Rwanda’s radical economic transformation builds institutions, it does not destroy them
Ispent last week in therapy. Or it felt like that, anyway. After a week of trauma as President Jacob Zuma recklessly destroyed years of building SA’s economic capacity, I found myself in a place that could not be more different: a place where policy is vigorously researched, planning is deep and implementation strongly monitored; a country that grew its economy an average 8% per year from 2001 to 2014 and more than 6% since.
That country is Rwanda. I met entrepreneurs and policy makers during a research trip to assess what makes its economy tick. And it was impressive. Instead of trying to defend the importance of evidence-based research as the route to solving a country’s challenges, discussions were about the opportunities being made widely available for the private sector; about the importance of science, technology, engineering and mathematics education; about programmes to get young Rwandans into computer coding on a large scale so the next Google or Facebook might be born among the country’s 1,000 hills.
A week earlier, the government had sold and listed a minority stake in one of the country’s banks on its nascent stock exchange, another of many privatisations. Inequality and poverty have been rapidly reduced, with life expectancy, school enrolment and spending on healthcare all increased. Infant mortality has been reduced by two-thirds. Women have a prominent role in public and private sectors.
Rwanda wants to transform itself from a poor agrarian economy into a knowledge-based, service-oriented economy with middle-income status by 2020. It is making large strides toward doing that.
Perhaps it is an example of “radical economic transformation”. If that is true, the most striking thing is how orthodox the route to delivering this transformation is and how different it is to what SA is doing.
There is no talk of creating government-anointed industrialists. The focus is on giving entrepreneurs the best possible shot at becoming successful.
OVERTOOK SA
Rwanda has rocketed up the World Bank’s rankings for the ease of doing business, now second only to Mauritius in Africa. It overtook SA for second place in 2016. SA plummeted to fifth in 2017. People in the public and private sector proclaimed how easy it was to start a business. “All you need is a good idea. If you have that, you will find the funding and you will get support from government to access international markets,” one businessman said. Rwanda ranks second in the world for ease of accessing credit by businesses and fourth for ease of registering property.
The ingredients of Rwanda’s success include major spending on infrastructure and rigorous monitoring and accountability of the public service. Rwanda moved from 111th to 50th in Transparency International’s corruption perception index from 2007 to 2016. SA ranked 64th. The Rwandan Development Board offers a one-stop shop for foreign investors, with opportunities detailed and everything from registration to immigration handled swiftly.
SIGNIFICANT RESEARCH
Rwanda’s ministry of finance and economic planning oversees public investment. Its national planning and monitoring unit sets out strategy and monitors implementation. It undertakes significant research to assess the evidence for policy approaches, running experiments and employing a raft of economists and other social scientists to study and develop new policy. It is what our National Planning Commission was meant to be.
Things are not perfect. President Paul Kagame has been accused of suppressing opposition. He recently amended the constitution to run for a third term. It would be better if Rwanda’s democratic institutions could be relied on to protect political stability, rather than relying on one leader. But Kagame is highly popular in the country, credited for its economic miracle. Kagame argues it is his responsibility to ensure Rwanda has the institutional strength and depth to drive the country forward in his absence.
Rwanda has a deep tragedy: the genocide of 800,000 Tutsis and moderate Hutus. About 30,000 of those convicted remain in jail. On Friday, as tens of thousands of South Africans took to the streets to protest against Zuma, Rwanda began its national period of mourning, 23 years since the beginning of the genocide. In a country where almost every family has members who were victims or perpetrators, sometimes both, the scars of the past are still clear.
It is hard to tell how much this history affects its determination today to work towards a bright future.
BUILDING INSTITUTIONS
The recipe for such a future is not in dispute: a highly capable state, implementing policy developed through careful research, with ongoing monitoring and development. That is what leads to radical economic transformation, of the sort that makes people better off.
SA has had institutions, from the Treasury to the National Prosecuting Authority, that were world class. While Rwanda has a leader set on building institutions, SA has one set on destroying them. If Rwanda is an example of radical economic transformation, SA is rapidly heading in the wrong direction.