17 February 2018

Rwanda: The Bumps to Watch Out for On Rwanda's Growth Trajectory

Most indications have been consistent that Rwanda is on a firm footing towards economic take-off.

Though some challenges remain, signs of progress continue to be borne out in international reports with the positive indicators serving to attract attention not only to the country, but to the region as well.

This has also served to bring attention to the many odds the country has had to overcome.

The future is, therefore, bright. One such report observing as much is the 2018 Growth Promise Indicators (GPI) by the international audit firm KPMG.

Based on various factors, the index gauges future growth promise of countries pegging on macroeconomic stability, openness, infrastructure, human capital and institutional strength.

The report ranks the country on the strength of its institutional foundation as holding the most promise not only in EAC but across the continent.

"Rwanda outscores many wealthier nations when it comes to the robustness of its institutions," the report says.

It notes the quality of regulation exhibited by the country's institutions, transparency of government policymaking and control of corruption and business and property rights.

But what makes it worth the attention is the geopolitical environment that, given the country's proximity, heightens the odds in the neighbourhood.

Other analyses, including the 2017 UNCTAD World Investment Report, put this in perspective. They cite the continuing conflicts in Great Lakes region perpetrated by all manner of rebel organisations that, without exception, tarnish the investment attractiveness of all the countries in the basin.

Other well known limitations peculiar to Rwanda include being landlocked and having limited natural resources among various other capacity limitations.

Yet, it is one thing to have others speak about you, and quite another to appreciate your predicament. Of this, it must begin with an honest self-appraisal.

The detailed Ministry of Trade and Industry's "Rwanda Private Sector Development Strategy (PSDS) 2013-18" offers such an appraisal, listing seven constraints to investment and growth.

These include, among others, access to infrastructure; lack of adequate skills; and low and variable levels of foreign direct investment (FDI).

However, note that the 5-year strategy comes to an end this year, of which the PSDS is part of the Second Economic Development and Poverty Reduction Strategy (EDPRS-II).

As progress in the past four years has shown, the constraints detailed in the PSDS have constituted hitherto surmountable bumps in the country's growth trajectory, of which enhancement of existing capacities is still ongoing. The seven constraints continue to form the intervention programmes in the country.

Part of the strategy's stated mission has been to "unlock the constraints to private sector-led investment and growth through an ongoing process of policy reform and dialogue that will allow an expansion in the quantity and quality of investment in Rwanda."

And, while the mission is still to be fully accomplished, the government has continued to develop liberal policies to transform the country into a trade and services hub.

In yet another analysis, the 2017 African Attractiveness Investment report by the global audit firm EY, formerly known as Ernest & Young, the country remains on its growth trajectory.

According to EY's Rwanda Partner and Principal, "the country is doing very well on the front of macroeconomic resilience, business enablement, investment in infrastructure and logistics and economic diversification." (See, "How Rwanda and Africa can attract more FDIs, spur growth", The New Times, June 20, 2017)

Sample, for instance, the ongoing development of a digital economy for investment moving away from policies designed for the analogue era.

Or, with the country being landlocked, how construction of a standard gauge railway will ease transportation costs for imports and exports, which are currently among the highest in the world.

Yet it is all in the general continental trend in which Africa's rise over the past 15 years is real, as the EY partner explained.

"It is important to note that what we have witnessed has been a process of structural evolution rather than the kind of cyclical change that has marked previous boom and bust periods in Africa's post-colonial history," he said.

In the structural revolution, the bumps in Rwanda's growth trajectory are finding their solution to smooth out the way, and thus must always be watched out for.

The views expressed in this article are of the author and do not necessarily represent those of The New Times.


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