Tobias Reiter (Viebeg Medical & Tech Enfold)

May 2021 –

Intro

My name is Tobias Reiter. I am the CEO and founder of two companies operating here in Rwanda: Viebeg Medical a health logistics company and Tech Enfold, a social enterprise which focuses on empowering female software developers in Africa.

Company registration

Why did you choose to set up Viebeg in Rwanda?

#registrtion
I already had a business in Europe, but I fell in love with Rwanda, and also found an opportunity to have a meaningful social impact by starting a company here.

As a general rule,

Rwanda is a great starting point for brining your product to the East-African market. It acts as a hub from which you can scout surrounding opportunities and then deliver services and goods to surrounding countries

that may, for example, have more civil unrest, and greater barriers to entry business-wise, such as bureaucracy, or even competition. #importExport
How was the company registration process in Rwanda for you?

#registration #investing
Our company (Viebeg Medical) is actually owned by a holding company based in the US. Having a holding company based abroad means that it’s easier for investors to invest in your business. It gives them more confidence too.

Why did you set up the holding company in the US?
#registration

It doesn’t have to be the US. You could do it in Germany, the UK, or France. But having the holding company set up in an English-speaking country is advantageous as it means that you won’t have to translate documents when bringing them to the Rwandan authorities.
After Rwanda, which was the next East African market you went to?
#importExport

The next market we went to was Kenya. In part, because my business partner is from there, but also because after Rwanda it likely is the next easiest place to do business in (in East Africa).

Import & Export

What kind of import/export taxes are you subject to?
#importExport
There is a 7% import tax on medical products entering the country, regardless of where they are imported from the East African Community (EAC) and EU countries are treated the same for that.



Do you have any advice for companies interested in entering the East African markets?
#importExport

My advice for companies looking to expand into EAC is don’t go too fast. There are a lot of things that could go wrong, politically, economically but also in terms of the competition. I’d advise waiting at least two years before expanding so as to make sure to first have a solid base in Rwanda.

It also takes time to adjust your product or service offering to the adjacent market. The products that we are selling in Rwanda are not always the best product-market fit for poorer countries like Burundi. Likewise, they are not always the best products for some richer countries like Kenya.

So you likely will need to do to adjustments to the products or software that you’re selling before entering the new market. Also, keep in mind that the competition is often higher in other countries like Kenya. These are things that it is important to take into consideration before making the jump.

How important is it to try and find a business partner in those countries before expanding there?
#importExport

I think it depends because you wouldn’t just trust anyone with your business. You have to be careful who you start a joint venture with because once you get started it might be tricky to pull back.

In our case, when moving to Kenya, we did it because we’d known the person for many years, and we trusted them. Still, our approach was very progressive to minimise the risk.

But, having a local business partner in some of those neighbouring countries does help a lot. They can really help you grow your company, help you understand the market conditions, and the regulatory situation and overall reduce risk. If you really know the person well, I’d advise it.

In some countries, like Tanzania, it is actually a legal requirement to have a partner (unless you invest over 750,000 USD). I’ve seen many companies fail because of that, and I’ve seen many companies succeed because of that.

What kind of hindrances has COVID caused to you in terms of being able to export to those countries?
#importExport

Huge. Normally a lot of our revenue comes from the DRC and Burundi. But the borders were completely closed – and are still closed for Burundi. So, we cannot really do trade with Burundi, Congo, and Tanzania.
We have also had a lot of difficulties importing products from Kenya and Uganda. So, the intra-African trade was really made more difficult because of it. Trading between these countries became harder and also financially less attractive. So for the moment, we’re refocused on Rwanda.

Are there any particular tax-related regulations that someone should be aware of before starting to export into EAC
#tax #importExport

I’m not sure as we don’t actually do any exporting.

There are different ways to get products to other countries, but mostly you would need to apply for an export license.

At the moment we have special arrangements with our customers in Bukavu and Goma, where they just collect the products at the border. It’s 100% legal, and it means we don’t need an export license.

Also, it avoids us having to deal with the Congolese border as there can be a lot of corruption with these things and we don’t want to engage in that.

It’s actually the clients that advised us to do that. It is something that is common there.

TAX

How was the tax registration process for you?
#accounting #tax #registration
I did find it somewhat tricky because when I registered the company at the RDB I expected that I would automatically also be registered for tax. What I didn’t know was that I also had to go to the Rwandan Revenue Authority (RRA) to do that separately. Likely I had an accountant that helped me with that.



What would have helped, however, is if there had been a bit more clarity in terms of which taxes I needed to pay. For example, at the beginning for my smaller company TechEnfold we did not know we had to pay the cleaning fees. As it turns out, every month you have to pay 10,000 RWF (approx. 8.74 EUR) in “cleaning fees”, which is something that we don’t really have in Europe.




My experience was that I didn’t really know which taxes were supposed to be paid and I found myself going door-to-door in order to ask and understand. The accountant we eventually found helped us out. He was found by my business partner who sourced her from the University.

She actually had an MBA, but still really lacked an understanding of basic accounting and regulations. As a general rule, there is a big gap between the educational level and the professional requirements. As a matter of fact, Rwandan accountants often don’t know the whole system and the laws in application in Rwanda. When they come out of University they just know the very basics and then often make a lot of mistakes in the beginning, such as forgetting to declare taxes etc.

EBCR actually helped a lot with that. Discussing with the members and participating in working groups over time has really helped me gain a lot of clarity in terms of what taxes I have to pay and how things work.

It is not uncommon for Rwandese SMEs to get big fines when there is an audit because they often don’t know a lot of things about tax regulation.

Even CPAs (Certified Public Accountants) and tax advisors are likely to make a lot of mistakes because they don’t always properly know the laws. It can be hard to find a reliable source of information for these matters, and for many things, EBCR has provided exactly that.

Did you ever face any difficulties when it came to paying taxes?
#tax

No. With the exception of the cleaning fees – for which we ended up having to pay a small penalty – we have had no problems with paying taxes so far. Mostly because from the beginning I made sure to discuss with and gather information from the other European entrepreneurs here. Learning how to avoid mistakes, and generally how to do things.

Other than that, our initial investment allowed us to always have a good cash flow and therefore always be able to pay taxes on time.
How do you maintain visibility/control over your taxes and VAT declarations?
#tax #accounting

We tried with internally hired accountants and we tried with CPA (Certified Public Accountants) too. Quite frankly, in both cases, we were disappointed with the quality and reliability of the work. As a matter of fact, the advice we were given did not always match with what the RRA stipulated. So, we’d always had to double-check.
For instance, I went to the RRA to find out: How do you tax a bonus? And the CPA who’d been working on the market for 20 years and advised more than a hundred companies on that exact matter said that you only had to pay Withholding tax (WHT) which is 15%. But then I went to the RRA and learned that you actually have to declare all and pay all the liable taxes I.e. including PAYE (Pay as you earn), and RSSB Contributions which is almost 42%! So quite a big difference.


I’m glad I didn’t just listen to the CPA without inquiring further as that could have cost a big fine. But for all the other companies who’ve made many mistakes over the years, it has been very expensive for them.
Recently we’ve found the right accounting firm to manage our accounts. We’ve also got an external CFO, which we found through an EBCR recommendation, so that network has been helpful for us.
Which is the tax that has the greatest impact on your organization at the moment?
#tax

The most we pay is PAYE (Pay as you earn) – which is what you pay for the employees on all the salaries – and Withholding tax (WHT). I think these two are almost the same every month. (We have a total of 25 employees: 14 in Rwanda and the rest are in our other East African Offices.)

For the first two years, we were not yet profitable, so we did not payCorporate Income Tax (CIT).

Human Resources

What was your experience in recruiting local talent?
#hr

My Kenyan partner had been in Rwanda for 10 years working for one of the biggest Medical Supplies companies in East Africa, so he knew a lot of people in the industry. We invited some of these people for interviews. We were also lucky that we had a big pool of people that were recommended to us.

So generally, when it comes to hiring for managing positions, we usually try to find people coming from the medical supplies industry. But with some other positions, such as admin, operations, and IT, it’s been very difficult to find the right people, because we don’t have any referrals. Some of our hires for these roles have turned out to be good, others not so much.

We do try to provide training to all of them, and a lot of them are already enrolled in an educational program in parallel such as a master’s degree.

As a general rule, the level of education is not as high as it is in Europe. I don’t think that’s a secret, but it is a problem. You’d expect someone with an MBA to have a certain skill level, while in fact, the level of practical experience is often really low here.

So, if you found someone who studied computer science, you might be surprised to find out that they don’t really know how to program.

The same is true for other fields like Finance, Accounting, Administration etc. My advice, if you want to hire graduates or near-graduates, is to be patient, hire people based on their mindset, and dedicate some time to training them.

How long would you dedicate to training a young computer graduate here?
#hr Normally a computer science graduate in Europe has 3-4 years of practical programming experience. (Without considering that, often computer science students have coding as a hobby.) Plus, through their university degrees, they have a lot of resources, with 1-on-1 and mentoring with professors, and are met with numerous opportunities to develop their skills throughout.

Whilst here, some of the graduates coming out of university, are not even junior developers. They’re real beginners. As a part of a computer science degree at a university here, you could expect that someone might have just done one or two projects – that’s all. So it would take a lot of months of training to get them to the European equivalent graduate level.

So, if they intend to work in the field, graduates often have to learn everything, nearly from scratch. This is why you see a lot of people who study computer science go and do some educational programs like Andela – which are great by the way.

What can you tell me about vocational training programs like Andela and WeCode?
#hr

Andela, WeCode, and various other programs funded by GIZ as well as other organisations offer training for people in Rwanda who want to learn to program or improve their programming skills. In general, these programs have the virtue of teaching people enough of the basics so that they can then go on and learn more code on their own. And the more they write the more they learn.

So, these programs are good but still only really teach the basics. When people come out, you shouldn’t expect them to even be at the level of Junior developers. But once they’ve done those programs, they might be able to go do an internship. Then, after the internship, hopefully, those companies will actually employ them and help them build their skillset even further.

The only issue is that there only are limited job opportunities – especially now after Covid. So, a lot of people might not immediately get a job. Some might go ahead and find work on platforms like UpWork and other freelance platforms to get more experience, or even start their own start-up.

Have you ever reverted to hiring someone from abroad, e.g. from Europe in order to fill a particular position for which you couldn’t find the right person in Rwanda?
#hr

Yes. The issue with, for example, Senior Engineers is that people that are really good here are in very high demand.

Because a lot of organizations want really good people locally, and the salaries are quite high. So, a senior engineer in Rwanda can cost $3,000 per month. This means that before tax, it can cost you almost $5,000

If you compare that to a Software Engineer in Ukraine who might have the same or even higher skill level could get them for $1,500. This is a huge problem in this market because hiring the right Senior Engineer or CTO is crucial.

I have hired someone on a $3,000 salary for my other company before and it was a mess. It wasn’t worth the money. Some people even asked for six, seven-thousand-dollar salaries.

So, despite wanting to be an African company and hiring Africans, it is sometimes tempting to hire someone from abroad. Sometimes there are some positions that you just can’t fill otherwise. For instance, for our current CFO, we were not able to find someone who was good with tax law, so we hired an external CFO who’s based in Rwanda but who’s originally from the UK and India.

How do the regulations and laws around employees in Rwanda compare to your home country?
#tax #hr

I would say it is easier compared to most places in Europe. Things like laying off employees etc are either similar or easier to do in Rwanda, to the benefit of the employer.




The process for hiring employees is easy too and doesn’t take too long. You just have to register as a company. Register your new employee at RSSB and then you start paying them.

What can be tricky, is calculating the PAYE tax to pay for each employee, and making sure you don’t make mistakes. Then there’s the RSSB contribution (Pension & Medical insurance), and the various allowances for every employee. So, it is something that is a bit more complex, but the contracts and laws are quite straightforward and similar to Europe.


In our case, it has been our accountant sorting these things out for us, such as how much tax we have to pay etc. But even then, despite having an accountant some mistakes were made at the beginning.

When you’re a big company, doing business in Rwanda is a lot easier because you can get the right people and the right advisers to help you. You also benefit from the extra help from RDB, which includes having a key account manager [see RDB Aftercare Service] etc.

While as a small company, and you want to do everything yourself, things can be a bit more complicated in the beginning.

Market Insights

In most European countries the healthcare sector is notoriously bureaucratic and difficult to do business with. How does that contrast with dealing with the various governmental and healthcare services?
#insights
The Rwandan government has been very supportive in many aspects. Immediately after the first year or second year, we won our first public tenders. So it was quite easy to enter the market as compared to other countries.

Now we have long-term contracts with the Government, with public institutions, and other big institutions like USAID.

So that is a very big advantage in Rwanda – in Africa in general – the barriers to entry are a lot lower than in other parts of the world.

Advice

Do you have any particular tips or advice for people considering coming to East Africa?
#insights #advice
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 you 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.