The tiny East African nation has proven to be a role model for the continent.
During
her November 2018 visit to Rwanda, World Bank CEO Kristalina Georgieva
described the country as one that has enjoyed impressive growth and
often has bold ambitions.
In recent years, at business summits
across the world, it’s not uncommon to hear such praise about Rwanda.
Various speakers have singled it out as one of the emerging economies to
look out for in terms of investment opportunities, value for money and
economic growth.
The statistics explain why Rwanda has become
Africa’s poster child for progress. The country has reduced reliance on
donations and currently, domestically funds about 84% of the budget up
from about 36% two decades ago.
In the last fiscal year (2017-2018), the economy grew by 8.9%.
Barely
24 years after the horrific genocide against the Tutsi, when the East
African nation lost over a million lives and the devastation left a
trail of trauma and economic ruin, its achievements have often been
described as miraculous.
Kagame has led his country from penury to prosperity. His government
has co-invested alongside private capital to reduce risk and create a
more appealing proposition.
For instance, when one of Africa’s
leading telecoms groups, MTN, was keen on entering the Rwandan market in
1998, the government boosted their confidence by purchasing a 20% stake
in the company.
This was driven by an ambition to not only
attract the firm to the country but to ensure citizens have access to
affordable telecom services. Years later, the government offloaded its
stake in the firm through an initial public offering, allowing citizens
to be part of a meaningful income-generating firm.
MTN is just one
example of the strategic approaches taken by the Kagame-led government.
The same has been replicated in multiple sectors, including finance and
agriculture.
The last two decades on the Rwandan economic front
have also been characterized by improving the investment ecosystem to
create interest from the international and local business community.
While
most would concentrate on the odds against the country, such as its
small size, and its landlocked location, amidst a volatile region,
Kagame sought to give investors every reason to put their money in
Rwanda.
In a continent that has always been associated with corruption, the Rwandan government adopted a zero-tolerance stance on graft.
This
was paired with the improvement of service delivery across all sectors,
eliminating the need for bribes to access public services.
The
most recent Corruption Perceptions Index by Transparency International
placed Rwanda as third least corrupt country in Africa.
The
reforms have for the last two decades addressed challenges that have
often kept investors up at night. Steps that are cumbersome in countries
across the world, such as business registration, were eased to a
six-hour activity, while tax declaration and registration were
simplified to online processes.
The World Bank ranked Rwanda 29th
globally in its 2018 Ease Of Doing Business Report and put it second in
Africa. The index tracks business efficiency across the world.
Many
African economies are known for distinct exports or income streams that
have remained unchanged for years. Rwanda chose a different path by
embarking on a concerted effort to diversify exports and revenue
streams.
This approach has seen services become the leading driver
of gross domestic product growth in the last three years, taking over
from agriculture.
Diversification has been achieved, in part,
through an increased focus on tourism, driven by initiatives such as the
Meetings Incentives Conferences and Exhibitions (MICE) strategy which
in less than five years placed Rwanda among the top conference
destinations in Africa.
In May 2018, the International Congress
and Convention Association (ICCA) ranked the capital Kigali as the third
most popular conference and event destination on the continent, after
Cape Town in South Africa, and Casablanca of Morocco.
The ranking
considered as the country’s capacity to accommodate international
meetings and events, together with landmark infrastructure such as a
modern airport and a state-of-the-art conference center.
The country has projected doubling revenues from conference tourism.
According
to Clare Akamanzi, the Chief Executive of the Rwanda Development Board
(RDB), the country collected a total of $42 million from 192 conferences
in 2017 and was projecting $74 million in 2018.
The
diversification strategy has opened up investment opportunities for
local and international investors (Marriott, Radisson Blu, Park Inn,
Serena among others) and created thousands of jobs in the hospitality
industry.
The Rwandan media was in November abuzz with news that
all hotels in the country’s capital were fully booked for conferences
during the month. Conference organizers and tour operators were also
said to be stretched to capacity.
Statistics from the RDB indicate
there were about 10,488 hotel rooms in the country in 2017, while
aviation traffic is expected to grow to about 1,151,300 in 2018, from
926,571 in 2017.
The trend is expected to persist going forward.
Rwanda will by the end of 2020 have a new modern airport located in the
Bugesera District, a 25-minute drive from the capital.
While
pursuing externally-driven growth, Kagame has not forgotten about the
home front. This led his government to adopt a ‘Made in Rwanda’ strategy
in 2016, which has reduced the trade deficit by about 36% and increased
the value of total exports by about 69% from about $558 million to $943
million. Local producers have fast become empowered to produce for the
local and export market.
The Rwandan leader has turned his
attention to regional integration in the six-member East African
Community to counter complaints about Africa’s small, fragmented
markets.
The consolidated market of over 200 million citizens is
more reassuring to investors and makes a business case for joint
infrastructure projects such as the Standard Gauge Railway, which will
connect the major Kenyan centers of Mombasa and Nairobi.
Lisa
Kaestner, a practice manager for finance competitiveness and innovation
at the International Finance Corporation, says: “I see Rwanda is keen on
this and trying to support through the East African Community. This is
one way to reduce the cost of doing business. If you look at it through
the doing business lenses, all countries are trying to improve.”
Kagame’s continental mission has been evident in his various roles at the African Union (AU).
He has often challenged African countries who contribute less than
30% of the AU’s budget and turn to external donors with a begging bowl,
which has been blamed for influencing the body’s decisions and
priorities.
As AU chair, Kagame has sought an adjustment of terms
between Africa and the rest of the world for mutual benefit. This, he
has argued, is more sustainable in the long run and presents an avenue
for growth among all parties, as opposed to aid, which maintains
dependence.
Months after assuming the chairmanship of the AU, in
March 2018, Kagame hosted over 50 African heads of state and government
in Kigali for the signing of the African Continental Free Trade Area.
As
a trade bloc, the trade agreement envisions a continental market of 1.2
billion people, with a combined gross domestic product of more than
$3.4 trillion.
So far, 49 countries have signed the agreement,
with nine ratifications. The development is a huge step towards
encouraging industrialization and job creation across Africa.
Peter
Mathuki, Executive Director of the East African Business Council, says:
“The country’s leadership is on grip to lift the EAC country to middle
income level faster than most African countries. The fast economic
growth is premised on pillars of good governance, easy-to-do business
climate and zero tolerance to corruption… Rwanda is indeed Africa’s
rising star and driver for economic transformation.”
– Collins Mwai
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