EDPRS II: Can the private sector deliver Rwanda’s growth agenda?

A fortnight ago, the government launched the second phase of the Economic Development and Poverty Reduction Strategy (EDPRS II) whose core focus is to improve the quality of life for all Rwandans and move the country from low income to a middle income economy. The programme will run for the next five years until 2018. It follows the first five-year plan, EDPRS I, that started in 2008. Under EDPRS I, more than one million Rwandans moved out of poverty, particularly through an emphasis on job-creation and equal distribution of social services like healthcareThese achievements are expected to be consolidated under EDPRS II, which seeks to reduce poverty from 45 per cent to 30 per cent. The strategy is focusing on four areas, economic transformation, rural development, productivity and youth employment, as well as accountable governance.Prof. Charles Kabwete, the head of political and administrative sciences department at the National University of Rwanda, believes that by focus creating jobs for the youth, EDPRS II is spot on in singling out the key drivers of Rwanda’s growth. “It is important to note that nothing new is being invented. All the strategies in EDPRS II are well known, but what is being scaled up is the efforts by the stakeholders to achieve the targets,” he said.“The plan to create 200,000 jobs for the youth every year is a very ambitious target. When you look at the past work done by the government, they are vigorous and accountable, meaning that the target is very achievable.” The programme seeks to ensure that the country’s youthful labour force is equipped with employable skills, with the private sector as the main driver of the economy.But how will all these targets be realised? Just like the President said last year: “When we set our first EDPRS targets, some were skeptical about our ambitions. But here we are celebrating the achievement of over 90 per cent of our goals. This proves that any country, even those with limited natural and human resources can and should aspire to eradicate poverty and grow to a middle income country.”Under EDPRS II, the Government seeks to raise GDP per capita from $644 last year to $1,200, reduce poverty levels from 44 per cent to below 30 per cent and extreme poverty from 24 per cent to below 10 per cent. It also targets to create over 200,000 new off farm jobs and increase private sector investments to 15.4 per cent of the GDP (as priority number one). To achieve these targets, the Government is banking on the private sector to be the main driver of the economy to ensure the programme achieves its goals, including the 11.5 per cent growth.Private sector players are confident the mission is achievable if there is the right environment to attract investments into the country, including incentives. Gerald Mukubu, the Private Sector Federation chief advocacy officer, notes that the federation is sensitising members on their role as far as achieving EDPRS II goals and targets are concerned. “Giving us incentives will encourage businesses to invest more in the economy. This will create more jobs for the youth and improve people’s living standards, reduce poverty levels and hence spur growth. Mohamed Mazimpaka, the director general of the Chamber of Commerce at the Private Sector Federation, says it is important to empower and support the sector to realise the programme’s goals. He notes that a strong private sector is the pillar of any economic growth, but says this is only possible if there is a good investment climate.“A vibrant private sector will widen the tax base, enabling the country to increase revenue to fund EDPRS II projects, like infrastructure development that will spur economic activities and growth,” Mazimpaka points out.Daniel Muhimuzi, the country manager OIKO Credit Investment Development, says to achieve the the objectives of EDPRS II, the financial services sector needs to facilitate investors, especially the ‘small’ ones. “There must be micro-economic stability to realise $1,200 GDP and an average growth rate of 11.5 per cent by 2017.” He, however, notes that there should be more investments in new sectors like gas, mining, tourism, airline services and ICT. “Financial institutions have the capacity to fuel investment that will make this economic agenda a reality through extending soft loans to the rural poor,” he says. Muhimuzi calls for more efforts to woo investors into these sectors to boost job-creation and, hence, reduce poverty among households. Chantal Umuraza, the executive director general of the Chamber of Industries at PSF, says the private sector will deliver the EDRPS II targets if it becomes more innovative and strategic. “We have to position our manufacturing industry in line with the country’s economic objectives, especially in areas of packaging, product specialisation and branding to make our products competitive at the regional and international levels,” she says.The industrial sector grew at an average rate of 9.8 per cent per year during EDPRS I, this is expected to double during EDPRS II.According to Jean Claude Karayenzi, the director general of the Chamber of Finance at PSF, transforming the private sector by increasing investments in priority sectors such as infrastructure, ICTs, skills development and energy, as well as attracting investors in priority sectors of the economy will help the country achieve EDPRS II objectives.“The private sector is the engine of the economy, therefore, making substantial investments and giving them incentives like tax waivers will attract them in these priority areas and boost the country’s growth,” he argues.For Jackson Rugambwa, an economist, stimulating entrepreneurship, increasing access to finance and off farm employment, as well as enhancing productivity of the private sector is the best way to achieve EDPRS II goals. In 2011, Rwanda’s formal private sector employed a mere 4 per cent of the country’s labour force, and only 0.5 per cent of firms had more than 30 employees. Also, the Government has identified five regional towns it hopes will be poles of growth and investment to create jobs for the youth and reduce the problem of rural-urban migration. These are Rubavu that will be developed as a tourism city, Musanze whose growth will revolve around building material businesses, and Nyagatare for commercial farming. Others are Huye for tertiary education and Rusizi.In all these regional cities, the private sector is playing a leading role with the Government providing key infrastructure to ease their role and enhance the investment climate.Private sector investments in non-traditional industries like flower growing are expected to be key foreign exchange earners to boost the country’s forex reserves. This will greatly support government projects that promote growth.According to the Ministry of Finance, economic transformation through EDPRS II will also be focused on developing priority areas in each of the country’s 30 districts.For example, the northern district of Gicumbi will focus on increasing milk and wheat production for cross-border trade, whereas Gakenke will augment mining activities due to its wealth in minerals such as tin, wolfram and coltan.Nyaruguru District in the south will have a tarmac road constructed to connect it to Huye District to facilitate inter-district trade.In the Western Province, tourism activities on Lake Kivu will be promoted, as well as other tourism sites like the Karongi Environment Museum, Akarwa k’Amahoro, Source du Nil, Chapeau de Napoleon and Nyungwe Forest will be made attractive to tourists.The Government will also seek investors in palm oil processing and paper manufacturing in Ngoma District in the east, while tarmac roads of up to 20km and feeder roads of 300km and power lines will be constructed in Nyagatare District.The district projects are only a tip of the iceberg. EDPRS IIcovers the entire country, with plans to expand the private sector to ensure urbanisation fuelled by district led development, employment and strengthened government accountability.Rwanda’s progress in the last two decades since the 1994 Genocide against the Tutsi speaks volumes about the commitment to development. The country was named the tenth fastest growing economy in the decade since 2000, a million people were lifted out of poverty in five years and its population is somewhat stabilising, according to the Ministry of Finance statistics.With a good measure of private sector efforts and more support from the government, EDPRS II is set to drive Rwanda towards its desired goal of development, self-reliance and global competitiveness.

Insight

EDPRS II: Can the private sector deliver Rwanda’s growth agenda?