Media attention was on Rwanda last week as the country commemorated the 20th anniversary of the 1994 genocide. While the tragedy of human loss amounting to 800,000 people in just 100 days will never be forgotten, entrepreneurs are offering hope for a better future.
While still far from an idyllic business environment, Rwanda has become an example for the African continent− and beyond− of how a country can envision and follow a healthy economic path despite the burdens of history and geography.
Few countries have had the miraculous economic turn-around that Rwanda has experienced since the genocide ended 20 years ago, and even fewer have managed to sustain a growth rate of nearly 8 percent for almost half a decade now. With the additional challenge of lacking major natural endowments like mines, oil or gas reserves, the country had to go on an economic venture. So far it has succeeded with the rising living standards as evidence.
The New York Times recently reported on Kigali’s commodity exchange, an inspiring symbol of economic progress with its dozens of terminals and state-of-the-art Nasdaq software that saw six auctions over its inaugural year in 2013. At the same time, the Rwanda Stock Exchange, established in 2011, is finding its footing, albeit more slowly, in terms of more initial public offerings (IPOs) to follow those of the brewery company Bralirwa, the Bank of Kigali, and a few others. This is no small feat for a country once identified solely with aid and debt relief. It also shows a silver lining for its growing, but still small financial sector characterized by high financing costs and limited access to credit for entrepreneurs.
Another sign of improvement comes from international recognition in cross-country indices. For example, according to the African Retail Development Index, Rwanda is the most attractive African market for retailers. In the Index of Economic Freedom, Rwanda is ranked 4th out of 46 countries in the Sub-Saharan Africa region, and its score exceeds the world average.
These relative improvements vis-à-vis other nations around the globe came about through purposeful reforms. Over the 20-year history since the genocide, Rwanda has resolved several institutional, systemic and regulatory issues that allow it to make headlines almost every year in articles and analyses of economic pulse-taking methods. Over that period, its economic freedom, for example, showed the fifth-best increase of any country with score improvements in 9 of the 10 economic freedoms measured by The Heritage Foundation. The Economist dubbed Rwanda “Africa’s new Singapore” for its commitment to private sector development. The World Bank in turn has given it high marks for the ease of doing business in the country, ranking Rwanda 32nd out of 189 worldwide in 2014, improving 22 places on the list in one single year. In the sub-index for the ease of starting a new business, Rwanda ranks 9th, above well-known entrepreneur-friendly economies like the United States (22nd).
While easily dreamed, the success in measurable business environment improvements was an ephemeral thought in most minds given that the country was consumed by violence and decades of ethnic tension. Yet Rwanda made tangible economic progress, and is now seeking a new wave of growth by attracting private investors, deviating from the economic model that relies on aid donors and projects, especially given the controversial aspects of its strong government hold on political and media freedoms (e.g. in 2012, when the United Nations accused President Kagame of supporting the M23 rebel group in the Democratic Republic of Congo, the U.S., the Netherlands, and Germany suspended aid).
With or without aid, Rwanda’s long-term economic outlook will depend on the government ceding the driving seat of the economy to the private sector. A tight government grip, now balanced by outperforming most others in the region in terms of indebtedness, inflation and growth, could eventually deter early stage investors and other key entrepreneurship ecosystem actors.
Until now, the improved business environment has attracted some of the Rwandan Diaspora. For example, Pierre Celestin Rwabukumba, 39, once a stockbroker in New York, is now leading the stock exchange in Rwanda. At the same time, young people are optimistic about the possibilities entrepreneurship creates. Ara Nashera, now 27, founder of Zilencio Creativo, launched Rwanda’s own crowdfunding via cellphone platform, winning a local competition to participate in The Next Web’s global competition Startup World while a first year economics student at Kigali Independent University (ULK). He was previously an intern of the now public brewery company Bralirwa.
Another student, Clarisse Iribagiza, from the Kigali Institute of Science and Technology co-founded a technology company called HeHe, and has taken the voice of African women in high entrepreneurship to the World Economic Forum’s Global Shapers program and locally to iHills, the youth ICT association center she founded to mentor young people. Her role as a role model was also expanded when she became the inaugural winner of the Inspire Africa Entrepreneurship Apprentice-like TV show (2012) where she walked away with 50,000USD of business growth capital.
I am not suggesting there is no role for the Rwandan government. As I have often reminded entrepreneurs, government sets the rules and incentives. However, Rwanda could also defy the norm by engaging in smarter policymaking by brainstorming ideas with other startup savvy policymakers that now make up the Startup Nations team. Of its population of just around 12 million, over 80 percent still depend on subsistence agriculture, and only 20 percent have access to electricity. But other countries are now also examining new ways to ensure high impact entrepreneurship thrives equally well in similar agricultural economies.
The government has its eyes set on youth and information technology and that need not change. “The strategic vision behind this is a knowledge economy …, shifting from an agrarian base to a knowledge base, leapfrogging the industrial,” told Jean Philbert Nsengimana, the Minister of Youth and ICT, to the New York Times. In a bold infrastructural investment, the government signed in 2013 a deal to build a 4G network that would cover 95 percent of the country. Global IT leaders have taken notice of the commitment to this growth path. Global telecom giant Millicom, recently announced it is building in Kigali a tech incubator called “Think”, through which the company will channel seed financing, training and coaching for entrepreneurs in return for equity in scalable businesses that emerge from the incubator.
Rwanda has proven that the country can instill a mindset in favor of modernization. For example, the Rwandan government famously banned plastic bags from the country to cut down on pollution, and successfully enforced helmet use among motorcycle taxi drivers and passengers. If you have ever spent time in Africa, you know this is not easy to do. Can it now promote a 21st century education and an entrepreneurial mindset among its future workforce?
The startup world of course is not always a technology field, and entrepreneurship is an ecosystem-wide phenomenon. To expand further will take new partnerships with entrepreneurship programs. The Babson Rwanda Entrepreneurship Center (BREC), Rwanda StartUp Cup, Millicom, LIONS@FRICA, and VC4Africa make up Rwanda’s participation in the global entrepreneurship network led by GEW each year. Together with new future partners, they can help the nation be deliberate in enlisting more entrepreneurs in their efforts to become a middle-income country. After last week’s reminder of such pain and suffering of the past, we all want Rwanda to succeed in the future.
Photo credit: Graham Holliday