In the last twenty years, Rwanda, a small East African country of 11 million people, has risen like an eagle from the ashes. GDP growth rates are averaging 7%, private sector investment is at 13.5% of GDP, and exports have doubled in value over the past five years.[i] Its history is marred by a genocide in which one million people died in a period of three months, a tragic event that shaped how the country is governed today. This post discusses how the alignment of the business and operating model of one institution within a bigger ecosystem contributes to these particular growth indicators. Since its re-birth in 1994, under leadership that was focused on sewing back the country’s torn social fabric, and creating tangible outcomes for its citizens, Rwanda boasts of soaring to the most efficiently governed country in Africa,[ii] and the third best place to do business.[iii]
Under a unanimous overarching economic development vision of becoming a middle-income country by 2020, the Rwanda Development Board (RDB) was formed in 2008 as a quasi-government institution responsible for selling Rwanda as an attractive and viable investment destination. This is a particularly difficult job for a post-conflict state with no mineral wealth. With a lot at stake, it was imperative that RDB embody a private sector model within its public eco-system. Modeled after similar institutions in Singapore and Costa Rica,[iv] the business model of RDB is to grow export-driven private sector investments as a way to accelerate economic development.
In order to align its operations to this vision, RDB has primarily focused on intangible investments in three key areas: 1) processes: standardizing business registration and aftercare procedures post merger of eight institutions, 2) human capital: recruiting and investing in the best talent, and 3) user experience: giving the “red-carpet” treatment to investors by adopting a private sector deal mentality.
The courtship begins
The investment process at RDB starts by leveraging the government’s political capital to actively pursue investors. It involves courting investors from before they arrive in country to after they leave, a rare experience with competing African peers. Depending on the size of the deal being pursued, RDB puts together a team covering the following functions: communication with the investor, travel logistics both to and within Rwanda, detailed agenda and meeting planning with key government and private sector decision makers and much more.
Sealing the deal
Following initial engagement with an investor, the account is assigned a manager who is responsible for following up. This process may involve gathering and sending additional data or connecting the investor with other individuals or service providers. In a private-public partnership, once the investor decides to move forward, a negotiation team covering legal and financial aspects of the deal takes over the account. In addition, senior management and other government institutions heavily support this deal team. If needed, the team is able to seek external professional counsel.
Once the deal closes, the account is handed over to an after-care manager who is responsible for helping the new partner execute smoothly. One of the services RDB provides is a “one-stop-center” with business registration, environmental impact assessment, legal, tax and banking services, all in the same office. This makes compliance for a new business seamless. Registration takes a maximum of 5 days, compared to an average of 27 days across sub-Saharan Africa.[v] The key account manager continues to track the investor’s progress, facilitating her interactions with other government institutions to move the investment from registration to implementation, and finally converting into measurable economic impact.
A taste of the fruits
The process for a purely private investment is similar to the one described above, with the exception of the negotiation step. To create alignment with its employees, RDB has an incentive bonus structure tied to institutional and individual metrics including: FDI and export growth, and response rates of account managers. For a country that was mostly known for its tragedy, the alignment of its broader business and operating model, as exemplified by this example, has been critical to changing its narrative and creating true economic value. Today, Rwanda has a “high-powered Western fan club consisting of, among others, Howard Schultz, Bill Gates, and Tony Blair.”[vi] It has become a center for scholarly inquisition within the region, with professors like Michael Porter comparing it to “running a business well” and writing about the country’s ability to “get things done,” by pursuing a private-sector driven economy as a means to self-sufficiency.[vii] That being said, even though the view atop the hills ascended so far is promising, the journey continues: there is still hundreds-more steep hills to climb.
[i] Rwanda Ministry of Finance and Economic Planning: http://www.minecofin.gov.rw/fileadmin/user_upload/Rwanda_Presentation_for_Investors_March_2015.pptx.
[ii] WEF Global Competitiveness Report 2014-2015
[iii] World Bank Doing Business report: http://www.doingbusiness.org
[iv] Rwanda Development Board website: http://www.rdb.rw/about-rdb/history.html
[v] Rwanda Doing Business Rankings: http://www.doingbusiness.org/data/exploreeconomies/rwanda/#starting-a-business
[vi]Harvard Business Review: https://hbr.org/2013/04/why-president-kagame-runs-rwanda/
[vii] Harvard Business Review: https://hbr.org/2013/04/why-president-kagame-runs-rwanda/