Reality Check: What is Agaciro Development Fund?

Jan 2nd, 2013 at 12:21 | By | Category: Economy, News

On the 23rd of August 2012, Rwanda launched its first ever Solidarity Fund under the name of ‘Agaciro’ Development Fund (AgDF). ‘Agaciro’ is a Kinyarwandan word that can loosely be translated as ‘Dignity’.  The Government of Rwanda, Rwandans and friends of Rwanda will voluntarily contribute to AgDF by donating their own money. The proceeds collected from donors will be used to support key priority projects as identified in the Vision 2020[1], a master plan of elevating Rwanda from a low to a medium human development country by 2020. Whilst AgDF could be a pragmatic concept that Rwanda should explore, the current AgDF execution plan might not be suitable with the social and economic framework of Rwanda.

A pragmatic model worth exploring



There are two main reasons that make me believe that the Fund is indeed a pragmatic model that Rwanda ought to attempt implementing. Firstly, the objective of the fund to promote self-reliance among Rwandans is very commendable. The promotion of an independent mindset among Rwandans is needed so that their untapped intangible assets (talent, knowledge, creativity) are explored towards driving their own development. This is crucial since Rwanda is not blessed with natural resources. If the AgDF can help foster the concept of self-reliance among Rwandans, then it is worth a trial.  Secondly, the concept of a Solidarity Fund has been proven to work in other parts of the world. For instance, the Quebec Federation of labour (QFL) Solidarity Fund[2] is one of the best examples of this model. QFL Solidarity fund was launched in 1983 during a period of economic recession in Quebec, Canada. Quebeckers savings were pooled into a Fund and invested in local companies with the objectives of making profit whilst promoting the creation and maintenance of jobs within the same companies the Fund was invested in. The QFL Solidarity Fund still exists and as of the 31st of May 2012, it is reported that the fund holds $ 8.5 billion in assets and has 594,287 shareholders[3]. The Tunisian National Solidarity Fund[4] (FSN) is another example. The FSN was launched in 1992 and the government of Tunisia, Tunisia’s citizens and private companies in Tunisia voluntarily contributed to it. The Fund financed public projects in impoverished remote areas of Tunisia such as improving basic infrastructure, renovating and building homes etc. The FSN still exists and it is said to have helped eradicate poverty in Tunisia from a poverty rate of 12% to 3.8% currently.

Surely, there will be cases where the Solidarity Fund model has not worked. However, such cases should not be a barrier to Rwanda towards replicating the Solidarity Fund Model. It is up to the Rwandan Policy Makers to make use of the experiences gained from the best solidarity fund models and incorporate these in reproducing the concept. In addition, they should tailor it to suit Rwanda’s social and economic environment.

What is in it for the contributors?

During the most recent National Dialogue that was held in Kigali on last 13th  and 14th  of December, Rwanda’s Minister of Finance announced that AgDF as a Sovereign Wealth Fund (SWF) will finance projects with high potential returns and a socio-economical impact[5]. To that effect, the key success of AgDF will depend on how the projects that are to be financed by the Fund will extensively transmit social and economic values to its contributors and all Rwandans in general.

One of the economic values that the AgDF could have offered to its contributors could have been a return on their contributions. Yet, under the current AgDF’s execution plan no returns will be offered to the contributors with the full knowledge that the Fund will finance projects with high potential returns. Moreover, even though foreseeable social economic benefits from the AgDF include creating employment opportunities, I doubt that abundant employment opportunities will be created through the AgDF considering a large number of unemployed people seeking immediate work in Rwanda. Thus comes the question of how long Rwandans, of which the majority lives on less than $2 a day, and businesses in Rwanda supposedly to make a return on their own investments will continuously afford to donate generously their own money to the AgDF when in actual fact the Fund offers them no direct economic value in return?

Had the contributions to the AgDF been considered as investments, like it is in the case of the QFL Solidarity Fund, contributors would certainly be motivated to continuously make contributions to the Fund since they would expect returns. Under such arrangements, the AgDF could have promoted a dynamic and productive entrepreneurship culture that is accountable to its shareholders in Rwanda, hopefully boosting domestic savings for further investments in the economy of the country. Both the management of AgDF and of the projects financed by AgDF would be encouraged to manage for profit and with full accountability to its contributors.  An intertwined dependency between the AgDF’s stakeholders would be established which is needed for Rwanda to drive its own development and achieve self-reliance. However, under the current AgDF settings, Rwanda will miss out the vibrancy such a return to investment scheme could have brought within its social and economic environment. The intertwined dependency among AgDF stakeholders will also be absent as the contributors to the Fund will only contribute and receive nothing other than the abstract social economic impact the projects financed by the Fund is expected to deliver.

The alternative to offering contributors to the AgDF a return on their contributions would have been investing the funds in tangible public infrastructure projects such as building a public school, a hospital, Airport, or roads, like in the case of FSN. Obviously, this would not have created employments to all that need them in Rwanda, but it could have had an extensive social and economic impact to many Rwandans. Once completed, these infrastructure projects would be used by members of the public on daily basis and for a very long time to meet their social and economic needs. They would be viewed as a symbol of self-reliance and serve as a reminder to a generation of Rwandans that they can achieve independency. It is more evident that Rwandans, or businesses in Rwanda and friends of Rwanda, would be delighted and stirred to repeatedly donate generously to the AgDF without expecting any direct monetary benefit in return if they knew that their contributions were to be spent directly towards developing solid infrastructure projects that are desperately needed in Rwanda.

Under the current arrangements, the AgDF will be run as a Sovereign Wealth Fund (SWF). Contributions of SWFs are usually collected from country’s budget and trade surplus or natural resources export revenues[1]. But this is not the case with AgDF as its contributions come directly from members of the public and the business community in Rwanda. Nevertheless, under the present proposed execution plan of AgDF the contributors, who could be teachers, farmers and business owners in Rwanda, will be freely giving capital to an investor in return of an abstract social economic value which is more likely to cater for a narrow spectrum of Rwandans. Perhaps Policy makers in Rwanda should be inspired by the QFL Solidarity Fund, FSN and any other similar fund, and design a viable template for the AgDF to suit the present social and economic environment of Rwanda.

Written by Aimé Sindayigaya and edited by Jules Niyibizi

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