Thursday, October 1, 2009



By Colin McCarthy
Africa tralac newsletter
September 2009

Economic reports on Africa, Sub-Sahara Africa in particular, make sad reading. They often paint a dismal picture of a continent with a declining share in world production and trade, burdened by political and economic instability and suffering growing numbers of poor people.

A whole literature has come about trying to explain why Africa has been left behind in the economic development stakes with some economists building solid reputations as experts on Africa's poor economic performance.

Of course there are notable exceptions to the economic malaise that describes the African economic scene but the general picture is pretty bleak, one of regression instead of progression, with spurts of growth in some cases the result not of broad-based economic development but of a favourable commodity cycle.

Can, in the foreseeable future, something good come out of Africa? Yes, it is quite possible if we take our cue from a single example, Rwanda. Considering all the downside factors that feature in the comparative analysis of Africa’s poor economic performance, a less likely candidate for a good story can hardly be imagined. Rwanda is a small, landlocked LDC in the tropics. It is ethnically divided and has a recent history of civil war which in 1994 culminated in an atrocious genocide.

A more dismal starting point for sustainable development will be difficult to find. Nevertheless,there are clear signs that Rwanda can overcome the severe constraints its economic development faces and move into a phase of sustainable, poverty-alleviating growth.

The government of President Paul Kagame is serious in its endeavours to develop the economy in a corruption-free environment, characterised by political and macro-economic stability and the implementation of the coherent Economic Development and Poverty Reduction Strategy adopted in 2007. Infrastructure development and investment in manufacturing, services and agriculture receive priority and through the activities of the Presidential Advisory Council economic development benefits from and is exposed to international business.

The seriousness of the desire to create a business-friendly environment is also reflected in the operation of what is reported to be a state of the art one-stop shop that significantly eases the transformation of planned investment into operational business (tralac has assisted Rwanda to develop capacity in trade in services)

Having joined the East African Community in July 2007 furthermore illustrates that Rwanda is aware that for a small landlocked economy viable regional market integration is crucial.

Rwanda is not out of the woods as far is economic development towards broad-based
growth is concerned. It will take time for development initiatives to mature and with the genocide albatross still round its neck, social and political stability remains fragile and demands steady and responsible governance. But progress is made and consequently the country is on track to achieve several of the Millennium Development Goals.

At this stage already, Rwanda serves as an example for other African countries in one
respect in particular. In Africa the blame for poor economic performance so often tends to be sought elsewhere, for example, it is the industrialised world that is not easing market access and it is the rich countries that are not keeping their promises of development aid.

These factors are important but the lesson that Rwanda has for others is that the capacity to produce tradable goods and services in the first place requires a concerted national effort and good domestic policies.

Foreign markets and foreign aid are important for the development of small poor economies, but even market access is of no use if the capacity to produce tradable goods and services do not exist. Also, flows of foreign aid and investment tend to favour those who have a record the productive use of aid. Getting the domestic scene and policies right remains the indispensable starting point of sustainable economic development.