The New York Times | Rwanda Reaches for New Economic Model

Posted March 24, 2014 by Ugandan Diaspora News Team in African News ~ 5,817 views



KIGALI, Rwanda — On the 12th floor of the Kigali City Tower, a modern blue-glass office building on the side of one of this capital’s famous hills, the latest endeavor in the effort to transform a tiny rural economy into a financial and high-tech hub is trying to find its footing.

A commodity exchange, with its dozen terminals and state-of-the-art software provided by Nasdaq, held its first six auctions over the past year — a fledgling venture, but the kind that helps explain how a nation with no oil, natural gas or other major natural resources has managed to grow at such a rapid clip in recent years.

“The feeling was that it could serve the region and perhaps be a springboard for the rest of Africa,” said Paul Kukubo, the chief executive of the commodity East Africa Exchange.

The swirl of potential, outsized ambitions and lingering problems like yawning income divides is typical of the story of booming Africa, which has caught the eye of foreign governments and corporations alike as a rich frontier for business. The International Monetary Fund said that economic growth in sub-Saharan Africa would average 6.1 percent this year, compared with 3.7 percent worldwide.

Critics respond that those gaudy numbers spring mostly from the sale of oil and gas reserves or valuable metals and minerals, and that the gains have been divvied up between the offshore accounts of the continent’s plutocrats and foreign conglomerates.

Rwanda offers an alternative model, analysts say, a country where the economy has grown an average of nearly 8 percent over the last four years because of increased agricultural productivity, tourism and government spending on infrastructure and housing. Despite having a population of just around 12 million, the consulting firm A.T. Kearney last week named Rwanda the most attractive African market for retailers in its first ever African Retail Development Index.

“I can’t imagine how they could have made better progress than they have over the past 20 years,” said Michael Lalor, lead partner at the EY Africa Business Center in Johannesburg.

That 20-year starting point is not arbitrary, but the zero hour for a country once consumed by violence.

Outside the Finance Ministry here stands a memorial with a small purple flame dedicated to the 1994 genocide that serves as a reminder of the urgency behind the government’s economic efforts. While preventing any semblance of a repeat of instability has been the principal justification for President Paul Kagame’s tight grip on power, rising living standards have helped keep a lid on renewed tension.

“In terms of the economic model, I think it’s a good example for the rest of Africa,” said Amadou Sy, senior fellow in the Africa Growth Initiative at the Brookings Institution. “Everybody has a vision but these guys have been successful. The record is there.”

He said that Rwanda has outperformed most others in the region in terms of indebtedness, inflation and growth. “The only downside I see,” he added, “I would really consult the political side.”

Rwanda is heavily dependent on foreign assistance, which got slashed after a United Nations report accused the country of fostering a recent rebellion in neighboring Democratic Republic of Congo, squeezing the budget. The World Bank warned last year that the aid shock “clouds the economic outlook for Rwanda.”

Continue reading the main story
So now, more than ever, Rwanda is on the hunt for investors rather than donors. Last April, it sold $400 million in bonds to investors from around the globe, part of a record year for African bonds that underscored how a continent once known for debt relief found a world eager to take a stake in it.

The slowdown in China, tapering of bond buying by the Federal Reserve in the United States and the flight of capital from emerging markets have jeopardized some of the gains on the continent. But some analysts say that Rwanda has held up better than many and has continued to make tangible headway in living standards.

The nation has reduced the percentage of people living below the poverty line from 59 percent to 45 percent between 2001 and 2011, with the share of people living in extreme poverty falling faster. Life expectancy, literacy, primary school enrollment and spending on health care have all gained in recent years.

Beneath the heights of Kigali City Tower, the rusty corrugated iron roofs on the ramshackle one- and two-story buildings below testify to the challenge of Rwanda’s goal: becoming a middle-income country. Beyond the city limits, an estimated 90 percent of the population is still employed in the country’s terraced green hills, growing bananas, sorghum, potatoes and other crops, much of it subsistence farming.

Rwanda hopes to turn itself into an information-technology hub for the roughly 135 million people in the East African Community, a regional common market. The nation has wired itself with well over 1,000 miles of fiber optic cables, and last year the government signed a deal to build a 4G network that would cover 95 percent of the country.

“The strategic vision behind this is a knowledge economy,” said Jean Philbert Nsengimana, the minister in charge of youth and information technology. “That’s where we want to go, shifting from an agrarian base to a knowledge base, leapfrogging the industrial.”

Rwanda faces stiff competition. Kenya has a thriving start-up scene and offices for Google, Intel and Microsoft, not to mention a much larger consumer market attracting foreign companies. But the smooth roads and lack of violent crime make Kigali ever more appealing compared with the gridlocked, more dangerous streets of Nairobi.

The Rwandan government famously banned plastic bags from the country to cut down on pollution. Motorcycle taxi drivers wear numbered vests and carry spare helmets for passengers without exception. As part of a modernization drive, the government demolished tens of thousands of huts with traditional grass-thatched roofs. To curb population growth, it offered free vasectomies and is embarking on a wide-ranging circumcision drive to reduce the number of HIV infections.

Elettra Pauletto, an analyst at Control Risks, a business-intelligence consultancy in London, said that while the country’s rigidly enforced stability and efficiency can attract investment, it can be a double-edged sword for those, including businesses, that run afoul of it. The government took control of Kigali’s Union Trade Center shopping mall after its principal owner went into exile in South Africa.

“It is a very authoritarian political environment,” said Ms. Pauletto. “There can be a failure to respect the sanctity of contracts.”

Human rights groups continue to assail the government for repressive political policies. The country has been engaged in a high-profile diplomatic dispute with South Africa over attacks on Rwandan dissidents living there, including the murder in January of the country’s former spy chief, found strangled in a Johannesburg hotel room.

Meanwhile, nongovernmental organizations focused on development have praised the country’s economic reforms, with the World Bank giving it high marks for the ease of doing business here, ranking Rwanda 32 out of 189 worldwide. It also put Rwanda above the United States for the simplicity of starting a new business.

“Getting started is really easy,” said Clarisse Iribagiza, one of the founders of a technology company called HeHe. She said it took them one day to set up the company, for less than $40. Help from a government official is available through social media.

“If I need to get in touch with a minister, it’s so much easier than when we started out,” said Ms. Iribagiza, at a shared space called the Office where she worked alongside other young entrepreneurs. “Basically I’ve tweeted them and gotten feedback.”

Like the commodities exchange, the Rwanda Stock Exchange, which opened its doors in 2011, is still finding its footing. Pierre Celestin Rwabukumba, 39, chief executive of the stock exchange and a former stockbroker in New York, returned to Rwanda in 2004, working first at the country’s central bank.

“We started from blank paper nine years ago,” he said of the stock exchange. Three years after getting its start, only two domestic companies, the brewer Bralirwa and Bank of Kigali, have had initial public offerings. But Mr. Rwabukumba said the Rwandan share index rose 44 percent last year, a sign in his view that the exchange, like the country itself, is headed in the right direction.

“We have order; we are straightforward, clear, clean — it’s a country governed by law,” said Mr. Rwabukumba, sitting in his second-floor office in the Kigali City Tower.

A few floors up, Ara Nashera, 27, creative director at Zilencio Creativo, was working on a crowd-funding platform like Kickstarter called eNkunga, which seeks to harness the money exchanged via cellphones in Africa. The technology may be new to Rwanda but the concept is anything but.

“Community contributions are how people get a child to university, pay for a wedding,” said Mr. Nashera. The city sprawled out behind him, with new office buildings springing up in the nascent downtown. “It’s the old way,” he said, “made new.”

Source — The New York Times

About the Author

Ugandan Diaspora News Team

Ugandan Diaspora News Online is an independent, non political news portal primarily aimed at serving Ugandans who work and reside outside Uganda. Our aim is to be a one stop shop for everything Ugandan and the celebration of our Ugandan heritage.

One Comment


    Very rapidly this website will be famous amid all
    blogging and site-building people, due to it’s nice posts

You must be logged in to post a comment.