I have a Saudi friend I made while in Canada five years ago. We talked about Rwanda once in a while whenever an opportunity presented itself. My stories largely rotated around the genocide, and a country in Africa that was trying to figure things out after the devastation.
I suddenly interrupted my education and returned home. We never talked for years until recently when he sent me a surprising message, catching up with an O.B.
He asked me one heck of a heavy question about Rwanda and President Kagame.
“You know, I have been reading a lot about Rwanda ever since you left Canada. I have heard a lot about your country and your President, Paul Kagame, but I seem confused, there is a lot bad said and a lot good told. Can you tell me what is the real story, briefly?”
We talked endlessly. He is interested in visiting and investing in Rwanda.
If I were to convince my friends to come invest in Rwanda, what would I tell them? He asked.
Here was my response! It might have not been convincing, but he picked what he needed and I am expecting him soon.
In the midst of chaos, opportunists look for advantages. But after the Rwandan infamous genocide against the Tutsi, the above line of thinking never crossed any opportunist.
Five years later, in 2000, all numbers in Rwanda painted a gloomy picture. Statistical representations of everything in the country were depressing. With the country’s population of 8.396 million then, GDP was a mere $1.7 billion.
Poverty was biting hard. Food consumption patterns and poverty distribution scored negatives. Almost 90% of the country was starving. Government struggled to pay salaries. At some point members of security forces went for months without pay. They only know how they survived.
There was no money, no infrastructure, no food, too many sick people, too many prisoners, a broken and fractured social fabric and a shuttered economy. Very few from the outside world wanted to befriend Rwanda.
The country had enormous needs and yet it was one with the lowest revenue bases in Africa. Corruption was rampant because it was inevitable. At one point, the World Bank could not get explanations to a $23 million grant that had disappeared in thin air.
This is the period government was designing a development master plan, popularly known as ‘Vision 2020’. But there was no money to finance it.
A national budget with no money?
On November 26, 2001, the first budget of the Vision 2020 plan was presented to parliament. The country’s needs in relation to the revenue base remained limited. The budget could not deliver everything. “It demands of each of us greater focus and optimal use of all the resources, human and financial at our disposal,” said Donald Kaberuka, then Finance Minister.
He had however increased the budget by 19%, from Rwf187.5 billion to Rwf223 billion including arrears, debt and net lending. With a belt-tightening spending approach, the plan was that the budget had to be financed without increasing tax burden. BRALIRWA; the only beer company then, was awarded a tax break from 57% to 40%.
While Rwanda relied on around 80% donations to finance its budget, Bralirwa was paying Rwf13 billion in taxes, 7% of the whole budget and employing about 700 people. There was also a reduction of 80% on import duty levied on imported products originating from COMESA member countries.
The world was in total bewilderment. What economic theories was Rwanda applying? Who was advising Rwanda with such risky and unheard of policies? What was Rwanda up to? There were many questions and less answers.
A master plan?
For the following years, Rwandan diplomats were traversing the world. Visits were wisely chosen; meeting highly targeted individuals; courting global CEOs and one or two powerful global leaders; the likes of Tony Blair and Bill Clinton.
American millionaires and billionaires, Costco CEO Jim Sinegal, Bill Gates, Howard Schultz – the CEO of Starbucks, now top buyer of the country’s coffee and many others, had luncheons with President Paul Kagame.
In a whirlwind global trotting for about three years, Rwanda had learnt what it needed, who it needed and how to get them on board in transforming the country and achieving the “Vision 2020”.
The first lesson was; “Doing Business”. And the second was; “Doing Business”. That was it.
In 2008, the Rwanda Development Board (RDB) was set up. By design, it has become Rwanda’s Sales and Marketing Department. American rich-man, Joe Ritchie, who had befriended Rwanda, with his global connections and expertise, volunteered to become the CEO, Deputised by young but aggressive Rwandans. None of them was 35 years yet.
Heads were rolling inside the RDB. Expectations were too high. There was stark thirst for Foreign Direct Investments to kick-start the economy, create employment and finance the country’s development agenda.
The team at RDB was supposed to use whatever resources available, move around the world and woo investors into the country. Investors began flowing in, as RDB pushed bureaucrats in Kigali to their edges to create a red carpet and facilitate investors to roll out their businesses.
By 2010, the country was already scoring high in the World Bank Doing Business Reforms Index and UN indices, scoring 3rd, 2nd, 6th, 46th, and now the 1st position -year after year.
Investments have never stopped
Between 2000 and 2012, Rwanda was one of the fastest-growing economies in the Sub-Saharan Africa with an average GDP growth rate of 8%, compared with 6% for the whole Sub-Saharan region.
According to the IMF, in 2014 – 2018 Rwandan GDP growth will average 7.0%, well above the 5.7% projected for the Sub-Saharan region.
In April 2013, Rwanda issued its first international bond, raising USD400 million at a 7% yield, in an offering that was oversubscribed by 750%. This 10-year bond currently trades with a yield to maturity of approximately 6.4% as of 30 March 2015.
The Fitch Ratings have maintained its rating of Rwanda’s local currency Issuer Default Ratings at ‘B+’ with a stable outlook. Inflation in Rwanda has been kept at single digits since 2008.
Some rough figures I managed to dig from RDB files indicate that from 2000 to 2015, the country had attracted approximately $9 billion in Foreign Direct Investments roughly 90% of the country’s GDP today. I am sure this figure has gone up.
Equipped with a lot of efforts, aggressive policy reforms, in less than two decades, at an average growth rate of 8%, the economy has grown from $1.7 billion GDP in 2000 to $10 billion and GDP per capita from $207 to $769 consecutively, lifting over a million citizens from extreme poverty.
What I don’t like is the depreciating value of the Rwandan Francs which has gone down from Rwf360 against a dollar in 2000 to Rwf840 today. This is ugly, by all means. This is not because of anything else, but due to several reasons including a sharp trade imbalance. We are heavy consumers of imported goods, even tooth picks, ironically even vegetables, eggs, and meat. But that is an opportunity for any investor, isn’t it?
Rwanda focuses on prudent macroeconomic management and fiscal discipline that has resulted in consistent economic growth at an average GDP of 8% and expected to grow by 11.8% in 2017. Much as we are a huge importer, we have managed to invest in manufacturing, mining, agriculture and services. We are not doing badly, but we also not happy at all. We just happen to have a good leader, a secure and a politically stable country.
The World Economic Forum, the World Bank, the IMF, and others, have ranked Rwanda among the fastest growing economies in the world and the 7th well-governed country in the world.
In 2015 the World Economic Forum ranked Rwanda as the most efficiently governed country in Africa and 7th, globally. The WEF says Rwanda ranked high because it has the lowest level of waste in government spending. Austerity? Yes, Kagame’s government is good at that.
Before I continued, my friend began asking about accommodation, business opportunities and so on. His is thinking of catching the next flight. He will learn more while he is here, he told me.
Magnus Mazimpaka is Taarifa’s Managing Editor and CEO of Ingam Group Ltd, a local firm that owns Taarifa.