Rwanda: A Privatization Revolution - In a Most Unlikely Place
By Lawrence W. Reed
The purpose of this column is not to bring more bad news from Rwanda; but to share some incredibly good news. One of the first signs a visitor sees upon arriving at the airport outside the capital of Kigali reads, "Privatization: A Loss? No Way." Another one declares that privatization fights laziness, poverty, smuggling, and unemployment. This is the good news: Rwanda is engaged in Africa’s most ambitious privatization campaign. It may be the most ambitious and systematic of any country anywhere.
Rwanda's President, Paul Kagame holds a degree in Professional Management and Business Studies. Under Kagame's direction, laws that define and protect private property and contracts have replaced a ramshackle legal system that once put political connections ahead of justice and order. Robert Bayigamba runs the Privatization Secretariat, which produces a magazine called Rwanda Privatization. A recent editorial about the sale of one of the few profitable government ventures asked, "Why should you sell a viable company that makes a profit?" Answer: "This privatization only confirms the strong determination of the Government to pull out of all its industrial and commercial activities. Moreover, in transferring these companies to the private sector, the Government wants to consolidate their future."
By the late 1990s, the Rwandan socialist experiment had become a failure. With few exceptions, state enterprises were backward, money-losing albatrosses. For the country to survive, the government recognized it had to revive private enterprise. Bernadette Muhimakazi of the Association of Rwandan Businesswomen, believes that privatization liberates "the State from … tasks that are not its job, reducing the waste of resources ... A private investor gives his all for his business, so he will do a better job and the quality of the work will improve." Muhimakazi personifies enterprise in Rwanda. Until recently, women in business was a professional taboo; now, it's widely encouraged.
In 1999, the bankrupt state oil company, Petrorwanda, was liquidated. Shell Oil bought a portion of its assets and completely renovated 14 decrepit and environmentally hazardous gasoline stations. Ten tea factories exist in Rwanda - nine owned by the government and one, Sorwathé, in private hands. With only 10 percent of the tea plantation acreage, Sorwathé produced 17 percent of the nation's black tea in 1999 and boasted a yield that was more than double the national average per acre. So last year, the government started to sell its tea factories and most of its tea plantations.
Since privatization started in 1996, other assets sold by the government include hotels, a fruit-juice factory, a printing firm, and companies that make insecticides, tobacco products, sugar, dairy products, processed fish, and coffee. Others slated for auction include chicken hatcheries, paper mills, rice products, the national telecommunications company, and all water distribution and electricity generation. Bayigamba says the country will remain on this path until it creates a genuine free market economy complete with a stock market.
Africa earned the moniker, "Dark Continent," because of its reputation for tyranny, isolation, and deprivation. To outside observers, Africans seemed incapable of or uninterested in the improvement of their situation through enterprise and private property. In Rwanda, an exciting development commands our attention and in time, may prove once and for all that free markets are applicable anywhere.
Lawrence Reed is President of the Mackinac Center for Public Policy in Midland, Michigan. This is an edited version of an essay that appears on the site of International Policy Network (IPN). It first appeared as Mr. Reed's monthly column for June 2002 in Ideas on Liberty, published by the Foundation for Economic Education, www.fee.org.
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