The Rwandan government plans to support at least 300 starts- up Small Medium Enterprises (SMEs) this year across the country to implement their business plans that will generate 200,000 jobs, to cut back on rising unemployment among the youth.
Rwanda’s private sector which currently still weak and under-developed is in capable of generating enough jobs to absorb the the country’s increasing number of graduates from institutions of higher learning.
Currently, approximately 140,000 new jobs are created annually though government is now targeting to increase this to 200,000.
Yet enrolment in higher learning institutions continues to grow with the number of students in public Higher Learning Institutions (HLIs) increasing from 20,967 in 2008 to 31,565 in 2010 and the number of students in private HLIs increasing from 26,441 in 2008 to 31,171 in 2010.
As a result, government is spending approximately Rwf360 million ($599,001.7) on a program-–‘Hanga Umulimo’ or ‘Start Your Own Business’ that will see 10 SMEs selected in each district of the 30 districts countrywide based on their business plans that will be facilitated to access funding and other business support services.
The project which is in still in its pilot phase was officially launched last year at district level attracted 16000 applications from SMEs countrywide.
“This (Hanga Umulimo) will be the real engine of creating viable SMEs in Rwanda that will spearhead economic development through job creation. The program will help to build the capacity of these SMEs to be able to attract financing,” said Francois Kanimba, the Minister of Trade and Industry.
However , labour experts say while Rwanda has already embarked on the development of non-agricultural sectors of the economy through expansion of small –scale business and activities operating in an informal or semi-informal basis, it has not be large enough to make non-agricultural entrepreneurship and wage employment a major source of new employment and income opportunities.
According to the World Bank, the Rwandan economy is still dominated by low productivity subsistence agriculture which contributes over 36 percent of GDP, 80 percent of employment and 45 percent of exports.
But, Mr Kanimba said that the government is working with the International Finance Corporation (IFC), the World Bank Group’s private sector arm and consultants to equip SMEs with business skills and improve their business plans.
“We are involving banks in the process of selection of these SMEs so that they can provide financing for the bankable projects. The program in the long term will be a permanent vehicle of job creation because we will increase the support to about 600 SMEs.” he said.
The Development Bank of Rwanda’s Business Development Fund (BDF) is expected to provide 75 per cent guarantee to the selected SMEs to access finance specifically those without collateral.
But according to the Institute of Policy Analysis and Research (IPAR), a local think tank, while government has implemented a number job creation initiatives and income generating initiatives for youths and SMEs, its approach to job creation is fragmented and insufficiently coordinated.
“This reduces the impact of such isolated initiatives in generating adequate jobs to match the growing number of new entrants on Rwanda’s labour market.
There is need for a more coordinated approach to job creation if new entrants to the labour market over the next eight years are to be absorbed into productive work,” IPAR statement issued recently ahead of the leadership retreat.
IPAR research shows that while self-employed workers in non-farm jobs, sole traders and hawkers, generally referred to as Household Enterprises (HEs) currently employing over 700,000 people in the country are a key job creating vehicle with the potential of reducing poverty, the sector has not been given appropriate support by government to unlock their potential to support economic growth.
According to the International Labour Office (ILO), Rwanda will have to increase productive employment -employment that provides income above the poverty line, by almost 2.5million over the next decade, to reduce the large backlog of the working poor, in particular in agriculture and achieve its development targets by the year 2020.
The country must create160, 000 new jobs every year particularly in non-farm job sectors to effectively help lift over 5 million households out of poverty.
Apart from reducing the large backlog of working poor, in particular in agriculture, the Rwandan labour market will have to absorb an annual increment of some 120-125 thousand new labour market entrants per year.