The decision by government to crackdown on all businesses that are not officially registered as it moves to enforce the company act, passed in 2009, is certainly commendable.The company act requires all businesses to register with the registrar of companies following the end the two-year grace period that was set in 2009. The new law also requires all businesses that are registered under the old law to reregister.Many businesses in Rwanda operate informally. In part, this is responsible for the country’s narrow tax base because such businesses are usually hidden from the state for taxes.Yet such businesses have consequences on legitimate businesses through unfair competition. But the consequences are dire for the informal businesses themselves.For instance, informal businesses can hardly access formal sources of financing, which holds back their growth. They are usually excluded from other official benefits such as training and incentives. While government has been urging all businesses to register, it has emerged that most of them are actually unaware of the law, which is largely why some of them have maintained their rudimentary operations.To encourage more businesses to register, responsible government institutions should embark on a thorough sensitisation campaign to help entrepreneurs understand the significance of law in their businesses and the benefits of operating as legal entities.
