Wednesday, September 30, 2020

There may be nothing Botswana can learn from Rwanda

Here at home, this one meeting has been hailed as evidence that Masisi is keeping the right company by associating with a leader who transformed a basket case into a bread basket within a short period of time. Rwanda is supposed to be making strides in other areas as well (notably in ICT) with Kigali, the capital, growing faster than Gaborone at the height of Botswana’s economic boom in the 1990s. Rwanda’s boom occurs on the back of what is supposed to be a very strong economy. In capitals that decide that whether a Third World nation succeeds or fails, Kagame has very powerful friends (like former United States president, Bill Clinton) who have the heads of Bretton Woods institutions and major donor agencies on speed dial. The thinking is that by associating so publicly with Kagame, Masisi was a making a statement that he would want to do with Botswana what Kagame did with Rwanda. However, it may turn out that Botswana has nothing to learn from Kagame’s Rwanda whom some have compared to Mobuto Sese Seko’s Zaire.

Using the Integrated Household Living Conditions Survey (EICV by its French abbreviation) data from the National Institute of Statistics of Rwanda (NISR) as well as looking at more recent trends in relevant macroeconomic variables, some economists have raised serious questions about the credibility and reliability of Rwanda’s official national account statistics (NAS) data.

Last year, the Review of African Political Economy (ROAPE) published analysis showing that Rwanda’s much-touted economic miracle is inconsistent with economic theory and experience elsewhere. Following in the recent example of the Greek government, Rwanda appears to be manipulating GDP figures which, apparently, is very easy to do.

ROAPE says that with agriculture accounting for more than one third of GDP and two thirds of the workforce, it is difficult to imagine a scenario in which total GDP growth could average between 6 percent and 8 percent annual growth, while incomes in the agricultural sector appear to be decreasing for a substantial proportion of farmers. ROAPE contests that finding harmony between the manipulated figures and reality has proved difficult for the Rwandan government. On one hand, the most recent growth data coming from the country shows that economic growth slowed to its lowest level since 2002 (1.7 percent) in the first quarter of 2017. On the other, with a population growth rate of 3 percent per year, this means that Rwanda’s GDP per capita growth rate is now effectively negative, even according to the NISR’s own estimates.

“The most notable feature of the GDP figures is that final household consumption is reported to have decreased by 9 percent year on year, even as total GDP is said to have grown by 4 percent,” says ROAPE. “A 9 percent decrease in total household consumption (meaning an 11-12 percent decrease in per capita consumption, assuming 2-3 percent population growth) would indicate a catastrophic deterioration in household welfare in the midst of supposed economic growth. This calls for a thorough explanation from NISR as to what is causing this very worrying and apparently contradictory (not to say implausible) situation.”

ROAPE found that information emerging from the household survey data was incompatible with the official figures on economic growth. In the vast majority of countries, NAS accurately predict both the direction and level of change in household consumption. In Rwanda’s case however, where household surveys household consumption decreased by 0.6 percent per year between 2010 and 2013, NAS household consumption increased by 6.5 percent. ROAPE found this to be inconsistent “with theory nor with other countries experience, nor even with Rwanda’s own experience before 2005.”

To everybody else, the new buildings that are going up in Kigali are a sign of economic progress. To ROAPE, they represent regression because much of the investment that is giving the capital a new look are being financed with public debt ÔÇô which has led to a surge in external debt levels.

“This would all be fine, if the investments had been strategically targeted at growth areas aimed at leapfrogging development Korean style. But to date, the vast majority of investments have gone into cosmetic ÔÇô and crucially loss-making ÔÇô prestige projects, such as the Kigali Convention Centre, Rwanda Air, Kigali skyscrapers and luxury housing units for the non-existent Rwandan upper-middle class,” says the UK-based publication, adding that even if these investments were not making a loss, this would arguably be a questionable use of public resources, since they are all highly regressive and aimed at subsidizing the super-rich or foreign clients. 

It may all be starting to unravel. ROAPE asserts that the situation will worsen as even larger prestige projects come online and existing ones start accumulating more losses. A regional publication, The East African, has warned about Rwanda’s foreign reserves falling below the East African Community’s convergence criterion of four months of imports and below IMF’s critical threshold of three months of imports. For the first time in recent years, capital account flows to Rwanda were negative by a large margin in 2016, indicating that investors may be starting to put their assets abroad.

ROAPE contests that if there ever was a Rwandan economic miracle, it probably “fizzled out” some time ago and is likely to “come crashing down” very soon: “At the very least, the data shows that the development strategy adopted by the Rwandan government is risky in the extreme, bordering on reckless. The closest example we can find in recent history of similar policies is Mobutu’s Zaire that squandered the country’s resources on space projects, nuclear power plants and a Concord airplane. As outlandish as they seem today, these projects also helped to give Mobutu an image of success up until the 1970s (remember the Rumble in the Jungle?)”

The latter was an ill-conceived investment decision by President Mobuto Sese Seko of Zaire (now Democratic Republic of the Congo) that saw at least US$120 million disappear down the drain and never ever came back up in the form of returns on investment. The money part-financed the historic boxing event in the capital, Kinshasa, on October 30, 1974 between George Foreman and Muhammad Ali. Tragically, the west obsesses over “Rumble in the Jungle” in terms of the records it broke but never not in terms of how it benefitted the country.

Interestingly, those who have contested ROAPE’s analysis have only managed to deploy Pan-Africanist politics and have not refuted scientific argument that raises questions about the actual health of Rwanda’s economy.

What ROAPE says has been confirmed by Kagame’s own former economic adviser, Dr. David Himbara, who had to flee to Canada when he suspected that his life was in danger.

Himbara, an economist who was Kagame’s Principal Private Secretary and later Head of Strategy and Policy in the Office of the President, also claims that his principal routinely manipulated statistics as he became “more obsessed with the looks of the capital city of Kigali than building national systems to improve lives.” Himbara pointed out was that while Rwanda is supposed to have achieved universal healthcare coverage, there are less than 700 doctors for a population of 12 million.

“Kagame has grossly exaggerated his social and economic accomplishments of the past 23 years. He says he has built an African economic lion — the Singapore of Africa,” Himbara told The San Francisco Bay View in 2017 in which he alleged “many examples of statistical exaggeration” in Kagame’s Rwanda. “In reality Rwanda remains the poorest country in East Africa, except for Burundi. Its per capita income stands at $697.3 versus Kenya’s of $1,376.7; Uganda, $705; and Tanzania at $879. Burundi is poorer than Rwanda with per capita of $277. Rwanda receives $1 billion a year in foreign aid, which is half of its annual budget of $2 billion.”

The fallout between Kagame and Himbara came in 2009 when the latter questioned the annual economic growth of 11 percent in 2009 during the global financial crisis.

“Kagame became aggressive and abusive. I decided to leave Rwanda at the earliest opportunity, which was January 2010,” Himbara said.

He moved to South Africa where he thought he would be safe from Kagame but that same year, Kagame’s former army chief of staff, who had also fled to South Africa, was almost assassinated. Soon thereafter, Kagame’s former intelligence chief, who was also living in exile in South Africa, was assassinated.

“Kagame had turned South Africa into a hunting ground; that is what convinced me to move to Canada,” Himbara said.

If what ROAPE and Himbara say is true, it could well be that the only thing that Masisi can learn from Kagame is how to completely take over the national statistical authority and get it to provide the World Bank with false statistics.

RELATED STORIES

Read this week's paper

COVID-19 throws Botswana Athletics Association off the track

Botswana Athletics Association (BAA) has cancelled its 2020 calendar of events. This was revealed by the association vice president technical Oabona Theetso.