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Rwanda’s risky bet on booming economic future

By AFP | Published Mon, July 31st 2017 at 11:26, Updated July 31st 2017 at 11:31 GMT +3

A Rwandan policeman walks past the dome of the Kigali Convention Centre in Kigali as it glows with the colours of the Rwandan flag. [AFP]

In a two-year-old mall in Kigali’s city centre, bored shopkeepers chat idly as muzak echoes through the quiet interior, with barely a client in sight on a weekday morning.

The gleaming building is one of several developments that have shot up in the Rwandan capital, a window to an ambitious future in which a thriving middle class built on a services-based economy will replace a nation of largely poor, rural farmers.

But the Rwandan dream is decades away and observers warn that aggressive and costly infrastructure expansion - mostly with public funds - is a risky gamble in a tiny market where 39 per cent of the population still lives on less than two dollars a day.

“Development is good but we are struggling, the rent is killing us,” said the 24-year-old owner of a cosmetics store. He says the lack of customers has caused two shops to close down. Many others remain unoccupied.

The pride of the city is the government-funded Kigali Convention Centre, a sprawling complex inaugurated in 2016 whose colourful dome lights up the hilly capital at night - a symbol of the country’s hopes of becoming a hub for business tourism.

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National airline

The Government has also invested massively in national airline Rwandair, buying a fleet of 12 aircraft and expanding to 22 destinations, including London and soon, New York.

To the south of Kigali, construction has started on an $800 million (Sh83.2 billion) new international airport, a public-private partnership with Portugal’s Mota-Engil.

Engineers have also rolled out 4,500km (2,800 miles) of fibre optic cable around the Land of a Thousand Hills.

Rwanda sees these projects as the crucial foundation of its economic blueprint to become a high-income country by 2050.

This will require multiplying GDP per capita by nearly 20 and achieving a growth rate of 10 per cent per year - a mind-boggling task.

A European diplomat told AFP the government’s investment drive was “overly optimistic”.

“The conference centre is the most expensive building in Africa. We were told it cost $300 million (Sh31.2 billion)... but I think it cost more like $800 million. A lot of the conferences are government-type conferences, they are not really earning money from them," the diplomat said.

“To us at the moment it looks like a very brave gamble, maybe strategically a very good one but we don’t quite see... where is this business going to come from?” he said, referring to both the conference centre and the airline.

However, observers agree that there are few other options for the tiny, landlocked nation with barely any mineral resources.

“What (Rwanda) does have is it is very well organised, it has security and good transportation links,” said IMF representative Alun Thomas.

“They are playing to their competitive advantage. It has risks but I think it is the right strategy. You have to take risks to develop and grow.”

International donors wax lyrical over the radical transformation of the central African nation 23 years after some 800,000 people, mostly from the Tutsi minority, were slaughtered in a 100-day genocide.

Growth has averaged seven per cent over the past two decades, poverty rates have dropped, health indicators have improved and the World Bank classes Rwanda as the second easiest African country in which to do business.

Kigali, meanwhile, is clean, green, and not plagued by petty crime and corruption seen elsewhere in the region.

However, outside the rising centre, some 70 per cent of the population tend small agricultural plots that cling to steep slopes or nestle in the valleys.

The economy of Rwanda, of which about 30 per cent of the national budget comes from foreign aid, slowed to about two per cent growth at the beginning of 2017 as the construction boom levelled out and foreign reserves ran low due to Government spending.

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