even make a pesewa.
“Instead of them thinking about how the business will grow and employ more young people before paying taxes, they even want their tax even before the business takes off,” he lamented.
Recently, the Vice President in charge of Sales and Marketing at DreamOval, Charles Kollo called on government to mainstream FinTechs, which are largely tech start ups, in the Digital Ghana Agenda, instead of leaving them on the fringes to fend for themselves, in spite of their immense contribution to cashless society drive.
Players in the tech start up industry are hopeful that soon, there will be a Start Up Act in Ghana to incentivise young entrepreneurs to develop their ideas into big businesses before GRA start demanding taxes from them.
