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Rwanda: Wealth Inequality, an impediment to sustainable human development

Written by Aimé Sindayigaya and edited by Jules Niyibizi

Rwanda is a developing country situated at the heart of Africa in the Great Lakes region. It is bordered by four countries; Burundi, the Democratic Republic of Congo (DRC), Tanzania and Uganda. It is a small landlocked country with an area covering 26,340 Km2 with no significant natural resources and has a very fast growing population.

Rwanda is today recognised as a model of development. However, the economic growth, which led to the subject development and that Rwanda has been praised for, has not been able to tackle the rising wealth inequality that materialised in the country in late 1980s and which has been continuously increasing in the country throughout the periods that followed the genocide that took place in the country in 1994.

Inevitable shortcomings of wealth inequality

The index used to measure the rise in inequality is referred to as the Gini coefficient. This index measures the extent to which the distribution of income within an economy deviates from a perfectly equal distribution. A Gini index of or close to 0 represents perfect equality while an index of or close to 1 implies perfect inequality.

Rwanda’s Gini coefficient has more than doubled in the last 30 years since the 1980s. The Gini coefficient that was 0.27 in 1985 was estimated at 0.531 in 2011 (Source: UN Human Development index 2011). Such an extreme increase in inequality could be a challenge to Rwanda towards achieving sustainable economic and human development. For example, according to the 2011 UN report on human development, if the human development index value achieved by Rwanda in 2011 was adjusted to take into account the inequality level of 0.53, the real human development value of Rwanda in 2011 would be reduced to almost the same level as it was back in 1980.

The rising inequality in Rwanda undermines the remarkable human development achieved a great deal and it is also an obstacle to Rwanda’s economic growth. At the current increasing inequality level of 0.531, the purchasing power in Rwanda across the board is certainly low. Because of this, Rwanda can not attract large-scale domestic and foreign investments which were needed to help the country achieve the desired economic growth to eradicate poverty or to accomplish the Vision 2020, Rwanda’s master plan to transform the country from a low to a medium human development country. The high level of income inequality in Rwanda is among other reasons the country is more likely to attract only small-scale domestic and foreign investments that target a small number of consumers with substantial purchasing power in the country. As witnessed in most countries, sustainable economic growth has to be underpinned by a growing middle class. But, If wealth remains concentrated within a tiny percentage of the Rwandan populace, the country will not be able to develop a middle class and attract large-scale investments that could create jobs, improve infrastructure and allow more capital to flow in the country. Furthermore, this will not rapidly meet the required economic growth to make a positive remarkable change in the human development of a significant number of impoverished Rwandans.

Economic and human development in Rwanda could be at risk if the wealth inequality is not tackled directly. Hence, the social cohesion that Rwanda may have been able to bring about in the country subsequent to the genocide of 1994, could be at stake. Social inequality is known to be a source of political and social chaos in countries where such inequalities prevail. For example, the protests that led to the Arab Spring were due to high levels of social inequality[1]. Excessive and persistent inequality could trigger a destruction of the social cohesion in Rwanda if policy makers in Rwanda do not pay attention to it, particularly that the social inequality that materialised in Rwanda as a result of the economic crisis that happened in the country in late 1980s helped intensify the antagonism among people, which potentially contributed to some degree to the killings carried out during the genocide of 1994 in Rwanda[2]. Policy makers in Rwanda should not at any point take the issue of the rising inequality lightly.

Possible causes of income inequality

There are many reasons attributed to the rising income inequality in Rwanda but in my view, unequal distribution of land among Rwandans is one of them. In the 1980s, Rwanda was considered an egalitarian country[3] because the arable land was very well distributed among Rwandans leading to a considerable equal distribution of income, which helped achieve economic growth in the country. Today, the average arable land available per household has reduced due to the significant population growth since the 1980s. Nonetheless, land remains fundamental for income generation because a large number of people still depend on agriculture particularly the majority that still live in the rural areas. They earn their income by either selling the harvest from their cultivated land or by working as labourers on the land. Thus, if the land is not roughly equally distributed, inequality in income will rise in the country with potentially adverse impacts to the economic progress, human development and the social cohesion in Rwanda.

A study analysing the potential of liquid biofuel production in Rwanda published by InternationaleZusammenarbeit (GIZ) in 2011 confirms that there is a high and increasing unequal distribution of land in Rwanda. The study reports that the Gini coefficient in terms of land per capita in Rwanda increased to 0.54 in 2000 from 0.43 in 1990. The study also states that in 2001, 11.5% of the Rwandan population had no land and in 2006 more than a quarter of agricultural households cultivated less than 0.2 ha. The authors of the study point out that there is no data illustrating the status of large-scale land distribution in Rwanda. However, add that “it is common knowledge among experts on Rwandan agriculture that land holdings of hundreds or even thousands of hectares exist. Many of these are held by government and military representatives, other members of the urban elite, and foreign investors”. Having recounted that, the study makes it clear that the government has put a ceiling on land ownership to no more than 25 ha but no ceiling has been put on leased land which is usually leased to investors and associations.

Inequality in land distribution in Rwanda could be attributed to the fact that not every body has equal land rights in the country today. A study of land right inequalities in Rwanda carried out and published in 2011 by the University of Gothenburg found out that households headed by women or young individuals and households that have been displaced due to conflict or those that have resettled in the Imidugudu village settlements have significantly weaker land rights than their respective counterparts in other parts of Rwanda. According to the same study, the land rights of those people are unfavourably affected because of a number of reasons including; limited awareness of the land policies and laws in Rwanda, tendency to apply customary land right instead of statutory written property laws which disadvantage women due to cultural beliefs that land tenure is prerogative to men, lack of information, lack of status in society, lack of resources to defend land claims, forced relocations, lack of compensation to people whose land was confiscated for the purpose of building Imidugudu sites, allocating too little land to each Imidugudu household that are located too far away from the farmers’ homes.

It is possible and not surprising that those stakeholders with more influence and resources could exploit the situation of inequality in land rights in Rwanda and acquire lands from the vulnerable and the poor. Such ambiguous but yet lawful land transfer from the majority that are poor towards the few that are rich, could work to the detriment of the country’s economic and human development by expanding income inequalities within the country.

Inequality in income in Rwanda does not come from unequal land distribution alone; it also comes from other sources. For instance, It is worth asking ourselves whether or not the mechanisms put in place in Rwanda to market the agricultural production allow landowners in Rwanda to earn enough revenue to cover their overheads, meet their basic daily living requirements and increase their purchasing power.

Inequality in Rwanda could also increase at a fast pace considering that the country is undergoing major economic transformation, moving its economy from being an agrarian one to a knowledge-based economy. Those without education to seek employment or without the capital to start up a service based enterprises that require intellectual knowledge to some extent may be left behind and they are the majority of the population of Rwanda. Have the policy makers in Rwanda anticipated the social inequality that may rise as Rwanda is pursuing its vision to transform its economy from an agrarian economy to a knowledge-based economy? Asian countries such as China, India and Indonesia have embraced the opportunities brought by advancement in technology and globalisation and achieved remarkable economic transformation. Then again, wealth inequality rose enormously and faster in those countries that the countries’ policy makers have been urged to work out how to share the benefits of this economic growth more widely[4]. Policy makers in Rwanda should avoid the same fate happening.

Probable Solutions

The rising inequality in Rwanda requires prompt and innovative solutions. This is because wealth inequality in Rwanda is part of an exhaustive list of existing issues that the country already faces. Consequently, solving the rising inequality in a country such as Rwanda requires ingenious policies loyal to the ordinary people at the bottom level of the social and political hierarchy, living in the rural areas of the country.

The most notable egalitarian countries in the world such as the Nordic countries have achieved such feat thanks to their small populations with a large proportion of them in employment and contributing towards income tax which is redistributed generously among the few people on low income by means of public transfer payments such as welfare and social security. The Baltic region that has some countries on the top of the list of egalitarian countries in the world such as Slovenia, Slovakia, Hungary, Czech Republic, Estonia, Latvia and Poland also redistribute income through public income transfers. Rwanda can not redistribute income in the same way as those countries because it does not enjoy the same advantages that the Nordic and Baltic countries have. Rwanda is densely populated with a high level of unemployment and is unable to raise public funds through tax collection alone hence receives aids and grants from its partner countries.

What Rwanda ought to do is to ensure that inequality is gradually tackled throughout the process of transforming its agrarian economy to a knowledge-based economy with a particular attention given to its inhabitants that live in the rural areas since they constitute the largest proportion of the population.

This can be achieved for example by Rwanda learning from the Nordic and Baltic countries the principles of wealth redistribution and initiate policies that redistribute equally not necessarily income but primarily the opportunities arising from the economic transformation that Rwanda has decided to pursue. This implies that Rwanda has to ensure that those living in the rural areas are both formally and informally educated and equipped with practical skills that would enable them to take advantage of the opportunities brought by the economic transformation their country is going through. Promoting innovation and investing in people’s talent should also be given consideration. This should be combined with the government of Rwanda continuously ensuring that land is equally distributed among those living in the rural areas, particularly the most vulnerable ones. To ensure that they are aware of their economic rights and protected against actors with more resources that could exploit their economic weakness. That the revenue generated from agricultural products can allow landowners to cover their production overheads and daily living requirements and increase their purchasing power.

Insightful Quotient is a website that encourages debates on how to achieve sustainable development in developing countries using an intercultural cooperation. Therefore, we welcome your insightful arguments that provide scrutiny and ideas that can elaborate further the analysis and suggestions detailed in this article.
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[1] http://www.thoughtleader.co.za/leeroychetty/2012/08/22/inequality-a-direct-link-to-political-instability/
[2] http://www.wider.unu.edu/publications/working-papers/previous/en_GB/rfa-24/_files/82530848357488691/default/RFA24.pdf , page 2
[3] http://www.grandslacs.net/doc/0912.pdf , page 22
[4] http://www.ft.com/cms/s/0/fba71e2c-9607-11e1-9d9d-00144feab49a.html#axzz24rRn1ZZw

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