The role of corporate Governance in the promotion of business in East African Community : A Case Study of Rwanda

Abstract

Corporate governance has become an issue of global importance and certainly that is why I was compelled to check its role in the promotion of businesses in EAC and hence zeroing in on Rwanda as a case study. It has been proven that doing commercial business in any state with good and propitious business laws promotes economic development of that state and hence prosperity. For the case of EAC and particularly Rwanda as a member state, harmonizing business laws may undoubtedly spur economic development without any fear of contradictions. It is in this spirit and letter that I chose to make a research on this topic and explore the role of harmonization of business laws in these East African Countries and try to discern whether not doing so may adversely affect the set goals of economic development. My thesis is comprised of three chapters and a conclusion with recommendations to this effect. Rwanda’s political history was characterized by turmoil and upheavals which largely contributed to the stunted economic growth because emphasis was not put on business development but rather on individual draconian controls based on identity and so on. After the war and genocide of 1994, the political landscape changed fundamentally and there was government programs to uplift peoples’ lives and safeguard human rights especially the fundamental rights. All this required that the functioning of the central government be tailor-made on the rule of law and respect for individual freedoms and liberties. To duly arrive at this, things had to grow well when grass and lawn grow on law court stares. It was respected and progressively things gained momentum hitherto. As a country that is land locked and needs to register economic development through imports and exports of goods and services, it had to make allies with bordering countries through the signing of different protocols that form the treaty of EAC. It happened and this was mainly done to ease and develop policies and programs aimed at widening and deepening co-operation among the Partner States in political, economic, social and cultural fields, research and technology, defense, security and legal and judicial affairs, for their mutual benefit. In the field legal and judicial affairs where this research lies, harmonization of business laws and its role in the development of businesses in EAC was explored and expounded with clear benefits outlined. Chapter one of the research paper deals with the overview of Rwanda’s historical corporate governance and its accession to EAC. This overview traces Rwanda’s corporate governance from the period when Rwanda obtained its political independence in 1962 to the current dispensation. Corporate governance regulates the exercise of power (that is, authority, direction and control) within a company in order to ensure that the company’s purpose is achieved namely; the creation of sustainable shareholder value, the raison d’Etre of most for profit companies. The structures, processes and practices that the board uses to direct and manage the operations of a company determine how the authority is exercised, how decisions are taken, how shareholders have their say and how decision-makers are held to account. In this chapter, citation of most reputable writers were used as doctrines to support my arguments and in some cases domestic laws referred to in an effort to fortify my point of view. Also, theories and essential requirements for the registration of the company were highlighted plus showing how a corporate body can be liable criminally basing on Rwandan laws. In chapter two, we managed to elucidate the impacts of corporate governance in EAC as well as the picture of corporate governance in Rwandan law. In Rwandan corporate governance we showed how general assembly of shareholders works, the ordinary general assembly as well as the extra ordinary general assembly. Rights and responsibilities of shareholders in this chapter are also discussed as well as how company directors are appointed. The composition of the board, the executive board and non-executive board of directors and their appointments are discussed based on the laws of Rwanda. The roles of the chairman, secretary to the company and company auditor are also discussed in this chapter. Governance of state owned entities and codes of best practices are fully discussed with some overview of salient impacts in Rwanda corporate governance, foreign direct investments, legislation and regulations. In chapter three, a bigger picture of harmonization of business laws in EAC is shown with introductory remarks of what harmonization aims to do and what it is in real terms. Harmonisation of laws generally and harmonisation of business laws in particular are discussed as well as its importance to the EAC member states. Finally, the conclusion based on the aforesaid discussion is made plus recommendations suggesting what should be done in order to preserve our corporate governance practices since this is seen as the modern way of spearheading commercial businesses in Rwanda.