Covid-19 may be a “100-year storm” in terms of pandemics, but the probabilities of having to confront another consequential crisis (global or localized) while we are still in recovery is probable.
Let’s speak in no uncertain terms: Governments, and we as global citizens, are going to have to come to terms with a world in which disruptive events, like pandemics, recur.
As the race continues to find a lasting solution promised by a vaccine, we see wisdom in remembering that survival is not about strength or intelligence, but the ability to adapt.
Robust, resilient systems can even thrive in troubling times.
Rwanda’s recovery plan from the Genocide Against the Tutsi worked to strengthen its adaptive capacity. Now the Covid-19 pandemic acts as a litmus test for the country as it responds to global financial shocks. Governments will utilize many tools to resuscitate their economies, principally through stimulus measures and policy.
As Rwanda braces for a possible lag and change in Foreign Direct Investments (FDI), as well as dramatic shifts and disruptions in global supply chains, we envision Rwanda’s transformational recovery including a strengthened Partnership of Impact with its diaspora.
If Rwanda seeks to bounce back relatively strongly, there are a wide range of possibilities. Though the implementation of AfCTA has been delayed, it should remain a domestic priority.
There are opportunities to build new regional supply chains, develop better working relationships with local suppliers, and increase access to markets.
Sectors can be restructured to take advantage of the breakdown in supply chains from foreign markets. Emerging innovations in agriculture could also pave the way for Rwanda to become a regional breadbasket.
Rwanda might capitalize on shifts in consumer behavior and attitudes about e-commerce. With a large informal workforce, lack of access to telecommuting and e-commerce tools are even more critical to address, creating the opportunity to gain momentum for #ConnectRwanda.
The crisis also demonstrated the importance of diversification and sustainability of energy, creating an opportunity to accelerate Rwanda’s energy transition. Above all, managing capital flows in lean times is crucial.
Financial stability is interconnected across borders, and actors in each country have a stake in those of the other. The Rwandan diaspora, in particular, can play a special role in an inclusive global recovery and economic growth through direct (re)investment in Rwanda.
On average, more than $250 million is remitted to Rwanda annually. Though Covid-19 negatively impacted the ability to send money, we might expect to see remittances increase as mobility returns.
As FDI flows to emerging markets fall even further than remittances, by around 35% this year, the proportional reliance on diaspora as sources of foreign currency may be even more prominent. Even small increases in the ratio of capital flows to GDP raises medium-term growth, with overall benefits more evident when foreign capital brings more than just financing.
Various mechanisms enhance remittances ability to affect economic growth in Rwanda. Every dollar remitted increases gross national product by more than its face value. However, if invested, remittances can also directly contribute to output growth.
This is the linchpin of our argument. Now is the time to encourage investment of foreign capital by providing small and medium-sized, low-interest loans to the diaspora to support business-as-development.
The Central Bank or other legislated financing mechanisms, like a Green Bank, could provide these financial products. These products would be enhanced by and advance the national investment strategy, further developing an attractive and favorable environment for doing business.
The Rwandan diaspora is already linked to the recent development of the real estate market. And additional investment in productive infrastructure development can unleash the potential for private sector-led growth and diversification.
Rwanda presents a number of attractive investment opportunities in manufacturing, infrastructure, energy distribution and transmission, agriculture, and agro-processing, low cost housing, tourism, services, and information and communication technology (ICT).
The global interest is there, but access to low cost capital remains an addressable challenge for the diaspora.
Business investments by the diaspora would contribute to more than just output growth. Strategically directed, such investment could enhance coherence of strategies, provided that funded projects meet certain criteria like job creation, gender equity, and leveraging the demographic dividend.
The Rwandan diaspora is also presumed to have a vested interest in the country, knowledge about the country, increased comfort with risk, better ability to navigate any ambiguities in relevant laws and regulations, ability to establish relationships with local workforce, and knowledge of available resources and skills.
As such, the diaspora serves as a special bridge between different types of knowledge and markets.
As the world anticipates further economic fallout, Rwanda is once again faced with the challenge of reimagining its future. In the dire aftermath of the Genocide, Rwanda built an impressive record. Safeguarding these socio-economic gains is a top priority.
Relaxing macro-prudential measures, as other countries have done in response to crises, can ease constraints on diaspora lending. Enhanced access to credit for these uniquely positioned individuals could unleash potentials in Rwanda’s economic development.
The strength of Rwanda lies in its people, including the diaspora. Together we can shape Rwanda’s post-Covid world.
Parfait Gasana is a policy advisor for Rwanda and a sustainable development consultant. Originally from Rwanda, Parfait now lives in the United States where he serves as a member of the Rwanda Advisory Committee at Yale University.
Coral Bielecki is the Online Programs Delivery Manager at the Yale Center for Business and the Environment.
The views expressed in this article are of the authors.