What's behind Rwanda’s double-digit growth rate?

Ivan Murenzi, the deputy director-general at the National Institute of Statistics of Rwanda, during the interview with The New Times in Kigali yesterday. Sam Ngendahimana.

Rwanda’s economic growth grew by 12.2 per cent from April to June this year, compared to 6.7 per cent in the same period last year, according to the National Institute of Statistics of Rwanda.

But what are the reasons behind this and what are the implications?

While the growth was driven by traditional key sectors – services, industry and agriculture – there are specific contributors that saw the economy grow at such a high rate.

These include construction activity, retail and wholesale trade, as well as food crops, among others.

According to Ivan Murenzi, the Deputy Director General at the National Institute of Statistics of Rwanda (NISR), for economies like Rwanda, it’s normal to achieve double-digit growth.

“We are a young economy where everything tangible that happens in the economy can be felt. This is different from a developed economies where huge things must happen,” he said.

Construction was the top contributor to the growth realised in the second quarter. Construction activities expanded 32 per cent driven by mega government projects and a few private sector-led activities.

“In quarter two, we saw big construction projects happening and others completing. The growth in construction activity in quarter two would be attributed to major government projects,” Murenzi noted.

Some of the projects he highlighted include the recently completed Kigali Arena, the ongoing construction of Bugesera International Airport, and several road networks being undertaken by the Government.

The growth in construction increased demand in mining and quarrying activities like sand and stones, which during the same period grew by 36 per cent.

Murenzi said that they have seen construction being closely linked to other activities like manufacturing, indicating that some domestic manufacturing factories, for instance, achieved a turnover of more than 43 per cent of their output.

Indeed, manufacturing grew at 16 per cent, thanks to increased production of metallic (like metal bars) and non-metallic (mainly cement) construction materials, as well as chemicals and plastic products.

Production of cement in Rwanda in this quarter grew by about 65 per cent.

Production of metallic and non-metallic construction equipment increased by 43 per cent and 42 per cent, respectively. Chemicals and plastic products increased by 32 per cent owing to increased growth of paints and soaps.

The official said construction is also linked to imports, reflecting why imports of construction materials and petroleum products increased by 32 per cent.

However, Murenzi suggests that most of the imported products are capital goods, which he said “are good for the future of the country”.

“These capital goods make sense because they bring returns in the future. You are talking about products used to construct establishments like Kigali Arena,” he said, adding that construction is also linked to transport, since more goods are being transported from one place to another.

Wholesale and retail trade activity, basically the distribution of goods, was another top driver. it grew 23 per cent.  

He said: “Some things are not independent, they are interconnected. But some others shake much.”

Another outstanding activity was the increase in food crops, a field that contributes more than 60 per cent to the entire agriculture sector.

Food crop production grew by 4 per cent and contributed 0.6 per cent to the overall economic growth.

Generally, this implies that more jobs were generated and more private sector activities were taking place as a result of the growth, and this could be seen through the performance of services such as the financial sector.

Credit provided by financial institutions to the private sector in the same quarter grew significantly, according to Murenzi.

Typically, financial institutions like banks drive the economy through a number of ways, one of which Maurice Toroitich, the Managing Director of BPR Atlas Mara, says is through the provision of private capital.

“Banks provide capital for investment and trading which in turn creates demand by the market for goods and services. This demand fuels growth in economic activity,” he noted.

editor@newtimesrwanda.com