Numbers tell story of Rwanda's economic rebirth

At some point, government officials and experts have to step aside and let the figures tell the story of Rwanda’s economic rebirth; that point is now, twenty one years, this week, since the end of the liberation struggle that ended the 1994 Genocide against the Tutsi. The numbers tell a story of strong economic growth on which today’s economic transformation feeds, resulting into rapid poverty reduction giving Rwandans much better living conditions, the total opposite of the hungry and haggard citizenry two decades ago. Perhaps one of Africa’s greatest post-independence economic miracles is how Rwanda managed to turn around an economy that was experiencing negative growth to one of the fastest growing on the continent and in the world, today; moreover, done with hardly any resources to talk about. “I think it was down to the political stability born out of the excellent governance; that was the key that unlocked today’s success,” says Prof. Manasseh Nshuti, an economist and former Minister for Finance. Evidence of what the professor says can be found in the figures; a comparison of numbers then and today. At a recent retreat by members of the ruling Rwanda Patriotic Front (RPF), the party famed for authoring the country’s renaissance story, Amb Claver Gatete, the current Minister of Finance, presented those figures and let them do the talking. What the numbers say Between 1990 and 1994, Rwanda’s economy literary came to a standstill with the country’s Gross Domestic Product (GDP) during that period averaging growth of -11.4 per cent; that was the period of the liberation struggle which would climax in 1994 when the Genocide started. From 1995 to 2014, after the war had ended, political stability had been restored and camps of internally displaced people had been closed, there was assurance for tomorrow and people had resumed to work and the total sum of their efforts saw the economy pick up and averaged growth of 9.8 per cent. Although the coming into power of the RPF immediately inspired an economic rebirth, Rwanda was heavily dependent on foreign aid in especially the first decade after liberation. In 1995, for example, Rwanda’s domestic resources only accounted for 29 per cent of the national budget. Over 70 per cent of the country’s budget- which was a paltry Rwf56bn was being sponsored by external sources – donors. By 2005, domestic revenues had increased to 45.3 per cent, a clear signal that the government clearly aimed for self-reliance in spite of troubled past and limited resources at home. Fast forward to 2015 and the budget for 2015/2016 - which has grown to over a Rwf1.7 trillion, will be 66 per cent funded by Rwanda’s own locally mobilized resources but the journey to fiscal independence continues. At the centre of Rwanda’s rapid growth between 1995 and 2014 were the services and industry sectors which have averaged 9.7 per cent and 9.2 per cent, respectively while agriculture has averaged 5.5 per cent in the same period. These contributed an average of 7.9 per cent to the GDP growth in that period. Nothing is built without a foundation. In the case of Rwanda’s economic reconstruction, there are sectors on which the growth is being anchored, the services sector being at the vanguard and tipped to account for over half of all Rwanda’s economic activity in the medium term. As of 2005, the services and agriculture sectors dominated Rwanda’s economic activity with 43 per cent and 39 per cent, respectively, while industrial activity contributed 12 per cent. By 2014, the service sector had edged out agricultural activities with the sector dominating the economy at 47 per cent to Agriculture’s 33 per cent while industrial activity dropped to 5 per cent. Economic growth without transformation of the people is almost pointless. Rwanda’s economy has expanded from less than a billion dollars twenty years ago to over US$7billion today and the resultant economic development can be seen in Kigali city’s crowded skyline, shopping malls and new roads. The income levels of Rwandans have also steadily grown from a lowly US$146 in 1994 to US$718 as of 2014, a rate at which, if maintained, can deliver Rwandan’s to middle income status by 2020. Between 1994 and 2010, the rapid economic growth and the resultant economic transformation saw poverty levels reducing from 78 per cent of the total population to 44.9 per cent becoming one of the few solid examples of inclusive growth on the African continent. Rwanda’s growth is particularly described as inclusive because befits can easily be reflected in the ways people’s standards of living have improved which shows in health, education and other indicators. For instance, the number of students in primary schools has since 1995 more than doubled from 941,012 to 2,402164 in 2013 while the number of schools has increased from 1845 to over 2590, in the same period. The same trend has been registered in secondary schools with the enrollment according to Ministry of Education statistics increasing more than 20 times over last two decades from 20,533 students in 1995 to 566,370 as of 2013. In 1995, Rwanda had only seven tertiary colleges but these have since increased to 38 with enrollment in these institutions surging from 2,821 students to over 84,448 students by 2013. One would probably be shocked to learn that in 1995, there was not a single student in the Technical and Vocational Education Training (TVET) colleges; but the reason is simple, there was such a programme. TVET was a direct result of challenges born out of Rwanda’s new rapid economic development; as industries and services sectors grew so did the hunger for skilled labour force. In 2011, a deliberate campaign by the government was launched to respond to that need. Today, there are about 93,000 students enrolled in various TVET colleges, they’re stocking up skills that match the needs of the labour market. Financial inclusion Apart from the social inclusion benefits of Rwanda’s economic development, the country has also made milestones in financial inclusion with the number of bank account holders totaling to 2.2million as of 2014. Saccos (savings and credit cooperatives) and other micro-finance institutions have particularly played a significant role in expanding Rwanda’s financial inclusion; by 2014, at least 1.9 million Rwandans had an account in a Saccos compared to less than 500, 000 subscribers as of 2010. With limited resources to fund its robust development agenda, borrowing couldn’t be ruled out as a source of financing for Rwanda’s essential post-liberation projects such as roads, energy projects, schools and hospitals. Moreover, with external financiers eager to lend to Rwanda because of its stable and positive B+ ratings by both Standards and Poors and Fitch, the government has been able to exercise restraint and borrowed only when there was need to invest in productive sectors of the economy. As a result, the size of Rwanda’s external debt compared to the wealth of the nation (GDP) is below 30 per cent which is well below the acceptable international minimum standard of 50 per cent; this means that Rwanda has room to seek more debt but also means the country is borrowing prudently. The significance of a manageable external debt portfolio is that creditors develop trust in a country which gives it an open ended invitation to borrow whenever it deems fit. Rwanda has that open ended invitation but it has decided to limit the number of times to visit lenders. Challenges to faster growth To paint Rwanda’s impressive post-liberation economic rebirth as a total success would be to suggest that the country has reached the biblical Promised Land; indeed, the current government is keenly aware that while a lot has been achieved, a lot more can be achieved. With just five years to meet the Vision 2020 targets to attain middle income status, the government admits it needs to step on the gas and double its efforts in addressing challenges stopping faster growth. The agriculture sector, for instance, is producing below its potential largely because it’s still dependant on natural factors. The Ministry of Agriculture says it wants to promote modern commercial farming to double production and increase farmers’ incomes. In a family of fast growing kids, the growth of Rwanda’s exports has been at most disappointing; in 2000, export earnings were about $100 million, although this has since increased to more than half a billion in the last decade or so, it’s still far weak compared to the import bill of over $2.billion. Can Rwanda double its exports earnings? The ministry of Trade and industry says this is possible. But for that to happen, it would depend on how fast Rwanda can grow its industrial base. A huge challenge remains in addressing energy problems. The cost of Rwanda’s electricity is the highest compared to its counterparts in the region and beyond. The cost stands at $24 cents for a KWh compared to Tanzania’s 17.4 cents, Kenya’s 15.5cents, Ethiopia’s 6.3 cents and Zambia’s 5.3 cents. Can Rwanda bring down the cost of electricity to reduce on the cost of production incurred by industries? According to the Ministry of infrastructure, this is possible if all the energy projects under implementation can get on line. Over 560 megawatts are targeted by 2017 from over 160MW today; about 70MW are expected to come on grid next financial year.

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Numbers tell story of Rwanda's economic rebirth