Rwanda: a development model?

Deep in the farming country that stretches along Rwanda’s southern frontier with Burundi, a vast project is taking root amid the scattered cassava and banana plots that locals have tended for generations.

As construction teams carve dirt roads, dig pipelines and hammer signs into the crimson mud, travellers along the nearby highway are greeted with an early glimpse of Rwanda’s industrial future.

The 100-hectare industrial zone may be a curious novelty for locals, but for policymakers in Kigali, the project is a key plank in a strategy that aims to turn this tiny, landlocked nation of smallholders into an economically diverse African champion.

Much ink has been spilled describing the so-called ‘Rwanda model’ – a development state inspired by Singapore’s rise from underdeveloped economy to a leading global trade hub, predicated on strong government, an incorruptible bureaucracy and a red-carpet welcome for investors. The statistics certainly make for impressive reading – according to the International Monetary Fund (IMF), poverty in Rwanda plunged from 56.7% in 2005 to 39.1% by 2014.

Yet if the country is to prove more than an imitation of an Asian ‘tiger’, policymakers insist that the pace of economic diversification and regional integration must be accelerated.

“Because of the rebalancing of China, the slowdown has affected us,” Claver Gatete, Rwanda’s finance minister, tells African Business.

“What we do here is two things – diversify so we are not relying on minerals, so that we are creating new areas that are going to support exports. At the same time we are working with areas such as textiles, which can be produced here to help us with import substitution.”

Early evidence suggests that Rwanda’s diversification is more than wishful thinking by politicians. The IMF estimates that GDP grew by 7.3% in the first half of 2015, even while regional rivals suffered from China’s slowing economy. Services are expected to grow 7.1% in 2016, compared to 5.1% for agriculture, traditionally the state’s superior performer. Yet with mining exports almost halving last year, a symptom of the global slump in commodity prices, there is a need to further nurture Rwanda’s fragile economic roots.

In response, the government has forged a private-sector outreach programme that is virtually unprecedented in sub-Saharan Africa. Over the last few years, myriad state agencies have attempted to promote, package and accelerate investments. The most prominent of these, the Rwanda Development Board (RDB), was established to simplify engagement and act as a one-stop shop at the beck and call of investors. Operating out of an imposing building in downtown Kigali, the RDB sits at the heart of Rwanda’s development strategy – chief executive Francis Gatare even has a ministerial post within the cabinet.

Innocent Bajiji, head of the investment promotion and facilitation department within the RDB, says that the board’s close work with government agencies – boosted by Gatare’s cabinet position – has helped to entrench Rwanda’s development philosophy and convince investors to come aboard. 

“If investors, for example, have a problem with construction permits, you have a team that sits down, calls meetings with stakeholders and discusses. Once we agree, we have a framework at ministerial level where we can agree on policy changes.”

Yet even if Rwanda’s investment authorities are singing from the same hymn sheet, there is an acknowledgement that the success of the country’s development model is at least partly dependent on events beyond its borders. With fewer than 12m citizens, according to World Bank estimates, Rwanda may not have the population to sustain an economic miracle on its own. Like Singapore, its development model relies on its assumed position as a regional hub. Without a strong hinterland, that status could be at risk.

“For us to be able to grow, regional integration is critical,” says Gatete. “As we get more risks and shocks that affect our economies, we need to make sure that the region is a buffer in terms of trade and that we’re removing all the barriers.”

Signs of deeper regional integration are certainly promising. The East African Community (EAC) – comprising Rwanda, Tanzania, Kenya, Burundi, Uganda and, as of March, South Sudan – has made significant strides towards the introduction of a common passport. The bloc has also made haste with plans to harmonise regional mobile charges and integrate financial services. Yet coordinating hugely expensive infrastructure projects across the region – particularly the key transport projects that will link Rwanda to East Africa’s coastal ports – remains a challenge.

“I think we are comfortable now that the leaders understand it. The question now is how to bring in the private sector. But the political leadership understands where we need to go,” says Gatete.

For EAC member countries prone to the vagaries of electoral cycles and leadership changes, forging consistent regional policies can be a challenge. In Rwanda, no such problems exist.

The story of its economic emergence remains closely intertwined with the personal narrative of President Paul Kagame – the former guerrilla leader who has led Rwanda since 2000. Having held a constitutional referendum to allow himself to run for a third term in 2017, Kagame’s forceful leadership style has drawn inevitable parallels with Lee Kuan Yew, the ‘father of Singapore’, who shepherded the city-state’s tightly controlled political system.

Observers are beginning to ask whether Rwanda’s development model is inseparable from Kagame’s stewardship. For Bajiji, the predictability of his rule is part of the charm for investors.

“I think what investors want to see … is stable government. You’ve been on a journey and you know this person has been driving the train for years, and you haven’t had any incidents. From an investor perspective, that would boost confidence.”

Gatete agrees that Kagame holds a unique place in Rwanda’s development model – but argues that the President’s work is just beginning.

“It’s very important to have continuity in terms of how much has started, and for the President it’s really to support us as we move forward. We are saying that he’s helped us build the entire system … He has helped us to work on a vision to become a middle-income country, but that’s not enough.”

David Thomas

African Business will publish a special report on Rwanda’s development in its May issue.