Project Name: Rwanda’s Accession to the EAC
Donor: European Commission
Location: East Africa
Time Span: 2006 – 2007
Ahead of Rwanda’s accession to the East African Community (EAC), Imani assisted the Government of Rwanda (GoR) by conducting an economic impact study of the potential impact accession would have on the Rwandan economy. Imani’s technical assistance to the GoR also included providing a legal road map to assist the Government of Rwanda and the private sector in managing their entry into the EAC. Various aspects of integration were looked at, including trade in goods and services, investment and macroeconomic convergence.
About the project:
As was the trend amongst most Eastern and Southern African countries at the time, Rwanda was participating in several different regional integration schemes, and was a member state of COMESA, ECCAS and CEPGL concurrently. Furthermore, it was looking to become a member of SADC and the EAC with the primary goal being to broaden and deepen the country’s market access. Rwanda therefore commissioned Imani Development to produce a cost-benefit analysis of its various regional integration options. A key finding was that, as membership status to both these institutional bodies involved the implementation of customs union and common trade policy, joint membership was recognised as unfeasible. Furthermore, it was noted that the over-subscription to regional bodies could actually serve to impede the positives effects that were intended.
The study made a strong recommendation that Rwanda should actively pursue its application to become a full member of the EAC, as this would form the backbone of the country’s further development and integration into the global economy. Indeed, ascension to the EAC would be of particular importance to the realisation of economic development goals involving the reduction of transport and other business costs and the general improvement of economic competitiveness. These benefits would likely exceed the market access benefits derived from membership of the EAC Customs Union, as Rwanda did not produce significant quantities of what the rest of the EAC region imported. This process therefore required a strategic and measured approach.
Accordingly, Imani was commissioned by the GoR to provide the technical expertise needed to facilitate the process of EAC accession.
The primary objective of the project was to identify and plot an appropriate strategy to align the increased market access associated with EAC integration to Rwanda’s strategic and competitive strengths. Specifically, the study proposed that Rwanda could utilize enhanced regional integration to reposition itself as a ‘land-linked’ country – rather than ‘land-locked’ – due to its bordered access to several other countries in the region, which could in turn unlock its potential to evolve into a centralised regional distribution centre. This refocus made the process of regional integration a fundamentally necessary component of the country’s economic development strategy. The concept of a “land-linked” country is one that was coined by Imani, and is one that is utilized widely today within the development space.
Imani’s task was therefore to strategically align Rwanda’s needs to the potential outcomes of ascension to the EAC. Rwanda’s policy focus for EAC integration was narrowed down to 5 important avenues, namely to:
- Increase competitiveness
- Reduce transport costs
- Improve business environment
- Increase skills Sharing within in EAC
- Increase focus on services
Through this policy focus, the country’s economic development strategy became intrinsically linked to its wider strategy sets of regional integration, trade facilitation, and market development. The result is that the accession to the EAC was to facilitate higher-level economic transformation, rather than being limited to a narrow trade in goods and services. The strategy led Rwanda to enter the EAC, withdraw its SADC application, become more engaged in COMESA, and pursue a membership of limited capacity in EGAD.
Furthermore, Imani initiated the process of setting up a transport and logistics hub, which is currently underway, and which carries potential for large-scale investment. The project involves upgrading the 51.54km Base-Rukomo road along the Base-Gicumbi-Rukomo-Nyagatare axis, which received a US$74.47 loan approval from the African Development Bank in 2014. This development will offer the country a new strategic axis for international trade flows between its Western and Northern Provinces, DR Congo and the port of Mombasa, via Uganda. Opportunities created through the project continue to be relevant too, with Rwanda experiencing steadily increasing inflows of FDI since 2010, peaking at US$160m in 2010, and US$174.9 approved for development projects in the 2014 financial year. The country has achieved sustained GDP growth in excess of 6% over the past 5 years, comfortably exceeding the Sub-Saharan Africa average, and it reduced its poverty headcount from 56.7% of the population in 2006 to 44.9% of the population in 2011.
In its provided feedback on the project, the EAC was notably positive, stating that Imani’s work combined latest academic thinking with practical needs.
The project presented many new challenges and curve-balls that provided Imani the space to rethink some of the fundamentals of how the company approaches the process of Regional Integration, and its role in the greater economic and development agenda.
Some of the lessons learnt through its delivery include the benefits of building sustainable relationships and working closely with its counterparts. Indeed, two of Imani’s counterparts on this project have since become experts themselves. It also highlighted the critical importance of building the relative capacities needed for the absorption of advice. As came to the fore, there is no point in providing advice, if the client has insufficient capacity for the absorption thereof.