Rwandas ruling party-owned enterprises: do they enhance or impede development?

Abstract

In the last 18 years, large enterprises have emerged in post-conflict Rwanda, which are fully or partially owned and controlled by the ruling party – Rwanda Patriotic Front (RPF) – in association with state-owned enterprises, the military and the RPF-appointed managers (i.e. the new business elite). These enterprises (i.e. ‘party-statals’) operate in key sectors of the economy, thus constituting the RPF’s business empire. The Government of Rwanda (GoR) initially created them in order to spearhead much-needed economic development. Over the years, however, it has expanded them in number and in size, instead of cultivating its hapless private sector. By virtue of their incestuous relationship with the Ministry of Finance and Economic Planning, the Ministry of Defence and certain state-owned banks, the party-statals have become increasingly reliant on the state’s scarce fiscal and monetary resources – the latter made possible with budgetary support from development partners. The expansion of these capital and skill-intensive party-statals, with their guarantees of massive asymmetry in market access and profits through state backing, has begun to impede the growth of a more inclusive, broadbased and labour-intensive private sector. Based on newly available but necessarily limited data, this paper provides a framework with which to assess the actual and potential developmental impact of party-statals (individually and combined) on various stakeholders, including the Government of Rwanda, development partners, owners and operators, domestic and international investors, the Rwandan workforce and consumers. The paper further argues that the international donor community should insist on transparency and full disclosure of the partystatals’ financial statements, that it should monitor their fiscal activity with the state and that it should assess their impact on stakeholders and private sector development. Finally, the paper proposes exit strategies aimed at improving competitive dynamics within the domestic business environment, where competition is desirable and feasible, thereby benefiting Rwandans as investors, workers and consumers.

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