UNITED KINGDOM - For President Paul Kagame, processing or value addition to local products is an indispensable practice Africans must fully embrace if they are to ever break the yoke of aid dependence that is necessitated by reliance on raw material exports. In this respect, Kagame envisions a Rwanda among prosperous African nations that are free of aid dependence. The President argued last week in the United Kingdom that Africans need to see aid as a temporary vehicle for building institutions, systems, infrastructure and capacity for embarking on real development via domestic entrepreneurship and direct foreign investment.
Governments do not create wealth, business does, the President emphasised.
Kagame was last week on a five-day trip to the UK during which he engaged leaders from the corporate world, government and academy in which he insisted that Africa and Rwanda in particular is a profitable investment destination.
This perspective explains why the President does not settle for customary visits with the United Nations and governments – engaging with business is also vital in this respect.
The central message in the President’s addresses at the Annual Conservative Party Conference and the London School of Economics as well as to meetings with British businessmen and women was the theme of enterprise and wealth creation.
Productive capacities, competitiveness and value addition to products – as opposed to aid dependency is a frame of mind and practice that Africa and Rwanda must embrace.
According to David Himbara of the Office of the President, the President’s message was that for Rwanda and Africa to defeat poverty, two things need to be done simultaneously.
“First, our country and Africa have to graduate from aid dependency; second, they must abandon the discredited wealth-creation strategies based on exporting raw materials. Both of these are poverty traps as proven by Africa’s development experience of the last forty years”.
Himbara adds that the Asian ‘miracle’ shows the reverse strategy in which countries adopted value export-led industrialisation strategy since the 1960s. Some of these countries have even surpassed their former colonisers in all aspects.
President Kagame, in his address to the London School of Economics (LSE) pointed out that over 83% of COMESA exports is raw materials. If the relatively industrialised economies of Kenya and Egypt are left out of this equation, the percentage of raw material exports goes much higher, said the President.
“This is why the four hundred million people of COMESA, including Rwandans remain trapped into poverty. And that is why COMESA citizens are sustained by taxpayers of the developed world through aid,” Kagame told his hosts.
The President insisted that aid has to give way to private investment as the principal means of improving African lives.
“It is high time Africans tapped into the US$500 billion investment that flow to developing world annually,” the President said.
“The President’s efforts in making the shift from aid to investment are beginning to make an impact in terms of private investments coming to Rwanda,” Himbara said when asked whether Kagame’s latest call was already paying off.
The President’s aide cited foreign private investment flows especially in the “financial sector and tourism where millions of dollars are being invested (in the country).”
And during the Head of State’s recent visits to the US and UK, Himbara said investors expressed serious interest some of whom are scheduled to come to Rwanda shortly to explore investment opportunities.
Similarly, he added, interests were expressed in investing in conservation sector on the basis of carbon trading to the amount of millions of dollars.
“The challenge now is for Rwandan institutions to follow up and make these things happen in various sectors,” Himbara observed.
THERE is very little to show for the $300bn in aid that has apparently been disbursed to the African continent since 1970. Economic growth and human development in Africa still lag behind the rest of the world.
In part, this is because past aid flows were often spent to suit the geostrategic interests of the givers. Today, Africa represents less than 2% of world trade. While Asia and Latin America have become richer through integration with the global economy, Africa has yet to take advantage of globalisation.
Fresh promises of doubling aid to Africa to $50bn a year are to be welcomed, but this money will not suffice in transforming our continent. To assess whether aid can be a more effective tool of development, we first have to understand why it is that Africa has fallen behind.
Four reasons stand out.
The first is bad leadership, giving way to personalised governance and weak public institutions, often led to costly conflict in Africa. The resulting insecurity made productive investment all but impossible.
Moreover, bad leadership in one country often infected entire regions.
Thankfully, since the early 1990s, democratic governance has made steady gains throughout Africa.
The second was a failure to invest in people – a trend that Africa is slowly reversing. We cannot expect to develop if we disqualify half of our population – women – from full and equal participation in national endeavours.
That is why in Rwanda we have been reforming our laws and institutions to bring women into the mainstream of socioeconomic and political development. Today half of our MPs are women.
Similarly, investing in education is a precondition for Africa’s development and for accessing the global economy. We have no option but to rapidly increase the number of science and technology graduates, and do much better at retaining than in the past.
That leads us to the third reason, a lack of productivity and competitiveness.
Countries get rich by adding value to commodities and selling these products. But that requires investment and Africa is still hardly the most attractive destination for such capital. Inadequate infrastructure, insecurity, lack of skilled labour and stifling government bureaucracies cause investors to put their money elsewhere.
Again we in Africa are reforming these structures and systems, but we need to do more and faster.
Fourth, we have to be honest about the consequences of aid dependence. Countries that have used aid as a temporary support while domestic and foreign investment stocks are built up have achieved lasting success.
Aid should strengthen the bonds between governments and their own citizens, including business communities. It should aim to build stronger domestic institutions and transfer skills to local managers and administrators. If aid weakens these relationships, systems and structures, it should be rejected. Development is about choices, and so is the acceptance of aid.
There have been recent, positive changes in the way some aid is given. For example, the Clinton Global Initiative (CGI) commits human and financial resources to community development in fields ranging from health care to environmental protection. The CGI’s strength is in its close alignment with national priorities, working hand in glove with African institutions.
This approach stresses the effectiveness of aid as transitory support, avoiding long-term dependence.
But what really matters most for socio-economic transformation is private capital and Africa’s share. Africa receives less than 10% of the $500bn in annual private capital flows to emerging markets -- five times the amount of official development assistance to all countries. How can we increase these flows to our continent?
First and foremost, we must maintain security. But security is not only – or even primarily – about the work of the military or the police. Security also derives from economic growth and political inclusiveness. Security ultimately is about building inclusive political culture in which all citizens see themselves. And this has to spread regionally to instil greater confidence for those international investors viewing Africa as a whole as one big “trouble spot”.
In Africa, we must above all confront the key constraints facing our economies. In Rwanda, our priorities include addressing the high costs of electricity and transportation. But these constraints are not necessarily universal to every African economy, and they certainly do not affect all our countries equally, which is why there will never be a successful “one-size-fits-all” solution to our continent’s development challenges.
The barriers that governments put in the path of entrepreneurs need to be urgently removed. Individuals and companies create wealth, not governments. This is not to say that the state should become invisible.
But governments should see their roles as enablers of business, and not gatekeepers that control and hamper it.
Lastly, we must develop and communicate a vision.
This does not come from one person. Rather, it must be nurtured over time in a way so that all citizens can contribute to its creation and ownership. Such a vision is not about reaching an abstract set of development targets focused on poverty alleviation. It is instead a positive and substantive strategy for growth and development.
Our vision in Rwanda is to become a regional service hub for transport and communications. It is a place where energy costs are sharply reduced by the use of cutting-edge technology and realised through regional co-operation. A country where visitors can not only experience our magnificent wildlife and famous gorillas but also take a journey on our “coffee trail”, a route of plantations dotted amid spectacular mountain scenery. This is a vision where the traumatic divisions of the past are healing in the melting pot of commercial activity and burgeoning employment. It is, in every sense, a vision of “Team Rwanda”.
The developed part of the world has also to play fair in contributing to such a vision by opening their markets to African trade. Openness and the engine of economic activity behind trade are the real tools for creating wealth and defeating poverty.
These actions will only bear fruit when Africa substitutes external conditionality – that is, doing what the donors tell us to do – with internal policy clarity – that is, knowing ourselves what we need to do and articulating this vision clearly to our development partners.
We need to learn to “just say no” whenever donor priorities do not align with domestic priorities. We need to use aid and debt relief as a catalyst for growth.
Africa must increasingly be seen on its own terms, as a continent of opportunity, and not as an object of pity and charity. With its 750-million people, half of whom are under the age of 15, Africa offers a fast-growing and dynamic market.
This is our future and our promise.