Investments in infrastructure in 2018 reflect resolve, direction Rwanda chose

Wednesday, January 02, 2019

James Karuhanga

Road construction in 2018 was a priority. workers fixing a guardrail at Kayonza-Nyagatare road .Sam Ngendahimana

The investment in infrastructure in Rwanda in 2018 is a true reflection of the resolve and direction the country has chosen, says Prof. Herman Musahara, an economist.

According to Musahara, the investments are made in a strategic move intended to move the country into a modern and middle income economy by 2050.

"You need growth; you invest big in billions whose returns or repayment as a credit will take many years,” Musahara said.

"The elasticity of growth of infrastructure is higher relative to, say, agriculture. The investment will have a huge multiplier effect and promotes linkages backward and forward with other sectors of the economy.”

In a way, the news, early December, that Rwanda and Russia signed an inter-governmental cooperation agreement on the use of atomic energy for peaceful purposes spoke volumes about Rwanda’s determination.

Infrastructure is about all basic physical and organisational structures and facilities, such as buildings, roads, electricity supplies and others, needed for the proper operation of a society, or a nation.

The Rwanda-Russia Agreement creates a solid base for establishing a Center for Nuclear Science and Technology in Rwanda for peaceful purposes as a basis for social economic transformation through modernizing vital sectors including agriculture, health, pharmaceuticals and industry, and electricity generation.

The contribution nuclear energy makes in providing clean electricity is no secret.

Musahara said: "Efficient, adequate and clean energy are engines of growth. Nuclear energy would ensure adequacy of needed energy for all purposes, especially industrialization. All these will position Rwanda well in the fourth industrial revolution.”

But the atomic energy deal does not define the entire year for Rwanda. There was more; such as the impetus in transport infrastructure.

First – just an example – was the birth of the 521-kilometre Isaka-Kigali Standard Gauge Railway (SGR) project, an outcome of a bilateral meeting early January between Presidents Paul Kagame and John Magufuli, in Dar es Salaam, Tanzania.

The leaders directed their infrastructure ministers to chart out, among others, the financing model for its commencement. Being a gigantic project, construction could take some time but what is not in doubt is the impact, and the current bilateral resolve to see it happen.

Since the Dar directive, Rwandan and Tanzanian ministers in charge of transport and those of finance have held several meetings – the most recent was in Kigali earlier this December – to fast track the project.

According to Infrastructure Minister Claver Gatete, the project which will in the end see Rwanda get its first railway line is good news for the government, the private sector and the ordinary citizens.

"The whole intention is to reduce the cost of transport for the goods and for the people and this has a direct impact on our socio-economic development, specifically in terms of trade,” Gatete said.

"We all export and import and if we can make it cheaper then more money would be available for investment in all the other economic activities. And it would help us in terms of expanding our trade and other economic opportunities.”

There was so much more going on in roads construction and refurbishment. In May, government obtained concessional loan from India worth US$66.60 million (about Rwf56 billion) for the construction of the 63 kilometer Base-Butaro-Kidaho tarmac road in the Northern Province.

Construction, if all goes according to plan, is due to start in 2019. The road will connect the rest of the country to the touristic hub of Burera, and Ruhondo lakes, the University of Global Health Equity (UGHE), a Cancer Reference Hospital in Butaro, and link to Uganda through Cyanika border.

When Chinese president Xi Jinping visited, in July, Rwanda secured a $77.9 million concessional loan worth to construct the 66 kilometre Huye-Nyaruguru tarmac road.

In February, the Government in partnership with African Development Fund (ADF), Japan International Cooperation Agency (JICA) and the EU launched a 208 kilometre Kagitumba-Kayonza-Rusumo road rehabilitation and widening project.

The overall cost of the project which is expected to be completed in November 2019, is $184,710,390 (approximately Rwf156bn).

Georgelin Lénaïc, head of the infrastructure section of the EU delegation to Rwanda, said the main objective of the project – in which they contribute €20 million out of €180 million – is to facilitate transport of goods and people along the Northern Corridor to Mombasa, in Kenya, and Central Corridor to Dar.

"A good quality infrastructure is essential to reduce transport cost at maximum, and this is particularly true for Rwanda which is a landlocked country. This road relates the two one-stop border posts of Rusumo and Kagitumba to the main access road to Kigali on the east side of Rwanda, continuing to the DRC borders in Rubavu or Goma and Rusizi or Bukavu,” Lénaïc said.

"It will absorb new additional traffic induced by the economic development of Rwanda and the increase of trade with neighboring countries. It complements past EU supported investments such as Kigali-Gatuna, Kigali-Kayonza, of Kigali-Huye.”

The EU has a grant portfolio of close to €250 million in Rwanda, mostly in energy and transport.

For 2018 only, about €35 million will be spent in Rwanda, Lénaïc said, noting that in 2017 it was close to €70 million.

Enter Bugesera International Airport

Roads aside, there was ample fast-tracking movement on the Bugesera International Airport project, during these past 12 months.

The developer, Bugesera Airport Company (BAC), is positive about having the first passenger airline land and take off in 2020. READ ALSO: Bugesera International Airport works to meet 2020 deadline

Musahara said the airport will link up and boost with tourism and hospitality.

Above all, he noted, railway and airport project reflect "diversification of means of transportation which can reduce the cost of doing business especially for a landlocked economy” like Rwanda.

The country’s single largest infrastructure investment in history, according to the Minister for Environment Dr Vincent Biruta, will be a net zero emissions complex, making it one of the greenest airports on the continent.

Action in other sectors of economy

However, Musahara recognizes that all these major decisions on infrastructure need more action in other sectors of the economy.

For instance, he explained, poverty is measured often using weighted household consumption.

"None of these big infrastructure investments bring down poverty levels in the short run. But GDP and GDP per capita will definitely rise,” Musahara said.

"This is within the national income composition of personal Consumption plus Investment plus Government Expenditure plus Exports less imports(C+I+G+X-M). Poverty is measured in C while our infrastructure is measured in I.”

In the short run, the economist noted, the value of C can be raised through food production and some safety nets. In the medium to long run, a very rich economy will be important for attaining modern living conditions, he said.

"That's why these are big 2018 decisions are consistent with Rwanda’s Vision. Planning as is in Economics is [about] choice. The best choice is that of moving forward.”