By Jordan Pic, MPA, Staff Writer, Brief Policy Perspectives
A landlocked, emerging democracy, Rwanda is on the rise as a key regional player. The country is a prominent member of the East African Community (EAC) and has one of the fastest growing GDPs in the world. Rwanda is in an advantageous position to solicit investment and attract new markets, and it can do so with public-private partnerships (PPPs).
In 2015, the Rwandan government passed its first law establishing guidelines for future contracts between the government and private investors. A PPP is a contractual arrangement between a contracting authority of the government and a private partner where both share the risks of finance, design, construction, rehabilitation, operation and/or maintenance of an infrastructure facility, other asset, or a public service. The private partner receives financial remuneration either from government contributions, charges or user fees, or a combination of both.
In my trip from March 13th to 18th to Kigali and Gisenyi, my Institution and Economic Development Class looked at Rwanda’s extraordinary progress since the 1994 genocide. During the trip, I saw three needs for PPP investments: transportation, energy, and recreation. These would would promote economic growth and community recovery in Rwanda.
Energy infrastructure is a key opportunity for public-private partnerships in Rwanda. Rwanda is ranked 117 out 190 in ease of getting electricity. The book Rwanda, Inc.argues that energy is the number one infrastructure priority for the country. During my visit, light switches in hotels in Kigali were key controlled, and Kigali often experiences short-term electricity outages. Rwanda is working to improve the ease of obtaining electricity by reducing costs of obtaining a connection and eliminating fees associated with obtaining electricity. To reduce the cost of electricity it would require cooperation from policy makers and suppliers to radically change the financial feasibility of electricity. An alternative is exploiting renewable energy options and allowing private investors to cover the short-term costs. Partnerships that offset the renewable energy costs would ease the cost of doing business. The current cost for an entrepreneur to obtain electricity is 2722.6% of income per capita, takes four procedures and a total of 34 days.
Rwanda is exploring new energy projects but they are expensive. “A hydroelectric dam that can produce up to 28 megawatts (of electricity) can cost up to $100 million to develop”. One of the largest of these hydroelectric projects is the KivuWatt project developed by ContourGlobal, a New York based international power company. The project extracts methane gas from Lake Kivu, a 1,500 foot deep body of water in Western Rwanda, and powers 100 megawatts of electricity generating capacity. In 2011, the KivuWatt project won the 2011 Africa Power Deal of the Year award from the Euromoney’s Project Finance magazine. Funding for the $92.5 million financing project comes from the Emerging Africa Infrastructure Fund, Netherlands Development Finance Company (FMO), the African Development Bank, and the Belgian Investment Company for Developing Countries.
Rwanda is also exploring geothermal and hydropower energy as alternative energy sources. Geothermal projects have already been identified in several locations including at Karisimbi, the dormant volcano in northern Rwanda. These efforts depend heavily on foreign investment from Japan and Germany. Hydropower development focuses mainly on micro projects that will power small villages and hospitals.
Outside of the main streets of Kigali, most roads are not paved. Roads are susceptible to bad conditions from the rain season which can result in traffic jams, roads bottoming out, and fatalities. This adds to the costs of doing business. Implementing transportation infrastructure projects and maintaining them in rural areas will make an impact on energy and electricity needs, agriculture, conservation and tourism efforts, and the crisis of clean water access.
An example of a successful infrastructure PPP is the Horizon Group, the leading Rwandan investment fund that builds roads. Horizon started by building roads on two-to-five kilometers long and now works on construction on highways. It provides jobs and skills to Rwandans so that more private sector contractors can emerge. The corporate social responsibility initiatives of the Horizon Group align with the country’s development goals.
Major manufacturers such as Inyange will be able to transport their products to communities that could not otherwise purchase them. Infrastructure materials could also finally travel to these areas where rain collection and filtration systems are needed. Howard Buffett, one of Rwanda’s major investors, prioritizes clean water and sees it as one of the largest looming threats in today’s world. Water is a basic human need, and above all else should be a case for prioritizing road infrastructure in the country.
While Rwanda is leading the region in economic development, the nation still has a long way to go to recover as a community. Although not many PPP initiatives exist of this type, free recreational parks could help Rwandan communities. In Rwanda, outdoor communal areas are mostly part of businesses like a cafe or campus soccer fields.
Kigali’s 2014 budget plan allocated money to building parks for the first time. Rwf1.17 billion(2 million US Dollars) was allocated to social development with Rwf25 million specified for a cultural centre at Meraneza Park in Nyarugenge District. The funds will allow Kigali to build recreational facilities such as youth centers.
The Trust for Public Land outlines benefits of investing in creating these types of spaces. Health, economic, environmental, and social benefits are all included. Public parks stimulate economic growth because maintained recreational areas have proven to drive up property values, encourage commercial property investment, and tourism–all related to the Rwandan Development Board goals.Communities with green common spaces have also shown greater likeliness to enjoy stronger social ties–which is essential to Rwanda’s recovery.
A Resilient Nation
Rwanda is an ambitious and thriving nation. The success of Rwanda is often created to the longtime leadership of President Kagame. After implementating Vision 2020, Rwanda has consistently scored highly at meeting the Millennium Development Goals. Rwanda is increasingly business friendly to international markets and open to diversifying its economy. PPPs provide the opportunity to continue these efforts — both for the nation’s well-being and its people’s.