Integration of Informal Sector in National accounts through Integrated Business and enterprise Survey (IBES) PRESENTED BY Jean NIYIGABA Tel: Addis Ababa, January 2016 REPUBLIC OF RWANDA

Contents O. Country Presentation I. Introduction II. Background III. Methodology I.V. Results V. Conclusion

O. Country Presentation Rwanda is a landlocked country situated in central East Africa. Also known as ’the land of a thousand hills’, Rwanda has five volcanoes, twenty-three lakes and numerous rivers, some forming the source of the River Nile. The country lies 75 miles south of the equator in the Tropic of Capricorn, 880 miles ’as the crow flies’ west of the Indian Ocean and 1,250 miles east of the Atlantic Ocean - literally in the heart of Africa. Rwanda is bordered by Uganda to the north, Tanzania to the east, Burundi to the south and the democratic republic of Congo to the west. Anyone visiting ’the land of a thousand hills’ is in for a multitude of surprises. The loveliness and variety of the landscapes in this ’green country’ is dominated to the north by volcanoes and bordered by Lake Kivu to the west. In Rwanda the great animals of the wild are protected from poachers and roam free in the vast national parks. The Volcanoes National park in the Virunga volcanic mountains with its high altitude forests, are world famous for mountain gorillas - timid and passive family oriented giants - which is teeming with wildlife both large and small, while Lake Kivu to the west offers beautiful beaches, jutting pennisulas and an archipelago of islands.

O. Country Presentation

Land Area: 26,338 square Kilometers. Population: Approx. 12 million (new census to be carried out in August 2012) Rainfall: Rainy seasons: March - May and October - November(Average of mm. per month). Average Temperature: ºc. Hottest months: August, September. Altitude: Ranges from m above sea level. Main water bodies: Lake Kivu, Lake Muhazi, Lake Ihema, Lake Bulera, Lake Ruhondo, Lake Mugesera. Vegetation: ranges from dense equatorial forest in the north-west of the country to tropical savannah in the east. Main National Parks/Animal Reserves: Akagera and Virunga Volcanoes National Parks. Highest point: Karisimbi volcano (4,507m) Borders: Uganda to the north, Tanzania to the east, Burundi to the south and Democratic Republic of Congo to the west.

I. Introduction Rwanda’s Economic development is dependent mostly on his population activities, the informal sector plays a significant role as a major source as a significant contributor to country Gross Domestic Product (GDP). Even if is the case, regarding different contributors on country GDP indentified during the periodic National Account publications, the informal sector remains ignored, then we choose the said topic for integration of Informal sector in Integrated Business and enterprise Survey (IBES) as this survey is being done periodically in the country and if it happen to integrate the informal sector in the questionnaire used during survey data collection it will be useful for the country to capture informal sector account and this integration will still on the purpose and objectives of the said survey

I. 1.Definitions IBES is a company-level survey of a representative sample of an economy’s private sector. The survey covers a broad range of business environment topics including income, expenditure, employment, access to finance, capital formation, inventories, balance sheet, etc… from non agriculture sector in Rwanda. Informal Sector: Informal sector is a set of enterprises or trade businesses which are not registered by neither Rwanda Development Board nor Rwanda Revenue Authority in other words those trade businesses uncountable fiscally. Most, if not all these companies do not maintain standard regular accounts (Balance sheet, Income statement, etc)

I. 1Definitions National Accounts: National accounts or national account systems (NAS) are the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation. These include detailed underlying measures that rely on double-entry accounting. By design, such accounting makes the totals on both sides of an account equal even though they each measure different characteristics, for example production and the income from it.

I.2 Objectives of the survey I.2.1. Main objective of IBES The main objective of the periodic IBES is to provide an integrated description of main economic and business indicators by economic activities such as income, expenditures and profitability. It also includes non-financial data such as the number of employees, data on access to ICT, access to finance and access to raw materials all of which are indicators of the business environment.

I.2 Objectives of the survey ( Count…) I.2.2. Specific objectives of IBES  The specific objectives of IBES are, but not limited, to the following:  To provide statistically significant business environment indicators that are useful in all ministries and institutions in Rwanda in general and to serve the compilation of National Accounts Statistics and the Balance of Payments Statistics in particular;  A measure of industry performance and financial structure, including economic ratios such as the return on assets and equity, debt ratios and gearing;  The basis of annual updates of Supply - Use table and Input - Output tables;  To assess the constraints to private sector growth and enterprise performance;  Information for the economic analysis of different economic activities.

II. Background IBES is a company and business level survey of a representative sample of an economy’s private sector. The survey covers a broad range of business environment topics including income, expenditure, employment, access to finance, capital formation, inventories, balance sheet, etc… from non agriculture sector in Rwanda. The objective of this periodic survey is to collect data needed by the Government of Rwanda and different business and development stakeholders to make sound planning and decision making concerning business contribution on National Account. Reference is made to the one conducted in Rwanda in , where there is some amendment being realized on the questionnaires for its improvement in , the integration of different informal sector areas will allow the identification of it contribution on National account periodically.

III. Methodology Using survey questionnaire / questionnaire on the population selected we shall be able to capture formal and informal sector necessary data which will allow estimating in general the contribution of informal sector on National Account.questionnaire IBES will be done using internationally recommended methods. Firstly the survey will be subdivided in two parts: Formal Sector which is already captured periodically and Informal Sector as a new area. The first is the Formal sector comprised of units that fulfill both these conditions:  Officially registered through Rwanda Revenue Authority RRA and/ or Rwanda Development Board RDB are considered) ;

III. Methodology All units in our sample that will be fulfilling the above criteria will be considered part of the Formal sector and will treated as so. The second is the Informal Sector which will be comprised of all other units not fitting in the first group. Companies in the informal sector usually do not maintain regular accounts but they only have rudimentary financial information. Consequently, their questionnaire will be designed in a simple way in order to tackle those challenges. IBES, like most other surveys, serves a variety of purposes. It cover businesses from different institutional sectors mainly Non Financial and Financial Sectors; Non Profit Institutions Serving Households (NPISH).

III. Methodology ( Count…)  For Non Financial Sector, the survey will emphasize on main characteristics related to different economic activities such as Manufacturing and Mining; Construction; Trade; Hotels and restaurants; Communication; Transport.  For the Financial Sector, the survey will emphasize on Banks; Insurance companies and micro finance institutions.  For the informal sector as a new area to be integrated, we shall focus on those informal activities related to economic that can contribute to the National account such as informal trade, informal services delivery activities such as protocols, tourism guidance, Employment etc..

IV. Results  The results from data analysis using different systems software will show how the informal sector areas contribute to the National account System in Rwanda and allow the catchment of informal sector contribution, without changing of the objectives on the normal Survey system.

V. Conclusion The large implications of our study are: It will help the Government to incorporate the informal sector contribution in National Account system using the existing data collection system It will help the Private sector to know the ignored part of their capacity and be able to start incorporation of that capacity in their normal system. The study will show on the government, the potential of informal sector as a most ignored area in country economy and allow same promotion from informal to formal sector for some activities

Will Informal Sector be Integrated in National accounts Perfectly as the formal one?

Thank you Murakoze

Q.A