Rwanda’s Startup Act Is Next Bold Step In Its Lofty Tech Hub Ambitions

By  |  August 27, 2020

Following in the footsteps of Tunisia and most recently Senegal (both of which have adopted similar legislation), Rwanda appears to have set the ball rolling on the formulation of a Startup Act.

To bring this home, the Rwandan government has called upon Innovation for Policy Foundation (i4Policy); the same organisation that was instrumental to the feat achieved in both Tunisia and Senegal.

The i4Policy has been tasked with drafting a national Startup Act and it’s hoped that this will accelerate the development of Rwanda’s fledgling tech startup ecosystem.

Although Rwanda’s capital, Kigali, ranks in the top 6 of the newest Global Startup Ecosystem Rankings Report by StartupBlink (an analysis of startup ecosystems in 1,000 cities and 100 countries), the country’s tech startup ecosystem is not nearly as connected, robust, and funded as top startup scenes in Kenya, Nigeria, and South Africa. Nor is it as attractive, yet.

However, in the last two decades, the small landlocked country with a population of 12 million has seemingly come from the brink of collapse (caused by a devastating genocide that claimed 1 million lives in 100 days in 1994) to position itself as one of the world’s fastest-growing economies.

This resurgence has in recent years catalysed the emergence of an active and growing entrepreneurial ecosystem, especially within the Rwandan capital.

Thanks to forward-thinking policies on the part of a government that is still criticised for its authoritarian approach and suppression of dissent, Rwanda now boasts one of the fastest-growing and most entrepreneur-friendly economies in Africa. 

The country currently ranks 38th on the 2019 global ease-of-doing-business index and 2nd on the African continent after Mauritius. A year prior, it ranked 29th globally and No.1 in Africa.

According to World Bank data, Rwanda recorded GDP growth of 9.4 percent in 2019. Furthermore, the Rwanda Development Board (RDB) is generally considered an easy-to-access entry point for all investors. The RDB is also the central point for company registrations. There are even claims that it takes just six hours or less to register a company in Rwanda.

Although Rwanda’s startup ecosystem is underdeveloped relative to the usual suspects, the country does boast an evolving scene with an ongoing explosion of promising tech startups like TorQue,  AC Group, Rwanda Online, VugaPay, Mergims, and many others.

In fact, a recent study sponsored by Credit Suisse and Swisscontact found that Kigali has one of the highest densities of Entrepreneurial Support Organisations (ESOs) globally.

There are over 20 ESOs in Kigali alone, with spaces like Impact Hub, kLab, and  Westerwelle Startup Haus among the most prominent ones.

According to the report, this represents around one ESO for every 20 startups or lifestyle businesses or almost one for every 2,000 university graduates in the country.

“This makes Kigali one of the most heavily supported entrepreneurship communities in the world. In contrast, Nairobi, East Africa’s most advanced ecosystem, had one ESO for every 32 startups in 2016, according to Endeavor,” reads a part of the findings which identified 403 startups in Kigali of which 67 percent are early-stage.

However, startup funding remains a tricky subject in Rwanda as the entire ecosystem (comprising ESOs and the entrepreneurs themselves) is still heavily dependent on funding from donors.

In the 2020 report titled “Connecting the Kigali Entrepreneurship Ecosystem”, it was found that more than 75 percent of Rwandan startups did not have access to external funding.

As was reported, the large majority bootstrapped. Among the startups that were able to mobilize external funds, 51 percent had access to a bank loan, 44 percent received a grant from a donor, and only 10 percent secured investment from an angel investor or venture capital fund.

Nevertheless, it looks like the coming of the Rwanda Startup Act, coupled with the ease of doing business in the country and the tech infrastructure investments made in the last few years, is the next step towards making Rwanda a preferred destination for startups.

While Kenya is putting red tapes on tech company ownership and Nigeria is cranking up stifling regulations, Rwanda seems to be positioning itself as “the new Mauritius.”

In the coming years, Kigali might well outdo Port Louis as the preferred incorporation destination for African startups or their holding companies which are always on the lookout for the path of least resistance and minimal friction.

Featured Image Courtesy: TechGistAfrica

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