William Gumede explains what’s behind Rwanda’s rapid economic success.
Twenty years ago, a genocide that saw 800000 people killed plunged Rwanda into a failed state. Now, spectacularly, Rwanda has among the fastest growing economies in Africa.
The average gross domestic product (GDP) growth rate for this year is tipped to reach 7.5 percent.
Between 1995 and 2008, growth rates averaged more than 8.6 percent per year.
GDP per capita, when adjusted for purchasing power, has grown from $575 (about R6 500) in 1995 to almost $1 170 (R13 100) in 2012. Between 2007 and 2012, about a 1 million Rwandans were lifted out of poverty.
In the Transparency International 2012 Corruption Perception Index, Rwanda is the only African state where more than 50 percent of respondents believe graft has fallen in their country.
Although the country has unexploited gas beneath Lake Kivu, Rwanda is poorly endowed with mineral resources – so it’s not characterised by the more typical growth of the continent driven by the exporting of minerals, which usually benefits small elites, creates few jobs and doesn’t undo poverty on significant scales.
Rwanda has undoubtedly benefited from disarray in mineral-rich neighbours, such as the Democratic Republic of Congo, with Rwanda “exporting” minerals from these countries.
What is behind the Rwandan economic success? The country has been the recipient of high levels of foreign aid since 2000, which amounts to $55 per capita, compared with an average in sub-Saharan Africa of about $25 per capita.
According to Organisation for Economic Co-operation and Development figures, development assistance ranges from $400 million to $500m yearly and covers more than half of Rwanda’s budget and most of their capital investment budget.
Rwanda has used foreign aid more shrewdly than most of its fellow African countries.
Money sent home from Rwandans working abroad has played an important role in economic growth. In 2012, the government launched a diaspora fund, to secure the savings of Rwandans overseas, which could be used for reconstruction.
The Rwandan government has been more assertive with donors than other African countries, insisting on freedom to make their own home-grown and more relevant policies, rather than follow the often inappropriate ones set by Western donors, experts and multilateral organisations.
Rwanda is one of the few African countries that has determinedly tried to build a manufacturing sector – which creates jobs and reduces poverty.
The country has spent massively in developing physical infrastructure, building roads, telecommunication networks and fast internet.
The government has tried to cut the bureaucratic red tape, making it simpler to set up new companies, or to apply for licences and permits.
Rwanda has a long-term development plan, Vision 2020, which appears to be serious about implementing long-term change.
For instance, the government has made education a priority – primary school enrolment rates increased from 87 percent in 2003 to 95 percent in 2006.
There is free mandatory primary education for all children. There is a big emphasis on teacher training – with rising numbers of new teachers.
The country has determinedly focused on the informal sector, especially agriculture, targeting the poor through direct transfers.
The government introduced the “girinka” or one cow per family initiative in 2006. In terms of this, poor households were each given a dairy cow. Not only did this milk help provide a balanced diet to the poor, it also helped provide fertilisers and simultaneously established a diary industry.
The Rwandan government also trained community health workers and assigned three of them to each village to take care of health needs ranging from family planning to vaccinations.
Unique in Africa, Rwanda has scaled-up access to health insurance, through local schemes called mutuelles de santé, from 7 to 70 percent of the population between 2003 and 2007.
At local level, the country has brought greater transparency to service delivery.
A new system of imihigo (performance contracts) binds officials at local levels to measurable policy outcomes.
Evaluation of officials takes place in full view of the communities. Rwanda has dealt more resolutely with official corruption than most other African countries.
According to Transparency International, a 1 percentage point improvement in a country’s corruption score translates into an economic productivity increase equal to 4 percent of GDP.
Challenges remain for the country. Poverty may have fallen but 63 percent of Rwandans live on less than $1.25 a day and 82 percent on less than $2.
The country remains too deeply dependent on development aid, which continues to leave the economy vulnerable.
Furthermore, wealth is concentrated in the hands of a small elite, centred around the president, although not as narrowly concentrated as in other African countries.
In 2011, the top 10 percent of the population took home 43 percent of the country’s income.
Infrastructure deficiencies still remain, with energy shortages frequent and road networks wholly inadequate.
Neighbours are politically unstable, and Rwanda is often accused of aiding them or at least turning a blind eye – the real risk is that conflicts in neighbouring countries could move to Rwanda.
Rwandan leader Paul Kagame has shown intolerance towards his opponents. Unless the country strengthens its democracy, it may see a decline in growth.
* Gumede is chairman of the Democracy Works Foundation. His latest work is: South Africa in Brics: Salvation or ruination?
** The views expressed here are not necessarily those of Independent Media.