Country Profile
Friday, 12 October 2012 10:08

Country profile: Rwanda

Known as the land of a thousand hills, Rwanda has made significant economic progress. This small, land-locked country’s economy continued to grow strongly in 2011 and significant progress in poverty reduction has been achieved, according to the International Monetary Fund (IMF) report, Fourth Review Under the Policy Support Instrument and Request for Modification of Assessment Criteria. In recent years, economic activity was driven by a large increase in agricultural output, robust exports and strong domestic demand.

Karien Slabbert

Also known as the land of a thousand hills, Rwanda is slowly but surely shaking off the stigma associated with the 1994 genocide. The genocide decimated the country’s fragile economic base, severely impoverished the country’s population and temporarily stalled the country’s ability to attract private and external investment. However, Rwanda has made substantial progress in stabilising and rehabilitating its economy to pre-1994 levels and since 2003, its gross domestic product (GDP) has rebounded.

In Rwanda, 90% of the population is engaged in (mainly subsistence) agriculture and some mineral and agro-processing. A significant percentage of the population still lives below the poverty line. As a result, the country continues to receive substantial aid money and obtained International Monetary Fund (IMF) Heavily Indebted Poor Country (HIPC) Initiative debt relief in 2005-2006. In recognition of the country’s successful management of its macro-economy, the IMF graduated Rwanda to a policy-support instrument in 2010. Rwanda also received a Millennium Challenge Threshold Programme in 2008.

Tourism, minerals, coffee and tea are the country’s main sources of foreign exchange. Minerals and exports declined by 40% due to the global economic downturn from 2009 to 2010. In 2011 rises in global food and fuel prices increased inflation from 1% in January to more than 7% in October.

Despite these challenges, the Rwandan economy continued to grow strongly in 2011 and significant progress in poverty reduction has been achieved, according to the International Monetary Fund (IMF) report, Fourth Review Under the Policy Support Instrument and Request for Modification of Assessment Criteria. In recent years, economic activity was driven by a large increase in agricultural output, robust exports and strong domestic demand. On the back of this growth, the government is gradually ending its fiscal stimulus policy while protecting aid to the poor.


The Rwandan government is seeking to become a regional leader in information and communication technologies. In 2010 Rwanda neared completion of the first modern Special Economic Zone (SEZ) in Kigali. The SEZ seeks to attract investment in all sectors, but specifically in agribusiness, information and communications technologies, trade and logistics, mining and construction.

Africa’s most densely populated country is trying to overcome the limitations of its small, landlocked economy by leveraging regional trade. Rwanda joined the East African Community and is aligning its budget, trade and immigration policies with its regional partners.

The government has embraced an expansionary fiscal policy to reduce poverty by improving education, infrastructure, and foreign and domestic investment, and pursuing market-orientated reforms. However, energy shortages, instability in neighbouring states and a lack of adequate transportation linkages to other countries continue to handicap private sector growth.

Growth

The Rwandan economy grew strongly in 2011. Real GDP growth is estimated at 8,6%, driven by a large increase in agricultural output in the second half of the year, robust exports and strong domestic demand, especially from construction and public expenditure. The latest household expenditure survey, (EICV3), released in February 2012, reveals that Rwanda has achieved significant progress in poverty reduction during the last five years. During the past five years, robust economic growth and government policy development contributed to inclusive growth in Rwanda in a number of respects.

•    Improved agricultural income and job creation
The reduction in poverty is supported by enhanced productivity and commercialisation of the agricultural sector, which covers more than 70% of employment. The use of fertilisers more than doubled from 18% in 2005/2006 to 38,3% in 2010/2011, whereas the share of marketed agricultural output increased from 21,5% to 26,9%. The number of non-farming jobs also increased by 60%.

•    Clean drinking water
During the past five years, access to clean drinking water and sanitation increased in all provinces (except Kigali in the case of drinking water), from 70,3% to 74,2% and from 58,5% to 74,5% respectively. 

•    Improved access to electricity
Electrification is still largely limited to urban areas – 46% of urban and 4,7% of rural households use electricity to light their homes, compared with 23,1% and 0,7% respectively five years ago.

Downside risk

Although Rwanda has been relatively immune to the global economic turmoil, there are clear downside risks to the outlook, according to the IMF report. These could arise from three channels: weaker global demand, which could have a negative impact on exports of goods and services; higher-than-expected international fuel and food prices, which could raise the import bill and add to inflationary pressures; and a shortfall in foreign financing including aid inflows and difficulties securing financing for key public investments, which could jeopardise growth prospects. Any combination of these channels could be at work simultaneously.

Plans to develop sustainable energy sources

Environmental experts are stressing the fact that the country needs to address the issue of natural resource degradation.

At the same time, there is a strong need to improve access to modern energy services. As such, the Rwandan government is committed to increasing the production of renewable energy by 50% by 2020. The government, in collaboration with different stakeholders and local research institutions, has embarked on various projects to exploit biomass from agricultural waste, small hydropower stations, as well as wind, solar and geothermal energy.

Hydropower

There are currently a dozen hydropower stations located nationwide, while several other renewable energy projects are underway across the country. Hydro-electricity represents a large part of the country’s energy consumption. However, the country is looking to diversify its resources – particularly by shifting to renewable energy, such as solar and thermal power stations.

Geothermal energy
The Rwandan authorities are looking to exploit geothermal power associated with solar energy plants to promote sustainable energy for all. Rwanda is looking to install a capacity of 23 328 megawatts, of which the high percentage of power will be devoted to small grid systems in several remote areas across the country. In these areas, only 14% of the population has access to electricity, according to the Energy and Water Sanitation Authority (EWSA), a government body.

Geothermal energy is an important resource in volcanically active areas. Rwanda is located astride one of the world’s hottest geothermal activity spots. Experts estimate  the geothermal potential of the East African Rift Valley, a geothermal hotspot that spans 11 countries, at more than 15 000 megawatts, but the valley’s massive potential remains largely untapped, except for budding projects underway only in Kenya and Ethiopia.

Solar water heaters
On the supply side, the government plans to encourage the private sector to invest in the manufacturing of solar water heaters or assembling them locally. With regard to establishing sustainable businesses, institutional and financial mechanisms will be put in place where all stakeholders will play a crucial role.

Location:
A small land-locked mountainous country south of the Equator in Central Africa, borders the Democratic Republic of the Congo (DRC), Uganda, Tanzania and Burundi.

Capital: Kigali
Population: 11 689 696 (2012). Rwanda is Africa’s most densely populated country, with 416 inhabitants per square kilometre.
Currency: Rwandan franc.
Head of state: President Paul Kagame.
Prime Minister: Pierre-Damien Habumuremyi.
Languages: Kinyarwanda (official), English (official), French (official), Kiswahili used in commercial centres and by the army.
Resources: Gold, cassiterite (tin ore), wolframite (tungsten ore), methane, hydropower and arable land.
Gross domestic product (GDP): US$6-billion (2011 est.).
Major trade partners: Exports: Kenya, Democratic Republic of Congo, China, Swaziland, US, Pakistan (2010). Imports: Kenya 18,1%, Uganda 16,4%, US 10,4%, UAE 8,8%, China 5,7%, Tanzania 5,3% (2011).
Gender equality: The Rwandan constitution requires that at least 30% of the senior government positions should be filled by women. In parliament, over 50% of the deputies are female, making Rwanda the country with the highest percentage of female parliamentarians in the world, notes the Human Rights Annual Report 2010.

Climate: Temperate – with two rainy seasons (March to May, October to December), mild in mountains with frost and snow possible.
Land: 26 338 square kilometres.
Water: 1 670 square kilometres.
Terrain: Mostly grassy uplands and hills, relief is mountainous with altitude declining from west to east.

Topography:

  • Lowest point: Rusizi River, 950 m.
  • Highest point: Volcan Karisimbi, 4,519 m.


Land use:

  • Arable land: 45,56%.
  • Permanent crops: 10,25%.
  • Other: 44,19% (2005).


Natural hazards: Periodic droughts, the volcanic Virunga Mountains in the northwest along the border with Democratic Republic of the Congo.
Environmental issues: Deforestation due to uncontrolled cutting of trees for fuel, overgrazing, soil exhaustion, soil erosion, widespread poaching.
Inflation: Inflation rose sharply in 2011, but remained in single digits and was the lowest in the region. Headline inflation reached 8,3% (year-on-year) at end-2011, up from 0,2% a year earlier. Inflation stood at 8,2% in March 2012, after a dip in January to February, reflecting the second phase of the planned reduction in fuel taxes.

Full acknowledgement and thanks are given to the UK Foreign and Commonwealth Office, www.fco.gov.za, www.data.un.org, www.nationsonline.org, Rwanda State of the Government Outlook Report: International Monetary Fund and www.cia.org for the information given to write this article.

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