Is Rwanda A Model Of Success In Economic Growth?

Coffee plantation, among contributors to Rwanda’s economic growth

While addressing the Fifth Annual Oxford Africa Business Conference that was recently held in London, the President of Rwanda Paul Kagame praised the African continent saying that it is the new frontier for business, which holds the promise for the global economic turn-around.

President Kagame was the inaugural recipient of the Distinction of Honour for African Growth Award, for presiding over Rwanda’s rebirth; the award that would push many to imagine if Rwanda is a real model in terms of economic growth.

The World Bank and other publications report that Africa is the second fastest growing region in the world. Nine out of 15 countries in the world with the highest rate of economic growth are in Africa, and despite worldwide economic slowdown, African economies have averaged growth rates of 5% over the last ten years.

But still, most aim for double-digit growth in the next decade. Rwanda, for instance, is targeting 11.5% annual growth in the next five years. Official statistics from financial institutions through recent surveys indicate that, 27 African countries have already reached middle-income status and by 2025 that number will have risen to 40.

President Kagame has told the Conference that the presence of skeptics on the Africa’s growth stability is on all fours with the presence of those many who are convinced by the evidence that it will.

Kagame sees the challenge in a different angle and has said: “Among these are those Africans, who are driving it and who are resolved to maintain the momentum. The question therefore as we look to the future is not whether this growth can be sustained, but rather of how.”

How and why Rwanda is distinguished?

According to Foreign Policy Magazine’s 2013 Baseline Profitability Index, Rwanda is the 5th best investment destination in the world. In Rwanda, between 2006 and 2011, poverty was reduced by an estimated 12 percent and lifted one million people out of poverty.

Radical reforms which have made it easier for businesses to get credit, pay taxes, starting a business have boosted Rwanda’s ratings in the World Bank’s ‘Doing Business Report’. Rwanda was rated 2nd in the most reformed countries in the World, over six years, after Georgia (2005-2011). It came in 45th on the overall list, up from 58th last year.

In 2011, Rwanda introduced about reforms to ease doing business in the country. It now takes only one day to start business compared to 45-days average on the African continent, and 13-days for the rich countries to start a business.

In 2012, the World Bank Doing Business report reflects Rwanda the 3rd easiest to do business in Africa after Mauritius, and South Africa. Rwanda is the easiest country to do business in East Africa.

Other key figures:

GDP (purchasing power parity):

$5.63 billion (2010)

$5.26 billion (2009),

$4.71 billion (2008),

$3.74 billion (2007) GDP

Challenges that may impede that growth potential still exist and must be addressed.  The advice from Rwandan President Paul Kagame is to work together. He said “Many African countries are charting their own way forward, but we recognize that we need to work together and establish partnerships with private industry/business, governments, academia and non-profit organizations to create lasting prosperity.”