The Economist recently ran two articles on Rwanda’s development that drew attention to the role of the investment firm, Crystal Ventures Ltd, in the economic life of the country. The focus was not so much on the firm itself as much as its association with the Rwanda Patriotic Front (RPF). The articles were done in the now familiar fashion. They acknowledged the strides Rwanda has made but also cast doubt on the motives of the players in the progress. It was made to appear as if they had uncovered a hidden secret and were doing us all a favour by bringing it into the open. The suggestion that there was a lot wrong with the companies doing business was too strong to miss. There are several things wrong with slanting the story in this manner. First, there is nothing to uncover. It is not a secret that Crystal Ventures Ltd is a very successful business entity and its connections to the RPF are well known. And indeed the RPF prides itself on being the engine of development. The various companies in the group, President Paul Kagame said in London last week at a Wall Street Journal conference on development in Africa, act as investment trailblazers, going into businesses where traditional private investors are not too keen to tread. Once they have smoothed the path and shown that profits can be made, they invite the private sector in and get out. There is a history to this involvement that is also well known. Upon the end of the liberation war and the formation of an administration, the RPF-led government found the national treasury empty. No one was willing to lend the government money. It fell back on the resources Rwandans had contributed during the war to fund activities of the state. No one said at the time that this was wrong. Perhaps there was no need: the country was destined to be a failed state anyway. That did not happen and so behind the current criticism lies a grudging admission of this fact but also a sense of dismay that the RPF is self-reliant and does not have to depend on foreign benefactors for its very livelihood. And more than that, it is prepared to spur investment, create wealth and improve the lives of Rwandans. Second, economic growth driven by business interests allied to the state is not peculiar to Rwanda. It happens in other places, even in the United States of America where free market economics was almost a religion until Trump came along. Now it is a sort of heresy. From the mid-twentieth century, the United States economy has been hugely influenced by what has come to be known as the military industrial complex. For instance, high tech companies, the aerospace industry, science and technology research centres, and even think tanks prosper on defence-related contracts. It is not only in the economy that the military industrial complex has impact. It is also in foreign relations and the way Americans regard themselves. Third, Rwanda is one of a number of countries across the world that believe the state has a role to play in the country’s economic development. Again, this is not unique. The East Asian countries, starting with Japan, used the state to build their industries and leaped from a state of underdevelopment to the level of the traditional western economies in a matter of a few decades. They are now often pointed out as the models to follow or to show up African countries’ weaknesses. In today’s competitive environment, Rwanda does not have the luxury of a leisurely evolution of the private sector that would then drive economic growth. One reason for this is that the businesses make decisions based on risk and profit, not necessarily on what is good for citizens. An engaged state must therefore bear the initial risks and demonstrate that profits can be made, and then let the private sector take it up from there. The state can only do this if it has developed the technical and industrial capacity, and is able to deploy its administrative and political institutions and other resources to the task of economic development. That is what Rwanda has been doing these past two decades: to kick the private sector into life and urge it to run and jump so as not to be left too far behind. Finally, the Government of Rwanda is well known for its business friendly policies and supporting the growth of a vibrant private sector. It is inconceivable that the same government would promote practices that harm doing business. And so rather than stifle business competition as some criticism suggests, state-linked enterprises are actually catalysts for business. They are prepared to go where others fear to tread, pave the way and then it is smooth for others.
