The Rise of Africa’s Switzerland

Tom McCarthy - Writer

Rwanda is breaking records. One of the fastest growing economies in the world, despite being victim to the world's most recent genocide.

Twenty-one years ago, the world watched aghast as the tiny African state of Rwanda plummeted into a vicious chasm of rapid, callous murder based along ethnic lines. An estimated 800,000 were killed in a three and a half month whirlwind of violence. So harrowing and widespread was the slaughter, as much as 70% of the country’s Tutsi demographic was wiped out, and the propagation of rape as a weapon to be used against Tutsi and moderate Hutu women escalated the HIV crisis in Rwanda to horrifying proportions. The brief genocide that exploded across Rwanda in the early summer of 1994 was so devastating one could be forgiven for wondering if the country could ever recover. Today, however, Rwanda is one of the fastest growing economies in Africa, posting annual growth rates of between 7-8% since 2003, positioning itself as a banking, manufacturing and communications hub and earning comparisons to Switzerland and Singapore. What has spurred this growth, and what are the prospects for Rwanda in the twenty-first century?

This may come as a surprise, given the fact that the genocide so encompassed Rwanda, and occurred only two decades ago. After the genocide, over $300 million was pumped into the country to alleviate the suffering of those who had survived and fled to refugee camps in neighbouring countries. A couple of years later, Western relief began to focus on not only reconstructing, but developing Rwanda’s infrastructure; building new roads, schools and healthcare facilities, and cementing government institutions. The current President of Rwanda, Paul Kagame, a Tutsi, has sat in the upper reaches of power since the end of the genocide in July 1994. Initially named as Vice President and Minister of Defence under Pasteur Bizimungu, he retained control of the Rwandan army (known as the Rwandan Patriotic Front during the Genocide), which he had headed during the slaughter: despite Bizimungu’s control over some domestic affairs, Kagame was essentially Rwanda’s new commander-in-chief. Kagame’s entire existence has been set against the backdrop of ethnic tensions in the region, having grown up across the border in Uganda after Hutu agitators unleashed a wave of attacks against Tutsis in 1959. His experiences have shaped his mantra, with a firm belief that, by sustaining economic growth and decimating poverty, Rwanda will have a peaceful, stable future.

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In the immediate post-genocide years, the new government undertook a programme of privatisation of industries to stem the flow of government money and reduce barriers to trade, thus improving efficiency and cultivating a new crop of domestic business leaders and foreign investment. The government also overhauled Rwanda’s attitude to tax collection, increasing the national coffers, and given the importance of the agricultural sector, instigated improvement in the production of major exports, in particular coffee, which is serious business for farmers. The export figures are starting to return to what they were prior to the Civil War in 1990, but Rwanda is not a resource-rich nation, nor is it large. Many Rwandans are still subsistence farmers, but the size of their holdings has been shrinking as more of their countrymen return to the country. That said, Kagame is well-travelled, and wherever he goes he sings his country’s praises, making powerful friends along the way, and finding parties willing to buy into Rwanda. The American supermarket giant Costco buys around a quarter of Rwanda’s coffee annually, with some 90% of total yields crossing the Atlantic in total. Kagame made a point of meeting both Costco’s CEO Jim Sinegal and Starbucks head Howard Schultz, to promote Rwanda’s produce and ensure these foreign buyers that the country was a good place to do business. It is all part of the small East African states strategy to market itself to Western and Asian markets.

Given the wide-spread killings in the genocide, more than half the population is under 18 years of age, and there is real pressure to provide secure jobs and futures to divert further possible conflict. Kagame’s government has also focused on investing in the service and knowledge sector, with a spotlight on ICT. According to the Rwanda Development Board, internet penetration stood at less than 1% in 2000; it had increased to 13% by 2013, and due to investment in 4G LTE infrastructure, is estimated to reach 95% by the end of next year. In 2014, the World Bank named Rwanda its most improved economy since 2005, and also ranked the country forty-sixth out of 189 states in its 2015 Doing Business report. The foundations are being laid for a successful future, with Rwanda also noted for its transparency, lack of corruption and the ease of entering its market.

Rwanda is one of only two countries where mountain gorillas can be visited safely.
Rwanda is one of only two countries where mountain gorillas can be visited safely.

The tertiary sector now accounts for around 45% of Rwanda’s GDP, with banking and finance, business services and tourism contributing significantly to this figure. Rwanda is one of only two countries where mountain gorillas can be visited safely, and the country has abundant wildlife in the Akagera National Park. Thousands make the trip annually. In 2010, Rwanda welcomed more than 660,000 visitors, bringing in some $200 million, an increase of 14% from the previous year. The government is still investing heavily in attracting foreign business, and promoting domestic-start-ups, commencing the construction of a new $200 million residential and business area in the capital Kigali, named Century Park. Located between the airport and city centre, Century Park will host not only luxury villas but large hotels and a business zone, with the expectation that it will promote the city to foreign investors.

Special Economic Zones have also been established to foster the manufacturing sector, which some believe to be the only industry that can accommodate the large numbers of Rwandans who will be looking for work in the coming decade. Manufacturing grew almost 15% between 2007 and 2014, and finance minister Claver Gatete has announced the creation of similar dedicated business parks in all of Rwanda’s major cities and regions. Displaying similar attitudes toward these Zones as they have in larger nations such as Zambia and Angola, the Chinese have wasted no time taking steps into the Rwandan market, evidenced by the presence of the Every Time Beijing Paper Corporation Ltd. in the park. These are all promising signs for a country that was so recently on the brink of tearing itself to pieces.

The government are beginning to invest in infrastructure, thanks to a demanding emerging middle-class in the country.
The government are beginning to invest in infrastructure, thanks to a demanding emerging middle-class in the country.

Of course, there are still creases that need to be ironed out. Infrastructure is still somewhat lacking, both in terms of roads and electricity, and the skill base is lower than that of neighbouring countries that have had greater foreign investment over a longer period of time. Geographically, Rwanda is landlocked, and so there needs to be improvement and expansion in its airports if it is to become a competitive manufacturing and service economy. Further, whilst GDP per capita has more than doubled since the end of the genocide, around 60% of the population still lives below the poverty line, meaning that foreign businesses who wish to expand into Rwanda’s markets have to display great consideration when it comes to selecting products that the majority of the population can actually afford. The low population, approximately 12 million people, also makes Rwanda a relatively small market, although some stability is provided as a result.  Overall though, with tax breaks, special economic zones and the support of one of Africa’s more reliable and incorruptible governments, it is clear to see why the world is becoming increasingly aware of the efforts Rwanda is going to make itself a genuine prospect for foreign investment.

Image credits: Dylan Walters|Flickr, Oledoe|Flickr, Thomas Stellmach|Flickr, Ludovic Hirlimann|Flickr.