Popularly known as the land of a thousand hills, Rwanda is still on an ambitious quest to become Africa’s Singapore
The East African nation is guided by the economic model of the Asian tiger, which registered rapid industrialization since independence in the 1960s, to become one of the world’s greatest business powerhouses.
Conquering a turbulent history, the 1994 genocide that claimed the lives of 800,000 people in just 100 days, Rwanda has risen like the legendary phoenix to become one of the fastest growing economies in Africa, despite its meagre endowment in natural resources. In parallel, when Singapore commenced its nation building process, it was after the Second World War, though not in the same degree as Rwanda, there were mounting roadblocks to overcome and in addition, it was not resource-rich as well.
Albeit landlocked, Rwanda’s economy has been growing exponentially but was impeded in 2020, by the Covid-19 pandemic and further exacerbated by the Russian-Ukraine war, which has been ongoing since February 2022.
Currently, the country’s debt-to-GDP ratio is at 74.8 per cent.
Rwanda is among the countries in the Great Lakes region of East–Central Africa, sandwiched between Uganda, the Democratic Republic of the Congo (DRC), Burundi, and Tanzania. The rate of economic progress registered hitherto, has led the international community to call Rwanda an ‘emerging Asian tiger.’
This economic rehabilitation and prosperity, has been especially spearheaded by the country’s long-standing president Paul Kagame, who in 2018 was named ‘African of the Year’ by Forbes Magazine. He has on several occasions since his ascension to power in 2000, expressed his desire to transform Rwanda into the ‘Singapore of Africa,’ a stable gateway of trade for the entire continent.
For years Kagame has been drawing parallels between the two countries, following in the footsteps of the late Lee Kuan Yew, the man credited with transforming the island city state from its third-world status. Together with his successors, they have been renowned globally as the ‘master builders’ of the 20th century.
According to the 2022 African Economic Outlook (AEO) report, Rwanda’s GDP growth reached 10 per cent in 2021 after contracting by 3.4 per cent in 2020, due to the Covid-19 pandemic. Furthermore, GDP per capita recovered from a 5.9 per cent contraction in 2020, to post 7.4 per cent growth in 2021, whilst the debt-to-GDP ratio climbed from 71.2 per cent in 2020 to 74.6 per cent in the same year. In addition, inflation declined from 7.7 per cent to 0.8 per cent over the period, owing mainly to low food prices. Over and above, the current account deficit widened from 12.2 per cent of GDP in 2020 to 13.5 per cent of GDP in 2021, due to higher oil prices and increased imports for intermediate and capital goods. However, GDP growth is projected at 6.9 per cent and 7.9 per cent in 2022 and 2023.
“The mounting inflation in Rwanda, which comes at a time when employment has not yet recovered to its pre-pandemic level, has the potential to undo hard-won achievements in terms of poverty reduction and human capital development. Government interventions to protect the most vulnerable, building on the country’s social safety nets continue to be critical,” noted Rolande Pryce, World Bank Country Manager for Rwanda, during the launch of the 19th edition of the Rwanda Economic Update (REU19), titled ‘Boosting Exports Through Technology, Innovation, and Trade in Services.’
The Russia–Ukraine conflict dented the economy as Rwanda heavily relies on Russia for wheat and fertilizer, with 64% of its wheat coming from Russia. The country plans to spend an additional US$50 million in fiscal stimulus in 2022, while seeking alternative sources of wheat and other disrupted supplies. The country is on course to rebuild its economy. Some key sectors that the country should be keen to tap into and maximize thereof include:
- Tourism
As Rwanda seeks to reignite its economy, tourism is one viable sector the country could rely on. The country is famous for gorilla tourism. In light of this, during the recently passed celebration of International Gorilla Day in late September, the Rwanda Development Board (RDM) revealed that revenues from the sector increased by 25 per cent from US$131 million in 2020 to US$164 million in 2021. Moreover, the Board highlighted that the US$164 million collected last year were from 512,000 international visitors, who bought permits to visit the gorillas in Volcanoes national park.
Prior to the Covid-19 pandemic, tourism was the leading foreign exchange earner for the country. In 2019 the country generated US$ 498 million in tourism revenues, employing about 165,000 people. Rwanda is home to a huge diverse population of animals including mountain gorillas and the world’s largest natural park for hippos with an estimated 20,000 believed to live there.
Leading sub-sectors include hospitality and hotels; tourist infrastructure, services and transportation. Additionally, the country should seal the gaps in the industry by tapping into opportunities such as tourism and hospitality training schools; eco-tourism in its national parks; construction of cultural villages; sports tourism especially around Lake Kivu, development of exhibition centres and advertising for domestic and international meetings.
The country has four national parks, Nyungwe, Akagera, Volcanoes and Gishwati-Mukura. The Nyungwe Park is home to the only canopy walk in East Africa and contains a spectacular array of biodiversity comprised of 1,068 plant species, 322 bird species and 75 types of mammals. Most tourists come to this rain forest to track chimpanzees which have been habituated to humans by park rangers.
The Kigali Genocide Memorial also attracts a huge number of tourists, given the occurrence of the tragic event in 1994. One of Africa’s best collections of ethnological and archaeological artefacts can be found in Rwanda’s Ethnographic Museum. Sports tourism is swiftly gaining ground evidenced by the opening of Kigali Golf Resort and Villas, whose renovations were funded by the Rwandan government; which seeks to build a local golf culture and promote it to appeal to international tourists and investors.
- Climate-Smart Agriculture
Agriculture is a vital sector that could reignite Rwanda’s economy markedly. In light of this, Rwanda was among the six countries selected to participate in the pilot phase of the African Continental Free Trade Area (AfCFTA), initiative; and the country recently exported coffee products to Ghana as part of the AfCFTA Guide Trade Initiative.
Historically, agriculture is the mainstay of Rwanda’s economy and accounts for 31 per cent GDP and 90 per cent domestic consumption, employing 70 per cent of citizens. The sector is a priority in Rwanda’s Vision 2050 national development strategy. The government aims to replace subsistence farming with fully monetized and technology-intensive commercial agriculture and agro-processing by 2050.
Principal agricultural exports are coffee, tea and some value-added agricultural products such as canned tomatoes, honey, French beans, passion fruit, macadamia nuts and mushrooms. Rwanda exports live animals, unprocessed meat and dairy products to the eastern Democratic Republic of Congo. Leading sub-sectors include grains such as maize and beans, fruits and vegetables. Rwanda’s proximity to large markets, demand for food exports is high such as Uganda, Burundi and Eastern DRC.
The country should tap into the vast opportunities in this sector that it has not previously explored and adequately invested in to get more returns. There is immense potential in agro-processing, seeds and fertilizers; storage facilities, horticulture, floriculture and plant propagation; farm equipment, education and farmer training, pyrethrum farming and processing; exporting and agritech. In regards to agritech, an example in Mahwi Tech and its platform dubbed MLIMA market place, which has helped address demand and supply chain gaps of agriculture commodities in Rwanda using digital technologies to contribute to food systems security. If Rwanda can develop its potential in infrastructure, tech and finance while making the most of the opportunities of the AfCFTA, farming will continue to enjoy a central role in the Rwandan economy.
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- Information Communication &Technology (ICT)
Rwanda can take advantage of its rapidly growing digital space to further catapult its economy to greatness. According to the World Economic Forum, Rwanda is taking strides to become a major innovation hotspot in Africa, pushing forward with digital development. Furthermore, over the past two decades, forward-looking digital policies have served as major drivers of Rwanda’s economic transformation. In view of this, the 2022 Global Startup Ecosystem Index, the nation ranks eighth among start-up ecosystems across the Middle East and Africa and fourth in Africa as a whole.
The Rwandan government is aiming to seriously increase the representation of its GDP in the technology industry, which currently sits at 3 per cent; to triple it and reach 110 per cent within a decade. In addition, the country is also prioritizing sustainability in its digital transformation, as one of only 13 African countries with specific legislation in place on e-waste. Rwanda is home to the Swedish investment fund Norrsken Foundation, making it its first hub outside Scandinavia. The Kigali facility is expected to host 1,000 entrepreneurs in its first year of activity.
Moreover, Rwanda launched its first telecommunications satellite, Rwa-Sat-1, into space in 2019 in partnership with the Japan Aerospace Exploration Agency (JAXA). The “CubeSat” now obtains data from terrestrial sensors to help keep the government informed on national water resources, agriculture, and meteorology and disaster risks.
The creation of Rwanda Space Agency (RSA) in 2021 by the government is highlight of the country’s ambition in the technology sector, and intends to promote the aerospace business and industrial development. In October 2021, Rwanda filed an application with the International Telecommunication Union (ITU), to launch two satellite constellations: Cinnamon-217 and Cinnamon-937. In 2019, Rwanda pioneered the first ‘made in Africa’ smartphones. In the same breath, the country has been achieving breakthroughs in driving innovation on data policy and Artificial Intelligence (AI), to build its modern digital economy, by facilitating access to services such as healthcare, education, e-commerce and financial transactions.
Into the bargain, Viebeg Technologies, a venture capital-backed Health Tech company, is an example of how Rwanda’s investment in healthcare is already bearing fruit. It uses AI to manage supply chain and procurement processes, to ensure that healthcare facilities have the precise medical supplies in stock. The Rwanda Innovation Fund, partly financed by the African Development Bank, invested in Viebeg’s data-driven logistics platform. The AI-driven medical procurement platform directly connects healthcare providers with manufacturers. This removes brokers and middlemen from the value chain, generating cost savings of up to 40 per cent for customers.
Rwanda’s financial services sector, albeit well established still has gaps that spell potential to investors and would in tandem build the economy. Some include mortgage financing and microfinance opportunities, competitive loan facilities, insurance and investment bank services; commercial bank products in rural areas; development banks to fund SME’s; private equity funds, provision of life policies among others. By the same token, renewables offer immense potential to build the country’s economy, such as solar and hydropower.
According to the 2020 World Bank’s ‘Doing Business Report’, Rwanda ranks second in Africa and 39th globally as the easiest place to do business. In addition, Fitch ratings issued the country a stable outlook of B+ as a Long –Term Foreign Currency Issuer Default Rating (IDR).
To boot, Rwanda ranked 4th in Africa and 1st least corrupt country in East Africa according to the Corruption Perception Index (CPI) 2015. A latest ranking by the Rand Merchant Bank (RMB), places Rwanda in fourth place, in terms of investment attractiveness in Africa. RMB is a leading African corporate and investment bank which is part of Firsthand Bank, one of the largest financial institutions on the continent. Again, Rwanda has been listed as one of the fastest growing economies in the next decade, with view of the recent Centi-millionaire report by Henley & Partners. With such positive indicators, Rwanda’s economy is set for a remarkable rebound.
