Rwanda is likely to be your EAst Africa start-up's best starting point
Make sure to pay your taxes
Be on the ground
You need a local network to succeed
Where else to source information?
Think long-term
A venture in Africa is a long-term endeavour. Many people regard Africa as a land of opportunity – which to a great extent it is. But that doesn’t mean you should expect large profits from day one. Like most ventures, it will take time.
A developing market is not a "developed market
The opportunities exist because the solutions have not yet been implemented: This is the characteristic thing about a developing market. So from a foreigner’s perspective, it’s easy to come here and spot the gaps in the solution space. But, from the lack of funding and the absence of market data to the scarcity of talent, be aware that it is this same “not-yet-developed-market” that you will have to work against when trying to build your own business.
should i bring capital
If you are coming here as a young aspiring entrepreneur from Europe, consider coming with enough funds to cover your costs for at least one year (500 – 600 EUR a month should give a fairly comfortable lifestyle) while you try to make revenue or source funding for your venture. Alternatively, seeking an “ex-pat job” (e.g. at an NGO or embassy) can be a good way to earn a living while scouting for business opportunities.
Alternatively, if you also have some initial capital to invest: 10 to 20 thousand EUR can get you a long way…
Rwanda is likely to be your EAst Africa start-up's best starting point
The Rwandan economy is one of the fastest-growing in Africa; every sector is booming. This palpable growth makes up for an exciting business environment filled with opportunities for the entrepreneurial mind.
From the ease of doing business, the little competition, and the readiness of the infrastructure, to the little bureaucracy and geopolitical security, Rwanda is arguably the best “pilot country” for your East African start-up. But the Rwandan market alone is small, so remember to plan (or at least aim) for expansion from the start. Think beyond the borders of Rwanda and into the other, more lucrative, East African markets.
Make sure to pay your taxes
When it comes to taxes, many African countries have the reputation of being “relaxed” with their enforcement. This naturally goes hand-in-hand with things like corruption and bribing.
Rwanda, home to one of the most tax-efficient revenue authorities in East Africa, evidently breaks the mould. You can — and should — expect a rigorous, yet fair, taxation system with heavy penalties for infringements and regular checks.
At the same time, no one in Rwanda will tell you they are not getting value out of their taxes. The infrastructure, the safety, the cleanliness and the brand new roads stand to prove it.
Taxation in Rwanda is not rocket science but the system is sometimes hard to navigate. This is why a lot of foreigners (and even locals) will hit a fine during the first years of operation. A good accountant will give you peace of mind.
Be on the ground
In developing economies market research is not done on Google. To validate your business idea you must search for market data on the ground and talk to people.
Also don’t expect to be able to set up your business here in a few months, hire a local team to run it for you and then head back home while occasionally “monitoring things from a distance”. This is a common mistake which is likely to cost you your venture (alongside many plane trips).
Only start a business in Rwanda is you see yourself living here long-term.
You need a local network to succeed
Getting started is hard. Getting started in a foreign country and a widely different market is even harder. Between referrals, recommendations, introductions, advice, tips or even first clients, belonging to a network like EBCR may very well end up being the single most important accelerator to your business. It will give you the support, knowledge, and first-hand experience to help you avoid mistakes and navigate the system with greater ease.
During the initial 3-month period, a network like EBCR can be a great accelerator. For someone new coming and having access to that right away: it’s great.
(Gabrel Ekman – CEO BAG Innovation)
Finally, it is highly recommended to look for a local partner. They will help you navigate the system alongside the “do-and-don’ts” of the local business community. If you struggle to find one, speak with EBCR.
Whatever you do, remember to look beyond the ex-pat community. Entrepreneurs who fail to go out and “plug into” the local Rwandese community are far more likely to fail.
Where else to source information?
Here is a list of good resources some of which have been used in this very Business Starter Pack:
I think a lot of people come to Africa, or hear about Africa, and see the huge potential. But you shouldn’t forget that it really is a long-term project and investment. It’s a long-term endeavour.
It is very difficult (almost impossible) to come here and immediately make huge profits. It depends on the industry, but in most cases, it takes time. This is why I really recommend to everyone to be patient.
I’ve seen people who’ve come to Rwanda, and after two years or so did not get what they expected in terms of returns and then they left again. I might have done the same if I’d come here with the same expectation. But I have seen that after the third or fourth year, you get to know the country, build the customer base, and get into some big projects.
So, be patient, keep working and think long-term.
I really see that you can be very successful and then really expand to other African markets and I believe that’s the future. Especially looking at Rwanda. The way it grows every year, the policies that are put in place, the stability. It is perceived as the new Singapore, and it might be, you never know what might happen. I think it looks very promising.
#advice
Another thing I’d like to mention here is that (especially for younger people) If you want to start something in Africa, you have to have capital – I believe. Because as I said it takes time until something works out, and then you have your living expenses as well. I have seen people fail because they ran out of money.
One thing that I wish I had done myself: If you have a good CV and a good level of Education you could start with a normal job here working for a startup or a company. So you get a good salary – because the salaries for ex-pats are generally quite good (you can even save money) – and get to know the market. You’ll also have the chance to see if this is a country that you want to live in. Then you could start a company while you’re still working and wait till you’re ready to make the switch.
I know people who have successfully done that. I’ve seen that they really have had a lot less pressure than all those entrepreneurs who came to Africa and who’ve had to be resilient – myself included. So, this is something that I would really recommend to young people.
And, I’m not sure how true this is but I’ve heard that it’s easier to get a job in Rwanda when you apply from abroad. Because if you’re here you might be perceived to be a little bit more desperate for it as you’d need the job for your visa.
These big organisations are looking for talent, and they know that if you’re in Europe you’re kind of hard to get.
So they’re more likely to offer you more in terms of benefits and salary. Those are things I’ve heard. I can’t guarantee they are true though.
I would advise you not to expect too much in the first two years.
You can expect to need a mixed financing model at the beginning, working between loans, grants, and other kinds of revenues.
You’re also likely going to have a very hard time sourcing statistics and data. From early on, you’ll need to figure out a way to gather that information by yourself. Don’t be reliant on any government or university entity. You’ll need to have a lot of patience in terms of getting your stuff through.
It took us three to three-and-a-half years to get recognized by the Ministries and finally get picked up. Even though everyone else was recognising us from the beginning, it took longer to be officially recognised.
Revenue is extremely hard to get by. Most companies use Rwanda as a pilot country: If you can make it in Rwanda, with even minor revenues, it means you are most likely going to make it if you scale into East Africa. This is what most solar companies do: they come in here, prove their technology and then go into Ethiopia etc.
Rwanda is the prefect playing ground. It’s very forgiving, in the sense that if you fail, you can still have the chance to try again and do it better.
Whereas in Sweden (or even in Nairobi) if you launch a company and it didn’t work, it’s very hard for you to relaunch it.
At BAG innovation we’ve pivoted our business model, our value proposition, and our problem statement so many times. Yet still, it has been very forgiving, and we still managed to grow despite that. It’s a very “relaxed” market in that sense. Also, the market here doesn’t move that fast, so you have a little bit more time to develop your product compared to another country where you’d have 10 competitors right away before you’ve even launched.
[…]
#advice
I survived on monthly costs of around USD 500 – 600. Rent, food, and everything. People have this perception that it’s more and that it’s expensive to come here, but you can even survive on USD 400. With that budget (500 – 600) it’s comfortable, you can still go to the restaurant once a week, and you can still enjoy yourself, without being privileged. Might not be able to travel too much. If you have a certain standard of living then you might spend something closer to USD 2,000, and you should probably not come here as a start-up entrepreneur.
#insights
It’s a very fun environment. It’s an exciting environment, in the sense that in the past 5 years every industry has boomed. There was no coffee industry 5 years ago and today there are cafes popping up everywhere. It’s the same in any industry, there’s so much money being pushed into all these sectors. Not always in the right way and not necessarily sustainable, but it’s everywhere and you can see it. That means that there are a lot of opportunities to tap into.
As an ex-pat, it’s very easy to come here and identify a problem and build a solution to address it. Then you get investment and grant funding to run that for a few years. From there, sustainability will come if you’re able to scale it outside of Rwanda — or if you’re selling in some key industries like the pharmaceuticals.
In terms of the environment there’s no better country in Africa to come and start up, because the safety, the cleanliness, the people.
My other advice is: Don’t do your market research at home. Come here. You have to get into the deep waters. Live here for three months and work hard. Those are the people who start and succeed. The people who are here for 2 weeks on a vacation, and then go back home and start doing research and try to communicate with me about helping them with market research for them it never works. You need to dedicate a considerable amount of time and you need to see yourself staying. You can’t be dependent on building up a local team and then leaving.
I’ve seen that with many Swedish companies: They come here and then ask us to train the team, and when they think it’s good enough, they leave, but then it’s never good enough. You need to be the supervisor for longer than you think.
During the initial 3-month period, a network like EBCR can be a great accelerator. For someone new coming and having access to that right away it’s great.
People here are also very reserved they need to have a relationship with you for one year or two before you eventually enter their circle. If you want to succeed in Rwanda, you have to get into the Rwandan circles.
That’s the biggest mistake I see is ex-pats coming here and having only expat-clients, and doing business with each other. But that’s not sustainable.
#advice
What was interesting from that experience was that I really had high hopes that I could have a couple of consultants in Kigali running the business, earning the money, and that I would have something that could look like a passive income.
That would have been really great, but as soon as I left one of my clients stole my consultants because they were really good.
Everybody warned me that you cannot have a business in Africa without being there yourself.
I soon discovered that this was the truth. And also, how disconnected you are from the market and from your clients when you’re so far away. Trying to be close to the process and close to the people while having another job in Denmark was really hard. I could see that my company was suffering from me not being there.
Then you have to keep in mind that this is also a very “relationship-based society”. You have your clients because you have a relationship with them. It’s not just about the work that you’re doing, it’s also about who you are.
In principle, I was back in Denmark for 1,5 years, but in practice half of that year, I was back here in Rwanda doing projects.
#advice #insight
Transposing your business back to Europe from here is not evident at all. You have to have some sort of niche experience that will help you compete with other European businesses. In my case, the only interesting option in the Danish context for HR in Africa would have been Doctors without Borders, but I chose not to do that.
In Rwanda, the system is more effective at enforcing tax regulation. These neighbouring countries are sometimes more “relaxed” with enforcement.
If you compare Tax Revenues with the Country’s GDP, you see that Rwanda is the most effective at collecting tax in the East African region.
Also, when you compare how much tax the Government collets and how much the public feels the benefit of public investments, Rwanda is again the best in the region. People feel like they are getting back what they are putting in. You see security, you see cleanness, a well-maintained road network, you see a vibrant city and you know this comes from the taxes. No one here will tell you they don’t feel like they are not getting something out of their taxes.
People might tell you taxes here are ‘very touch’, but not because the rates are particularly high or because they are applied differently, it’s just because of the difference in enforcement and the greater regularity of the checks.
For example, with the new EBM (Electronic Billing Machine) system the Rwanda Revenue Authority (RRA) is trying to get your tax performance before you even come to declare it. Neighbouring countries are also implementing the EBM system, but not at that level of, let’s say “intelligency”.
Then, of course, if you have been operating in a country where you’ve been able to easily play the system without paying taxes, you’ll come here and you’ll find it disappointing.
Launching a new product is probably a year-long process which we own entirely because what we’ve learned is that whenever we outsource it’s not done well.
When you want something done properly, try to do it as much as possible yourself.
(Which is possible because labour is cheaper here so you can get a good team.)
Not everyone would agree with me but, what I would say is to find a very good marketing strategist who helps you put your product in the market.
So, for us in Uganda, we’ll set up a similar factory there, but with our marketing, we’ll have a different approach than in Rwanda.
I think your market strategy for your brand at the start is the most important thing. So, for your local marketing strategy, I would advise starting with a consultant.
But as soon as marketing becomes part of your operations takes it over yourself. These people are expensive. You don’t want to use them for a long time. As a general rule remember to always follow up to stay in control.
