BusinessCountry FocusWill Rwanda's bargain hold?


Posted on Tuesday, 04 February 2014 14:29

Will Rwanda's bargain hold?

By Honoré Banda in Kigali and Patrick Smith

The memory of the genocide still weighs heavily on the Rwandan psyche. Photo©Galerie Paul Kagame/FlickrIn May, finance ministers, central bank governors and thousands of bureaucrats will descend on Kigali for what will be Rwanda's biggest chance to showcase its economic story.


Rwanda is hosting the African Development Bank's annual meeting at a time when Africa's average economic growth is outpacing Asia's

The timing of the African Development Bank (AfDB) meeting on 19-23 May in Kigali is highly symbolic.

It will be exactly 20 years since bands of thugs wielding machetes and clubs killed around a million people in Rwanda in three months – the fastest mass murder rate in history.

Rwanda's technocrats have to persuade investors that the politics are under control

The killers were mainly Hutu militiamen trained by Juvénal Habyarimana's government, and the victims were mainly Tutsi and those Hutus who opposed the government's racist ideology.

Since the 1994 genocide, Kigali's state-led resurgence has produced spectacular economic results.

A leading figure in that economic campaign was Donald Kaberuka, who was finance minister from 1997 until his election as president of the AfDB in 2005.

It will be Rwanda's chance not just to make the case for its brand of developmental authoritarianism but to sell its merits as a regional financial, services and trading hub to its fellow African states, as well as to Europeans and Asians.Now, as Kaberuka considers his next move after two terms at the helm of the bank, he is bringing it home to Kigali for a week.

Poverty reduction

Is this realistic? Absolutely, according to the World Bank economists who voted Rwanda the top performer last year in its Doing Business index.

It leapt to 52nd position on the ease of doing business rankings from 158th position in 2005.

The Rwandan government has also invested millions of dollars in a new national airline and plans for a new international airport with hi-tech cargo clearing facilities.

Under current finance minister Claver Gatete, the implementation of an internationally compatible instant electronic payment system is roaring ahead.

But it is the social significance of Rwanda's strategy that has attracted economists such as Professor Paul Collier of Oxford University. He remains "deeply impressed" by Kigali's hat trick of rapid, growth, sharp cuts in poverty and falling inequality.

Pointing to a possible demonstration effect for the meeting in Kigali, Collier says: "This should be happening everywhere in Africa [...]. Instead it's nowhere else."

Certainly, Rwanda's success in cutting the number of people in poverty by more than a million out of its 11 mil- lion people since 2005 has rarely been equalled outside China.

The key point about Rwanda's economic growth averaging 8.1% between 2001 and 2012 is how that has changed social conditions: life expectancy has increased to 61 years in 2012 from 36 in 1994, and the government has presided over the fastest reduction in infant mortality in Africa over the past decade.

Similarly, large state allocations for education mean 93% of Rwandan children attend primary school.

However, two giant questions loom over the development data: how have these leaps been achieved and at what political and social cost? The how is the easier of the two questions.

The government is allocating a minimum of 10% of the budget to agriculture programmes, which includes mass distribution of fertil- isers, anti-erosion and terracing schemes, better transport and irrigation.

May you own a cow

They also veer into social engineering with the Girinka programme.

Girinka is Kinyarwanda for 'May you own a cow,' a popular greeting in the countryside.

Introduced in 2006, the Girinka programme aims to give every poor family a dairy cow that will produce milk and manure.

It is designed to be self-sustaining: when the cow has calves, the calf is handed to the neighbour and the chain continues.

The cultural significance is that historically it was mainly the pastoral and minority Tutsi people who owned cows, while the majority Hutu were often established farmers.

Girinka aims to end that cultural difference.

Kagame's big deal

As Frederick Golooba-Mutebi argues, Rwanda is at no risk of being mistaken for a liberal democracy.

Instead, President Paul Kagame sets out a grand political bargain: he will run an efficient state, channelling substantial resources into health, education and agriculture and thus raising incomes and improving lives.

In exchange, competitive party politics are off the agenda as are the lively media and civic freedoms enjoyed by countries such as South Africa, Nigeria and Ghana.

Officially, at least, Rwandans have to buy into the government's 'end of ethnicity' ideology.

No one can recruit for political parties on the basis of ethnicity, which may seek to strengthen the position of the majority Hutu at the expense of the minority Tutsi.

By most independent calculations the latter hold the key positions in government, the army and the civil service.

Kagame's bargain, however, now faces heavy economic and political pressure.

Rwanda's target of reaching middle- income status by 2030 requires shifting several gears in its growth strategy and diversifying rapidly into services and industry.

That will require billions of dollars of direct investment in new enterprises and further investment in roads, power stations and railways.

Two important new recruits will play a leading role here.

The highly regarded Valentine Rugwabiza, former deputy director general of the World Trade Organisation, has taken over the leadership of the Rwanda Development Board.

And Crystal Ventures, Rwanda's answer to South Korea's state-directed conglomerates, is now headed by former investment banker Jack Kayonga, who will turn it into a private venture capital fund.

These technocrats are as impressive as Kigali's statistical records, but they still have to persuade investors that the politics will remain under control despite growing criticism of the government's record on human rights, media freedoms and foreign policy.

Two cases stand out.

After successive reports by United Nations (UN) experts and officials in the Democratic Republic of Congo (DRC), almost no international organisations or diplomats believe the government's ever shriller denials that it has been arming and supporting the murderous Mouvement du 23 Mars (M23) militia in the DRC's eastern provinces.

Government officials reacted furiously when European and North American governments suspended aid worth more than $85m in 2012 and 2013.

Much to Kagame's frustration, aid still accounts for about 40% of the national budget.

Trying to escape from this straitjacket, the government floated a $400m euro-bond, borrowed more than $20m from the AfDB, the Organisation of the Petroleum Exporting Countries and the Arab Development Bank.

China also offered $35m in grants, but most of this is exceptional and unsustainable funding.

The latest reports that M23 is regroup- ing in eastern DRC, after being defeated by a Tanzanian-and South African-led intervention brigade alongside Congolese troops, will return the spotlight to Kigali.

The UN is now sending drones to patrol the Rwanda-DRC border to search for suspicious troop movements.

In January, Kagame and his colleagues unleashed a tirade against critics and exiled opposition politicians.

These accuse his government of running a hit squad that strangled former military intelligence director and leader of the opposition Rwanda National Congress Colonel Patrick Karegeya in a South African hotel room on New Year's eve, and of trying to assassinate former army chief of staff Faustin Kayumba Nyamwasa, also in South Africa, in 2011.

Tacit admission

Without admitting direct responsibility for Karegeya's murder, defence minister James Kabarebe commented: "When you choose to be a dog, you die like a dog."

Kagame was scarcely more cautious when he told journalists in Kinyarwanda on 12 January: "My job as president is to confront and defend Rwanda against people who want to destroy what we have been building.

"It's a matter of time for anybody trying to undermine Rwanda to face the consequences of their actions anywhere. It's the first time I am speaking about the Karegeya issue because there was no need. We don't seek permission to defend our country."

Ultimately what happens internally is the key.

Some Rwandans talk of 'dangerous wobbles' ahead of 2017, the date when Kagame is due to hand over to an as yet unidentified successor.

Insiders say there is absolutely no discussion about the succession and no plans even to talk about it.

Seasoned technocrats such as Kaberuka, Rugwabiza or foreign minister Louise Mushikiwabo evince no interest in the job.

One mooted solution is that Kagame steps down from the presidency to become an omnipresent chairman of the ruling Front Patriotique Rwandais party and allows a technocrat to become head of state under his watchful eyes.

But there is one certainty: all discussions on the issue at the AfDB meeting will be conducted at an extraordinarily low volume. ●



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