A joint publication between the World Bank and the Government of Rwanda themed “Future Drivers of Growth in Rwanda: Innovation, Integration, Agglomeration, and Competition”, launched in November, reiterated that Rwanda’s growth trajectory fits the narrative of ‘Africa rising’ ahead of many of its African peers. Africa economic performance since 2000 remained varied and below its full potential prospects arguably underlining the current question of whether Africa is rising or not. On the other end, the post-1994 Gsenocide Rwanda’s growth has averaged 7 per cent per annum making it one of the fastest in the world. Even when adjusted to accommodate population growth, Rwanda’s impressive record is maintained – growing in per capita terms at 5 per cent per annum - the second fastest on the continent after Ethiopia between 2006 and 2016. Rwanda’s growth has also arguably been inclusive, life expectancy increased from 31 to the current 69 years, which is higher than regional comparators, poverty has been halved – now at less than 40 per cent of the population, social indicators, particularly in the health sector, have also significantly improved. Health insurance outreach is over 80 per cent of the population. In the Africa Sustainable Development Goal (SDG) Index and Dashboards Report 2018 published by the Sustainable Development Goal Center for Africa, Rwanda ranks 11th out of 51 countries in Africa in terms of SDGs mainstreaming and progress - beating the regional average and all Eastern Africa peers. According to the FinScope Rwanda survey (2016), nine in ten Rwandans have access to some form of financial services. However, the impressive inclusive growth era has not been short of caveats. Inequality measured by the Gini coefficient has increased, for instance nearly one in four children suffered from stunting, higher than global and regional rates. Stunting has implications for future productivity. In the recently developed Human Capital Index (HCI), Rwanda’s score was only 37/100, implying that a child born today will only be 37 per cent productive relative to if they had attained complete education and health. The current quality and capacity of human capital remains unpropitious. One proxy of human capital formation is the average primary completion. The primary completion rate of 66 per cent not only remains low (compared to Sub Saharan Africa of 70 per cent) but also the education quality is a challenge with 85 percent of Rwandan students at the end of grade 3 rated below comprehension. Some of these challenges are underpinned by population structure and pressure on the limited resources. Median age for Rwandans is 19 years which compares unfavourably to the global average of 30 years, Lower Middle Income Countries (25 years) and High Income Countries (40 years). At a macro level, export base and domestic savings remain undesirably low respectively around 20 per cent and 10 per cent of GDP. The investment needs are than double the current savings. Additionally, despite Rwanda ranking second in the Doing Business Indicators for 2019 after Mauritius (29th out of 190 countries) and ranked the most business friendly nation in Africa in the 2018 Ibrahim Index of African Governance, the private investment sector remains small – arguably explaining the small middle income class. One proxy to look at are the number of privately registered cars not exceeding 100,000 (cross validated against current issued number plates RAA – RAD series). Growing from a small base Rwanda’s GDP per capita has witnessed a three-and-a half-fold increase since 1994. However, this growth has not translated into attainment of middle income status of GDP per Capita. Underpinned by this resilient and strong growth history, Rwanda’s aspirations enshrined in Vision 2050 are achieving upper-middle-income status by 2035 and high-income status by 2050. The long term growth requires 12 per cent (over 10% in per capita terms) higher than China and South Korea attained at similar stage of development. The requisite growth is twice the current growth rate, implying it is not as easy task and will require doubling of the export and investment each as share of GDP rising to over 40 per cent leveraged by savings of over 35 per cent of GDP and higher factor productivity. The ambitious growth agenda is arguably feasible through a multi-front pathway. The six primary drivers relate to addressing human capital, creating competitive domestic enterprises (linked to Made-in-Rwanda policy), creating a well-managed urbanisation linked to structural transformation, modernising agriculture sector, while incentivising labour to move into manufacturing and service sector, and reinforcing trade and regional integration initiatives. Population growth control remains imperative, as Rwanda already has a high population density and high levels of dependency. Evidence suggests that reducing dependency could increase Rwanda’s growth by a percentage point. The writer is a PhD holder and is a Kigali based economist.
