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http://www.fastcompany.com/magazine/134/special-report-rwanda-rising.html
March 18, 2009
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Innovation,
Leadership,
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branding
Rwanda Rising: A New Model of Economic Development
By
Jeff Chu
Nobody likes to say "No, Mr. President." So three years ago, when Costco CEO Jim Sinegal got a call from shareholder Dan Cooper, a partner in Chicago's Fox River Financial Resources, asking if he'd have lunch with Rwandan president Paul Kagame, he agreed. That meeting in New York led to a presidential stop at Costco HQ near Seattle. Which led to Sinegal's promise to visit Rwanda. "I made it in a moment of weakness," he says, "before I realized how long it takes to get there." He ended up taking his whole family, and today Costco is one of the two biggest buyers of Rwandan coffee beans -- about 25% of the country's premium crop, by Sinegal's estimation. Without Cooper's introduction, "no way would this have happened. I knew the Rwanda story, but I wasn't intimately involved," Sinegal says. "It took more elbow grease to get this started up, but it has been very profitable. Good for us and good for them."
Very good for Rwanda, in fact. Sinegal introduced Kagame to Howard Schultz, the CEO of Starbucks, now the other top buyer of the country's coffee. On Kagame's last swing through Washington, Sinegal and Schultz cohosted a dinner with Seattle-area execs from companies including Microsoft. And last fall, Sinegal started an internship program for Rwandans at Costco.
The courtship of Sinegal is a clarion example of Rwanda's strategy for development. The country doesn't have much going for it. It's landlocked, largely deforested, and ridiculously packed: About the size of Vermont, it has 16 times more people. Fifteen years after the genocide that killed an eighth of the population, its name still brings to mind death. Nine of every 10 adults are subsistence farmers, and per capita income is less than a dollar a day. Rwanda has no oil and few minerals. But it does have one abundant asset: well-placed friends.
Sinegal. Schultz. Former British prime minister Tony Blair. "Purpose-driven" pastor Rick Warren. RealNetworks founder and CEO Rob Glaser. Google CEO Eric Schmidt. All are part of Rwanda's ever-expanding network of influential supporters. President Kagame's goals are ambitious: to boost GDP sevenfold, find paying jobs for half of Rwanda's subsistence farmers, nearly quadruple per capita income to $900, and turn his country into an African center for technology, all by 2020. The government is doing what it can -- it has, for instance, committed to investing annually 5% of its GDP in science and technology by 2012 -- but to reach those goals, it's going to need outside assistance.
Kagame's strategy relies on wealthy and powerful friends to lure private investment, train a new generation of managers, build a globally competitive economy, and wean the country off foreign aid. Even as troubling questions remain about Kagame's involvement in the region's ongoing conflicts, this unpaid, business-savvy team is marketing the brand called Rwanda.
Just as the Asian Tigers arose as export-led, middle-income economies in the 20th century, Rwanda wants to become the African Gorilla in the 21st. It seems crazily audacious -- and Rwanda's leaders know it. "We're trying to create a new model for fighting poverty. Nobody believes that it's possible," says éliane Ubalijoro, a researcher at Montreal's McGill University who serves as a Kagame adviser. "How do you take a country that's been through hell and bring it to security and prosperity? This is about healing, and this is about hope. We think it can be done."
On a good day, Rwanda sparkles like an emerald. One warm December Saturday, I drove the road from Kigali northwest toward the Congolese border, the tourist route to the country's famed gorillas. The sunshine darted across the steep mountainsides. Even the dull gray-green eucalyptus shone in the late-afternoon light.
Ahead of me, lumbering up the hill, was a big blue truck. On the back, someone had painted happiness is forward. You just have to hope that's right, especially since reminders of the 1994 genocide are omnipresent -- roadside memorials, signs pointing to churches -- turned -- massacre sites, work crews of jailed genocidaires in their shockingly pink prison clothes.
Hutu-versus-Tutsi violence did not begin in 1994: There was 1959. 1962. 1964. 1973. 1992. But 1994 was the worst. In 100 days, 1 million people died, 90% of them Tutsi. Shot in their beds. Bludgeoned in the streets. Smashed against brick walls. Dismembered by grenades ... in their churches. And the world? It did nothing. It left Rwanda to the killers, who turned out to be neighbors, classmates, even relatives.
The tragedy was, as tragedies often are, both formative and transformative. This one brought to power a rebel army composed largely of fighters who had long been exiled; Kagame, its chief, grew up in Uganda. During the 15 years that he has effectively run Rwanda, Kagame has stabilized the country, but he hasn't yet been able to bring prosperity. Despite annual economic growth of about 6%, Rwanda still ranks 194th out of 208 countries on the World Bank's most recent per capita income table. The ramifications of poverty are more than economic: Kagame's desire to transform the economy is rooted in the belief that poverty exacerbated the tensions that erupted into 1994's genocide. "We know that if that past is never going to happen again," the president told Fast Company in an email, "we must grow our economy, create opportunities for higher wages, so that we create the conditions for tolerance, trust, and optimism."
Poverty, president kagame says, contributed to the genocide. "If that past is never going to happen again, we must grow our economy."
Aid, which still provides nearly half of the budget, is not the answer. The West has spent $1 trillion on aid to Africa over the past four decades. "But no nation has ever attained economic development by aid," says former Goldman Sachs banker Dambisa Moyo, author of the new book
Dead Aid. "It's just not productive." Worse, it can be destructive. Corrupt leaders siphon off money; merely inefficient ones squander it. Millions of people end up hooked on handouts.
"No country can depend on development aid forever," Kagame told Fast Company. "Such dependency dehumanizes us and robs us of our dignity." It may also, of course, make him accountable to people outside Rwanda. Last December, following a United Nations report that Rwanda was supporting Tutsi rebels in Congo, the Netherlands and Sweden suspended $20 million in aid. Kagame slammed what he called the donors' "arrogance" -- then arrested the rebel leader and made a deal with the Congolese president.
Businesspeople are seen as less likely to focus on geopolitics, so long as the commercial environment stays secure. "In the future, the engine has to be the private sector," says commerce minister Monique Nsanzabaganwa, who notes that since more than half the populace is under 18, "we need to create jobs to absorb all those young people." The government surely doesn't have the money to hire them all. As Francis Gatare, CEO of the Rwanda Investment and Export Promotion Agency, says, "If you don't have development through investment, you won't have economic growth."
So Kagame sends fact-finding missions to Asia. He pursues the Rwandan diaspora. He speaks at Google and meets American entrepreneurs. He recruits more friends. And it's beginning to look as if his personal strategy -- selling people on Rwanda's story and its promise, telling them that this is a place where they can make a difference as well as profits -- just might work.
Another bunch of crooks. That was what Clet Niyikiza thought in 1994 as he read about Rwanda's new regime. Half-Hutu and half-Tutsi, he had left in 1983, seeing no future for himself, no matter who was in power. Most of his family "thought I was crazy nuts," he recalls, but he immigrated with his wife and children to America, where he built a career as a distinguished drug researcher. (He helped create Aleve.) He became a Hoosiers fan. (His PhD is from Indiana.) He didn't go home. ("Especially after 1994 -- I lost too many people. It was too much pain.")
Then, in 2006, the Rwandan ambassador to the United States introduced him to Kagame. "He put on the table his belief in self-reliance: If you're not prepared to take it in your own hands and move forward, you don't deserve to make any progress," says Niyikiza, a VP of medicine development at GlaxoSmithKline. "I thought, This guy could really change the country."
The following year, Niyikiza visited Rwanda for the first time in nearly a quarter-century. At the end of the trip, Kagame, headed to the U.S., offered Niyikiza a ride home in the presidential jet. On board, Kagame handed Niyikiza a proposal for a presidential commission -- and asked him to join. "He wanted advocates for the country to the rest of the world so Rwanda could effectively bypass the traditional development model," Niyikiza says. "The idea was to do that through relationships."
Since its launch in September 2007, the Presidential Advisory Council has become a high-level, low-profile dispatch team and brain trust. All 16 members -- 10 are non-Rwandan -- are stars in their sectors, from life sciences to telecom to economic-development consulting. They meet twice yearly, once in Kigali and once in New York, for strategy sessions. One member observes wryly that "it's the consultants" -- Monitor Group cofounder Michael Porter, Aslan Global founder Kaia Miller, and OTF Group cofounder Michael Fairbanks -- "who do the most talking."
It isn't just talk; the council has delivered visible results. Tony Blair established a program that sends civil servants from Whitehall to work in Kagame's office. Arkansas investment banker Dale Dawson created a scholarship for Rwandans to study in the United States. McGill's Ubalijoro helped broker a multimillion-dollar deal with Canada's Ecosystem Restoration Associates and Germany's Ecolutions to reforest denuded land and develop alternative energy; the plan is to sell credits on the global carbon markets and split the profits with the Rwandan landowners. Christian Angermayer's Frankfurt-based financial-services company launched an East Africa private-equity fund that has invested in a Kigali bank and a Rwandan banking-IT company. "Rwanda is a place [where] we can make money and also make a huge difference," says Angermayer, the only council member who has significant investments in Rwanda. "The best thing we can do is not to give charity, but to treat it as a normal economy."
Like the chain that led from Cooper to Sinegal to Schultz, the council is a network of personal relationships -- the link in several cases being a shared Christian faith. Rwanda's conservative Anglican bishop John Rucyahana reached out to a supporter, banker Dawson, who brought in former Alltel CEO Scott Ford. Kagame himself recruited the council's most prominent evangelical, Rick Warren, who claims Jesus and Peter Drucker as major influences (in that order) and calls himself a "spiritual entrepreneur." The two had been introduced a few years earlier by presidential adviser Joe Ritchie.
Kagame's closeness to evangelicals, especially his support of Warren's campaign to turn Rwanda into a "purpose-driven country," has unnerved some observers. Back in 2005, Alan Wolfe, director of Boston College's Center for Religion and American Public Life, expressed some concern in
The Wall Street Journal about Warren's "missionary zeal" in Rwanda. But now Wolfe seems unworried. Evangelical Christians, he says, are "much more interested today than 10, 15, 20 years ago in Africa and in justice. From the African end, if you're desperate for help and attention, it doesn't matter where it comes from."
Kagame would agree. Pragmatic, even opportunistic, he told
Time in 2005 that he's not very religious but has "a good sense of what faith is about and the usefulness of it." What he wants are partners who let him map the mission. "We do appreciate support from the outside, but it should be support for what we intend to achieve ourselves," he writes in an essay in the book
In the River They Swim. "No one can assume that he or she knows better than we what is good for us."
There was no clearer sign of that than a startling investment Rwanda made last summer. The country plowed an eight-figure sum into a small U.S. biotech company. (Officials declined to name the company, citing its pre-IPO quiet period.) The money came from the nation's social-security funds, which led the company's CEO to fret that if the FDA doesn't approve the firm's therapies, he won't be losing the money of just another multimillionaire investor but of an entire country -- and one of the poorest at that. An adviser to Kagame -- who personally gave his approval and even increased the amount of the investment -- responded sharply: "You're going to tell this man about risk?"
This is typical. Rwandan officials often defend decisions not with arguments about merit, but with incredulity. You're going to question this president? The one who rebuilt a country and created one of Africa's few relatively corruption-free havens? It's a clever silencing tactic at that moment. But later, the memory of it only magnifies the enormous daring -- and risk -- of the venture that is Rwanda Inc.
One of Rwanda's fiercest advocates is a mustachioed Chicagoan with a crushing handshake. Joe Ritchie, who made his fortune building and then selling a company called Chicago Research & Trading and is now Cooper's partner in Fox River, cochairs the Presidential Advisory Council. Last summer, after the council suggested that Rwanda needed to streamline its bureaucracy and have just one go-to agency for development, President Kagame created the Rwanda Development Board and named Ritchie CEO.
Ritchie, 68, is a lifelong adventurer. He flew a chase plane for the late Steve Fossett, and before the September 11 attacks, he and his brother sunk millions into fighting the Taliban in Afghanistan, where they spent part of their childhood. (Their father was a civil engineer who taught in Kabul and was buried there.) He first heard about Rwanda from one of his daughters, who did volunteer work in the country.
So far, the biggest payoff of his advocacy may come from a partnership with the U.S. rail titan Burlington Northern -- Santa Fe. Rwanda's poor transport links boost the prices of both its imports and its (few) exports. After Ritchie spoke with BNSF chairman Matt Rose, the company agreed to advise on design and construction of a rail link between Kigali and Tanzania's Indian Ocean port of Dar es Salaam. Rwandan officials say the ability to use the company's name has opened doors with potential rail builders and operators.
Ritchie repeatedly emphasizes his desire to "stay low profile." So why take on such a significant role, and even move to Kigali? "Who wouldn't jump at the chance to play for the 1985 Bears?" he replies. "And if you tell me I can pick between being second-string left guard or quarterback -- well, yeah, I'm gonna take QB."
If only Rwanda's depth chart were half as strong as the '85 Bears'. Ritchie says that a major part of his job is identifying and training a generation of deal makers and strategists. "The quality of the leadership here is stunning," he says. "The government is long on dedication and commitment -- that's not learnable. I'm teaching how to wheel and deal. That is learnable. That is the missing ingredient. Don't change the soup. Just add the ingredient."
The model for the agency is Singapore's development board. In 2007, Kagame took a team to Singapore to study how the country turned itself from a regional trading post into a global business capital. But while there are parallels between the two nations -- both are run by strong, postcolonial governments whose democratic credentials are widely questioned -- Singapore has advantages that Rwanda does not, from its outstanding education system to its geography to its fastidious reputation. (It annoys President Kagame that foreigners often don't know that Rwanda, too, is tidy. At a speech in Boston last year, an American rose during the Q&A time and praised Kigali for being surprisingly safe and clean. Those in the audience recall that the president called the guy out. "What did you expect?" he said. "Did you expect us to be violent and dirty?")
Then there's the lingering taint of the genocide. "Rwanda's biggest challenge is reputational. It's associated with war. It's seen as so poor that people think of it as a place to do charity. The opportunities are there, but it hasn't been taken seriously as a place to do business," says economist Jean-Louis Warnholz of Oxford's Center for the Study of African Economies. Commerce minister Nsanzabaganwa agrees: "One of the development board's priority projects is to devise an image-building strategy so that the genocide image is replaced by something else." But this is tricky. Part of Rwanda's appeal is the compelling story it can (very carefully) tell and sell: Come invest, and be a part of our amazing renaissance.
In the dozens of conversations I had with investors and donors, the genocide and Rwanda's awe-inspiring recovery from it inevitably came to the fore -- and these supporters were unanimously thrilled to participate in the rebuilding of the country. The words of RealNetworks' Glaser, who has created internships at his company and given more than $6 million to build health centers in Rwanda, were typical: "If we can make this place a beacon of hope -- a place where just 15 years ago, an eighth of the country was murdered in the most brutal way possible -- then that hope should be possible anywhere."
Asked about 1994 and Rwanda's image, President Kagame responded, "We will not forget the genocide, but we will not be defined by it, either. Each year, we use the memory of the genocide to convene a national discussion, but then we use the discussion to talk about the future." Many Rwandans I spoke with expressed the wish that outsiders see the country through a lens other than that of 1994, but not one articulated just how they could or would make that happen.
Kigali," one aid worker explained to me, "is Africa that Americans can handle." There's little crime. There are plenty of small, shabby houses with rusty corrugated-metal roofs, but the neat streets, many fringed with careful landscaping, are remarkably free of honking or traffic jams, at least by the standards of a developing country. Plastic bags don't clog the drains -- the government banned them for environmental reasons -- nor do odors of street food compete with the mingled scents of frangipani and diesel, since hawkers were outlawed too. Several cafés offer free Wi-Fi. Downtown, there's even a new 24-hour supermarket.
Bugesera, by contrast, is the Africa that most Americans expect. About 40 minutes' drive south of Kigali, down a road paved two years ago, this dusty district has unreliable rains, scarce jobs, and enormous families. It was one of the areas hardest hit by the genocide -- nearly 10,000 people died in the Nyamata parish church alone. This is where you can find the sad-faced moms in African wax prints and American T-shirts holding wailing, malarial babies.
It's places like Bugesera where Rwanda most needs the help of nongovernmental organizations. The country will never be prosperous if the countryside remains poor, but it's not appealing for private investment. "We have opportunities for investors, but we are facing big problems here. You can't do anything when you don't have health security," says Berthilde Mukantwali, the top government official in Ngeruka, a slice of Bugesera on the Burundian border. She pauses and holds her head. "You have to excuse me. I have malaria."
Later this year, construction will begin on a health center -- the first for Ngeruka's 26,000 people. This is a pretty traditional NGO project: Foreigners provide where the government can't, especially in the building and equipping of medical facilities and schools. In Ngeruka, $500,000 in funding will come from singer Garth Brooks's Teammates for Kids charity.
But Rwanda still does things differently. Its oversight of not-for-profits is tighter than in many other developing countries. In a modern spin on
imihigo -- a traditional Rwandan concept in which two people or groups publicly pledge to work toward a stated task -- organizations must file annual action plans and reports, and they're continually reminded to align their plans with the government's. Failure to do so can mean expulsion. "The government has taken on a very forceful role -- coordinating without bludgeoning," Jessica Price, country director for U.S.-based Family Health International, says carefully.
Staci Leuschner, who heads local operations for the not-for-profit PSI, says the government "has been particularly encouraging of innovation," especially health services. Two years ago, for instance, PSI created new packaging for Coartem -- a drug cocktail from Novartis that is the most effective malaria treatment available -- with graphics that show even illiterate moms how to dose their infants and toddlers. The government quickly agreed to test it, not in one district or two, but everywhere. The packaging helped spike the drug's usage and cut the number of deaths from malaria. Novartis now plans a similar venture in Kenya.
Several NGOs are experimenting with rural job-creation programs. What's particularly interesting about Rwanda Community Works -- started in 2007 by Columbia University public-health professor Josh Ruxin -- is that its strategy is similar to Kagame's: It focuses on building coalitions of rich people to help the poor. David Bonderman, founding partner of private-equity giant TPG, provided Ruxin's organization with $750,000 in seed funding. Ruxin corralled Garth Brooks's Ngeruka donation as well as hundreds of thousands of dollars from the Schmidt Family Foundation -- Google CEO Eric Schmidt's personal philanthropy -- for another Bugesera health center.
"When people stop dying, they want to create wealth," Ruxin says. "We're going to demonstrate, in one district, that through a variety of business-driven approaches, they can achieve it." Ruxin's team, which includes a former National University of Rwanda business lecturer and an ex-ING project manager, has launched experiments in agribusiness and partnerships with basket-weaving and knitting cooperatives. (The co-op model is one of the government's pillars for rural development.) The goal is to build what would essentially be a Bugesera conglomerate, with all the profits reinvested in new businesses.
"When people stop dying, they want to create wealth," says josh ruxin. his ngo is building businesses -- but are they sustainable?
The first fully-to-market product from Ruxin's organization was a line of $85 silk-mohair knitted scarves for Whitney Port, star of the MTV reality show
The City. The project's startup funds and the connection to Port came from Megan Chernin, wife of News Corp. president Peter Chernin. Each knitter is paid about $5 per scarf, and the remaining profits -- about $45 -- are reinvested in other projects. "That we're able to produce something with extraordinary levels of profits here is a huge accomplishment," Ruxin says. "The question is, Can something be left behind that becomes organic, that grows on its own?"
Terrific question. The scarf project's chief virtue is that it provides income from previously inaccessible markets. But it risks creating new forms of dependency. Rwanda Community Works has a PR person in New York and a master salesman in Ruxin, who has generated so much press that both government officials and some in Kigali's NGO community voiced concerns to me that it's too much about him and not enough about Rwanda. The big issue, though, is that RCW isn't building a bridge that Rwandans can use for generations to come -- it
is the bridge. On their own, the knitters have no more access to TV starlets than they did before. And surely nobody believes that this business would have come to Bugesera's women if not for their tear-jerking story. But pity is not a renewable resource that anyone wants to cultivate.
One afternoon, I stood in chicken poop with Marta Mukakalisa, 30. We were in the chicken coop, which doubles as her kitchen -- a perverse reminder to the birds of their destiny -- and she was telling me about her four kids, plus an orphan she supports. She wants to make enough to pay their way through school; she never got past fourth grade. Her husband is off in the army, so she's basically on her own. She has had some help. The government gave her a cow, and RCW extended credit so she could buy higher-quality feed, which helped boost the cow's milk production from 6 liters a day to 12. But it's her ingenuity and entrepreneurialism that turned those inputs into much more lucrative outputs.
She calculated that if she saved some milk for the kids and sold the rest to the dairy collection center in town, she could net about 1,500 francs a day, about $2.75. "It wasn't fair," she says, "because the collection center pays 170 francs a liter but sells for 250." So she went to a nearby military camp and offered to sell them milk. She wasn't going to undersell the collection center -- the per-liter price would still be 250. But here's what she offered: Free delivery. Full liters (since the collection center notoriously skimps). And freshness. Since she has no refrigeration, her milk has to be delivered immediately, so it's fresher than the collection center's -- an advantage spun from an apparent disadvantage.
Today, Mukakalisa sells 60 liters a day. She employs two bicycle deliverymen. She shares the wealth with neighbors, paying them nearly 20% more per liter than the collection center. And she has lifted herself out of extreme poverty -- her annual income is roughly double the government's $900-per-capita goal.
"Tell the people in America that I am the best businesswoman. I expect to make a lot of money. Some people here, they're reluctant to take risks," she says, one hand planted on her hip and the other waving dismissively in the air. She looks at me. "I like to take risks." May Rwanda find millions more just like her.