Lessons for SA poverty-reduction from Rwanda of all places.

Philadelphia – When most people hear the name ‘Rwanda’, they think bloody massacres, genocide, and machetes, but that mental image is so twenty years ago – the truth is that today, Rwanda is evolving into one of Africa’s best economic success stories, with plenty of lessons to teach the rest of the continent.

Consider the following. Since 1996, Rwanda’s GDP has grown by an average of 8.5% a year (see chart below, note that data for 1994/5 were excluded as they reflected the changes wrought by the genocide and civil war). Even coming off a low base, and with a few down years, this is an impressive performance.

But even more impressive is the fact that was recently revealed by the 3rd Rwandan Household Living Conditions Survey: over the last five years or so, Rwanda has reduced its poverty rate from 57% to 45%, which means that close to 1m Rwandans (out of a population of 10.6m) have been lifted out of poverty in just a few short years (the table below summarises some of the key results of the survey).

 

Results of the Rwandan Household Living Conditions Survey

Metric

2005/6

2010/11

Poverty rate

56.7%

44.9%

Gini coefficient

0.522

0.49

GDP per capita

$333

$540

Net primary school enrollment

86.6%

91.7%

% with safe drinking water

70.3%

74.2%

% with access to electricity

4.3%

10.8%

Ownership of mobile phones

6.2%

45.2%

Maternal mortality

750

487

Infant mortality

86

50

Under 5 mortality

152

76

This is a remarkable achievement, particularly given the country’s heritage of inter-tribal bloodshed and civil war, so let’s take a closer look at how Rwanda managed this impressive feat, and what lessons it has for other countries in Africa, including South Africa.

The secret of its success

If you look closely at the information above, you’ll notice that Rwanda has achieved two separate but related things: it has grown its economy substantially and rapidly, and it has reduced poverty and inequality. These two things don’t always go together – some countries grow rapidly but retain high poverty levels – so Rwanda is an especially encouraging success story for African countries facing the twin challenges of low growth and high poverty levels.

On the economic growth front, there have been several factors that have helped boost Rwanda’s growth. One, admittedly, was the rise in global coffee prices which, together with programmes that improved agricultural outputs, gave Rwanda’s economy a nice boost. But more important were changes in how the country manages its domestic economy.

For a start, over the last few years Rwanda has made great strides in making itself a lot more business-friendly. In 2009, for example, Rwanda was named the world’s top reformer by the World Bank’s Doing Business report for its efforts in streamlining the process of setting up a business, improving investor protections, and speeding up the property transfer process. Between 2011 and 2012, Rwanda moved up five spots in the global Doing Businessindex, which ranks 183 economies in terms of how business friendly they are. In 2012, Rwanda was ranked 45 out of 183, making it one of the most business-friendly places in Africa.

In addition, the Rwandan government under Paul Kagame has emphasised clean government based on performance. According to Transparency International’s Corruption Perceptions Index, Rwanda has improved from a score of 2.5 in 2006, indicating a high level of perceived corruption, to 5 in 2011, indicating moderate levels of corruption (the scale ranges from 0, totally corrupt, to 10, totally clean). This focus on performance and fighting corruption has made Rwanda a much better and more efficient place to do business. Finally, Rwanda has managed its finances prudently, keeping inflation and budget deficits low.

In terms of poverty reduction, Rwanda has also done a lot of innovative things. Its primary poverty-reducing strategies were aimed at the agricultural sector, because Rwanda is primarily an agri-based economy. Programmes that helped subsistence farmers included agricultural extension services that provided fertilizers, crop advice, and even a “one cow” programme that gave poor families a free cow. Like the cash-transfer programmes that are being touted as excellent poverty reduction strategies, the one cow programme puts a productive asset into the hands of the poor, enabling them to make choices to improve their livelihoods.

So what can we learn?

So what are the lessons that other countries, including South Africa, can draw from Rwanda’s example? Basically, there are four:

1. Focus on improving the business environment, and growth and investment will eventually follow. Reforms that make a country more business-friendly will produce results.

2. Corruption is a poison that slows growth and harms the poor. Governments must take a firm stance against corruption and work hard to reduce it. Government positions should be awarded based on merit and performance.

3. Anti-poverty programmes should be designed with a country’s unique characteristics in mind. In Rwanda, with its high levels of agricultural employment, programmes like the one cow programme make a lot of sense. In places where the poor face different challenges, policies should be tailored to their circumstances.

If Rwanda, with its gory history and status as a small, landlocked state can do so much to fight poverty, so can other nations. Let’s hope African governments across the continent embrace the lessons Rwanda teaches us.

 

 

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