Small, hilly, landlocked and fertile, Rwanda has been able to make important economic and structural reforms and sustain its economic growth rates over the last decade. Rwanda now aspires to reach Middle Income Country (MIC) status by 2035 and High-Income Country (HIC) status by 2050.
This aspiration will be carried out through a series of seven-year National strategies transformation (NST1) underpinned by detailed sectoral strategies that are aimed toward achievement of the Sustainable Development Goals.
The pandemic chapter, Rwanda was in the middle of an economic boom prior to the Covid-19 (coronavirus) pandemic. Economic growth exceeded 10% in 2019, driven mostly by large public investments for implementation of the National Strategy of Transformation. Strong growth was expected to continue in 2020.
Responding to the pandemic Rwanda has initiated an Economic Recovery Fund with the objective to support businesses highly impacted by the crisis so they can survive, restart work/produce and safeguard employment, also aims to fast-track private sector investments in manufacturing and construction whereby Construction materials incentives are applicable to a minimum investment of $10 million.
Factory construction incentives are applied for a project whose investment is not less than $1 million of construction value for companies opening a subsidiary in Rwanda, and not less than $ 1 million or 20% of total investment when an entity purchases or leases an existing facility to begin new production in Rwanda.
Using the Center of Housing Finance in Africa Economic Value Chain assessment methodology, Rwanda’s housing economy is estimated to directly contribute 9.5 per cent to Rwanda’s GDP (Rwf 724 billion / US$ 841 billion).
Approximately 40 per cent of this amount is gross value added in the housing construction sector, and 60 percent comprises intermediate inputs into house construction (materials and services). The importance of Rwanda’s informal housing development sector (SMMEs and households themselves) is also identified as an important element for future growth.
The Government of Rwanda targets to increase urbanization rate from 18% to 35% in 2024 to support economic growth. An urbanization of 35% by 2024 is the expression of an increase of urban population by about 2.7 million people.
The Housing Market study done in City of Kigali (IGC 2018) showed that 700,00 new dwelling units were needed by 2028, where 70% dwelling units lay in the Affordable Housing category.
The role of housing in economic development is perhaps not sufficiently recognised, investment in housing is often regarded with disquiet due to its association with speculative property bubbles and financial instability.
Yet in developed economies housing is by far the most important tangible asset, and in Africa it has the potential to make a substantial and prolonged contribution to labour demand.
Housing by its nature is a locally consumed product. Housing influences national economies in three important ways.
Firstly, while housing fulfils a basic human need for shelter, it also provides the base from which households participate in the economy.
Secondly, housing is the largest asset most households will accumulate over their lives and therefore comprises an important part of most countries’ generation of wealth.
Thirdly, the construction, trading and occupation of housing stimulates the production and sale of related goods and services, impacting on many sectors of national economies. For housing to be a lead economic sector in Rwanda, it will be required to broaden and deepen its reach across household affordability.
In addition, housing as a lead sector will require economic stability and consistency and certainty in policy and support programs in order to facilitate the development, localization and growth of the local construction and rental sectors.
It is also important that policies that improve the functioning of the entire housing market are implemented, as the informal sector will continue to play a leading role in providing affordable housing for the majority of Rwandan households.
Housing and employment; housing construction has played an important role in urban economies of developing countries by creating employment, especially for unskilled labour.
However, the central issue will not be the amount of employment created by investment in housing as compared to other sectors.
It is the effectiveness of residential construction in creating additional jobs through forwards and backwards linkages in related sectors, such as industry.
The building industry has a high potential for employment generation, not only through on-site activities but also through off-site activities (e.g., land surveying, draughts men, building materials production and marketing and distribution of construction materials and equipment).
The Housing construction industry has long been held up as an ideal mechanism for delivering economic stimulus in periods of recession and stagnation. This reflects the labor-intensive nature of the industry, the high ‘propensities to consume’ of skilled and unskilled workers, and the extensive connections between the construction sector and other sectors of the economy (manufacturing, mining, resources, retail, transportation and logistics, and support industries).
Brick by brick, these factors give rise to a high economic multiplier effect, meaning that government spending on construction projects leads to an increase in economic output several times the size of the initial spend, depending on the type of house building activity.
The writer is a construction technician with an advanced diploma in civil engineering and specialization in Construction Technology.
shaksshyaka33@gmail.com