Meticulous attention to the requirements of the most dynamic sectors has sustained the confidence of the private sector, as Rwanda’s economy continues to grow, writes Eugene Kwibuka
“It is the private sector that develops the country’s economy,” said Emmanuel Hategeka, Permanent Secretary at Rwanda’s Ministry of Trade and Industry. His emphasis is hardly surprising given that he is a former CEO of the Rwanda Private Sector Federation. “We try to focus where we can do best,” he added. “There is commitment of leadership to implement strategies aiming at uplifting the country’s economy.”
Although at heart he may be a businessman, it is clear that Hategeka is fully conversant with his government’s guiding principles and approach, as he explains the secret of building a new economy for a country that has been forced to start again from scratch.
Sustained growth has visibly brought Rwanda back to life, nearly 17 years after the 1994 genocide against the Tutsis and the subsequent liberation war left the country in a very sorry state. The country’s economy has now been growing consistently since 2000, at an average annual rate of between 7-8 percent, and its total GDP is currently valued at $5.2 billion – according to World Bank figures for 2010.
This geographically tiny but densely populated country has managed to attract both foreign and domestic investment. Money is currently being injected into restructuring the main cash crops of tea and coffee, developing high-end tourism, creating new industries, introducing a working financial system and building the communications and energy infrastructure.
The key investment opportunities have been highlighted and marketed through the three-year-old Rwanda Development Board (RDB), the government’s business marketing and registration arm. Specialpriority has been given to agriculture, trade and manufacturing, tourism, ICT, infrastructure, mining and services. In 2010, the RDB said it had attracted 105 investment projects worth $381 million from both local and foreign investors. Its 2011 target is for another $550 million. One of the fastest growing investment sectors is tourism, which generated income of $200 million last year, a 14 percent increase over 2009. This year’s tourism earnings are estimated at $216 million.
Rwanda’s strong economic growth has been helped by the fact that the government has been diligently following its long-term development plans, such as those described in the Vision 2020 document. This has the ambitious aim of transforming Rwanda from a low-income, agriculture-based economy to a knowledge-based one, and seeks to raise the annual per capita income of the average Rwandan to $1,000 – up from only $200 in 2000 and the current level of $541. It is an article of faith for President Paul Kagame’s government that achieving a service-oriented and knowledge-based economy by the year 2020 will require a steady rate of growth of 8 percent every year. This is to be achieved by reforming the way in which Rwanda does business, by investing in major infrastructure projects like power, transport and ICT, by increasing agricultural productivity and by fostering the skills needed for economic modernisation.
In the short and medium term, the Vision 2020 programme is boosted by the five year Economic Development and Poverty Reduction Strategy, which kicked off in 2007. Where previously Rwanda lacked concrete plans for the growth of its different economic sectors, these have now been developed on several fronts, Hategeka explained. The strategy of investing in agriculture has helped Rwanda to be food-secure, while schemes to attract high-end tourists and diversify tourism attractions have also brought benefits. After describing the different programmes that the government has been putting in place to attract investors’ dollars, Hategeka said that it was clear that the approach had “paid off.”
Rwanda was ranked as a major reformer in the World Bank’s ‘Doing Business 2010’ report, which assesses regulatory environments for domestic businesses in individual countries – it jumped 76 places to 67th position out of 183 countries. Hategeka stressed that the secret to Rwanda’s current success is “leadership and addressing the right problems with the right solutions”. As the country struggles to end poverty by means of new investment, it is also striving to end its dependence on foreign aid. Currently, the Rwandan government generates sufficient revenue to fund about 50 percent of its national budget, with the remainder provided by donor countries through budgetary support. The country’s tax collection agency, the Rwanda Revenue Authority, has been doing well since it was created in 1998. It estimated annual tax collections for the fiscal year 2009-2010 at RWF374 billion ($631 million). By comparison, in 2000 the agency collected only around Rwf65 billion ($109 million).
And as Rwandans work their way out of poverty, they will need the private sector to grow, Hategeka emphasised. Responding to the criticism that there is an increasingly observable gap between the rich people and the destitute in the country, he said this had to be expected: “If the economy is growing, the gap between the rich and the poor also grows.”
But that doesn’t mean the government in Kigali does not have plans for those Rwandans who are still living below the poverty line, especially in rural areas. The World Bank estimated that 56 percent of Rwandans could be classified as poor in 2010, with about 37 percent of them classified as extremely poor. It also reiterated the government’s own ambition that, with the population growing at approximately 2.7 percent annually, Rwanda will need to achieve GDP growth of at least 8 percent per year if it is to achieve any significant reduction of poverty in the years ahead.
With the continued support of donors, the government of Rwanda has responded by initiating special programmes to donate cows to poor families, and by extending the services of small local savings and credit banks to local people. Small projects like this are intended to keep the poor not only alive but alert to the opportunities becoming available, as they wait to see if the country’s multi-year visions for the future will bring a sustainable and positive change.
