A Privatization Revolution-In a Most Unlikely Place

The following article is a forthcoming installment of Mackinac Center President Lawrence Reed's column in Ideas on Liberty, the monthly journal of the Foundation for Economic Education in Irvington, New York, and will appear in the June 2002 issue.

When Mount Nyiragongo suddenly gushed red hot lava down its southern slope and destroyed the town of Goma in the Congo last January, the tiny neighboring country of Rwanda made page one headlines around the world.  Hundreds of thousands of Congolese poured into Rwanda seeking refuge from the eruption.  Authorities there faced an impossible task of finding food and shelter for so many displaced people.

It was the first time since 1994 that Rwanda was on the front pages in America, and most of the stories reminded readers of the awful circumstances of the previous occasion.  In 1994, nearly a million of the country's 8 million citizens were slaughtered in ethnic violence between the Tutsi and Hutu tribes.  Perhaps in reading the news of this most recent tragedy, many Americans wondered if anything good ever happens in this poor and benighted place.

I was in Rwanda this past January to observe in the wild some of the only 670 mountain gorillas left in the world.  They live on a string of lush, rain forested-volcanoes along the border with Uganda and Congo.  Mount Nyiragongo, adjacent to the volcano I climbed to see the gorillas, blew up just three days after I left.  But the purpose of this column is not to bring more bad news from Rwanda; the purpose is to share some incredibly good news, news that deserves far more attention than the few paragraphs it has so far garnered in the Western press.

Hints of this good news came my way weeks before even arriving in Rwanda.  Making reservations for my gorilla safari via e-mail, I learned that all gorilla safaris are conducted by private, native-owned and locally-run companies.  (Part of the fee goes to the government for distribution in salaries to national park employees and for programs that protect gorilla habitat, which are substantially supplemented by the efforts of private, non-profits that get support from around the world.)  Two Rwandan entrepreneurs started the firm I signed up with, Primate Safaris, three years ago.  With six employees, they provide everything a gorilla safari enthusiast in a Third World country could hope for—a competent guide with a four-wheel drive, good meals and comfortable though spartan accommodations.  The lodge where I stayed at the base of one of the volcanoes is owned by three Rwandan women now, but at the time they bought it two years ago it was government property.

One of the first road signs a visitor sees upon arriving at the airport outside the capital of Kigali reads, "Privatization: A Loss? No Way."  Another one a couple miles away in the downtown area declares that privatization fights laziness, poverty, smuggling, and unemployment.  This is the good news to which I've referred: Rwanda, in the heart of Africa, is engaged in the continent's most ambitious privatization campaign.  It may be the most ambitious and systematic of any country anywhere.  After experiencing the kind of stifling, socialist rule that consigned virtually all of Africa to grinding deprivation for ages, this is a country that is now embracing the private sector with deliberate policy and enormous enthusiasm.

A photojournalist with dual American and Canadian citizenship, David Pluth, has spent a great deal of time in Rwanda in recent years.  As he sees it, the country had no other option, nowhere to go but in the direction of free enterprise.  What Rwanda has now embarked upon is, in his words, "a great experiment" and one that so far seems to be gathering momentum every day.

Robert Bayigamba runs the Privatization Secretariat, the national agency of the Rwanda government that is supervising an ongoing sell-off of state companies and assets.  His 24 employees draw up requests for proposals, solicit bids, monitor contracts, and slice through red tape to facilitate foreign investment in the country.  During a two-hour interview with Bayigamba in Kigali, I learned that the privatization campaign has the full support of Rwanda's extremely bright, 44-year-old, tennis-playing President, Paul Kagame, who holds a degree in Professional Management and Business Studies from the Open University of London, England.  Under Kagame's direction, laws that define and protect private property and the sanctity of contracts have been crafted, replacing a ramshackle legal system that once put political connections ahead of justice and order.

Six times a year, Bayigamba's office produces a 16-page glossy magazine called Rwanda Privatization.  In a May/June 2001 editorial about the impending sale of one of the few profitable government ventures, the Karuruma tin-smelting factory, RP 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 too embarrassing to hide or ignore.  With a few exceptions like Karurumu, state enterprises were slothful, backward, money-losing albatrosses.  For the country to survive, the government recognized it had to revive private enterprise and get out of the way. 

Bernadette Muhimakazi, executive secretary of the Association of Rwandan Businesswomen, says that privatization is seen as "liberating the State from the execution of tasks that are not its job, reducing the waste of resources that constitutes a heavy burden.  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 is herself a personification of the new appreciation of 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 has completely renovated 14 of the defunct firm's decrepit and environmentally hazardous gasoline stations. 

Tea is a top Rwandan export and it too is going private.  Nine tea factories exist in Rwanda—eight owned by the government and one, Sorwathé, in private hands.  With only 10 percent of the national 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 commenced a program that will soon culminate in the sale of all eight of its tea factories and most, if not eventually all, of its tea plantations.

Since the privatization drive started in 1996, other assets sold by the Rwandan government include its hotels, a fruit-juice factory, a printing firm, and companies that make insecticides, tobacco products, sugar, dairy products, processed fish, and coffee.  Among many others slated for the auction block over the next couple of years are chicken hatcheries, paper mills, rice products, and even 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 something else it has never had before—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.  But the lights are coming on at Africa's very center, in a place called Rwanda.  It's an exciting development that commands our attention and in time, may also prove once and for all that free markets are applicable anywhere.