Rwanda shows economic clout with World Economic Forum

More than two decades on from a genocide that claimed 800,000 lives, Rwanda is taking another step toward looking like the closest thing Africa has to Switzerland.

Rwanda’s economy has outperformed almost all its continental peers, with annual growth averaging 7.8 percent since 2000. Like Switzerland, which hosts the World Economic Forum (WEF) in Davos every year, it is also about to welcome delegates to the organization’s annual African gathering.

“Nurturing an attractive business environment has become more important for many African nations to sustain growth, as commodity revenue and aid inflows have fallen,” Mark Bohlund, Africa economist with Bloomberg Intelligence in London, said. “Rwanda has led the way by cutting red tape, providing tax incentives and improving governance, which has helped overcome the disadvantages of its small size, lack of port access and limited natural resources.”

Rwanda’s economic success story is furthered with a ranking by the World Bank as mainland Africa’s easiest place to do business.

Tourism Industry

The Kagame administration has built the tourism industry into the country’s biggest foreign-exchange earner by hosting events such as the WEF and the African Development Bank’s 2014 annual meeting and luring visitors to see endangered mountain gorillas and climb volcanoes. It has also boosted agricultural output and manufacturing by improving roads and electricity supply. Rwanda’s experiences feature high on the agenda of the WEF gathering, which will focus on how African countries can harness technology and knowledge to spur growth.

“The slump in energy and commodities prices has demonstrated the urgent need for greater diversification and entrepreneurship across Africa,” said Elsie Kanza, the WEF’s head of Africa. Rwanda “stands as a good example of how long-term planning and savvy investing can lead to sustainable and inclusive growth.”

The Kagame administration’s determination to maintain security and its coordinated fiscal and monetary policy should continue to provide impetus for growth and new investment, according to Maurice Toroitich, the chief executive officer of Kenya Commercial Bank Ltd.’s Rwandan unit. Foreign direct investment in Rwanda will probably rise 36 percent this year to US$1.5 billion, the nation’s development board said last month.

“The government has a good PR machine,” Toroitich said by phone from Kigali, the Rwandan capital. “Investment returns continue to be attractive.”

While global economic recovery is taking longer than expected and the slowdown in China limits growth for commodity-based economies, Rwanda has decided to focus on marketing itself as a conference destination to support growth, Finance Minister Claver Gatete said after briefing reporters Tuesday in Kigali. “At conferences like these, we expect to sign deals during side events in key areas like energy, science and technology,” he said.

One agreement was announced on Tuesday on the eve of the WEF meeting. Rwanda and implementing partners signed a financing deal worth US$201 million to support the country’s electricity provision over the next 5 years, and according to an official, more such accords in other areas like agriculture are in the works.

Source: Bloomberg