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Rwanda’s dream of beating unemployment is yet to come true

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At the end of the Covid-19 pandemic, there was a real risk of more Rwandans falling into poverty as thousands faced unemployment, contended with increasing consumer prices, and businesses recorded revenue losses.

The government rolled out an extensive social safety net that led to a 1.4 percentage point reduction in the poverty headcount ratio in 2020. However, the poverty headcount is now likely to rise by 5.1 percentage points or 550,000 people in 2021, with more than 80 percent of the new poor in rural areas, according to data released by the World Bank this week.

The pandemic hit Rwanda’s key strategic sector — service, particularly retail trade, leisure and hospitality and conference tourism — which collectively account for most jobs in the country.

And despite the government adopting the Economic Recovery Plan estimated at $900 million over the two fiscal years 2019/20 and 2020/21, economic recovery remains slow in some sectors. 

Inefficiencies in funds management 

For instance, Rwanda vied to create 1.5 million jobs by 2024, according to the National Transformation Strategy known as NST1. This goal has faced many challenges including inconveniences in job creation plans. 

In 2020, the Auditor General revealed the rot that is taking toll on the National Employment Development Fund which was expected to help the country create jobs.

The auditor in the report said the country’s plan of creating 214,000 jobs annually by 2024 is threatened by inefficiencies, deviation from mandate and poor management of funds.

The National Employment Programme (NEP) and Business Development Fund (BDF) – institutions at the heart of this ambition – are said to be suffering from inefficiencies. A 2019 audit report says the inefficiencies undermine the ongoing efforts to create jobs and eradicate poverty.

The audit shows that since its establishment in 2011, BDF invested more than a half of its credit guarantee allocations towards supporting 217 projects owned by large enterprises.

The projects absorbed Rwf 25.1 billion, representing 51 per cent of its total credit guarantees package of Rwf49.2 billion as at August 2019. The fund also undertook five guarantees worth Rwf 261.1 million to three foreign-owned companies.

The audit showed that one of them guaranteed at Rwf108.3 million defaulted, exposing the fund to loss of funds meant to facilitate access to finance nationals.

The fund also incurred losses from compensating ineligible claims to a tune of Rwf 256.4 million, provision of credit guarantees to restructured defaulting loans estimated at Rwf2.4 billion, as well as compensating for deviated projects.

Record high unemployment rates

At least 200,000 Rwandans lost their jobs between August 2020 and February 2021.

Unemployment rate increased from 17 percent to 20 percent in 2020-2021, and reached a record high of 27 percent in early 2023, affecting mainly women and small businesses.

As a result, many have resorted to subsistence agriculture to make ends meet. The sector attracted 206,000 new non-commercial farmers, an increase from 1.6 million farmers in February 2020 to 1.9 million people in February 2021.

Figures released by the National Institute of Statistics of Rwanda (NISR)’s Quarterly Labour Force Survey, indicated that not only did the unemployed population decrease but also the labor force participation rate decreased drastically from 56.5 percent in November 2020 to 50.6 percent in February 2021.

The report came after it was announced that Rwanda’s GDP has increased by 20 percent in 2021 quarter 2. According to Michel Ndakize, demographics and social statistics director at NISR, an increase in GDP does not necessarily reflect on the labour force.

The youth, fresh graduates, bear the brunt 

A mini-survey by Hobe around Kigali suburbs has revealed that many young people remain unemployed while employers have raised the bar for hiring.

It is no longer enough to have a university degree as employers are demanding not only qualifications but also more years of work experience from the jobseekers.

Hobe found that employers, who sometimes find it hard to surf through hundreds and sometimes thousands of applications, raise the bar on required degrees while others only pick the ones who are willing to accept lower salaries.

Thousands of young Rwandans remain jobless despite having basic qualifications such as a university degree with many struggling to make ends meet.

While local universities annually unleash thousands on the job market, the rate of job creation remains well below what is needed to absorb fresh graduates.

With unemployment levels in the country rising, the government has been supporting entrepreneurship and removing access to finance limitations by youth and women projects, coupled with TVET Skills training as key to creating the much-needed jobs by 2024.

For a few years since 2017, the unemployment rate of university graduates in the country currently stands at 16.7 per cent, which was the highest rate faced by any employable group, according to the Rwanda Institute of Research and Statistics.

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