HAS RWANDA UNDER PAUL KAGAME UNDERGONE AN ECONOMIC MIRACLE? A RESPONSE

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The reaction I am getting from my friends on facebook is that most people wish to see an objective analysis of Rwanda’s economic performance since 1994. Our readers’ request is based on the fact that, on the one hand, the Kagame government sees itself as having performed an economic miracle.http://www.qfinance.com/dictionary/economic-miracle

But on the other hand its critics depict this same record as disaster. These two extremes leave most people confused and unable to make an informed decision on this critical matter.

I show in this brief article that Kagame’s performance is nowhere close to an economic miracle. Most Rwandans still eke their living from subsistence agriculture as their forefathers did before them. I demonstrate in particular that it took the Kagame government some 14 years to bring Rwanda’s per capita income to its 1990 pre-war levels – but thereafter making substantial gains. Bringing GDP level to its pre-war level took 11 years – followed by a quicker pace of growth. Comparatively, however, as shown here, Rwanda remains in the same position regionally by per capita income – it is second to Kenya at present as it was in 1990. By GDP, however, Rwanda is dwarf compared to its neighbors, except for Burundi. Kagame is therefore no economic miracle-maker by any stretch of imagination.

The simplest starting point in this review is to look at both gross domestic product (GDP) and per capita income before the war in 1990-1994 and after the war from 1994 to 2011. Thereafter we contrast Rwanda’s performance against its East African neighbours to gain a broader comparative understanding of its performance since 1994.

In 1990, Rwanda’s per capita income was US$395, before sharply collapsing to US$133 in 1994 due to the war and genocide. Rwanda’s per capita income was to rise slowly, nearly reaching the 1990 level in 2007 with per capita of US$385, before surpassing the 1990 mark in 2008 with a per capita of US$471. As already stated, it took the Kagame/RPF government 14 years to reach and overtake the 1990’s per capita income of US$394. After 2008, however, Rwanda’s economic performance as illustrated by per capita income improved substantially, growing to US$509 in 2009, US$529 in 2010, and to US$586 in 2011.http://data.worldbank.org/indicator/NY.GDP.PCAP.CD

In the case of GDP, Rwanda’s was US$2.5bil in 1990, before falling sharply in 1994 to 754million due to war and genocide. Rwanda’s GDP reached the pre-war level of U$2.5bil in 2005, surpassing it in 2006 with a GDP of US$3.1bil. Thereafter, GDP rose substantially increasing by at least a billion dollars each year up to US$6.3bil level that was reached in 2011. As previously indicated, therefore, growing Rwanda’s GDP to pre-war level and surpassing it took the Kagame government some 11 years.

Let us now contrast Rwanda’s per capita income and GDP performance with its neighbors to gain a comparative sense of what its achievements.

In 1990, Kenya led the East African grouping with per capita income of US$366, closely followed by Rwanda at US$359; Uganda at US$243; and Burundi with US$202, with Tanzania trailing at US$172. Twenty one years later in 2011, Kenya still led with an even bigger gap with per capita income of US$808, followed by Rwanda at US$583; Tanzania with US$532; Uganda at US$487 and Burundi trailing with per capita of US$271. In other words, the top two (Kenya and Rwanda) remained the same, while the last three changed positions with Tanzania replacing Uganda for the third position. Burundi that had previously occupied the fourth position fell to the fifth and to the rear of the group.

In the case of GDP, Kenya in 1990 stood at US$8.5bil; Uganda with US$4.3bil; Tanzania with US$4.2bil; Rwanda with US$2.5bil; and Burundi at the rear with US$1.1bil. Twenty one years later in 2011, Kenya had outstripped the rest by a much bigger margin with GDP of US$33bil; Tanzania with US$24bil; Uganda at US$17bil; Rwanda at US$6.3, distantly trailed by Burundi with GDP of US$2.3bil. The order in this case remained the same with the exception of Tanzania that overtook Uganda for the second position of the grouping. The most significant change here, by far, is the expansion of the Kenyan economy that is now bigger than those of Uganda, Rwanda and Burundi combined.
http://data.worldbank.org/indicator/NY.GDP.MKTP.CD?page=4

So where is the Kagame miracle?

The above picture shows that Rwanda has done okay – but nothing spectacular. Part of Rwanda’s relative success has been to improve the business climate from what it was some ten years ago – as the government is always proclaiming. But even in this case, however, achievement is very modest compared to its neighbours. A World Bank analysis has recently stated the following: “Rwanda is doing well in quite a few important areas of the business climate. However, in some of the other aspects of business environment, Rwanda’s performance is just about at par with the regional average or worse than the frontier or best practice countries. These areas, such as exporting activity, labor issues, skill availability, tax rates and tax administration as obstacles to firms, transportation, etc., present an important opportunity for Rwanda to mimic its neighbors thereby to further improve its business climate.”http://blogs.worldbank.org/psd/rwanda-next-big-thing-africa

The April 2013 World Bank’s country review of Rwanda paints an equally pessimistic picture: “The private sector is still overwhelmingly informal and plays a limited role in contributing to economic activity. Despite Rwanda’s success in having established a sound investment climate, foreign direct investments remain low. Private sector investment is estimated at 10.9% of GDP, compared to 14.4% in the region in 2010. Poor physical infrastructure and the lack of electricity access and generation are other major constraints to increasing and diversifying exports of goods and services and further enhancing competitiveness. Rwanda also experiences significant capacity and skills gaps in the private sector and across government agencies that play significant roles in establishing the policy environment for private sector development.” http://www.worldbank.org/en/country/rwanda/overview

Lastly, I recently stumbled on a shocking statistic from the Rwanda Social Security Board – the number of Rwandan public and private sector employees that contribute to the fund number only 265,660, in a population of at least 10 million people. This is hardly a sign of an economic miracle. Rwanda remains an essentially subsistence agriculture economy in which most of its people still eke a living.

President Kagame’s evidence for economic miracle are demonstrative things you see in the enclave capital city of Kigali – high buildings and paved roads lined with palm trees. But even here is a side most people do not see – such as the fact that this is a city of a million people with neither a central sewage or a treatment plant. Like its village and town counterparts, Kigali remains a city of latrines.

David Himbara

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