Rwandan Economy at the Crossroads of Development: Key Macroeconomic and Microeconomic Perspectives

276 Pages·2020·4.818 MB·English

by  Gouranga G. Das, Rukundo Bosco Johnson

Frontiers in African Business Research
Gouranga G. Das
Rukundo Bosco Johnson   Editors
Rwandan
Economy
at the Crossroads
of Development
Key Macroeconomic and Microeconomic
Perspectives
Frontiers in African Business Research
Series Editor
Almas Heshmati, Jönköping International Business School,
Jönköping, Sweden
This book series publishes monographs and edited volumes devoted to studies on
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More information about this series at http://www.springer.com/series/13889
Gouranga G. Das Rukundo Bosco Johnson
(cid:129)
Editors
Rwandan Economy
at the Crossroads
of Development
Key Macroeconomic and Microeconomic
Perspectives
123
Editors
Gouranga G.Das Rukundo BoscoJohnson
Department ofEconomics Department ofEconomics
HanyangUniversity Schoolof Economics
Ansan-Si,Gyeonggi-do,Korea(Republicof) University of Rwanda
Kigali, Rwanda
ISSN 2367-1033 ISSN 2367-1041 (electronic)
Frontiers in AfricanBusiness Research
ISBN978-981-15-5045-4 ISBN978-981-15-5046-1 (eBook)
https://doi.org/10.1007/978-981-15-5046-1
©SpringerNatureSingaporePteLtd.2020
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To the fondest memory of my Parents, who
instilled within me the value of development
without divisiveness, and replenished my
credence that the world—despite odds–will
always emerge a better place for all.
—Gouranga
To my Wife and our two Boys, who have
always been beside me on the academic
trajectory
—Johnson
Foreword
TheGreatestEscapeinhumanhistoryistheescapefrom
povertyanddeath.…BuildingontheEnlightenment,the
IndustrialRevolution,andthegermtheoryofdisease,living
standardshaveincreasedbymanytimes,lifespanshave
morethandoubled,andpeoplehavefullerandbetterlives
thaneverbefore.Theprocessisstillgoingon.
—AngusDeaton.Page23,In‘TheGreatEscape:Health,
Wealth,andtheOriginsofInequality’.PrincetonUniversity
Press.
ThequoteabovebyaNobelLaureateinEconomicsisaptonetostartthisforeword
asithighlightsthatsalientfeatureofeconomicdevelopmentisacontinuousprocess
despiteupsanddowns.Inlessthanthreedecades,Rwandahasmanagedtoundergo
an impressive economic and social transformation, serving as a model for many
Africancountrieswhichaspiretoatruerenaissance.Comingfromfaraway,aftera
3-yearcivilwarthatdestroyedexistingeconomicandsocialinfrastructure,Rwanda
isnow experiencing robust economicgrowth,a sharp reductionin poverty,and an
improvementininfrastructure.However,despitesignificantprogress,muchremains
to be done to put the economy on the path of sustainable development.
From this point of view, the book offers a nice tale about how a developing
country could turn failure into real success and what should be done to maintain
growth momentum. It also brings hope to many countries around the world, cur-
rently facing civil wars and conflicts, that with enlightened leadership, strong
determination, and disciplined people, success is possible.
The book begins by assessing the macroeconomic framework to give an idea
ofthemaineconomicchallengesfacingthecountry,focusingmainlyoninvestment
as a basis for economic activity and on the financing needed to achieve higher
growth.
Given the key role of the private sector in job and wealth creation, the book
focuses on the performance of Rwandan companies, especially SMEs, supporting
the analysis with success stories on which the country could build on to achieve
higher economic performance.
vii
viii Foreword
Since no success could be achieved without the existence of an appropriate
ecosystem and a good legal framework, the book attaches great importance to the
role of entrepreneurial culture in stimulating investment and innovation and to the
role of tax incentives in shaping the economic structures and channeling invest-
ments to priority areas.
Whatisappealingaboutthebookisthatitusesconcreteexamplesofsuccessto
show how developing countries could achieve economic transformation and pro-
motesustainablegrowth.Thebookalsoshowsthewayforwardtoconsolidategood
economic performance and meet existing challenges.
ThereismuchtolearnfromRwanda’sexperienceonhowtotransformnegative
feelings and anger into a determination to fuel development and progress. This
editedbookisavaluableadditionintheareaofgrowthanddevelopmenteconomics
with commendable blends of theory and practice.
I would like to thank the editors for this compilation of research papers, the
contributors for offering us a complete analysis of the Rwandan economy, and
advise readers to browse the 13 chapters of the book to learn more about the
resurgence of Rwanda.
February 2020 Imed Drine, Ph.D.
Lead Economist
Country Strategy and Cooperation Department
Islamic Development Bank
Jeddah, Saudi Arabia
Associate Professor of Economics
University of Sousse
Sousse, Tunisia
Preface and Acknowledgements
The book is a timely and relevant study on the aspects of development of the
Rwandaneconomyandtheunderlyingdriversthatcouldshapetheevolutionofthe
economy,polity,andsociety.ThisismorepertinentinconsideringtheGovernment
ofRwanda’sStrategicRoadMap(SRM)forEconomicDevelopment,theNational
Strategy for Development 2017–2024. In other words, given the plans and road
map adopted by the Republic of Rwanda, we need to investigate what are the
implications for those agendas, identify the “pillars” of success, and highlight the
policies that need to be formulated for effective implementation of those
high-profileobjectives.Thisbookistheoutcome ofahigh-profileconferenceheld
inKigali,CapitalofRwanda.Theconferenceentitled“4thInternationalConference
on Eastern Africa Business and Economic Watch (4th EABEW—2019)” was held
during June 12–14, 2019 at theCollege of Business and Economics, University of
Rwanda. The theme of the research was “Inclusive Growth and Sustainable
Socio-Economic Transformation.” What could be more appropriate theme than
discussing sustainable and inclusive development in the context of less-developed
economies aspiring to make progress in the fast-track highway of socio-economic
and structural transformation.
Thevolumeisrichbecause,asthesectionplansshow,itcoversbothmicro-level
and macro-level analysis. Given the fact that the world economy is inflicted with
problems of macroeconomic adjustments, conflicts, trade wars, and rise of pro-
tectionism, the current economic scenarios in the developing and least-developed
economies are not so promising in an interconnected world.Thus, the necessity of
“global” as well as “national, local, or regional” problems and policy dimensions
are crucial. This book—taking Rwanda as a case in hand—is important in the
context of African continent undergoing structural changes.
The essays comprise contributions on various microeconomic and macroeco-
nomic policy angles that are crucial for a less-developed economy to embark on a
roadtorecoverytoconvergewiththedesiredtrajectory.Organizationofthebookis
based on three major themes: (i) Macroeconomic Constraints: Monetary Policy,
ix
x PrefaceandAcknowledgements
Investments, and Population; (ii) Firms’ Performance, SMEs, and Role of
Entrepreneurship; and (iii) Entrepreneurship and Business Performance: Strategies
and Policies.
Theconferencepapersarefurtherrevisedandupdatedtoofferacollectionof12
empirical studies that have an overall focus on macroeconomic policies such as
savingsamongtheruralpoor;sustainedinvestmentsinanddevelopmentofcapital
markets; role of entrepreneurial sustainability; role of innovations for firms’ per-
formance;healthcare reforms; thebenefitsoftechnology,policyincentivessuchas
taxbenefitsforpromotinggrowth,andstrategicconsiderationssuchasmarketingor
positioning strategies; export strategies; and productivity enhancement via pro-
cessing and profit sharing.
It enhances the readers’ knowledge about the factors that influence inclusive
growth on a sustained basis via better technologies and innovations favoring pro-
ductivity, firm performance, and their positive externalities in the food, nutrition,
andhealthsectors.Asitcoverstop-downandbottom-upapproachesandstrategies
for development, the insights are truly pragmatic and realistic for policy interven-
tionsnecessaryforRwanda’sgradualtransitioningfromagriculturetoanindustrial
transformation.
Thetopicsareorientedtodevelopmentandgrowthininvestments,businessand
entrepreneurial growth, innovation, and others. The main methods of interest
include the quantitative techniques used such as the econometric models, and the
resultstheyportraytothereaders.Alltopicsuggestedinthebookareofinterestas
they are diverse and linked to the development agenda of Rwanda’ development
strategy.Thereaderswillderivenewanalyticaltechniquesusedinthechapters,the
methodologiesusedinthedifferent chaptersofthebook,andmostimportantlythe
policy recommendations aimed at supplementing the existing policy frameworks
for Rwanda’s growth.
Thebookwillbereadbyvariousscholars,students,andthepublicinRwanda.It
canbeusedas“reference”bookforanyDevelopmentEconomicscourse,graduate
course, or for research only courses. In particular, the book addresses the issues
under thefollowingmajorareas: Macroeconomics,Microeconomics,Businessand
entrepreneurship, Firm performance and innovation, Economics of Development.
Ansan-Si, Gyeonggi-do, Korea (Republic of) Gouranga G. Das
Kigali, Rwanda Rukundo Bosco Johnson
AcknowledgementsWithnoexception,alikeotherworks,thisbookistheoutcomeofcollective
effortofmanypeople.It’sourpleasureto offeroursincerestthankstothosewhoseinspiration,
help, and advice have shaped this work. The contributors are researchers and academics from-
diversebackgrounds,andthustheircontributionshavemadethisbooka“salad-bowl”ofmultiple
ingredients with wide range of perspectives. First of all, the conference was organized with the
valuablesupportoftheGlobalLaborOrganization(GLO)andtheirintellectualstalwarts,fellows,
andotherpersonnel.Withouttheirmoralandintellectualsupport,thisbookwouldnothaveseen-
the daylight. Special thanks are due to Almas Heshmati—the Academic Lead of the GLO
Research Cluster on “Labor Markets in Africa” and the GLO Fellow/s, who have given us the
opportunitytoeditthisvolumeandimbibedwithinusaspiritof“can-do”attitude,withoutwhich