Rwanda: Achieving Food Security, Reducing Poverty, Moving up the Value Chain

June 16, 2016


Challenge

Rwanda has made remarkable progress since the civil war and genocide that started in October 1990 and ended in July 1994. GDP per capita increased from US$228 in 1995 to US$718 in 2014.  The poverty headcount ratio using the national poverty line fell from 78% in 1995 to 45% in 2010/11.

Rwanda’s GDP per capita (constant US$) increased by 5% per annum in the last decade, but given the rate of population increase of 2.7% this growth rate would need to be accelerated further to achieve sustained poverty reduction and in order to meet Rwanda’s ambitions to achieve lower middle-income status by the end of the decade. Currently, growth remains driven by the public sector financed by foreign aid (30-40% of the budget is financed by foreign aid).  Diversification of the economy and growth of the private sector is constrained by: (i) low energy access rates (at around 20% in 2014) and highest cost (still at around $0.22 per kwh in 2014) in the region; and (ii) high transportation costs compared to regional averages. Costs from the main ports of Mombasa and Dar es Salaam are estimated to be at least 70% higher than that in the rest of the EAC region and account for about 40% of the cost of imported goods and 50% of exported goods. Despite an adverse external environment, Rwanda has maintained steady growth at 6.9% in the first three quarters of 2015, almost the same as the average over the past five years and the country’s potential growth. Annual average inflation rate at 2.5% in 2015 was less than half of that of other East African Community (EAC) countries.  

Approach

With IDA funding, the Bank’s analytic work that helped inform the development of Rwanda’s medium term 2008-2013 Economic Development and Poverty Reduction Strategy (EDPRS), concluded clearly that increasing agricultural productivity and commercializing production would be critical to achieving Rwanda’s vision for structural transformation from subsistence agriculture to a middle income economy. The EDPRS 2 aims to achieve the following goals by 2018: (i) increasing GDP per capita to $1,000, (ii) reducing the poverty rate to below 30% and (iii) the reducing extreme poverty rate to below 9%. An underlying macroeconomic assumption is to accelerate annual GDP growth to 10% over the period 2013-2018.

The Bank accordingly embarked on a program of investment lending support first using a three phased Adaptable Program Loan, the Rural Sector Support Project (RSSP) that since 2001 has focused on intensifying production in the marshlands followed by the Land Husbandry, Water Harvesting and Hillside Irrigation (LWH) Project that started in 2010 and focuses on developing horticulture and food crop production on the hillsides.  These long term programs have enabled the Government to make significant progress on its agricultural intensification objectives through investments in infrastructure for irrigation and erosion control and the provision of quality inputs and capacity building to all the stakeholders in various agricultural value chains. These programs have also incorporated a number of innovations such as the farmer based extension model that has led to increased rice productivity and a comprehensive land husbandry package that has enabled effective erosion control and soil fertility restoration at the landscape level.

Finally, starting in 2008 an annual development policy operation, (the Poverty Reduction Support Financing) has underpinned critical policy reforms in the agriculture sector including: (i) improving planning and predictability of funding for the agricultural sector to allow for more effective spending on input distribution, irrigation, water and soil management; (ii) promoting the emergence of a private sector procurement and distribution system for agricultural inputs, especially fertilizer; and (iii) capacity building of private sector agro-dealers.


Synopsis

Over the last decade one million people in Rwanda have lifted themselves out of extreme poverty, capitalizing on a rapidly improving agriculture sector in which the IDA has been proud to make substantial investments. Although agriculture is the backbone of the Rwandan economy and accounts for 33% of GDP and occupies 79.5% of the labor force and generates more than 45.0% of the country’s export revenues,   its development has been constrained by population density, hilly terrain and soil erosion. Since 2001 Rwanda has worked closely with IDA making on-the-ground investments to achieve food security and increase agricultural productivity. The results are remarkable. Agricultural production has more than doubled and Rwanda attained food security in 2010 - producing enough on its own to not have to rely on imports. Agricultural productivity has increased by more than one-third in ten years, commercialization has expanded allowing rapid export growth, and farmers’ incomes in some cases have risen by 30%. This has helped cut the extreme poverty rate by 14% points. Between 2006 and 2011poverty was reduced by about 12 % owing largely to increased productivity (35%) and commercialization (10%) in the agriculture sector.

Results

Since the beginning of the First Rural Sector Support Project (RSSP1) in 2001:

  • 7,500 hectares of marshlands have been rehabilitated or developed;
  • Nearly 30,500 hectares of marshland and hillsides have been sustainably developed;
  • Average crop yields on the developed marshlands and hillsides have increased by over 100% relative to the baseline at the beginning of RSSP1. Maize yields have improved from 1.6 tons/ha to nearly 5 tons/ha; rice yields have improved from 3 tons/ha to 6.30 tons/ha; and potato yields have improved from 7 tons/ha to nearly 20 tons/ha;
  • Crop derived incomes have increased from a baseline of RWF 73,000 to over RWF 156,000 per farm household(for RSSP2 beneficiaries);
  • Over 73,000 with 340,292 beneficiaries from the RSSP3projects, of which over 43% are females as are 49% of the 57,000 households 264,920 beneficiaries from LWH.  Both projects have created 17,000 and 33,000 jobs, respectively. Preliminary results presented by the Government of Rwanda on the most recent household survey indicate that the reported poverty reduction of 11.8% between 2005/06 and 2010/11 is likely to be attributed in part to improved agriculture production, increased number of agro businesses and increased farm wage employment;
  • Between 2008 and 2011 agricultural exports (other than coffee and tea) increased on average by 46% annually; and
  • Since 2010, Rwanda has maintained a positive food balance sheet and only imports those products that are not produced locally or that are consumed by the higher end of the market.

Bank Contribution

As of June 2016, the IDA lending portfolio in Rwanda consists of 14 active projects with total commitments of US$956 million in the key sectors of agriculture, energy, transport, skills development, demobilization and reintegration and social protection sector. Current IDA investments in agriculture RSSP 3 (US$95.9 million) and LWH (US$69 million), and the Bank is managing three trust funds totaling US$ 72 million directly co-financing LWH.

In addition, Rwanda is benefiting from Global Agriculture and Food Security Program TF (US$50 million), USAID ($7.8 million) and CIDA ($5.1 million) Trust Funds., which are directly linked to active IDA operations in transport and agriculture. Rwanda also participates in five regional projects totaling some US$119 million in the areas of energy (Rusumo Hydroelectricity Project), Great lakes emergency Sexual and Gender based violence, Great Lakes Trade Facilitation, public health laboratories and Lake Victoria environment management

Annually, IDA disburses about US$100 million in sector budget support operation to support strengthening the Government's social protection system and improving the quality of service delivery at the decentralized level. The Bank also undertakes a number of analytic pieces and just-in-time policy notes in each year.

Partners

The Government has established a number of formal aid coordination mechanisms including sixteen Sector Working Groups (SWGs). Each mechanism is chaired by the Government and co-chaired by a Development Partner. The Bank currently co-chairs the energy, public financial management and urban SWGs.

SWGs provide a forum for dialogue, ownership and accountability of the development agenda by all stakeholders at the sector level. They build synergies in policy formulation, implementation and undertake biannual joint sector reviews. The agriculture SWG is particularly effective with the active and engaged participation from key development partners such as the Canadian International Development Agency (CIDA), the United States Agency for International Development (USAID), the Japanese International Cooperation Agency (JICA) and the World Food Program. The private sector, civil society and farmers’ organizations are also very engaged.

A particular strategy that the Bank has adopted in Rwanda is to leverage IDA funding to crowd in funding from other sources. In agriculture this has involved leveraging both public and private sector financing. In the public sector an initial IDA Credit of only US$ 34 million to the LWH Program has leveraged financing from GAFSP of US$ 50 million; from USAID of US$ 14 million and from  CIDA of CAD 8 million bringing donor contribution to the program to over US$ 106 million. The World Bank was also instrumental in putting into place a Common Framework of Engagement (CFE) for LWH financiers. The CFE facilitates engagement with potential new financiers for the LWH program.


Moving Forward

The Rwandan Government has implemented several ambitious programs designed to improve and diversify the country’s agriculture sector as a key strategy to fight poverty. In the short- to medium-term agriculture remains the best possibility of: continuing to reduce poverty; weathering the impact of the global economic crisis; maintaining macro-economic stability; reducing job unemployment; and increasing export earnings. As such, the Bank will continue to support the sector to address some of the key impediments to increased agricultural productivity including: a poor feeder roads network; lack of information on investment potential; prohibitive air freight costs; inadequately developed frameworks for quality certification; and a lack of post-harvest handling and storage facilities.

In March 2014, IDA committed a further $60.9 million to help the Rwanda Government to upgrade road conditions and intensify farmers’ agricultural productivity as part of the strategy to reduce poverty and boost shared prosperity throughout the country. Rwanda’s government, which has demonstrated strong country ownership and performance, plans to eliminate the 23% of the population currently living in extreme poverty by 2020.

Beneficiaries

  “The project has taught me better farming methods which increased my yields. I have sold part of the increased yields to. I am able to buy health insurance for my family and as well pay school fees for my children.” said Aphrodis Nsengiyumva a farmer from Nyanza.

“ In the past, I cultivated and harvested very little, I could not even save for the market. But after constructing terraces, I had a good harvest and a surplus for the market. I had an uncompleted house but now, I have been able to buy cement from the sales of my potato harvest and we are about to complete the house” Colette Nyiraneza - a farmer.

“The production of Irish potatoes has increased from 10.5 tons in 7 hectares to 42 tons in 13 hectares. Cooperative members attribute this boost in production to RSSPs support….When we look back at the traditional farming methods we used, we consider this as a great success” Zigama Francois, farmer and President COAVIDEP Cooperative.

“I used to harvest 10 Kilograms of maize on one and half hectare but now I harvest five tons. On my savings account in Sacco I have Rwf250,000 and I am planning to buy a maize milling machine” said Minani a farmer in Rwamagana District