Business thrives where there is peace and justice

In Africa, the newest member to the East African Community, Rwanda, is a good example of how a country can rise from the ashes if there is a concerted effort to fight past ills and remedy past wrongs.

It is not surprising therefore that slightly over a decade after Rwanda was engulfed in the worst genocide in recent history, the ICAS places Rwanda 28 places higher than Kenya in its ease of doing business rankings and counts it the best country to do business in Africa.

Investors have significantly more protection in Rwanda than in Kenya and enforcement of contracts is much easier in Rwanda.

This is telling. One way that impunity is expressed in business is in a disregard for honouring contracts.

In a country where impunity is rife, parties to a contract know that if they disregard their contractual obligations, little if anything will be done to them since the courts are either too inept or too incompetent to enforce the agreement.

In other words, the rule of law is flagrantly disregarded and the risk that the contract will not be honoured is very high.

Based on this as a measure of the ease of doing business, a comparison between Kenya and Rwanda is befitting.

Rwanda, where close to one million people lost their lives in the genocide of 1994, is ranked at a solid position 40 in enforcing contracts through the courts.

That is a remarkable achievement by any standards.

Kenya on the other hand is placed at a disheartening 126 when it comes to enforcing contractual obligations.

Basically, the rule of law is enforced better in Rwanda than in Kenya, yet Kenya has a gross national income per capita of $767 compared to Rwanda’s $406.

Due process

In 2007 during preparation for the Safaricom Initial Public Offer (IPO), the largest ever in the history of East and Central Africa, law professor Githu Muigai remarked that the blatant disregard for due process, a lack of faith in the rule of law and the weak enforcement of contractual obligations is one of the biggest setbacks for economic growth and ease of doing business in Kenya.

He dubbed this phenomenon contractual impunity.

Three months after his comments, Kenya erupted in the worst internal conflict in its history.