While most favor bottom-up, entrepreneur-led efforts to develop robust entrepreneurial ecosystems, in Africa especially, what the government does actually matters a great deal. In the third of four posts this month on Africa, I look at Rwanda and find a country where smart government engagement has created a favorable climate for entrepreneurs.
In the 2010 Ease of Doing Business ranking from the World Bank, Rwanda made a spectacular leap—from 143rd on the list to 67th. It had a better business environment than Italy, Turkey and Poland. That same year, the Heritage Foundation’s Index of Economic Freedom showed similar results as Rwanda had improved on half of the ten indicators of economic freedom, achieving the fourth largest score gain among 179 countries. On the ground, those improvements translated into real impact: per capita GDP had almost quadrupled since 1995, life expectancy had increased by 23 years, the country’s primary school enrolment had risen by 50 percent and 18,447 new businesses were registered in 2010 alone.
In the 2013 edition of the Doing Business report, Rwanda’s worldwide position is even better, ranking 52nd in the overall ease of doing business. On one sub-index in the study, the ease of opening a new business, it ranks 8th. In the latest Index of Economic Freedom, in turn, Rwanda is ranked 3rd out of 46 countries in the Sub-Saharan Africa region.
How did it get there so fast? After all, it was Rwanda where the most atrocious genocide of the 1990s happened. According to UNCTAD, the 2000s marked the onset of a new decade when entrepreneurship policy became integrated into the overall poverty reduction strategy. In 2001, under the leadership of President Paul Kagame, the Rwanda National Innovation and Competitiveness initiative put entrepreneurship front and center in economic policy. It did not seek to emulate Silicon Valley but rather leverage local strengths, with an entrepreneurial vision. Among other efforts, the government developed a “national coffee strategy” that included identifying foreign mentorship, over $100 million worth of investments to improve coffee washing, production, capacity, and marketing, and establishing a partnership among agricultural institutes in Rwanda, Michigan State University and Texas A&M. If you are a coffee drinker, you have probably already savored the results in your cup.
Pro-entrepreneur efforts have continued in various sectors. Among recent local ventures are new boutique hotels, restaurants, small IT shops, event planning, tourism offerings and the rising k-Lab ICT innovation hub in Kigali. According to the World Bank, since 2004 Rwanda has substantially improved access to credit, streamlined procedures for starting a business, reduced the time to register property, simplified cross-border trade and made courts more accessible for resolving commercial disputes. And they have not forgotten about education. The government’s 2008-2012 Economic Development and Poverty Reduction Strategy stressed changes in the educational curricula to allow for the enhancing of entrepreneurship skills. Clearly, Rwanda was on to an ambitious and complex reform program.
Rwanda’s emerging entrepreneurship ecosystem caught the world’s attention. In 2009, Babson College established a permanent presence in Rwanda with the help of an in-country partner, the Private-Sector Federation, an organization in Kigali working to represent the interests of business owners. Since then, the Babson-Rwanda Entrepreneurship Center has worked to map and increase entrepreneurial activity in Rwanda by implementing the Entrepreneurial Leadership Academies, offering mentorship and putting together a landscape report of actors supporting entrepreneurs in Rwanda, among other efforts. In 2011, it became the host organization for Global Entrepreneurship Week/Rwanda (GEW/Rwanda), effectively linking the country’s efforts to promote entrepreneurship to the rest of the world. In 2011, GEW/Rwanda reached 12,000 people through 26 local events. In 2012, through partnerships with the Ministry of Youth and ICT, the Rwanda Development Board and others, the reach increased to 25,000 people through 50 different activities around the country. In addition, in 2012, Startup World, announced that Kigali is among 36 cities around the globe selected to compete a global technology competition slated to take place later this year.
Despite the difficult global economic environment, Rwanda’s economy has expanded at an average rate of over 10 percent during the past five years. In 2013, the projected GDP growth is 7.8%, making it the ninth fastest growing economy in the world. The work has just begun of course. The country needs to solidify the institutional foundations for an entrepreneurial economy to pave way for its aspirations to become a service-based economy by 2020. The weak legal system, property rights infringement and corruption are still latent threats. Human capital also remains a considerable challenge.
But with more and more attention being devoted to high growth entrepreneurship in Africa, Rwanda should leverage its initial success by finding new policy levers at its disposal to advance new firm formation and position the country as a place to attract start-ups. Rwanda could set an example to Africa by demonstrating that African governments, too often in the news for corruption and strife, can rather be about collaboration and startups and as such a vital part of the solution.
A Look Back at Innovation Daily