Saturday, April 29, 2017
In his book “The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It” Paul Collier, Professor of Economics at Oxford University, is exploring the reasons why impoverished countries fail to progress despite international aid and support. These countries typically suffer from one or more development traps. One of those traps identified by Collier is being landlocked with bad neighbors. Poor landlocked countries with bad neighbors find it almost impossible to tap into world economic growth. Collier explains that countries with coastline trade with the world, while landlocked countries only trade with their neighbors. Landlocked countries with poor infrastructure connections to their neighbors therefore necessarily have a limited market for their goods. This problem is stressed even more when those neighbors are bad. Rwanda is a landlocked country surrounded by Eastern RDC, a region that has been at war for decades, by Burundi where there is unrest and violence since the last presidential election, and while Tanzania, and Uganda may not be as bad, they surely are not the best of neighbors. As this was not enough, the country sustained one of the worst genocide in 1994. So based on Collier’s book Rwanda is doomed and should fail to progress. Yet Rwanda is in the 13 fastest-growing economies in the world . What’s wrong with Rwanda?
Conventional wisdom on poverty has been that poor remain poor because of low incomes and their certain lifestyle and behavioral traits like lack of cleanliness. Poverty is usually associated with dirt and deprivation. It is often assumed that if one is poor, they are more unlikely to portray a clean, fresh appearance. Rwanda by the IMF evaluation takes the 138th position in the GDP per capita, ranking in the bottom 20% of the world as a low income economy by World Bank ranking. Yet a report from the Chinese CCTV  claimed that Kigali is the cleanest and safest city and according the United Nations, Kigali, the capital of Rwanda is the most beautiful city of Africa . What’s wrong with Rwanda?
Even in times of peace, the poor are worst affected by violent crime, lawlessness and state-sanctioned abuse. And in times of war, millions of poor people have been killed, injured or displaced across the developing world. Yet the Gallup Global Report- 2015 placed Rwanda the safest place to walk at night in Africa and fifth safest country in the world. What’s wrong with Rwanda?
Governments in developing countries play an important role in the growth process. This potentially beneficial role is, however, hindered by government expenditure inefficiency. In addition corrupt behavior has significant adverse consequences for efficiency and equity outcomes. Rwanda was ranked in the Global Competitiveness Report of 2015  as the Africa’s most efficient government followed by Mauritius and South Africa. The same report ranked the country’s government as the 2nd most efficient globally and Rwanda is ranked in 13th position globally and in first position in Africa for ethics and corruption. Rwanda ranks first in Africa for wastefulness of government spending and 4th in the world. What’s wrong with Rwanda?
Infrastructure is a critical driver of economic growth. Researchers estimate that a significant part of economic growth has been lost in Africa because of lack of access to quality infrastructure. In developing countries, infrastructure deficits are still enormous in both quantity and quality terms. In the latest Global Competitiveness Index 2016–2017  from the World Economic Forum, Rwanda’s quality of overall infrastructure ranks first in Africa and 41st in the world, while the quality of roads ranks 3rd in Africa and 31st in the world. What’s wrong with Rwanda?
The competitiveness of firms in a global economic environment is an essential element in the development strategy of a country. This is particularly relevant for developing countries where the problem of concentrated power structures and uncompetitive domestic markets is often considerably more acute than in developed countries. Rwanda is ranked third in Africa and 52nd in the world . What’s wrong with Rwanda?
So is there anything wrong in Rwanda? Yes there is, but what is wrong is what people would think is normal for a poor African country. For example Rwanda ranks above 80th position in the world for travel & tourism competitiveness index, for global food security index, and above 100th position for higher education and training, health and democracy index*.
But by far in most independent world rankings, Rwanda’s position is way above what you would expect for such a small and poor African country. The question then is: how do they do it?
While there are many ways you can explain and answer that question I think that there is only one answer, and that is the quality of the leadership of the country.
While I visited over 20 countries in Africa, I can only claim experience from living in Congo-Zaire for 11 years and in Rwanda for 6 years. I grew up in Congo when it was a Belgian colony but then I returned there under the Mobutu regime for 3 years. And now I live in Rwanda for the last 6 years under Kagame’s presidency.
One day in Zaire, I got stopped by a police agent who wanted to give me a ticket for some reason and we were going to negotiate the amount. Basically we were going to decide how much he would put in his pocket. While I don’t favor this type of transaction, I said that I agreed but at one condition, that he would answer one question. I asked him: “Why are you doing this?”, basically why are you stealing money from citizens? His answer was: “le chef le fait bien, pourquoi pas moi?” « The boss does it, why not me? ». Mobutu was recently ranked as the second worst dictator in Africa (after Idi Amin Dada). By the time he was overthrown in 1997, Mobutu had stolen almost half of the $12bn in aid money that Zaire - now the Democratic Republic of Congo - received from the IMF during his 32-year reign, leaving his country saddled with a crippling debt.
A couple a years ago, at Kigali’s International Airport, a police agent found a paper bag with $42,000 in cash at a security post. He returned the bag with the cash to his superior! Tell me any country including mine where this would happen! He got a $500 bonus and was promoted. I think that the owner of the bag also provided him with some reward. I claim that that attitude percolates from the top. When the top of the hierarchy doesn’t steal money, the money is used for what it is meant for and everyone in the chain till the lowest level of responsibility gets his part of it. I can’t remember how many times Zairian professors at the national university where I was teaching didn’t get paid.
More importantly, I think that Mr Kagame is not managing his country like a typical politician but rather like a professional business manager. Like a CEO, he has a Presidential Advisory Council (PAC), a group of eminent Rwandan and International experts who offer strategic advice and guidance. The cabinet meets annually during a three day retreat to define the country’ strategy for development. That strategy is widely published and made available. It started in 2000 with the publication of the first Vision 2020 . It has been instrumental in the success of Rwanda development. It took the neighboring countries more than a decade to understand the impact and they are now copying Rwanda with their own Vision documents. But as one my senior executives at IBM once told me: “A vision without execution is hallucination”, and Rwanda excels in its vision execution.
All the leaders from cabinet members to province governors, district authority and city mayors have to report annually on their execution results. Each year performance contracts are signed between the president of Rwanda and local government institutions and line ministries. These bind respective institutions to targets they set for themselves. Performance contracts are measured against an agreed set of governance, economic and social indicators known as performance indicators. These performance contracts are called “imihigo”. District Mayors are held to account on their imihigo performance twice a year in public sessions (and broadcasted on national TV) in Kigali, which are chaired by the President himself. There is a Q&A session, with phone-ins from the public on the how and why of Districts’ performances. When performances are repeatedly below-par mayors can get fired.
I recently invited a government official as a guest speaker at my course “Strategic Use of Digital Information in Enterprises”. I wanted her to present how the Rwandan government is using data to manage the country. She showed us the real-time dashboard used by the cabinet to monitor over 300 KPIs linked to strategic projects and to each ministry. In 25 years of my career in the IT industry where I visited countless large enterprises, I have never seen one like that. Most of the data were real time. For example, anonymized electronic medical records allow monitoring malaria in real time. While some data was still entered manually, the government was working hard to convert all the data to real-time digital capture at the source to prevent data manipulation.
So everything is good in the best of the world in Rwanda? Certainly not. Rwanda is facing many challenges and mistakes are made on a regular basis. For example, while I think that the switch from French to English made sense in the Rwandan context, the way that decision was executed had a negative impact on education in the short term. One day, my manager asked me: “How many mistakes did you do this month?” As I proudly answered that I did no mistake he said: “That is probably because you didn’t try hard enough!”
Rwanda’s leadership is trying very hard every day and that is why they are where they are today 23 years after the genocide and I don’t know of any similar success story anywhere in the world in recent history.
Seeya later alligator….
*While I don’t contest the result, one may wonder about the criteria used for the democracy index ranking. One of the reasons cited for the low ranking of Rwanda is the recent change in the constitution reducing presidential term limits from seven to five years renewable only once. But the change will be preceded by one transitional presidential term of seven years for which any presidential candidate will be eligible which in effect allows President Kagame to run for a third term. As expected the negative reaction of the Western media was immediate. Strangely, as authorized by the German constitution, Angela Merckel’s running for a 4th Chancellor mandate does not seem to be a problem for the same media despite the disastrous impact of her austerity policy on Europe’s economy for the last decade . Sometimes I wish that the Western world would listen more to what African themselves think about their continent. An interesting paper “Why Kagame’s bid to serve a third term makes sense for Rwanda” was recently published by the Joburg Post .
 Elena Holodny, The 13 fastest-growing economies in the world, Business Insider, Jun. 12, 2015, http://www.businessinsider.com/world-bank-fast-growing-global-economies-2015-6?IR=T
 Capital Kigali cleanest and safest city in Rwanda, CCTV.com, Jan. 12,2012, http://english.cntv.cn/program/africalive/20120112/108232.shtml
 A. Onuh, This is why Kigali is UN’s most beautiful African city, AnswersAfrica.com, http://answersafrica.com/this-is-why-kigali-is-uns-most-beautiful-african-city.html
 The Global Competitiveness Report 2015-2016, World Economic Forum, 2016, http://reports.weforum.org/global-competitiveness-report-2015-2016/
 The Global Competitiveness Report 2016-2017, World Economic Forum, 2017, https://www.weforum.org/reports/the-global-competitiveness-report-2016-2017-1
 MINISTRY OF FINANCE AND ECONOMIC PLANNING, REPUBLIC OF RWANDA, http://www.minecofin.gov.rw/index.php?id=148
 B. Versailles, Rwanda: performance contracts (imihigo), April 2012, http://www.rwandapedia.rw/explore/imihigo
N. Gutteridge, We’ve had ENOUGH Merkel’ Rest of Europe gangs up on Germany over crippling EU austerity, The Daily Express, Aug 6, 2016, http://www.express.co.uk/news/world/697340/European-Union-Mediterranean-anti-austerity-alliance-Germany-Angela-Merkel-Brexit
 Why Kagame’s bid to serve a third term makes sense for Rwanda, Joburg Post, 21 APRIL 2017 https://www.joburgpost.co.za/2017/04/21/why-kagames-bid-to-serve-a-third-term-makes-sense-for-rwanda/
Wednesday, February 1, 2017
In the late 1990s the government of Rwanda (GoR) recognized that ICTs could play an important role in accelerating the socio-economic development of the country and the creation of an information and knowledge economy.
In 2000, GOR established Vision 2020 a government development program in Rwanda, launched by president Paul Kagame in which it is said that the "government is actively trying to attract multinational corporations through investment-friendly policies to develop a Technopole".
In the National Industry Policy document published in April 2001 by the Ministry of Trade and Industry of GOR, one of the policy actions describes the need to "allocate land for industries, develop industrial parks and Special Economic Zones (SEZs)– leveraging Public-Private-Partnerships (PPPs) for development and management of SEZ such as ...Technopole (park for ICT, nanotechnology, etc)".
In january 2013, the government through Rwanda Development Board (RDB) announced plans to set up an ICT park that will host a collection of technological investments including training, industries, research and development.
According to Patrick Nyirishema, the Head of IT at RDB at the time, the plans to set up Kigali Technopole are on the right track. The Technopole will be built on the grounds of the Kigali SEZ, located 10 km east of Kigali City’s business district. The project plans reveal that the Innovation City will comprise all elements of a typical urban centre including corporate buildings, retail, leisure, sports, accommodation, health care center and other amenities with the regional ICT Center of Excellence (CoE) hosting Carnegie Mellon University (CMU) as its first anchor tenant.
In September 2013, the masterplan for the development of a Technopole in Kigali is published together with a viability and business plan. The Technopole will provide much needed infrastructural improvements, including guaranteed electricity and ICT infrastructure for companies that will be located in the park. Therefore the Technopole is Rwanda’s best bet in fast-tracking the country’s ICT transformation as it has the potential to diversify jobs beyond agriculture, provide new middle-income jobs, drive the development of SMEs, and increase product and service innovation.
Technopole Master Plan
In May 2016, the government of Rwanda launched Kigali Innovation City (KIC replacing the name of Technopole), a flagship project to drive digital transformation through its dynamic ecosystem of technology clusters in which domestic and international companies will innovate and deliver products and services for global markets and with Carnegie Mellon University as its anchor tenant.
"Kigali Innovation City is the natural home where indigenous Rwandan technology companies can innovate and serve the whole market of the African continent. It is also the best home in Africa for multinational technology companies to domicile their subsidiaries, bring their technologies and skills, and conduct the innovation necessary to create optimized products and services for the African market. "
The concept of KIC is similar to Silicon Valley that was developed around the world class anchor Stanford University which became the epicenter of technological innovation over the past half-century. Stanford's role as an incubator of technology is clear. In the last 50 years, university faculty, staff and graduates have launched some 1,200 companies. Today, more than 50 percent of Silicon Valley's product comes from companies of Stanford alumni.
While comparisons with Silicon Valley are always difficult, the KIC concept presents the same dynamic of close proximity between a world class university (CMU), entrepreneurs and IT businesses.
So far Rwanda's KIC plan made a lot of sense and was strategically better positioned than other projects in the region as I explained in this post. But while the vision was clear, besides many declarations of intention reported above and the development of its master plan, its execution has not delivered to its expectations. In the National Information and Communication Technology (ICT) Strategic Plan for the period 2011 – 2015 the target was 50 ICT companies operating in the Technopole by 2015, 50 ICT intellectual property registered annually by 2015, and the ICT sector contributing to 15% of the economy by 2015. None of that happened.
The only real development has been the start of the construction of the ICT CoE, financed by the African Development Bank that will host Carnegie Mellon University to be completed by the end of 2017.
The construction site of the Regional ICT CoE to host CMU
That the development of KIC did not follow the aggressive plan of the government is not surprising or unique for such an ambitious project and the vision is still strong. It is even getting stronger as I will explain later.
However, recently I was surprised by a presentation of a new plan for KIC presented by the KIC chief strategist to representatives of the President's Advisory Council visiting the ICT COE construction site. But before I get to this new plan, let me first cover some important and recent developments that took place in Rwanda.
Key to the success of the Technopole is the investment of private sector in the development and also the attraction of high level skills that would be needed for the development of the industry sector in the country.
Since the government of Rwanda signed an agreement for the development of the ICT CoE with CMU in 2011, the government has been very active and successful in attracting other major tertiary education and research institutions to Rwanda.
In 2014 Rwanda announced that it was set to host the region’s International Centre for Theoretical Physics (ICTP), a science hub that seeks to advance scientific education in the developing world.
In early 2016, at the Ministry of Education a partnership agreement was signed between the Government of Rwanda and the African Institute for Mathematical Sciences (AIMS) – Next Einstein Initiative (NEI). AIMS was established in 2003 in South Africa but at the invitation of President Paul Kagame, AIMS will join the science and innovation ecosystem that the government is building with the goal of being a continental hub in technology and will move their headquarters to Kigali.
and will soon house undergraduate offerings set to launch in 2017.
Rwanda can be proud of these accomplishments, creating an education and research hub with world class institutions in Kigali that should deliver the skills and expertise required for its Vision 2020 strategic plan to become a knowledge based economy. These new world class partners will at least triple the number of highly skilled students that will graduate each year in Rwanda. Adding to that the extraordinary effort by the GOR in Higher Education that has seen the number of students increased from 3,261 in 1994 to 87,013 in 2015, this is making the KIC strategy and project even stronger than it was at his inception, providing probably the best high level skills available in the region for future investors in KIC.
Let me now get back to the new plan presented by the chief strategist of KIC. The base idea of the plan is to install all the new education partners AIMS, ALU and ITCP in KIC where CMU was the first anchor tenant planned. That idea makes a lot of sense to create a critical mass of expertise and skills and to foster interaction and collaboration between those institutions in the spirit of a dynamic ecosystem that can nurture innovation and new businesses.
So far so good, but the problem is in the execution plan.
KIC is a 61 ha (150 acres) site. A quarter of it (25% or 15 ha) has been dedicated to CMU and the ICT CoE as shown in the master plan. The rest of it (75% or 46 ha) was dedicated for the city including business offices, government buildings, shopping center, financial district, support services, green space, etc.
In the new plan presented by the chief strategist which I reproduce here as accurately as possible since we did not get a copy of it, the city has been reduced to less than 20% of the space while CMU, AIMS, ALU and ITCP would take 80%! So 80% of the space will be dedicated for higher education institution campuses where we can imagine their buildings being built in the middle of large green landscaping typical of university campuses, like a large prairie.
New KIC plan presented in December 2016
It is difficult to understand the logic beyond that change if only to provide each institutions with similar space. The CMU academic building (shown above) covers less than 1 ha in a zone of 15 ha. The building is only representing Phase 1 of the project. Phase 2 will see the construction of a conference center, a student activity center with cafeteria and sports facilities, students lodging and visiting professor guest house. Even when Phase 2 will be completed, there will be lots of space left in the 15 ha zone. CMU presented RDB with the idea to offer that space left to the new institutions like AIMS and ALU. There is enough space for that.
There a several advantages to that approach. First those institutions can share common facilities described in CMU Phase 2 above, i.e. activity center, students lodging, etc., thereby reducing the total cost. Second and probably more important is that this sharing will facilitate and encourage contacts and synergy between their students. It is this cohort of world class engineering, business school, mathematics and physics students that will be the new generation of innovators and leaders that will transform Africa. Third by concentrating all the universities in the space proposed for universities in the master plan, it leaves the original 75% of KIC available for the real objective of it, i.e. the development of an ICT industry and hub as originally planned.
I mentioned earlier that the KIC project did not achieve its goals yet, but I also said that there was nothing really abnormal about it. Indeed, I can imagine how difficult it has been for the RDB investment promotion services to convince businesses to come to KIC which has been a large maize field since the beginning of the project.
But now that the anchor and flagship regional ICT CoE building is almost completed and that the base road infrastructure is being built, and that Rwanda was successful in attracting AIMS, ALU and ICTP in addition to CMU, the value proposition is much more attractive for those potential investors.
I guess that what is left is the legal framework. The business plan issued with the master plan gives an overview of some of the incentives that could be offered at KIC:
- Corporate income of 20% after tax holiday of 10 years
- Capital Gains Tax-Exempt to the SEZ enterprise
- Tax on Dividend- Exempt within SEZ
- ICT-Research, Innovation & Development (Including software development)
- Allowable Expense– Double Tax Deduction.
- Effective 15% subsidy of actual expense taken off SEZ enterprise tax liability
Seeya later alligator....