Rwanda's Economy: An Introduction

Muraho,

So Rwanda is often associated with one thing; the genocide that ravaged the country and resulted in over 800,000 deaths.  While the civil war and genocide are a part of Rwanda's history that cannot and should not be ignored, I think that it’s crucial that the world realize that this small African nation is so much more than a killing field, as it is often portrayed.  Rwanda has come a long way from that tragedy 16 years ago.  The government is stable, the economy is strong and poverty has been reduced.  These factors are not by chance, but are a concerted effort of the government and Rwandan citizens to become a middle income nation by the year 2020.  This rising star has adopted a fairly comprehensive market-based development strategy that has helped it achieve strong growth in many indicators over the past 10 years.  Following lessons from successful economies such as Singapore, Rwanda hopes to become a technology and trade hub of the region and Africa at large.  I've compiled some of what I felt were the most relevant aspects of the Rwandan economy.  Hopefully, this will help change perspectives on Rwanda as well as provide context for my future posts on entrepreneurship and business development.

Overview: Rwanda is a landlocked nation located in Central Africa.  Its neighbors include the Democratic Republic of Congo to the West, Uganda to the North, Tanzania to the East and Burundi to the South.  It’s about 26,000km2 (10,000mi2), which is slightly smaller than the state of Maryland.  However, Rwanda has one of the highest population densities in Sub-Saharan Africa, with an estimated population of 10.7 million people.

Key Economic Indicators

   

Government: Rwanda is a presidential republic with a multiparty system.  The current president is the iconic Paul Kagame.  He is an advocate of private business and free market principles which have been influential in shaping Rwanda's development strategy.  Kagame is also a huge supporter of new models of aid that help recipient countries become more self reliant.  He won the election this past August and will be in office for another 7 years.  His government has received some criticism in regards to political freedom and human rights, but I'm not well versed on this and don't want to discuss it here.

Exports: Exports are central to Rwanda's development strategy.  Currently, Rwanda has to import many of its goods and inputs. This has led to a balance of trade deficit of $382 million in 2009. Rwanda must aggressively grow its exports while reducing or substituting imports.  In the table below, I've listed Rwanda's main exports and some relevant statistics.  I'm going to begin a series in which I will highlight each of these sectors.  I’ll attempt to give everyone an idea of the dynamics and challenges unique to each sector.

 Rwandan Exports

  

Transparency: Many low income and developing nations are plagued by corruption in the form of bribes, kickbacks, and nepotism.  This graft adds to businesses costs and leads to a generally inefficient government and sluggish private sector.  Rwanda has bucked that trend and is relatively free of corruption.  In Transparency International's 2010 Corruption Perceptions Index, Rwanda received a score of 4 (9=very clean, 0=highly corrupt) which gives it a rank of 66 out of 178 nations surveyed.  This means that Rwanda is perceived to be less corrupt than all of its East African neighbors and even more developed economies such as Italy, Brazil, India, China, and Russia. Providing a corruption free environment is key to allowing the growth of domestic business and attracting foreign businesses.  It is just one example of Rwanda's dedication to development. (The CPI is an aggregate measure of corruption in terms of the frequency and/or size of bribes according to country experts and business leaders for more information visit http://www.transparency.org)

Business Environment: Rwanda has made a series of reforms to make it easier to conduct business and they have been tremendously successful at achieving this goal.  The 2010 World Bank Doing Business report ranks Rwanda as the 67 out of 187 (ranked 143 in 2009).  In fact, Rwanda was this year’s leader in instituting pro business reforms to promote private sector development.  According to the report, it now takes 3 days to start business at a cost equivalent to 10% of the per capita income.  Other key areas where Rwanda is relatively progressive include employment, access to credit, and protection of investors (ranking 30, 61, and 27 respectively).  This is great news for entrepreneurs in Rwanda and those thinking of doing business here.  http://www.doingbusiness.org/

Challenges:  Of course there are always roadblocks and stumbling steps on the path development.  Unfortunately, Rwanda is not exempt from them.  The country will need to develop solutions to these pressing issues in order to reach its developmental goals: underdeveloped human capital, unsophisticated financial markets and infrastructure (energy and transportation).  The good news is that the government and private businesses are aware of these issues and are actively solving the problems.  I also plan on starting another series that discusses these issues in more detail and highlights the progress being made.

I hope that this has been fascinating and informative.  Please feel free to ask questions and make comments about any part of this that peaks your interest.

Turongera,

Chris

Getting Around Town

Muraho!

Kigali is a relatively small city by international standards, but transportation has still proven to be a difficult.  We live in an area called Remera, but work about 5 kilometers away in Gikondo.  Thus far, our co-workers have been kind enough to pick us up in the morning and drop us off after work.  This has worked out ok for the first couple of weeks, but I think that its time that we look into a more permanent form transportation for two reasons. First, co-workers have been extremely helpful as we've settled into our new home and I don't want to overburden them with picking us up every day.  Second, I feel that we're completely dependant on them for any type of transportation.  We don't have a reliable way to getting around town at other times of day.  This problem is exacerbated by the fact that we don't speak Kinyarwanda.  Bottom line, we need to become independent.  Here are a few of our options.

Moto taxis are a common form of transportation in Kigali.  You can find them waiting to pick up fares at high traffic intersections and parking lots for popular attractions (malls, clubs, etc).  You tell the driver your destination, negotiate a price ( you can usually get anywhere in the city for 2000 RwF or less), he hands you an ill fitting helmet and then you're off.  The motos weave in and out and make the craziest NYC taxi drivers look like Sunday drivers, which is exceedingly convenient during rush hour gridlock, but sometimes terrifying.  We've taken them a couple of times and while they can be exciting, I'm not particularly fond of them.  Additionally, they're probably not the best choice if you have to travel with a large package or if its wet outside.  This is a picture of a moto that I saw while driving.  Maybe I'll post a video of one of my rides sometime.

Car taxis are less common and can become quite expensive.  We discussed the possibility of hiring a taxi to take us to and from work and the driver gave us a quote of 100,000 RWF (about $200) a month.  They would cost way more if we were to use them on an ad hoc basis.  The cars are usually white sedans from late 80's or early 90's of Japanese or Europeans make. Sorry no pictures yet. 

Public Busses are probably the most affordable way to get around town.  We will probably learn how to use them at some point, but its pretty difficult to navigate without knowing how to speak French or Kinyarwanda.  Another concern is security.  A bus parks was one of the targets of the bombings earlier this year.  I'm not paranoid about security, but I want to avoid areas that are potential targets of violence.  If we take the busses, I'll stick to routes where I can avoid the bus parks.

  

The last option is to buy our own transportation.  Its certainly the most economical and convenient way to get around in the long run.  One of our coworkers drove us to a shop so that we could price out scooters and motos.  The one in the picture below has a 70cc engine and retails for about 600,000 RwF.  There's also a vespa-esque option with a bigger engine that goes for about 850,000 RwF.  Either way, I would feel more secure being in the driver seat, rather than on the backseat of a moto taxi.

 

I think that sums up our transportation issues and options.  I'll keep everyone posted on what we end up doing.

Turongera,

Chris

What is the Babson-Rwanda Entrepreneurship Center (BREC)?

Muraho!

Most everyone that's visiting this blog has some idea of why I'm in Rwanda, but I thought that I'd quickly explain my what my work will be.

The Babson-Rwanda Entrepreneurship Center is a newly formed partnership between Babson College (#1 college in the world for entrepreneurship) and Rwanda's Private Sector Federation (PSF).  The goal of the center is to work with PSF to increase the capacity and productivity of the private sector.  Positive developments in these fields are essential to Rwanda's goal of becoming a middle-income country.  On a micro-level, success can improve the living standards for the Rwandan people, many of whom currently live below the poverty line of $1.25 (USD) a day.  As one of the founding Project Directors, I will live in Kigali and work alongside the PSF to meet those goals.  Our work will be varied, but all of it will be related towards fostering entrepreneurship within Rwanda.

To start out we're going to be working with 12 Provincial Investment Corporations (PICs).   The PICs are essentially investment groups supported by wealthy Rwandan individuals and municipalities that are meant to make equity investments in SMEs in a number of target industries/sectors.  Although, the PICs were established a couple of years ago, they have been paralyzed by a number of issues and thus have failed to make any investments.  Enter the BREC.  Our first assignment will be to work with our PSF counterparts to identify the reasons for the stall and provide solutions that will get the PICs to operate.  This project is really exciting for me because I love problem-solving in a business context and the success of this project could have an enormous impact on Rwanda's nascent financial sector.  We're still working on the details of the scope of this project, but I'll be sure to update as much as possible.

Below, I've embedded a youtube video of the signing ceremony between Babson and the PSF that took place on September 27th at  Babson's Campus.  Enjoy!

Turongera,
Chris

Introduction

Muraho! (Hello in Kinyarwandan)

After a grueling 2 days of crowded airports and cramped airplane seats, we finally made it to Kigali, Rwanda, the city that will become my home for the next 2 years.  I'm excited for the adventures that lie ahead and that’s' part of the reason why I've chosen to start this blog.  Over the next 24 months, my posts will broadly cover three topics:

1. My personal experiences living in Kigali and traveling throughout Rwanda.  I will share the people that I meet, the places that I go, and the food (yum!).  This will give my family, friends, and any one who happens to pass through a general idea of life here.
2. My work here in Rwanda.  As many of you know, I'm one of the project directors of the newly established Babson-Rwanda Entrepreneurship Center.  I will share some of the challenges and triumphs that we encounter on this new venture.
3. Economic development at large.  The study of developing and emerging economies has long been a passion of mine.  This blog will serve as a forum to discuss some of the amazing progresses being made and the controversial debates.

Above all, I hope that you will enjoy reading my updates.  I want to be informative without proselytizing.

To my family, friends, and everyone else who has supported my decision to come here, THANK YOU from the bottom of my heart.  Its not an easy decision to pack up your life and move to middle of Africa for two years and your encouragement has been great. Finally, thank you, whomever stumbled upon my little experiment, for reading.  Be sure to check back often for updates!

Turongera (until next time),

Chris