Rwanda: The International Community Turns Off the Aid Tap
By Daniel Howden, 5 April 2013
Analysis
Jaqueline Mukagatete lives somewhere between Rwanda's past and its future.
She shells peas while sitting on the step of what will be, when it is
finished, her new concrete house. Only a stone's throw away is the
traditional mud-and-wattle hut where she still sleeps at night.
The 32-year-old mother of four says she is proud of the new home and eager
to start a new life.
The Mukagatetes are among 100 families who have moved to the
Kitazigurwa-Ntebe "model village", a two-hour drive outside of Rwanda's
capital, Kigali. It is one of several similar collective villages in the
small mountainous central African state. They are intended to help families
escape the poverty trap in a single generation.
Smallholders have been scraping a living in subsistence farming for years.
Their tiny plots are spread out over the surrounding hills. Now they live in
identical houses lining the streets of these new villages. Each one has a
small lawn outside and a naked electric light bulb hanging from a cord
inside.
Projects like this model village, only a mile away from the rural home of
President Paul Kagame, are emblematic of the regimented, aid-intensive route
Rwanda has taken to development.
It is a strategy that has enjoyed considerable support from the Unites
States, Britain and other major donors. Rwanda until last year depended on
aid equivalent to more than 40% of its budget.
The results have been remarkable. Development experts have feted the country
for achieving what they call the "hat-trick": rapid growth, sharp poverty
reduction and reduced inequality. That compact is now threatened by
international condemnation of Rwanda's interference in its vast and chaotic
neighbour, the Democratic Republic of Congo (DRC).
Mr Kagame's government has steadfastly denied a UN report that concludes
that it commands, recruits and finances armed rebels in the eastern DRC.
Those denials have failed to stop a backlash from donors, led by Britain
which, after internal wrangles, froze its aid budget last year. Other
European Union countries have followed suit and only the United States has
restricted itself to a symbolic cut in military assistance of $200,000.
Rwanda has capitalised on guilt over international failures during the 1994
genocide - when about 800,000 people were murdered in three months - to earn
aid dollars and plaudits. But this recent sudden shift in perceptions has
surprised longterm observers and raised concerns that development lessons
learned in Rwanda will be discarded.
Rwanda is starkly different from its East and Central African neighbours and
sometimes appears to be a giant laboratory for development studies.
Nothing symbolises the ambition and speed of the country's modernisation
effort more than the Kivuwatt project on Lake Kivu - the deep and dangerous
body of water that divides Rwanda from the eastern DRC.
Kivu is one of the world's three exploding lakes, saturated with carbon
dioxide and methane from the surrounding volcanoes.
An explosion in which the lake's gases are suddenly released, what
scientists call a "turnover", would be "the biggest catastrophe humankind
has experienced", according to Finnish engineer Jarmo Gummerus, who is
working on the power project. The gases would either suffocate or incinerate
the 2m people living on the lake's shores.
The solution has been to build a hi-tech barge weighed down with gleaming
steel tanks that now sits in the bay at Kibuye, on the Rwandan side. When it
is finished the project will extract the methane and convert it into
electricity.
With a contract from the Rwandan government, the US-based energy company
Contour Global is building the plant, which is paid for by loans from
development banks and private investors.
The ambition of the first phase of the Kivuwatt project may yet represent
the high watermark for Rwanda's development push. When it is switched on
later this year, the $140m project will increase the nation's power
generation by a third.
Its 11m inhabitants make Rwanda the second most densely populated nation in
sub-Saharan Africa. It faces a huge challenge to feed itself. The government
has responded by terracing the "land of a thousand hills" on an epic scale.
Totemic policies like a ban on plastic bags mean that its rivers and
drainage ditches are not choked, unlike their counterparts in Uganda and
Burundi.
Some of the biggest achievements from Rwanda's development laboratory have
come through direct budget support: aid that goes to the government, rather
than NGOs - an approach donors favour in countries where government
corruption is rife.
Rwanda is on course to meet the UN's global anti-poverty targets, the
Millennium Development Goals. In education, for instance, foreign aid has
financed new schools, trained teachers, developed learning materials and
improved access.
A recent report by the Overseas Development Institute found that budget
support had met government and donor objectives and had been "extremely
positive".
These kinds of results have made the country a "donor darling" and a vital
proving ground in the debate over whether foreign aid works. It was the star
performer in Britain's Department for International Development (DfID)
annual report in 2012 after receiving $112m that year.
The report card highlighted a surge in primary school enrolments; a sharp
drop in the population living below the poverty line; and a near doubling in
the number of births attended by a skilled midwife. Only one line in the
report mentioned the need for a "transition to inclusive politics and
enhanced human rights".
A senior Western diplomat warns that the fallout from eastern Congo has
ruptured donor relations with Kigali: "Rwanda's relationship with the rest
of the world has changed." The cost of that change is measurable.
Rwanda's finance ministry expects GDP growth, previously forecast to rise to
7.8% in 2013, to be 1.5 percentage points lower. Inflation, which had crept
up to 6.6%, is expected to rise even higher. Foreign currency shortages in
Kigali have created a small black market there for the first time since
1994.
Meanwhile the vision of transforming a subsistence farming economy into a
middle-income services hub by 2020 - based on annual growth of 11% - is
fading.
Rwanda's Cuban-style health system with 90% coverage is creaking. Bonuses to
doctors and nurses worth up to 40% of their salaries have already been cut,
due to the suspension of aid.
For the architects of Rwanda's aid-driven accomplishments, like the
respected governor of the Central Bank, Claver Gatete, the suspension of
committed funds is a betrayal.
A model based on direct budget support, developed with Britain, was close to
making Rwanda an "aid graduate" that could have taught other poor countries
how to develop. Without that aid, he says, this is "no longer a guarantee".
The ability to make the best use of it has also gone.
The signal being sent to multilateral donors and lenders is as important as
the money at issue, he argues. The World Bank, the International Monetary
Fund and the African Development Bank have all delayed significant funding
decisions until a clearer signal emerges from the US and the EU.
Mr Gatete, a former ambassador to the UK, summed up the consternation felt
by his compatriots with three questions: Are there poor people in Rwanda?
Did the money reach them? Did any of it go missing? He answers the first two
questions with "yes". The third answer is "no".
There is also considerable surprise among Rwanda's fledgling opposition that
the aid tap has been turned off because of events in the DRC rather than
repression at home.
Foreign critics point to the complete absence of a free media and the
prohibition of credible opposition groups as evidence that donors are
supporting a dictatorship in Rwanda. (So far, the aid cut-off has not
reduced the fighting in the DRC, but it may have encouraged the on-going
talks.)
Victoire Ingabire, who tried to challenge Mr Kagame at the last election in
2010, was recently jailed for eight years on charges that included "genocide
denial". Other party leaders admit to "looking over their shoulder" and
avoid criticising the government directly.
In a report advising the Commonwealth against admitting Rwanda four years
ago, respected Kenyan scholar Yash Pal Ghai said the country was not a state
with an army but "an army with a state".
One of the responses to the aid shortfall has been the new Agaciro (Dignity)
Fund, similar to a war bond, which relies on voluntary contributions. In its
first two weeks of operations last year it raised $11.7m. But this fund
cannot replace aid, as it is effectively a tax on public sector pay. This
one-off act of defiance will be felt in reduced consumer spending and does
not inject money into the economy.
China has also provided soft loans worth $36m but neither will adequately
replace larger Western aid flows.
In Ms Mukagatete's model village there is disciplined determination to look
forward: "We can never go back to how we were," she says. "My children will
not live how we have lived."
People are told to put in decorative plants and instructed to grow kitchen
gardens. All residents are expected to work on their own homes as well as
the construction of new homes. For all the collectivism, houses still cost
between $7,500 and $10,500 to build. That money is going to be harder to
find in the new, harsher aid climate.
