As government officials retreat in a few weeks, I would like to underscore the importance of empowering local entrepreneurs in weaning Rwanda off aid in the long run. One way for a nation to become self-reliant is making its citizens self-reliant. This is why local industrialists could be key to putting a substantial number of people to work.
Given that addressing youth unemployment is a priority, it critical that government leaders bring Rwandan entrepreneurs and industrialists into the discussion on long term self reliance. With the targets on the table, 400,000 jobs need to be created annually in order to accommodate both new entrants onto the labour market coupled with the surplus labour from agriculture as the economy modernises.
The big question is how do we get the investment needed to get these people to become self-reliant? Yes, put them to work because people who work do not need to depend on their parents for handouts and the same holds for recipient governments with their donors. I have been comparing employment and productivity trends between 2006 and 2011 using Rwanda's 2006 and 2010/11 household surveys and national accounts. My aim is to decompose the growth Rwanda has achieved over the past five years and figure out what it entails in terms of new jobs, productivity changes and shifts in employment between sectors. What do I find?
Although the share of employment in agriculture as part of the working age population has gone down over the past five years, agriculture has become a more productive sector contributing an annual average of about four per cent of the productivity growth that has been achieved. Thanks to the government's Crop Intensification Programme (CIP). Sectors like mining, commerce and services have shown improvements in both the proportions of adults they employ and productivity in terms of value added per capita.
However, despite the above impressive achievements, development of the manufacturing sector seems to have lagged behind. Although the proportion of working age population employed in the sector has increased by an average of four per cent per year, the increase is smaller when compared to other sectors like construction, commerce and transport that have increased well above six percent. In addition, the productivity of the sector in terms of output per worker has gone down by two percent per annum over the past five years. This leads to the question of how Rwanda can prop up its manufacturing sector in order to make the country self-reliant with decent jobs from the manufacturing sector?
In my view, part of the solution lies in promoting and empowering medium to large scale local entrepreneurs and industrialists. For instance, Uganda lost one of its prominent industrialists by the names of James Mulwana, a few weeks ago. From very humble beginnings, Mulwana built a business empire with interest in diary, batteries, plastics among others, which employed a sizeable number of Ugandans.
Yet quite often, government led discussions on self reliance and development leave such local entrepreneurs and industrialists on the side. While the economy needs to attract FDI, foreign investments may sometimes end in capital flight once foreign investors feel the environment is not conducive. This is why promoting local investment should be given as much priority as attracting foreign investment. Looking at the employment breakdown, domestic direct investment employs far more people than FDI over time. In addition, it is here to stay. For instance, despite the political turbulence that Uganda experienced like constant changes in government, the likes of Mulwanas and the Wavammunos of Uganda still maintained their investments in Uganda. The question is, who and where are the potential local industrialists and entrepreneurs of Rwanda and how can we get them onto the discussion table in the quest for independence from foreign handouts? I am not advocating for picking winners here but with hindsight, these m
ay hold the key to self sustenance. Rwanda is admired for its CEO-style leadership something uncommon in many African countries. It is high time we figure out how we use local funds like the Agaciro into some sort of investment vehicles to have revolving funds or loans for local industrialists to invest, more so in the agro-processing industries in the rural districts in order to put our people to work.
With the worsening economic situation in the donor countries, international aid flows will decline in the long run, for one reason or another. However, we can channel the aid funds into the energy sector so that we build a foundation for our industrialists.
As Rwandan leaders go for the annual government retreat, my humble desire is to take with them industrialists, CEOs and entrepreneurs to be part of the central discussion in the quest for self-reliance from foreign aid.
The writer is a Senior Research Fellow at the Institute of Policy Analysis and Research-Rwanda.