Economic Renaissance in Rwanda: Factors, Results, and Future Challenges

This study addresses the developmental successes achieved by Rwanda in recent decades, a nation that suffered from instability due to civil war. What success factors contributed to the significant political, economic, and developmental transformations in Rwanda that have led to notable stability? How is this experience evaluated, and how sustainable is it?

Introduction

In this brief study, we will highlight Rwanda and the successes it has achieved in recent decades in the field of political and economic development, particularly after enduring prolonged instability during the civil war and beforehand, where horrific massacres and ethnic cleansing led to immense casualties among thousands. We will attempt to identify the major factors that contributed to the successful political, economic, and developmental transformations in Rwanda, allowing it to enjoy political stability and a recovering, advanced economy. We will then evaluate this experience and its potential for sustainability.

Challenges and Obstacles after the Civil War

Since the end of the civil war, the nascent government has pursued policies and reforms in state management to achieve social peace and economic prosperity. The new government adopted a unique political approach such that it cannot be categorized as a true democracy due to its one-party rule and the exclusion and marginalization of the opposition; however, it did carry out transformations in the nation’s economic and social structure that contributed to creating a new nation-building model in Africa. Nevertheless, this strategic shift in governance was not without its challenges; scarcity of environmental or natural resources posed significant difficulties for the fledgling state, a factor that previously contributed to igniting the civil war from which Rwanda had just emerged. A country like Rwanda, with a high population density relative to its size, has limited land availability, particularly as a significant portion of the country consists of hills and volcanoes, limiting effective utilization of its various areas. Furthermore, the nation faced challenges of resource depletion or degradation due to natural factors, and the previous political legacy that resulted in injustice in land distribution among the population represented another significant hurdle; prior to the civil war, the affluent owned more than half of the arable land, while most people lacked land sufficient to meet their daily needs.

This situation led to a kind of structural famine that affected large sectors of society. By the late 1980s, unemployment in rural areas among adults reached 30%. Naturally, these long-standing issues contributed to numerous barriers and obstacles hindering the state’s ability to uplift its population and aspire toward becoming a modern state capable of managing its resources and aligning with politically, socially, and economically stable nations in Africa.

Rwanda previously faced widespread poverty, particularly among its rural population, and governmental failure to address these fundamental issues has long marked the African state since its inception. Although the root cause of internal conflict in Rwanda was the prevalence of poverty and the widening gap between the rich and the poor, Rwandan politicians succeeded in redirecting the discourse from resource-based conflict to one between the Tutsi and Hutu tribes.

Before the arrival of French colonialism, the Tutsi were the ruling kings of Rwanda, thus forming the feudal class, while the Hutu constituted the peasant class. This hierarchy was manipulated by the colonizers in efforts to enhance divisive “divide and conquer” colonial policies to prevent the peoples of that region from uniting against the colonizer. Additionally, the Cold War rivalry influenced this conflict, with the Tutsi forming alliances with countries aligned with the communist bloc, while the Hutu received support from the Western bloc. All of this exacerbated social memory tensions, manifesting starkly in the form of the massacres and ethnic cleansing that occurred in 1994.

These factors gradually escalated tensions between the conflicting sides, leading to further massacres and forced displacement, compounded by the oppressive political regime that existed prior to the civil war, which practiced exclusionary policies toward the Tutsi.

Thus, the aforementioned factors significantly contributed to preparing the various sides for a brutal civil conflict and bloody ethnic cleansing; these factors did not operate in isolation but rather in an interactive framework, leading to the emergence of other subsidiary causes of war.

Following the civil war, the Rwandan government faced immense challenges to achieve social, economic, and political prosperity. The bloody legacy was the first of these challenges. In this tragic context, despair gripped the hearts of the people, raising questions about the government’s ability to implement real reforms, especially given the charged social memory filled with bloodshed and animosities.

The second challenge was the exodus of investors, the wealthier members of society, and the youth, resulting in Rwanda losing its human and economic capital, leaving it devoid of skills, capacities, and financial resources. Additionally, Rwanda is a resource-scarce country, which exacerbated its economic burdens; the nation lacks oil fields, substantial precious mineral mines, and maritime outlets. It is also a geographically small country filled with hills, posing serious geological challenges that hinder the effective utilization of its limited geographic spaces due to its small size and high population density.

Another challenge facing the nascent republic was the significant population increase due to the return of many refugees from neighboring countries, particularly those who immigrated voluntarily or were compelled to leave due to policies implemented between 1959 and 1973. The return of these individuals undoubtedly presented an additional economic, political, and social challenge for the new state, with some estimates suggesting that the population doubled over two and a half decades.

Economic Renaissance Despite Hardships

Within just a few years, Rwanda experienced rapid transformations and significant leaps forward; the real Gross Domestic Product (GDP) in Rwanda grew by an average of 7.44% annually from 2000 to 2022. This remarkable increase can be attributed to the government’s structural economic reforms, efforts to enhance the business environment, and attract investments, resulting in a doubling of foreign trade during those years. In education, student enrollment rates in pre-university levels increased significantly, with primary school enrollment reaching around 88% in 2022, favoring females compared to males in secondary education. In health, maternal mortality and mortality rates for children under five saw a sharp decline, while life expectancy at birth doubled from 31.6 years in 1995 to 66 years in 2022. These figures indicate extraordinary progress in human and social development in the country, leading to questions about the underlying causes that propelled Rwanda’s economy to advanced levels compared to other African nations.

Before delving into the reasons, we can characterize Rwanda’s socio-economic performance post-genocide through four key traits:

1. A rapid pace of economic growth, coupled with noticeable improvements in the provision of social services.
2. Limited changes in the industrial structure; consequently, there was no significant industrial development.
3. The reduction of poverty remained a top priority on the government’s agenda, due to low income levels and worsening economic disparity since the end of the civil war.
4. Economic growth was achieved under an authoritarian regime.

To achieve leading economic development after the civil war, the government adopted a balanced approach between the free-market capitalism model, applying the “Laissez-Faire” principle, and a model of a non-free market where the government intervened. This strategy enabled the government to manage internal and external considerations harmoniously. The first model was applied in the business and mining sectors, while the second was implemented in agriculture and rural areas, reinforcing the government’s political grip in those regions away from decision-making centers.

In 2000 and subsequent years, the Rwandan government initiated various policies aimed at implementing genuine reforms within the state. The core pillar of the economic development strategy was to promote private sector development by improving the business environment. To achieve this, the government focused on three key areas: good governance, human resources development, and infrastructure development. Consequently, the government enhanced and developed Rwanda’s working environment, exhausting its resources and efforts as it regarded this as the primary entry point for private sector development.

In agricultural regions and villages, to increase jobs and improve trade activity, the government issued several policies, including land-sharing initiatives implemented among thousands of returning Tutsi refugees and resident Hutu, especially since the homes of returning Tutsi were occupied by their neighbors during years of exile. As a result, the Tutsi received half of the land from the Hutu, and this policy was applied in the eastern regions with abundant land. This approach facilitated the resettlement of displaced individuals and provided an appropriate environment for their social, political, and economic integration. In 1999, the government enacted an important decision recognizing gender equality regarding land ownership. Prior to this decision, women in Rwanda had no rights to own land. It’s worth noting that significant changes in social structure in villages facilitated the issuance of this decision, alongside an increase in the female population relative to males, which was a realistic outcome of the civil war. Furthermore, another decision regarding property registration and issuance of ownership rights played a crucial role in safeguarding rights; the government succeeded in registering and issuing titles for all properties in the names of their respective owners.

Combating Corruption and Economic Development

Rwanda exhibited highly effective institutional performance, ranking alongside middle-income African countries on governance indicators in 2016 and subsequent years. This strong performance was clearly reflected in indicators of government effectiveness, control of corruption, rule of law, and regulatory quality.

The Rwandan government maintained its high-profile efforts to combat corruption in subsequent years. According to the 2023 Corruption Perceptions Index (CPI) released by Transparency International, Rwanda ranked 49th globally, making it the fourth least corrupt country in Africa after Botswana, Cape Verde, and Seychelles, and the least corrupt in East Africa.

This success in combating corruption in Rwanda is attributed to numerous measures taken since the end of the civil war, including stipulations in the 2003 constitution urging politicians and civil service employees to declare their assets and properties.

This was followed by a series of measures undertaken by the government, including prosecuting senior government officials who violated the law. Other measures that reinforced good governance and anti-corruption efforts included improving the efficiency of selecting government officials from leadership levels to lower positions, with selections based on merit and competency in a highly transparent manner.

Other Success Factors

The presence of inspiring leadership with a clear vision and will has been a fundamental cornerstone for building Rwanda post-war. A figure such as “Paul Kagame” merits serious contemplation and thorough study. This man is a former military leader who participated in the violence witnessed in the country and was a member of local militias in neighboring Uganda and Congo, belonging to the Tutsi minority that had been exterminated by militias from the other ethnic majority, the Hutu. Nevertheless, he and his government embarked on a developmental path aimed primarily at ensuring equality for all on Rwandan soil, leading him and his government to implement several effective reforms, such as abolishing the classification of the population into “Hutu” and “Tutsi” on identity cards, opting instead for the term Rwandan, which reinforced national cohesion.

The successive Rwandan governments under “Kagame” have also been credited with crafting a national vision. After assuming power, the government launched a long-term national plan to build a robust economy, aiming to create wealth, attract investment, and reduce reliance on foreign aid and debt.

To achieve this, the government implemented various policies and enacted legislation that facilitated the business environment in Rwanda. For instance, it reduced the time required to establish a business from 43 days to four days and rebuilt infrastructure. As a result, since President “Paul Kagame” took office in 2000, Rwanda has become home to one of the fastest-growing economies on the African continent, with its economy relying on agriculture, livestock farming, mining, and tourism.

In an innovative step, the Rwandan government launched the National Dialogue Council, a forum that brings the president together with citizen representatives to discuss national issues. This forum is part of the broader framework established by the Rwandan government for decentralization and service delivery. This initiative represents a significant step toward transparency in the relationship between the government and the people, and it raises citizens’ awareness of the state’s institutional performance.

Today, Rwanda exemplifies what can be achieved through inspiring leadership with clear foresight. Despite the challenging legacy that “Paul Kagame” faced, and Rwanda’s location surrounded by weak or even failed states on all sides, he recognized that people are the key to success. Regardless of how much money is spent on infrastructure and service projects, neglecting the development of ordinary citizens would yield no results. Thus, he prioritized the Rwandan citizen throughout the path of successful development. Consequently, this small nation has achieved successes that elude larger and wealthier countries in Africa, emerging as an African model for economic success.

Challenges to Economic Development

Coordination between ministries and public sector agencies remains a visible challenge. Although the government focuses on decentralization in government administration to empower local governments, this has led to the emergence of multiple semi-independent agencies, creating obstacles due to competition among those institutions, which has confused investors and private sector companies. Additionally, there seems to be overlap of responsibilities between the central government and local governments.

Another challenge to economic development in Rwanda is its over-reliance on foreign direct investment (FDI) at the expense of limited domestic capital. There are many reasons for this issue, including the low income of the majority of the population and weak bank savings, indicating that the level of local savings only encourages short-term investments, necessitating considerable foreign investment to propel economic development and fund projects requiring long-term investments. Moreover, Rwanda’s exports, primarily consisting of tea, coffee, and minerals, are subject to fluctuations in international market prices, which can impact its revenues, especially during economic downturns.

Additionally, the African experience suggests that democracy is essential for enhancing sustainable economic development. Historically, no dictator — civil, military, or insurgent — has brought lasting prosperity to any African nation, as seen in the unique economic experiences of Ivory Coast that ended in a spiral of civil war between 2005 and 2010. In Rwanda, the government cannot be classified as a true democracy under a one-party rule system that excludes and marginalizes opposition, which poses an important question: What if the system changes? What will happen to Rwanda’s emerging economic miracle in the medium and long term? Are there guarantees that the Rwandan experience will not collapse again? The economic model adopted by “Paul Kagame” resembles that of the Asian tiger in Singapore, yet this model has its distinct conditions and circumstances that differ from those that shaped post-civil war Rwanda.

Rwanda needs further types of sustainable reforms to maintain its historic economic achievements, as intellectual, political, constitutional, and institutional reforms are either generally absent or at best limited. The sequencing of these reforms is critically important; otherwise, the country might find itself prone to falling back into conflict. The factors enabling rapid economic growth within the nation could also hinder it due to political and economic fluctuations and setbacks, thus the strength and weakness of Rwanda’s development can be seen as two sides of the same coin.