In his book titled "How Rich Countries Got Rich and Why Poor Countries Stay Poor”, Professor Erik Reinert explains how it will only be when countries adopt strategies to deliberately industrialise through manufacturing that they can begin to achieve increasing marginal returns to create wealth, employment and sustainable higher incomes. Countries that wish to achieve industrialisation should therefore deliberately move away from resource based revenues because they give diminishing marginal returns and instead, move towards rapid modernisation and industrialisation to achieve their developmental objectives and higher incomes.
There is no debate that Rwanda‘s Vision 2050, the National Strategy For Transformation 2017-2024 (NST1) and the National Industrialisation Policy of 2011 all address the issues above. What will be important, is that all key stakeholders understand what needs to be done, have the requisite resources and competency to deliver and that there are coherent policies amongst all economic sectors to ensure policy alignment, efficient and optimal use of resources.
What are the key principles that Rwanda needs to follow in order to achieve sustainable economic transformation as envisaged by the NST1?
In his book Erik Reinert talks about Phillip von Hornigk’s "Nine Points on How to Emulate Rich Countries” written in 1684, well before Adam Smith in 1930. (Hornigk is the author of a book which outlined Austria’s strategy in 1684 which resulted in the greatest increase in Austria’s wealth over 100 years.)
The first point he raises is that "a country should inspect its soils with greatest care not to leave any agricultural possibilities of a single corner or cloud of earth unconsidered. Every useful form of plant under the sun should be experimented with and considered for adaptation to the country.”
For Rwanda and many other African countries, agriculture remains the largest employer and a critical trigger for economic transformation and the achievement of Vision 2050. We must therefore see serious attention being given to create a vibrant market driven agricultural sector underpinned by security of tenure, access to long term capital, high productivity and diversification of products, value addition (agro-processing) and exports. We must also see an increase in research capabilities so that farmers can adopt new production methods, new technologies and new products which take into account the potential negative impact of climate change. Food security is critical for poverty alleviation.
Secondly, Hornigk says that "no trouble or expense should be spared to find gold or silver and to keep it. Gold and silver once in the country, whether from own mines or obtained by industry from other countries, are under no circumstances to be taken out for any purpose. They should never be converted into any use which destroys them.”
It is therefore critical for the mining sector in Rwanda to invest in mineral exploration and increase mineral production. For example, Rwanda can significantly increase its mineral output especially in rare earth minerals, petroleum and gas, but it is important to know the extent and potential value of a country's resource base and this requires investment and having the appropriate skills and technology. Sadly, many African countries are sitting on unimaginable mineral wealth but they do not know what they have. That is a travesty.
The third point raised is that "all commodities found in the country, which cannot be used in their natural state should be worked up (value added) within the country, since payment for manufacturing generally exceeds the value of raw materials by two, three, ten, twenty or even hundred-fold and the neglect of this is an abomination to prudent management.”
"In carrying out the above, there will be a need for people to cultivate the raw materials and for working them up. Therefore the people should be turned by all possible means from idleness to remunerative professions, instructed and encouraged in all kinds of inventions, arts and trades and if necessary instructors should be brought in from foreign lands for this.”
This basically means that we must create employment and deliberately limit the importation of finished products but add value locally. Value addition driven industrialisation is the key. The "Made in Rwanda” policy is the appropriate tool to achieve this, and must be taken seriously and aggressively implemented.
Fourth, "the inhabitants of the country should make every effort to get along with their domestic products to confine their luxuries to these alone and to do without foreign products as far as possible and if necessary such foreign products should be exchanged for other wares and not for gold or silver.”
A "buy Rwanda” philosophy is the way to go. This needs commitment from the biggest spender in the economy, which is government and public institutions. We must realise that each time government and citizens deliberately purchase local products, they are creating jobs and unleashing the multiplier effect in the economy to the benefit of all citizens and the economy at large. Consumer awareness, high quality standards, competitive prices and incentives can achieve this.
Fifth, all foreign imports should be obtained in their unfinished form and worked up within the country, thus earning the wages of manufacturing there. "Except for important considerations, no importation should be allowed under any circumstances of commodities of which there is a sufficient supply of suitable quality at home. And this holds good even if domestic products are of poor quality or even higher priced. For it would be better to pay for an article two dollars which remain in the country than only one which goes out.” says Hornigk.
Lastly, "opportunities should be sought night and day to for selling the country’s superfluous goods to foreigners in manufactured form for gold and silver if possible, and their consumption must be sort in the farthest ends of the earth and developed in every possible way.” This basically means promoting exports of processed goods.
Regional integration is therefore key. Rwanda is strategically placed in the centre of Africa with access to an estimated 838 million consumers in the East African Community (EAC), Economic Community of Central Africa States (ECCAS) and the Common Market for Eastern and Southern Africa (COMESA) regional blocks. Infrastructure rehabilitation and development to enhance the productive capacity, trade and regional integration of the economy must therefore be a priority and we have seen such initiatives being aggressively driven by the Rwanda Development Board (RDB).
Now if this is not economic development policy and practice simplified, I don’t know what is. These principles worked in 1684 and still work to this day. What matters is the value system of leadership and the ability to implement, manage and allocate resources prudently.
In my opinion Rwanda’s compelling inclusive national vision as articulated by President Kagame in Vision 2050, is critical to fuel an inclusive transformational developmental agenda. Added to this, effectively implementing the above principles is important, and if that is combined with competent management and an alignment of government policies which are consistent and well thought out and political will, the NST1 will truly unlock Rwanda’s full potential as a country, improve quality of life of all citizens and create wealth for all and generations to come.
Vince Musewe is an economist for Resources Africa Limited (RAL) based in Kigali.