Rebuilding Rwanda’s Shattered Economy From the Ground Up

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Francis Gatare of the Rwanda Development Board discusses efforts to rebuild Rwanda.

Francis Gatare is chief executive officer of the Rwanda Development Board and a cabinet member in the country’s government. He previously served as principal private secretary, chief economist and deputy head of policy and strategy for the president of Rwanda. Katherine Klein, vice dean of Wharton’s Social Impact Initiative, spoke with him recently about the continuing, collaborative effort to rebuild the nation and grow its economy. Gatare — an architect of the financial renaissance — reveals the sense of pride and purpose shared by all the stakeholders in Rwanda’s success.

An edited transcript of the conversation appears below.

Katherine Klein: A common phrase we hear in the United States and around the world is, “Africa is open for business.” Certainly, Rwanda is open for business. But when people think of Rwanda, unfortunately, what comes to mind for many is the tragic history of the genocide in 1994. What should people know about Rwanda today?

Francis Gatare: I think people need to know Rwanda as a new Rwanda. In fact, when we talk about Rwanda now, it’s almost as if Rwanda had a new beginning, starting in 1994. Since then, we have had a rebirth of our nation, because what many people around the world will always remember is that in 1994, our country had a terrible genocide. A million people were killed and three million displaced internally. Others fled outside as refugees. Infrastructure was destroyed. It was a failed nation, without governance or any economy to talk of.

Since then, we have built a new country. Thanks to the leadership that was able to recover the country, restore its economy, restore the confidence of the people, return the refugees and put back safety and security of property and people, now we have an economy that is fully functional, that has more than four times grown what it was then. It is a country that we believe is beginning to show very strong signs of takeoff into a different stage of development. The idea of Rwanda being open for business is not just an idea; it’s a reality. This is the result of both public sector and private sector [efforts].

Klein: Rwanda is one of the fastest-growing economies in the world.

Gatare:  That’s correct. In fact, over the last 15 years, Rwanda has featured among the fastest-growing economies. In the last 10 years alone, we have had an economy registering, on average, 8% growth of GDP. We have seen that translate into the per capita income of our citizens increasing more than 400%. During the last three years, more than 600,000 people have been lifted out of poverty as a result of economic growth.

Klein: What is the Rwanda Development Board, and what is its mission?

Gatare: The RDB has a very simple and straightforward mission. It was created as a result of a recognition that our continued economic growth requires big involvement of the private sector. The requirement then was, how best can we facilitate private sector investment? The RDB was created as this one-stop center that would act as the single stop for every private individual or company that wants to do business in the country.

“During the last three years, more than 600,000 people have been lifted out of poverty as a result of economic growth.”

The RDB has three objectives. One is to service the entire life cycle of the business. From registration, licensing, facilitating the acquisition of utilities and whatever is required to start a business, it will all be done in one office. The second thing would be to engage in the kind of reforms that are required to develop competitiveness. How best could we turn Rwanda into a competitive environment to do business? The third one was to facilitate these businesses into contributing to continued growth in terms of exports, attracting more investments into the country and participating in the overall economic life of the country. That’s what we do on a daily basis at RDB.

Klein: I know that Rwanda has risen very rapidly on the Ease of Doing Business Index. That’s partly because it’s so easy to open and register a business in Rwanda. Correct?

Gatare: That is correct. About 2008, it came to our attention that there are a number of international best practices in facilitating businesses. We particularly picked the World Bank “Doing Business” report, which caught our attention at that time. Rwanda was ranked number 145 among 189 countries that were surveyed. We took it upon ourselves to have a reform agenda every year that would improve measuring ourselves against the best practices to aim at getting among the top 10.

I’m very happy to inform you that since then, Rwanda has improved across the board from 145th to about 42nd today — a tremendous improvement. But beyond that, the reform agenda also captures many other issues that businesses are interested in, that help them become competitive and run profitable businesses. Some are captured by the World Economic Forum Report. Some are captured by the Global Profitability Indices. Some are captured by Gallup Polls. Some are captured by international governance indices. All add up to form a very competitive business environment that we think today is among the best and that business people should look at more favorably.

Klein: I love this description that you’ve given because it’s so typical of what I’ve observed in Rwanda of having very specific goals, very clear metrics, a big vision and accomplishments to those. The Ease of Doing Business Index is just one example of that approach.

Gatare: It is. But also, that whole culture of having targets and working towards them is one that permeates across the entire society of our country. In the public sector, in government in particular, we have a process that we call imihigo, which loosely translates into performance contracts. Every institution of government, management of the institution’s staff and everyone must have a performance contract that first articulates what they aim to achieve, the resources required to achieve that and accountability associated with achieving that. That is what is helping us to achieve many of our targets that we set.

Klein: I often bring Wharton MBA students to Rwanda, and they’re astonished by imihigo and what this says about the country’s culture.

Gatare: It’s very important. The process that people go through aiming at achieving their targets, however ambitious they may be, is very important, and eventually results in a culture that is results-oriented.

Klein: We know from abundant research that goal-setting is hugely effective in motivating people and improving performance, and Rwanda does it remarkably well. I want to shift the conversation to your role in attracting foreign business and foreign investors to Rwanda. What are your goals in that area?

“When you’re starting at a lower base in development, you have to have to have a lot of investments by the public sector in infrastructure, in education, in health. But with time, we realized that it’s very important that the private sector continues to take on more of a role.”

Gatare: We have two goals. One is to increase the component of our GDP that is private-sector investments. Every year, we want to make sure that as the economy grows, the role of the private sector is not only growing, it’s also significantly growing enough to take on a larger share of our economy. As you know, when you’re starting at a lower base in development, you have to have to have a lot of investments by the public sector in infrastructure, in education, in health. But with time, we realized that it’s very important that the private sector continues to take on more of a role. 

With the second goal, we realized the limitations of mobilizing domestic capital and aimed to increase the foreign direct investment in the economy so that it can have that push for takeoff as we transform our economy. Currently, we aim to reach more than 10% of our GDP as foreign direct investment by the year 2020. We aim to achieve more than 30% of private-sector investments into the economy by 2020. Those are targets that inform what I do every day. With that, then we translate into how much we want to raise on an annual basis. We have a target of growing private investment by a factor of 20% on an annual basis to reach the kind of targets we have set for ourselves.

Klein: These are ambitious goals. How are you succeeding in attracting investment, and what are the barriers?

Gatare: What I am finding is that our biggest success comes as a silver lining around our challenges Twitter . For example, Rwanda has 12 million people within a larger environment of an East African community of 145 million people. So, what previously had been seen as a small economy has now become a large economy that is attracting businesses into Rwanda as a way to also operate in the wider East African community.  By making Rwanda a core advocate of regional integration, and also being seen to participate actively in that, we have expanded the market reach for any business that comes into Rwanda. That’s building on what would have been initially seen as a challenge of our economy.

The second thing is, as we are building our economy, the core infrastructure that is required for businesses to succeed, like energy, transportation infrastructure, education and skills training, have become the sectors that we have seen businesses participate in by opening private universities. Private companies are going into training. Private companies are going into infrastructure construction, into energy generation, translating what previously could have been seen as disadvantages into business opportunities that are also championing growth.

Klein: You’re describing a cycle of businesses investing to create businesses that grow, that allow other businesses to grow. Right?

Gatare: Absolutely, and that’s how we see building competitiveness in the sense of one providing the kind of infrastructure that is important for other businesses to build on. On that platform, the businesses begin to access the markets and become profitable. As a result of these initial investments, you are seeing other sectors emerge.

Because of the peace and security dividends you have seen in our country and the region as a whole, tourism continues to be the fastest-growing sector in our economy. Last year alone, more than $305 million was generated as a result of tourism, making it the largest export for our country. So, you’re seeing both the foundational infrastructure for businesses turning into business opportunities that are making it attractive for investors.

“There is a perception issue overall about African economies, about risk. So, there’s an enormous amount of work that we put into demonstrating that Rwanda is a place that you can do business and realize your business growth aspirations.”

Klein:  Do you find that for some business leaders, for some investors, there’s an issue of mindset? They think more of Rwanda as a place maybe to visit or help, but not a place to come and do business?

Gatare: There is a perception issue overall about African economies, about risk. A lot of what we see is risk as a perception, rather than risk as real risk of doing business. So, there’s an enormous amount of work that we put into demonstrating that Rwanda is a place that you can do business and realize your business growth aspirations. But we also realize that there are many people that see not just Rwanda, but Africa, as a place to help. This is especially true with many successful business people who are high net worth, have achieved a certain success in life and want to give back to society, who are often attracted by the desire to contribute. What we are saying to them is that this is very good, because philanthropy is good. This desire to help others and lift lives is very important, but we can actually do it using hybrid business models. You can help while you’re creating employment and, as a result, contribute to the sustainable growth of the economy.

Klein: As you reflect on Rwanda’s 21 years since the genocide, what are you most proud of?

Gatare: The unity of purpose of the Rwandan people. It’s not every society that has suffered a genocide. It’s a devastating, destructive experience that shatters a society from its core. To see a people come back together and have a common identity as Rwandans, and begin to aspire for self-improvement as individuals, together for their families, and begin to invest in long term, and by so doing, collectively contribute the rebirth of the nation that we are seeing as Rwanda, I’m extremely proud of that. It’s the single thing that I believe is really happening and changing the story of Rwanda today.

Image credit: Downtown Kigali and papyrus marsh October 2012″ by Lemurbaby – Own work. Licensed under CC BY-SA 3.0 via Commons

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