Rwanda's Economic Expansion May Propel Kagame to Second Presidential Term

The killings of a Rwandan opposition leader and an investigative journalist aren’t likely to keep President Paul Kagame from winning a second term next week nor to slow the pace of investment in the East African nation.

While human-rights groups criticize the 52-year-old leader for restricting political freedom, he has also been praised for resurrecting Rwanda’s economy. Kagame has pledged to continue policies that contributed to average annual growth of 8.3 percent in the nine years through 2008. He has also promised to maintain peace in a country torn apart in 1994 by genocide that killed 800,000.

“We will not abandon our investment interest in Rwanda because of violent incidents,” said Robert Fogler, a founder of Kigali-based Thousand Hills Venture Fund, which he says has spent $1 million so far. The stakes are in technology, cotton and cement projects, according to the fund’s website.

“We have seen that investors who dash in and out of communities based on temporary troubles or short-term uncertainty can cause great harm,” Fogler said in an Aug. 3 interview from Denver.

The Aug. 9 vote comes after Andre Rwisereka, deputy leader of the opposition Democratic Green Party, was found dead July 14, and Jean-Leonard Rugambage, editor of the banned Umuvugizi newspaper, was shot and killed June 24. Rugambage was investigating allegations the government was behind the June 19 shooting of Faustin Kayumba Nyamwasa in South Africa. The former Rwandan army chief of staff survived.

Ambassador Recalled

The government denied any involvement in the incidents. Yesterday, South Africa recalled its ambassador to Rwanda amid an investigation into the shooting of Nyamwasa, the South African Press Association reported.

Kagame led rebel forces that ended the genocide of ethnic Tutsis and moderate Hutus in which 10 percent of Rwanda’s population died. He came to power in 2000 after President Pasteur Bizimungu was deposed and then won a seven-year term in September 2003 after Rwanda’s first multiparty elections.

He now faces three challengers: Jean Damascene Ntawukuriryayo, deputy speaker of parliament, Alvera Mukabaramba of the opposition Party of Progress and Concord, and the Liberal Party’s Prosper Higiro. About 5.2 million of Rwanda’s 9.7 million people are eligible to vote. Results are expected starting Aug. 10, according to the electoral commission.

‘Weak Opposition’

It’s “almost certain” Kagame will win “because of what he has achieved,” said Frederick Golooba, political analyst at Makerere University in neighboring Uganda. Rwandan opposition parties are also “too weak to oust an incumbent,” he said in an interview.

Foreign direct investment increased to $541.2 million in 2009 from $32 million in 2003, according to the Kigali-based Rwanda Development Board. Investors include Starbucks Corp. in Seattle, the world’s largest coffee-shop chain, and Issaquah, Washington-based Costco Wholesale Corp., which have become the biggest buyers of Rwanda’s coffee, the backbone of its economy.

“The atmosphere of the government is about trade and investment, not about aid,” Peter Torrebiarte, director of coffee sustainability at Starbucks, said in a telephone interview. “That’s very attractive because we believe in that model.”

David Sherman, a spokesman for Costco, said no one was available to comment because the company’s international managers are involved in a weeklong meeting.

Coffee Exports

Rwanda will produce 27,000 metric tons of coffee this year, up 13 percent from 2009, estimates the Rwanda Coffee Development Authority. The country exports 98 percent of its crop. The nation also produces Africa’s second most-expensive tea after Kenya, said Mombasa-based Africa Tea Brokers Ltd. in an e-mail. Agriculture accounts for 33 percent of Rwanda’s $10 billion economy, according to the latest African Economic Outlook report.

Kagame’s ruling Rwandan Patriotic Front says he should remain in power to extend the economic expansion. Growth is forecast to accelerate to 7 percent this year, Finance Minister John Rwangombwa said June 10, after slowing to 6 percent last year because of the global crisis. Rwanda relies on aid from foreign donors to finance about half its budget, according to the Foreign Ministry.

While the economy has prospered, opposition parties complain that Kagame’s party dominates the electoral commission and that they have been blocked from registering presidential candidates. Incidents of harassment and intimidation have increased ahead of the vote, Human Rights Watch said on its website.

‘Diverging Stories’

The controversy may weigh on investors after the election, said Yvonne Mhango, head of Africa research at Johannesburg- based Standard Bank Group Ltd. Rwanda now has “two diverging stories” -- the growing economy and the increasingly oppressive political environment, she said in an Aug. 4 telephone interview.

While the oppression will likely “ease or subside” after the election season ends, “I think private investors are going to be a lot more wary,” she added.

Their caution may be tempered by policies that have increased access to credit and simplified rules for business start-ups, which contributed to Rwanda’s selection as the “top reformer” in the World Bank’s 2010 Doing Business report.

“There are so many people in the donor community and the West that have invested themselves so strongly in Kagame,” Laura Morrison, an Africa analyst at Control Risks, a London political-risk management company, said in a telephone interview. “They would rather try and bring him back on the straight and narrow by talking to him than by criticizing him in public.”

To contact the reporters on this story: David Malingha Doya in Kigali via Johannesburg at pmrichardson@bloomberg.net; Michael Kavanagh in Kinshasa on mkavanagh9@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.