Rwanda Rising: A New Model of Economic Development: Part 1

Nobody likes to say “No, Mr. President.” So three years ago, when Costco CEO Jim Sinegal got a call from shareholder Dan Cooper, a partner in Chicago’s Fox River Financial Resources, asking if he’d have lunch with Rwandan president Paul Kagame, he agreed.

Nobody likes to say “No, Mr. President.” So three years ago, when Costco CEO Jim Sinegal got a call from shareholder Dan Cooper, a partner in Chicago’s Fox River Financial Resources, asking if he’d have lunch with Rwandan president Paul Kagame, he agreed.

That meeting in New York led to a presidential stop at Costco HQ near Seattle. Which led to Sinegal’s promise to visit Rwanda.

“I made it in a moment of weakness,” he says, “before I realized how long it takes to get there.”

He ended up taking his whole family, and today Costco is one of the two biggest buyers of Rwandan coffee beans -- about 25% of the country’s premium crop, by Sinegal’s estimation.

Without Cooper’s introduction, “no way would this have happened. I knew the Rwanda story, but I wasn’t intimately involved,” Sinegal says.

“It took more elbow grease to get this started up, but it has been very profitable. Good for us and good for them.”

Very good for Rwanda, in fact. Sinegal introduced Kagame to Howard Schultz, the CEO of Starbucks, now the other top buyer of the country’s coffee.

On Kagame’s last swing through Washington, Sinegal and Schultz cohosted a dinner with Seattle-area execs from companies including Microsoft. And last fall, Sinegal started an internship program for Rwandans at Costco.

The courtship of Sinegal is a clarion example of Rwanda’s strategy for development. The country doesn’t have much going for it. It’s landlocked, largely deforested, and ridiculously packed: About the size of Vermont, it has 16 times more people.

Fifteen years after the genocide that killed an eighth of the population, its name still brings to mind death. Nine of every 10 adults are subsistence farmers, and per capita income is less than a dollar a day.

Rwanda has no oil and few minerals. But it does have one abundant asset: well-placed friends. Sinegal. Schultz. Former British Prime Minister Tony Blair.

“Purpose-driven” pastor Rick Warren. RealNetworks founder and CEO Rob Glaser. Google CEO Eric Schmidt. All are part of Rwanda’s ever-expanding network of influential supporters.

President Kagame’s goals are ambitious: to boost GDP sevenfold, find paying jobs for half of Rwanda’s subsistence farmers, nearly quadruple per capita income to $900, and turn his country into an African center for technology, all by 2020.

The government is doing what it can -- it has, for instance, committed to investing annually 5% of its GDP in science and technology by 2012 -- but to reach those goals, it’s going to need outside assistance.

Kagame’s strategy relies on wealthy and powerful friends to lure private investment, train a new generation of managers, build a globally competitive economy, and wean the country off foreign aid.

Even as troubling questions remain about Kagame’s involvement in the region’s ongoing conflicts, this unpaid, business-savvy team is marketing the brand called Rwanda.

Just as the Asian Tigers arose as export-led, middle-income economies in the 20th century, Rwanda wants to become the African Gorilla in the 21st. It seems crazily audacious -- and Rwanda’s leaders know it.

“We’re trying to create a new model for fighting poverty. Nobody believes that it’s possible,” says Eliane Ubalijoro, a researcher at Montreal’s McGill University who serves as a Kagame adviser.

“How do you take a country that’s been through hell and bring it to security and prosperity? This is about healing, and this is about hope. We think it can be done.”

On a good day, Rwanda sparkles like an emerald. One warm December Saturday, I drove the road from Kigali northwest toward the Congolese border, the tourist route to the country’s famed gorillas.

The sunshine darted across the steep mountainsides. Even the dull gray-green eucalyptus shone in the late-afternoon light. Ahead of me, lumbering up the hill, was a big blue truck. On the back, someone had painted happiness is forward.

You just have to hope that’s right, especially since reminders of the 1994 genocide are omnipresent -- roadside memorials, signs pointing to churches -- turned -- massacre sites, work crews of jailed genocidaires in their shockingly pink prison clothes.

Hutu-versus-Tutsi violence did not begin in 1994: There was 1959. 1962. 1964. 1973. 1992. But 1994 was the worst. In 100 days, 1 million people died, 90% of them Tutsi. Shot in their beds. Bludgeoned in the streets.

Smashed against brick walls. Dismembered by grenades ... in their churches. And the world? It did nothing. It left Rwanda to the killers, who turned out to be neighbors, classmates, even relatives.

The tragedy was, as tragedies often are, both formative and transformative. This one brought to power a rebel army composed largely of fighters who had long been exiled; Kagame, its chief, grew up in Uganda.

During the 15 years that he has effectively run Rwanda, Kagame has stabilized the country, but he hasn’t yet been able to bring prosperity.

Despite annual economic growth of about 6%, Rwanda still ranks 194th out of 208 countries on the World Bank’s most recent per capita income table.

The ramifications of poverty are more than economic: Kagame’s desire to transform the economy is rooted in the belief that poverty exacerbated the tensions that erupted into 1994’s genocide.

“We know that if that past is never going to happen again,” the president told Fast Company in an email, “we must grow our economy, create opportunities for higher wages, so that we create the conditions for tolerance, trust, and optimism.” Poverty, President Kagame says, contributed to the genocide.

“If that past is never going to happen again, we must grow our economy.”

Aid, which still provides nearly half of the budget, is not the answer. The West has spent $1 trillion on aid to Africa over the past four decades.

“But no nation has ever attained economic development by aid,” says former Goldman Sachs banker Dambisa Moyo, author of the new book Dead Aid.

“It’s just not productive.” Worse, it can be destructive. Corrupt leaders siphon off money; merely inefficient ones squander it. Millions of people end up hooked on handouts.

“No country can depend on development aid forever,” Kagame told Fast Company. “Such dependency dehumanizes us and robs us of our dignity.” It may also, of course, make him accountable to people outside Rwanda.

Last December, following a United Nations report that Rwanda was supporting Tutsi rebels in Congo, the Netherlands and Sweden suspended $20 million in aid.

Kagame slammed what he called the donors’ “arrogance” -- then arrested the rebel leader and made a deal with the Congolese president. Businesspeople are seen as less likely to focus on geopolitics, so long as the commercial environment stays secure.

“In the future, the engine has to be the private sector,” says commerce minister Monique Nsanzabaganwa, who notes that since more than half the populace is under 18, “we need to create jobs to absorb all those young people.”

The government surely doesn’t have the money to hire them all. As Francis Gatare, CEO of the Rwanda Investment and Export Promotion Agency, says, “If you don’t have development through investment, you won’t have economic growth.”

So Kagame sends fact-finding missions to Asia. He pursues the Rwandan diaspora. He speaks at Google and meets American entrepreneurs. He recruits more friends.

And it’s beginning to look as if his personal strategy -- selling people on Rwanda’s story and its promise, telling them that this is a place where they can make a difference as well as profits -- just might work.

To be continued tomorrow...

 

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