Africa Micro Analysis- Rwanda- a New Model for Africa?- W#84, Dated 6th-12th Sept

Africa Micro Analysis: Rwanda, World’s Top Business Reformer- A new Model for Africa?
Rwanda, having been termed World's top business reformer for the current year by World Bank, is now being touted as a new model for Africa's development. The country has made financial headlines having made the biggest strides in becoming business-friendly, an annual ranking by the World Bank has revealed. It is the first Sub-Sahara African nation to be named the top reformer since the World Bank began its ‘Doing Business report’ in 2003. It jumped 76 places to number 67 on the list primarily by cutting bureaucratic delays to start a business and sell property, making employment laws more flexible and simplifying tax payment.

Many proudly assert that despite the nations turbulent history Rwanda is now well on its way to achieve its ambition of becoming a regional logistics and services hub, asserting itself as a global player. Some even go so far as to assert that perhaps the lack of an African model for development can now be provided by Rwanda's success story.

An African Development Bank group report states that the nation’s economy has been resilient in the face of the shocks emanating from the post-election violence in Kenya and the disruptions in trade. Aid inflows, Foreign Direct Investment, and remittances have risen as a result of reforms and improved economic conditions. Exports have increased but from a low base and FDI inflows remain below the Sub-Saharan Africa average. However, Rwanda receives more aid per capita than its neighbors. [1]

Rwanda's policy innovations are also a paradox, because the country is so aid-dependent. Such countries tend to be more oriented to donor priorities and processes than to developing their own economic policy vision. They also tend to have a low tax effort, because extracting revenue domestically is difficult and politically painful and the governments do not depend on it for revenue. Countries in this position also tend to have little 'ownership' of their own policy space, which is dictated by the political needs of donors. Above all, politics in such countries tends to be distorted because accountability is oriented outwards, towards donors, and not inwards, to domestic constituencies and business interests.[2]

Given such speculations it remains to see how well Rwanda may be able to maintain a delicate balance between foreign aid, investment promotion and national development.

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Discussion Questions:

In your opinion is the spurt of progress in Rwanda sustainable?

Is it too ambitious to tout the policies of this developing nation as a model for Africa as a whole?

Does the paradoxical policy initiatives for a heavily aid dependent country depict promising national ambition?

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[1] http://www.afdb.org/en/countries/east-africa/rwanda/
[2] http://www.aei.org/article/27476, American Enterprise Institute for Public Policy Research

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Business and Politics in the Muslim World (BPM)refers to the project entitled, "Globalized Business and Politics: A View from the Muslim World.' This project has been undertaken and developed by the Gilani Research Foundation as a free resource and social discussion tool.