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Sunday, July 13, 2014

Rwanda@20, a performance audit

How Rwanda’s growth since 1994 measures against other economies and what explains the figures

Rwanda seems to be a country of extremes. Its turnaround since the genocide has been as astounding as the tragedy itself. The scale and speed of the Rwanda genocide was unprecedented. Rwanda’s rapid state and economic reconstruction has been equally unprecedented. One measure for success of a country is the growth of the Gross Domestic Product (GDP). Because this is based on statistical evidence rather than on opinion, it is a more preferred way to assess the performance of any government.

For example, statistical evidence shows that very few countries in the history of humankind have sustained economic growth rates above 7% on average for 25 years. These include South Korea, China, Japan, Malaysia, Taiwan, Singapore, Mauritius and Botswana. Many countries have had short sprints at growth but have not been able to sustain it over a long period.

One way to measure the success of post genocide Rwanda is to look at the growth of GDP. I went to the IMF website and downloaded GDP growth figures of 191 countries and sought to see how Rwanda ranks over the last 25 years (since 1988), over the last 19 years (since 1994) and over the last 13 years (since Paul Kagame became president in 2000). The figures for 2014 are not yet available as we are only half way through it.

Over the last 25 years, Rwanda’s GDP growth rate has averaged 4.5% thus making it the 75th fastest growing economy in the world. This sample is affected by the last six years of the Juvénal Habyarimana government and three months of the genocide that destroyed 60% of that nation’s GDP. But if the years are reduced to 19 (to account for the time since RPF took power), average growth has been 6.6% making it the 23rd fastest growing economy in the world. However, when this figure is reduced to 13 years to account for the time Kagame has been president, its average growth rate has been 7.7% and ranks as the 15th fastest growing economy in the world.

Since 2,000 world prices of oil have been at exceptionally high levels. This has brought revenue windfalls to oil producing and exporting countries thus boosting their growth even without hard work. It is no surprise therefore that out of the 15 fastest growing economies of the last 13 years, seven have been oil producers and exporters.

China is the 5th largest producer of oil in the world but the 29th largest oil exporter. However, most of its growth is driven by export of manufactured products. Therefore, although China has been the 7th fastest growing economy in the world over the last 13 years, I have not included it in the sample of oil exporters. Therefore, without oil exporters distorting the sample, Rwanda has been the 8th fastest growing economy in the world since Kagame assumed office in 2000.  I must admit that Rwanda is not an African exception. Indeed, our continent has been the fastest growing region of the world over the last 13 years. Out of the top 15 fastest growing economies in the world, Africa has six countries. If the time is reduced to the last ten years, Africa has six out of the ten fastest growing economies in the world. Therefore, we need to test Rwanda against Africa’s growth story.

For the last 13 years, Rwanda has been the sixth fastest growing economy on the continent. However, if you remove oil exporters from the sample (Angola, Equatorial Guinea, Nigeria, plus Sierra Leone which exports diamonds), Rwanda has been Africa’s second fastest growing economy behind Ethiopia.

Rwanda’s growth story is much bigger than this if one accounts for its many disadvantages. It lacks the natural advantages that can make a country grow faster economically.

First, neighbourhood: Countries like South Korea, Taiwan and Singapore on the Pacific Rim enjoyed close geographical proximity to Japan which had industrialised earlier and was enjoying a Post-World War Two reconstruction boom. Supplying Japan’s hungry industries with raw materials, labour and cheap manufactured goods - like industrial parts, became their speciality. Rwanda, on the other hand, lives in a bad and dangerous neighbourhood – bordering the Democratic Republic of Congo to the West and Burundi to the south – both of which countries have been mired in civil war for most of post genocide Rwanda’s history.

The second factor is proximity to the sea. Rwanda is 1500kms from the sea and this journey is traversed over treacherous and narrow roads in Kenya (until recently Mombasa-Nairobi-Busia road was bad) and Uganda (till now Katuna-Mbarara road is under reconstruction).

The third factor is Rwanda’s lack of rich minerals or rich soils; its hilly landscape makes agriculture an expensive enterprise as rains wash away the soils.

Four: where countries in East Asia enjoyed the advantage of a pre-existing high level of skills and education, the RPF inherited a country with two lawyers, 30 doctors and hardly any engineers at all – leave alone people with skills and experience to manage a modern bureaucratic state.

And five: Rwanda did not have a strategic advantage to attract a big power to bankroll its reconstruction. Therefore, over the last twenty years, Rwanda has succeeded in spite of numerous obstacles that would under normal circumstances have relegated it to slow, stagnant, or declining economic growth.  Rwanda has achieved this rapid growth because of the quality of its institutions and public policies and the hard work of its leaders and citizens. This has only been possible because of the political arrangements that have underpinned post genocide Rwanda.

Most Western “experts” on Rwanda claim that Kagame has presided over a police state, suffocating individual freedoms, and terrorising its citizens. It is difficult to make people work hard through coercion. So consent is fundamental to growth. Rwanda’s stability and success has come from decisions that have fostered social reconciliation and political inclusion in the governance.

Rwandans know all too well their ugly history and the political and social accommodations necessary for them to live in a stable political order. There are political restrictions in Rwanda that may seem authoritarian to a foreign visitor armed with an abstract notion of freedom but which its people, knowing all too well their own circumstances, see and accept as absolutely necessary for their stability and cohesion. That is possibly why, when asked how free they feel, Rwandans in a July 04 Gallup poll ranked higher in feeling free than citizens of the United States, the world’s oldest democracy.


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