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Rwanda: economy will provide the acid test: Rwanda's normalisation process took another step forward with the recent Presidential and legislative elections. But it is the economy, rather than politics which will provide stability to the nation.

The normalisation of Rwanda's domestic affairs continued in August and September with the country's first Presidential and legislative elections since the 1994 genocide catapulted the nation in the headlines for all the wrong reasons.

Paul Kagame of the Rwandan Patriotic Front (RPF) won the Presidential poll and should lead the country for at least the next seven years. During this time, he could put even more distance between contemporary Rwanda and the country which was devastated just under a decade ago.

The key to success will be to boost the standard of living for the masses, for there is a great deal of truth in the old saying that rebellion and revolution is borne out of empty stomachs.

Kagame originally served as Vice-President in the transitional government which was set up in 1994, before acceding to the Presidency in 2000. He won the August poll with 95% of the vote, something of a surprise given that he is a Tutsi, that Rwandans traditionally vote along ethnic lines and that Hutus remain in the majority. Some may view the result as proof of Kagame's popularity across the board but others fear the overwhelming result was partly the result of electoral fraud. Representatives of non-governmental organisations criticised irregularities and the lack of political freedoms, while European Union observers described the election as "an important step in the democratic process", although they conceded that it was "not entirely free and fair".

Putting Rwanda's role in the conflict in the Democratic Republic of the Congo to one side, Kagame is generally popular with international donors and governments. However, he needs to build on the improved national security situation of the past few years and embark upon genuine national reconstruction. While improved civil and political rights may help to assuage Hutu opposition, as always it is economic growth that will stabilise the country in the long term. The risk of renewed conflict can be limited, provided the standard of living of most Rwandans starts to rise.

Kagame has repeatedly said all the right things regarding rebuilding the country. For instance, he argued: "There ate some who are scared by unity and by building a country on the basis of ideas. They are still using ethnic criteria and believe that politics should be based on ethnic belonging, religion or other criteria which divide people. I thought we had outgrown that."

The Rwandan newspaper Umuseso summed up the needs of the nation: "Rwanda needs a leader with a vision, who places himself above petty politics and loves equally his country and all Rwandans. Then development and foreign assistance will follow: There will be freedom of the press, it will rain and farmers will harvest because there will be peace."

Balancing national peace with agrarian success will be the key to success, while the new constitution should also encourage a spirit of co-operation. The RPF is not permitted to hold more than hall of all Ministerial posts, in order to encourage the participation of all strands of political opinion in government, while Kagame is not permitted to select the Prime Minister from his own party.

ECONOMIC CHALLENGE

The economic strategy adopt ed by most African nations focuses upon economic restructuring and diversification. Improvements in infrastructure are put at the top of the agenda, with IMF and other donor lending closely associated with balancing the budget. The situation is slightly different in Rwanda as a result of the overwhelmingly rural nature of the population. Although the country is one of the most densely inhabited on the continent, around 90% of the population continues to live outside towns.

Coffee cultivation formed the foundation of the economy prior to the genocide and so enabling people to earn a reasonable living from coffee production and so staying on the land is central to both economic and national success.

During the 1994 genocide and subsequent instability, many people abandoned their coffee plantations, while others who fled the killing have been working land for the past nine years that they found abandoned. Sorting out who is entitled to what is a logistical nightmare but one that is largely being settled on a local basis. The resolution of land disputes should also encourage increased cultivation of Rwanda's second biggest revenue earner--tea. The country's other main crops are bananas, beans, sorghum and potatoes, mainly for domestic consumption or for export to Burundi.

Even today, when production has resumed in many areas, coffee exports stand at just 17,000 tonnes a year, in comparison with 45,000 tonnes in 1990. This is partly due to problems in the Rwandan economy, such as the lack of access to credit for farmers seeking to re-establish their plantations or set up new areas of cultivation, but also because it is difficult for Rwanda to recapture the markets which were lost nine years ago to other producers. Moreover, in the meantime competition in the market has become yet stiffer as the result of greatly increased production in some parts of Asia.

The re-establishment of the key coffee sector has also been hit by erratic and generally very low commodity prices over the past year. During the first part of 2003, many growers spent more on coffee production than they recouped in sales, prompting Minister of Commerce Alexandre Lyambabaje to say: "It is terrible because some smaller holders have abandoned the plantations because they are not sustainable."

Rather than attempting to regain the markets that were lost a decade ago, local co-operatives have decided to target the speciality coffee and fair trade markets. According to the Ministry of Commerce, farmers producing for fair trade companies receive 80 US cents a kilo, compared with only 28 US cents from the main buyers. Lyambabaje believes that exports will have regained their 1990 level by 2010, but while growth in the coffee sector is certainly desirable, it would be wrong to hark back to the economy of the early 1990s too much. In 1990, coffee accounted for 60% of Rwanda's exports--over-reliance on a single commodity on a grand scale.

DIVERSIFICATION GREATER THAN IN 1990

Lyambabaje says that the economy is already more diverse than in t990. He states: "Recently the mining industry has brought in quite significant revenues that has helped the government cope. We are also signed up to the World Bank's HIPC programme, which is how we are financing development" In concert with support from the World Bank and IMF, the government has embarked upon the standard economic reform package, including a rail of privatisation plans.

At least 47 of the 72 state owned companies listed for sale in 1996 have now been privatised, generating $10m for the government, including $1.5m from the sale of a 30% stake in the Rwanda Tobacco Company to British American Tobacco in 2001.

However, many of the country's most important parastatals remain in state hands and it is hoped that the sale of organisations such as telecoms company Rwandatel will raise another $90m. In the case of Rwandatel, the government intends to sell stakes to both foreign and domestic investors, while retaining a golden share in order to maintain some influence over key decisions.

According to Robert Bayigamba, the head of the Rwandan Privatisation Trust, fewer than 1,200 jobs have been lost in the newly privatised companies and he is confident that more efficient operations should lead to job creation that will more than make up for the losses within a few years.

In a somewhat unusual turn of events, the World Bank last year asked the government to postpone privatising two of the country's nine state owned tea plantations, Pfunda and Mulindi. The Bank insists that the government finalise an agreement with tea growers' associations before selling off the country's main tea estates, but the government is keen to push ahead with privatisation in the agricultural sector in the hope that private investors will be able to invest in fertilisers and machinery in order to boost output and make the sector more efficient.

The country's macro economic figures look very promising, with growth of 9.9% and inflation of 3.4% recorded in 2002. High levels of economic growth ate to be expected after the huge recession of 1994 and 1995 but the latter statistic indicates an economy being brought under real control.

The governor of the Banque Nationale Rwandaise, Francois Kanimba, says: "The figures reflect a healthy democratic economy, unlike the '70s and '80s, when industries were financially controlled and protected by state interventionism." He argues: "Our main internal challenges are to reduce bank holdings, keep inflation down and modernise the payments systems" A number of foreign bankers are being recruited to help introduce such reforms.

RWANDA NEEDS DONOR SUPPORT

With the fruits of economic reform still several years away, Rwanda continues to rely heavily upon donor support. For example, the European Union agreed to fund $20m worth of road projects in September, two days after the African Development Bank (ADB) announced grants and loans worth almost $30m. The money will be used to combat the spread of HIV/AIDS, to invest in water and power sector infrastructure in the capital Kigali and to fund a range of natural resources projects. It will take many years before Rwanda can reduce its dependence on external support and begin to reduce the large national debt.

Projects funded by donors, the government and private companies have led to a great deal of building work in the country. The health of the construction sector in Rwanda is emphasised by an announcement by leading Ugandan building contractor, Roko Construction, that it is busier in Kigali than in Uganda. Its $27m worth of projects include the construction of a new restaurant, swimming pool and conference centre, as well as the extension of the prestigious Hotel Diplomate.

That economic success can defuse ethnic tensions even in a country as scarred as Rwanda should not be taken for granted. Bitterness and animosity find a breeding ground in poverty and a lack of hope. It is therefore to be hoped that Rwanda's high levels of economic growth can be improved for many years to come and that the regeneration of civil society and the private sector can be sustained by donor support.
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Title Annotation:Countryfile
Author:Ford, Neil
Publication:African Business
Geographic Code:6RWAN
Date:Nov 1, 2003
Words:1700
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