Rwanda: Growth, Structural Transformation, and

Diversification

Kasim Ggombe and Richard Newfarmer

International Growth Centre

UN WIDER Conference

Helsinki, July 19-20, 2016

Overview

Rwanda has grown rapidly in the last two decades, with

enormous benefits for poverty reduction and quality of life…

Four features stand-out: the state-led nature of the recovery,

the degree of structural transformation, the role of ODA, and

recently the focus on niche markets

Rwanda has inverted the historical pattern of structural

transformation – as labor moved out of agriculture not into

manufacturing but into construction and services. Only now it

is beginning to focus on manufacturing

Rwanda’s post-genocide economic performance has been

stellar… unimaginable in 1995

1994: Genocide

1996-2012 Ave: 8.2%

Source: World Bank, World Development Indicators, IMF

-60

-40

-20

02

04

0

GD

P G

row

th R

ate

(%

)

1980 1985 1990 1995 2000 2005 2010 2015Year

Source: World Development Indicators, World Bank online

Figure 1: Rwanda GDP Growth 1981-2015

Growth 1995-2015 = 8%

Growth 1981-1993 = 1.5%

100

150

200

250

GD

P p

er

capita

ind

ex

(19

95

= 1

00

)

1995 2000 2005 2010 2015Year

Rwanda Uganda

Kenya Tanzania

Ghana Botswana

Source: IGC staff based on WITS, WDI, and UNCTAD data

Figure 2: Rwanda Rising Average Income

Rwanda is catching up with other high performers in the

region

58%

77%

60.40%

57%

44.90%

30.20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1990 1994 2000 2005/06 2010/11 2015

Pro

po

rtio

n

Proportion below poverty line

Linear projection

More than 1 million out of poverty

611500

1071

750

476

268

0

200

400

600

800

1000

1200

1990 1992 2000 2005 2010 2015

Nu

mb

er

of

De

ath

s p

er

10

0,0

00

Number of Deaths

Linear projection

151

196

152

76

50

0

50

100

150

200

250

1990 2000 2005 2010 2015

Nu

mb

er

of

De

ath

s

Number of deaths

Linear projection

Child

Mortality

Maternal

Mortality

Life expectancy: from 49 years

in 2000 to 55 years in 2011

Literacy rates (aged 15 to 24):

from 48% in 2000 to 84% in

2011

…with impressive improvements in social conditions

…with impressive improvements in social conditions

As one illustration, take a look at what Rwanda is doing in

prevention and treatment of AIDS, as recounted in this PBS

report:

http://www.pbs.org/newshour/bb/rwanda-torn-genocide-became-global-anti-aids-

leader/

…or in developing local high(er) tech entrepreneurship…:

http://www.pbs.org/newshour/bb/new-generation-rwandan-entrepreneurs-offer-tech-

solutions-farmers-dilemmas/

Investment has been financed by foreign savings, mainly

ODA

0

5

10

15

20

25

30

Rwanda LICs

Domestic savings

Foreign savings

Data source: IMF, Financial Access Survey and World Bank, World Development Indicators.

Note: In the left graph, HP equals 15 and 14. In the right graph, HP=5 and LICs=8.

Investment as a percentage of

GDP

80

100

120

140

160

180

Se

cto

r c

ontrib

utio

n to

em

plo

ym

ent (

199

5 =

10

0)

1995 2000 2005 2010 2015 2020Year

Agriculture Industry

Services

Source: IGC staff based on WITS, WDI, and UNCTAD data

Figure 5B: From Agriculture to Services: Employment

Labor is moving from agriculture to services and industry

but so far little into manufacturing

05

01

00

150

Se

cto

r v

alu

e a

dditio

n to G

DP

(1

99

0 =

10

0)

1990 1995 2000 2005 2010 2015Year

Agriculture Industry

Manufacturing Services

Source: IGC staff based on WITS, WDI, and UNCTAD data

Figure 5A: From Agriculture to Services: GDP Composition

Structural transformation….labor movement

and diversification away from agriculture

Source: World Bank, 2016

Issues going forward… the need to expand exports

Adding value to commodities

• Coffee, tea. minerals

Labor-intensive

manufacturing

• textiles

ICT

• Call centers; software

Horticulture

• Cut flowers

Tourism

• MICE

Some diversification has occurred… …but exports are still low

The mobile revolution: mobile

subscriptions are soring

Country 2005 2010 2014

Rwanda 2 33 64

Kenya 13 61 74

Uganda 5 38 52

Tanzania 8 47 63

Burundi 2 18 30

Conclusions…

Rapid growth has occurred because of a unique combination

of leadership, good policy, an activist government and steady

movement of labor into high productivity jobs in industry and

services.

Development finance was crucial – both in amounts and more

importantly sound public investments.

Growth in the medium term will depend on increasing

domestic private savings and investment, mobilizing new

foreign savings and technology (particularly FDI), and

generating new sources of exports.

Thank You

Growth in Labor Productivity

Growth

in labor

force =

4%

Growth in

productivity

= 3.9%

Intersectoral shifts account for greatest portion of

increases in labor productivity

Source: World Bank, 2016