The leap beyond the post-1994 economic miracle

In a few months (May, to be precise) it will be twelve years since my maternal grandmother passed on. Madame Appolonia did not have a great deal of formal education; be that as it may, she was disarmingly wise as only people who have lived eventful lives can be. As her eyesight and hearing diminished with old age, her powers of deductive thinking seemed to grow even more pronounced. When she listened to the news, she was able to view seemingly unconnected events to draw comprehensive conclusions that my university trained brain struggled to grasp. In the first half of 2002, in the early days of Vision 2020 I spent a fair amount of my time cursing the plight of being an unemployed fresh graduate. My grandmother on the other hand was full of optimism. Whenever the Kinyarwanda evening news came on, we often sat in silence trying to catch up on the latest happenings in the country and beyond. There was a symbiosis to our relationship; she needed my younger ears to catch every detail and I needed her language skills to fully understand what was said. What struck me the most was her excitement whenever the news contained an item about President Kagame; while most of the world was still making up its mind about the future of Rwanda, my then 73-year-old grandmother seemed to have already figured it out. Granted, Madame Appolonia still marveled at how mobile phones worked and how young kids (anyone under 30) could drive cars but she was certain Rwanda was in good hands under President Kagame. Her only concern at the time was that he was being overworked! Unlike my grandmother, conventional economists aren’t so great at predicting future trends or fortunes of economies. They seem to conveniently wait until events have occurred and then go to great lengths to explain why they happened! The world is undergoing its third major economic revolution; first there was the agricultural revolution with man taking on large scale farming as a commercial endeavour based mainly on human labour. This was followed by the industrial revolution with machines replacing humans in providing the muscle for most physical tasks in the pursuit of profit based on efficiency. The current economic revolution is based on using information and ICT as the major drivers of wealth generation. The economic revolutions are ignited by advances in technology and a clear pattern of economic revolutions following technological revolutions has emerged. Rwanda and other developing countries have been able to exploit the unpredictability of economic revolutions to envision the possibility of leapfrogging the industrialization phase of development to target directly at achieving a knowledge-based economy. While this is a bold move, some obstacles stand in the way of these ambitions. Technological revolutions have previously come along every 40-50 years. By these calculations, we should expect major technological changes beyond the current internet based advances around 2030 to 2040. This may seem like a longtime from now but if you bear in mind that it is 23 years from now, that’s when you realise the pressure is really on. If you hadn’t figured it out yet, that is exactly the same amount of time it has taken Rwanda to rewrite its modern economic story from its lowest point in 1994. It is now clear that the Rwandan economy is ‘out of the woods’ and is on a steady path of progress towards a middle income economy status with per capital gross national income of around $1000 by 2025. While this will be a very significant milestone when it happens, the real challenge is the modest outlook of current economic growth forecasts of 5.5 per cent of GDP in 2017 and thereabouts in the near future. The media reports of substantial mineral deposits potentially available to Rwanda and continued efforts in prospecting for oil and gas deposits provide hope for a much needed catalyst for enhanced economic growth. For real economic transformation to occur for the majority of Rwandans, a sustained level of growth rates of 8 – 10 per cent need to be achieved. Perhaps the most impressive statistic from the recent economic recovery was the lifting of over a million Rwandans out of poverty between 2006 and 2012. It is no coincidence that the average economic growth rate in that period was over 8 per cent of GDP. The future of the Rwandan economy has been premised on the exploitation of ICT to transform the country into a knowledge-based economy. For this to happen, a critical mass of the youth population has to embrace the prevalent internet technologies and generate significant economic activity around these technologies to impact the Rwandan economy. My humble view is that we are currently behind the trajectory for this to happen before the next big technological wave arrives as early as 2030. For Rwanda to benefit economically from the next big thing, we need to develop an underlying economic structure that is a pre-requisite for quick economic transformation. I will call it the ‘cobweb economy’. This simply means an economy where there is a high level of interdependency amongst all players that any change to one part of the economy quickly permeates down to almost all participants. A good example is the communication via the radio or mobile phone technologies owing to their prevalence across most communities. For economic transformation to occur, the level of domestic economic activity in terms of consumption, investment and government expenditure (C+I+G) has to be deliberately spread across Rwanda and not only be concentrated in Kigali. This will ultimately address the anomalous gap in the economy that is the disparity between the majority rural poor and the few but economically powerful urban middle class. The writer is a Kigali-based consultant and trainer specialising in Finance and Strategy.

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The leap beyond the post-1994 economic miracle