Rwanda’s foreign direct investment hit a record of $3.2 billion in 2024, according to the Rwanda Development Board. The rapid growth of foreign investment in the country has created pressure in manufacturing, real estate, and urban services.
However, Kigali, the country’s capital, thrives while many districts lag. The Integrated Household Living Conditions Survey in Rwanda shows “poverty rates of 12 per cent in cities and 30.6 per cent in rural areas.”
The International Monetary Fund cautions that investment focused only on cities can exacerbate inequality. To ensure balanced growth, Rwanda should attract investors to rural areas and promote local value addition to reduce urban–rural development disparities.
Rwanda’s Vision 2050 aims to significantly raise living standards by 2035 and to achieve a high level of prosperity for its population by 2050. Achieving these goals requires aligning foreign investment with domestic priorities to strengthen economic sovereignty.
Effective strategies can translate Rwanda’s Vision 2050 into tangible results. Strategic resource allocation allows benefits to ripple across communities, lifting rural districts while easing urban pressure. Locally rooted industries absorb labour, diversify incomes, and boost food security through Agro-processing. Ethiopia provides a successful precedent.
In Ethiopia, establishing the Hawassa Industrial Park outside Addis Ababa created thousands of jobs for young women while boosting exports. Rwanda can replicate Ethiopia’s model by situating industrial parks near raw material sources such as tea, coffee, and minerals. Decentralised investment drives GDP growth and supports inclusive national development.
Beyond industrial zones, local production can offer further economic benefits. Rwanda’s reliance on $86 million in imported machinery and transport equipment misses an opportunity for local production.
Processing raw materials locally can retain wealth, strengthen industry, and connect foreign investment to local skills and enterprises. The government of Rwanda should promote local processing of minerals, coffee, and horticultural products to retain more income and jobs.
Through the Ministry of Trade and Industry, Rwanda can offer incentives like lower taxes on processed exports. These incentives should help suppliers of raw materials, packaging, and services meet standards and strengthen the value chain.
Supporting local suppliers and promoting local processing can also strengthen the link between foreign capital and domestic industry. Local processing would create skilled employment, expand manufacturing capacity, and boost export earnings.
Local value addition would also reduce reliance on imported finished goods, improving the trade balance and technological competence. Over time, Rwandan firms could climb global value chains and manage production independently.
Botswana’s diamond industry shows the impact of an effective local value-addition policy. The government required the cutting and polishing of diamonds locally rather than exporting them in raw form.
The policy increased national revenue, created jobs, and attracted related service industries. Similarly, Nigeria’s Local Content Act ensures that foreign oil companies use local labour and materials.
As a result, Nigeria has expanded local participation in oil and gas operations, created jobs for Nigerians, and preserved more value within its economy. These examples show that clear policy frameworks can transform foreign capital into a tool for sovereignty rather than dependence.
While foreign investment has fueled Rwanda’s growth, without balance, it risks widening inequality and creating dependence on external capital. Every dollar invested should generate profit while strengthening individuals, industries, and opportunities.
Focusing investment on rural areas and local value addition creates jobs, supports small businesses, and builds skills in Agro-processing and other key sectors. Improvements in infrastructure, such as roads, electricity, and transport, amplify these benefits and ensure inclusive participation in economic growth.
By directing foreign investment toward rural areas, promoting local value addition, and enforcing local content and value-addition policies, Rwanda can reduce inequality, build domestic capacity, and strengthen economic sovereignty.
Emmanuel Nigabe is a writing fellow at African Liberty.
Article first appeared in The Chanzo.
Photo by AMISOM via Iwaria.
