mR 94 - Rwanda Tourism Value Chain Case Study

RWANDA TOURISM VALUE CHAIN CASE STUDY GUIDED CASE STUDIES IN VALUE CHAIN DEVELOPMENT FOR CONFLICT-AFFECTED ENVIRONMENTS

microREPORT #94

January 2008 This publication was produced for review by the United States Agency for International Development. It was prepared by Rob Henning, Manager; Neal Donahue, Director and Eric Kacou, Managing Director of the OTF Group, under the Accelerated Microenterprise Advancement Project Small Grant Facility administered by Pact, Inc., sub-contractor to Weidemann & Associates, Inc.

RWANDA TOURISM VALUE CHAIN CASE STUDY GUIDED CASE STUDIES IN VALUE CHAIN DEVELOPMENT FOR CONFLICT-AFFECTED ENVIRONMENTS microREPORT #94

DISCLAIMER The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

CONTENTS EXECUTIVE SUMMARY ........................................................................................................1 I. INTRODUCTION ...............................................................................................................3 II. CONFLICT AND POST-CONFLICT ASSESSMENT.................................................5 III. RWANDA TOURISM VALUE CHAIN ANALYSIS ................................................ 12 IV. VALUE CHAIN FINDINGS.......................................................................................... 29 V. STATEMENT AND ANALYSIS OF THE RESEARCH QUESTIONS .................. 33 VI. RECOMMENDATIONS................................................................................................ 51 VII. CONCLUSION.............................................................................................................. 54

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ACRONYMS ADAR Assistance à la Dynamisation de l’Agribusiness au Rwanda AMAP Accelerated Microenterprise Advancement Program BDS Business Development Services BEE Business Enabling Environment BLCF Business Linkages Challenge Fund (a Volcanoes Safaris project) BNR National Bank of Rwanda CMM USAID Conflict Management and Mitigation Office DFID UK Department for International Development DRC Democratic Republic of Congo EE Enabling Environment FL Firm-level GDP Gross Domestic Product GoR Government of Rwanda IFC International Finance Corporation IT Information Technology ITB ITB Berlin International Tourism Fair MDGs U.N. Millennium Development Goals MIJESPOC Ministry of Culture MINICOM Ministry of Commerce MSE(s) Micro and Small Enterprise(s) NDA New Dawn Associates NGO Non-governmental Organization OTF OTF Group, Inc. A US-based emerging market advisory services firm ORTPN Rwandan Office of Tourism and National Parks PEARL Partnership to Enhance Agriculture in Rwanda through Linkages Project PNN Parc National de Nyungwe (Nyungwe National Park) PNV Parc National des Volcanoes (Volcanoes National Park) PR Public Relations PSF Private Sector Federation (apex organization) RACE Rwanda Accelerated Competitiveness and Execution Project RBS Rwanda Bureau of Standards RIEPA Rwanda Investment and Export Promotion Agency RMC Radio Milles Collines RNIC Rwanda National Innovation and Competitiveness Project (OTF project) RPF Rwandan Patriotic Front SNV Stichting Nederlandse Vrijwilligers (Foundation of Netherlands Volunteers) SPREAD Sustaining Partnerships to enhance Rural Enterprise and Agribusiness Development TWG Rwanda Tourism Workgroup UK United Kingdom USAID United States Agency for International Development UN United Nations VCA Value Chain Approach VEM Visitor Experience Model

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KEY DEFINITIONS OTF Group 5-Step Process: This is OTF’s standardized approach to value chain interventions. There are a few key differences between this approach and USAID’s value chain approach. One is the significant focus on the process in terms of forming industry workgroups and facilitating dialogue between various stakeholders in the sector and another is the emphasis on industry-level versus firm-level assistance or general business enabling environment (BEE) interventions. In the OTF project design and overall approach, business development services (BDS) are assumed to be handled by partners. In the case of BEE, OTF intervenes on industry-specific BEE issues, but does not tackle general issues such as financial sector reform or reducing the cost of doing business.

Experiential Tourism: In this model, visitors are exposed to and have an opportunity to interact with a wide variety of enterprises. There are both pros and cons to this model. The positive impact is that tourism spending is more broadly distributed throughout the economy, but the negative impact is that quality standards and experiences can vary widely. This is in sharp contrast to enclave tourism, whereby visitors are largely sequestered within the confines of a particular resort. The total economic impact of enclave tourism is substantially less than experiential tourism for two reasons: first, visitors are dissuaded from engaging the local culture and therefore do not have the opportunity to transact with local merchants or service providers and second, the enclaves are typically developed by, or in partnership with, foreign investors who tend to direct as much revenue as possible to their home country rather than the destination. OTF strives to develop experiential tourism strategies for its clients to maximize local impact and profitability.

Rwanda Tourism Workgroup (TWG): The TWG is an industry group, facilitated by OTF Group, whose members are tourism professionals from the public and private sectors.

Micro and Small Scale Enterprises (MSEs) in Rwanda: A recent World Bank report on Rwanda defines an MSE as any firm with 30 or fewer employees. This covers an estimated 95 percent of the firms that participate in the TWG and in Rwanda’s tourism sector, in general.

Enabling Environment Approach (EE): EE is an initiative or project that attempts to address large systemic problems in a country business enabling environment (BEE). Examples of such projects might be focused on property rights, financial sector reform, customs modernization, or tax code streamlining.

Value Chain Approach (VCA): For the purposes of this document, VCA applies to OTF’s version of the Value Chain Approach—the 5-Step Process.

Firm-Level Approach (FL): Traditional BDS projects deliver direct assistance to companies with project resources or through intermediaries.

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EXECUTIVE SUMMARY In 2001, skeptics thought that the notion of building the competitiveness of Rwanda’s tourism industry was laughable. Handicapped by a legacy of genocide and its isolated location in the heart of Africa, most assumed that the country was too dangerous, too far away and too expensive to attract tourists. To overcome the serious constraints facing the tourism sector, OTF Group implemented its 5-Step Process for Industry Development, a participatory and data-driven value chain approach. Six years later, Rwanda’s tourism sector has had a renaissance. Receipts are surging, the mountain gorilla is a world-renowned attraction and the country won first prize at a major international tourism fair for “Best African Exhibitor” in 2007. This case study delves into the details OTF’s use of the value chain approach (VCA) to mobilize the tourism sector and transform it into a cornerstone of Rwanda’s post-conflict reconstruction and reconciliation process.

OTF has a long and ongoing relationship advising the government and private sector of Rwanda on the competitiveness of three key export sectors: coffee, tea and tourism. This case study draws on the direct experience of two OTF research team members facilitating the tourism workgroup (TWG), an informal body composed of public and private sector tourism professionals, and the research and analysis the OTF team conducted. While writing the case study, the team also interviewed TWG members to pinpoint areas of relative strength and weakness in OTF’s application of the value chain approach. Both the experience and analysis were customized to address the research questions, which the technical team asked OTF to explore in order to better understand the impact of upgrading Rwanda’s tourism sector in rebuilding its overall economy.

• Research Question 1: How can value chain analysis and the value chain framework help us identify and understand the major opportunities for upgrading and the driving constraints to market growth exacerbated by, or resulting from, conflict?

• Research Question 2: How can stakeholders be encouraged to adopt longer range “win-win” rather than short term “win-lose” strategies, particularly in shortened decision-making time horizons?

The overarching conclusion from Research Question 1 is that the value chain approach helps identify both opportunities for and constraints to upgrading by taking a holistic view of an industry. In the case of Rwanda tourism, this is particularly true because of the complex set of actions and relationships required to move from a stagnant to a competitive position in the global tourism market. To create maximum value at the national, industry and firm level, OTF needed to ensure that the strategy generated by the approach simultaneously created significant overall receipts and had a positive impact on the profitability of the full range of businesses that comprise the tourism value chain. As noted above, there has been progress in Rwanda’s tourism sector, but the approach did have its shortcomings. Despite the dramatic turnaround of the sector, failure to implement standards and training programs threaten the long-term growth of the industry. OTF believes that this lack of progress is due to the absence of dedicated tourism business services providers. Progress on the enabling environment has also been limited. Although OTF has had some limited success in improving access to finance, Rwanda is considered a difficult place to do business due to elevated interest rates, high tax rates compared regional competitors and the astronomical costs of starting a business. Again, OTF did not budget sufficient resources to address these “big” BEE issues in the original project design.

In response to Research Question 2, Rwanda tourism provides a clear picture of how a participatory VCA can help create a common vision and productive relationships that promote competitiveness among specific value chain actors. Examples include improved public-private dialogue, collaborative product development, mechanisms for validating high-impact decisions and a value chain-wide ability to choose the segment best suited to build sector competitiveness. Early success in a post-conflict situation relies on quick-wins such as attendance at a major tourism trade fair and rapid restructuring of the tourism board to provide support and public sector leadership to the sector.

RWANDA TOURISM CASE STUDY 1

The shortcomings of OTF’s value chain approach became apparent when implementing initiatives related to cross-cutting issues such as training and building collaborative relationships across ethnicities.

There are several overarching insights stemming from this analysis. One is that to rebuild the trust and relationships required for competitiveness in post-conflict economies, programs that adopt a VCA should create and regularly convene industry workgroups. Additionally, to engage and motivate the workgroup, implementers must carefully analyze the sector to identify quick-win activities that can solve value chain-level constraints or generate higher profits for a broad range of stakeholders. Based on the Rwanda tourism case, the sector can be an excellent one to target for post-conflict development because low economies of scale permit broad participation of MSEs, and there is potential to generate rural off-farm employment. However, it could be difficult to duplicate Rwanda’s tourism success in other post-conflict environments due to a lack of security and stability and/or of the existence of a world-class tourism asset like mountain gorillas.

This case study clearly shows that, in the context of post-conflict Rwanda, a VCA to support the growth of the tourism industry was instrumental to its success. It also shows the critical need to tie value chain activities to technical and financial assistance at the firm-level (FL) and at efforts to improve the BEE. In the end, OTF learned that there are never enough resources to solve all the problems of a post-conflict society as quickly as people would like and that when resources are scarce, using a VCA and allowing it to drive FL and EE efforts can be both rapid and cost effective.

Hard work by a broad range of stakeholders and good analysis have transformed Rwanda’s tourism sector over the past six years. Going forward, success at alleviating structural constraints at the industry level must be complemented by the upgrading of firm-level skills and general improvements in the business environment. If the synergy of these interventions can transform Rwanda’s tourism sector, the industry could become a global model for the strategic repositioning of the country and provide tangible economic benefits for stakeholders at all levels—from large companies and government agencies to MSEs and rural tourism workers and their families.


I. INTRODUCTION Rwanda conjures up gruesome images of genocide due to the events of 1994. Although the genocide officially lasted only 100 days, the damage done to the country’s physical and social fabric was enormous. As OTF began its engagement with Rwanda’s tourism sector in 2001, seven years after the genocide, reconstruction was well underway, but the conflict continued to adversely affect the country and the industry. Details of these lingering effects are below, but the main incentives to violence encountered then, and still present today, are increasing population density and growing income inequality.

In 2001, tourism was not an obvious choice for a value chain intervention by government and donors. Never a major foreign exchange earner compared to coffee and tea, tourism was treated as a secondary activity by conservation NGOs during most of Rwanda’s recent history. When OTF began its project in 2001, there was little or no interest on the part of international donors to support development of the sector. Given the country’s recent history and the almost constant security risk postings issued by the diplomatic community in Rwanda, many considered it almost laughable to view tourism as a serious industry to develop. However, by 2007 this attitude and support for the tourism industry had changed completely as the private sector and government-driven re-launch of the industry sparked the interest of numerous international donors, including USAID, DFID, SNV and the World Bank. The latest and most hands-on of these efforts is a multi-year USAID effort to upgrade tourism in Nyungwe Forest, an important component of Rwanda’s overall primate experience.

In the relief to development continuum, OTF’s project should be considered almost purely development. Although certain adjustments were made to address the post-conflict situation, the overarching focus of the value chain intervention was to build the long-term competitiveness of Rwanda’s tourism industry. Although the project team did engage in short-term “quick win” activities, no typical basic needs/relief activities were built into the project.

OTF Group has been implementing a competitiveness project in Rwanda since 2001 with the Government of Rwanda (GoR) as the direct client. The primary focus of two projects, the Rwanda National Innovation and Competitiveness Project (RNIC) and the follow-on Rwanda Accelerated Competitiveness and Execution Project (RACE), has been to build the competitiveness of three priority export sectors (coffee, tea and tourism) and to instill a culture of competitiveness at the national and industry levels. The genocide impacted OTF’s project in both profoundly positive and negative ways. On the positive side, the genocide and its economic impact created a useful tension at all levels of the economy that made value chain actors very receptive to change and new ideas. This made it easy for OTF to engage and mobilize stakeholders. Second, relevant private and public sector stakeholders at all levels created a focused leadership team committed to the reconstruction of the country and willing and able to facilitate acceptance of the project and its recommendations. Negative impacts of the conflict were partially destroyed infrastructure, a crippled financial system, weak institutions, lack of skilled human resources, limited knowledge of international markets and a survival culture focused on short-term gain over long-term competitiveness.

This case study focuses exclusively on Rwanda’s tourism value chain and OTF’s six years of past and ongoing experience in implementing its version of the value chain approach, the 5-Step Process. At project inception, the tourism industry was in shambles. International tourists were repulsed by the country’s recent, violent past and the few travelers who came only to see mountain gorillas avoided spending even one night in-country. OTF addressed industry challenges using its 5-Step Process to conduct sorely needed research and analysis for the sector and to create the Tourism Workgroup, an informal body consisting of tourism professionals from the public and private sectors. Together with OTF, the TWG articulated a vision of high value and environmentally friendly tourism in Rwanda based on two products, eco- and cultural-tourism. Implementation began in 2002, after the TWG and Rwanda’s cabinet validated the vision and strategy for the tourism sector. Since then, the sector has enjoyed considerable success in developing its mountain gorilla product and improving its image in the international marketplace. Overall,


major issues such as training and product diversification have lagged, putting in jeopardy the long-term sustainability of the industry. These challenges and potential solutions are detailed later in the study.

This case study draws on OTF’s six years of experience in Rwanda’s tourism sector, including desk research, end market surveys, dozens of TWG meetings and hundreds of individual meetings with tourism stakeholders. The study team comprises Eric Kacou and Rob Henning, both with direct experience in Rwanda tourism; Neal Donahue, a tourism strategy expert; and Ruth Ishimwe who provided in-country administrative and analytical support.


II. CONFLICT AND POST-CONFLICT ASSESSMENT

THE RWANDAN GENOCIDE IS INFAMOUS; THE FACTORS THAT CAUSED IT ARE LESS OBVIOUS The horror of the Rwandan Genocide is infamous, with the massacre of approximately 800,000 Tutsis and moderate Hutus (or 11 percent of the total population) over the course of 100 days from April to July 1994. Less well-known and understood is the nearly “perfect storm” of incentives for violence, conflict mobilization and expansion dynamics that was present at the time and the fact that state and non-state institutions played a role in fostering and contributing to the violence. Using the USAID Conflict Management and Mitigation Office (CMM)1 framework, this section provides a brief overview of the factors that contributed to the 1994 genocide and a glimpse of how these underlying factors have changed (or not changed) in post-genocide Rwanda.

THE FOUR P’S OF RWANDA’S GENOCIDE A combination of long-term and proximate causes triggered the genocide. Based on a selective review of available studies, these factors can be classified as poverty, population, politics and propaganda—the four P’s.

POVERTY The 1970s and most of the 1980s were good economic times for Rwanda. Following the bloodless coup that brought Juvenal Habyarimana to power in 1973, the country became a magnet for foreign assistance. For the most part, the government invested this money wisely in agricultural infrastructure such as terraces, critical infrastructure such as roads and electricity and, most importantly, in education. This investment led to a short spurt of agricultural productivity increases in the early 1980s.2 Despite these relatively good times, high population growth meant that per capita GDP growth was marginal, with consistent declines beginning in the late ’80s. This poor performance was driven by the lack of an effective economic growth strategy that emphasized reducing poverty more than increasing growth and a government focused on social equity (dividing what could be considered a fixed pie) over economic growth (growing the pie). Ideally, any government finds a balance in its policies between enabling the growth of MSEs and ensuring that the largest possible swath of the population benefits from this growth. Global commodity markets determined Rwanda’s fate rather than the country implementing an assertive strategy to make choices about what customers to serve and how to configure its industries to win in these market segments. In the case of coffee (and to a lesser extent other commoditized agricultural products), traders in faraway places such as New York, Chicago and Mombasa set a price for Rwandan products completely outside the control of Rwandan firms and the government.

Starting in 1986, Rwanda’s economic boom times came to an abrupt halt when world coffee prices crashed, devastating export revenues for the country’s largest foreign exchange earner. In addition, coffee was (and remains) the largest employment sector, with 400,000 families (roughly 2 million people) dependent on the success or failure of the coffee industry for their livelihoods. This meant that any downturn in the price of coffee created major economic and social impacts on the country. Coupled with the drought of 1988-89, this slowed agricultural even more output and impacted nearly all Rwandans. In response to the continued slump in coffee prices, the government cut spending

1 The guide to this analysis can be found at: http://www.usaid.gov/our_work/cross-cutting_programs/conflict/publications/docs/CMM_ConflAssessFrmwrk_8-17-04.pdf 2 “In the Kingdom of the Gorillas,” pg 314, Bill Weber and Amy Vedder, Simon and Schuster, 2001.


http://www.usaid.gov/our_work/cross-cutting_programs/conflict/publications/docs/CMM_ConflAssessFrmwrk_8-17-04.pdf

http://www.usaid.gov/our_work/cross-cutting_programs/conflict/publications/docs/CMM_ConflAssessFrmwrk_8-17-04.pdf

by 40 percent, which further aggravated the economic crisis. The devaluation of the Rwandan Franc by 40 percent (and even higher on the black market) as part of an IMF structural program increased inflation, the cost of food and hardship, especially for the poor, who suffered disproportionately,3 and led to deprivation for the most other Rwandans.

POPULATION Rwanda’s high altitude, temperate climate and fertile soils have attracted three different populations over the centuries. Beginning about 2,000 years ago, Bantu farmers from West Africa arrived in what is now Rwanda. Mainly agriculturalists, these immigrants became the modern day Hutus. Their most important contribution to the country was the domesticated banana, a perennial crop well suited to Rwanda’s climate that remains a staple in modern times. The Twa, a hunter-gatherer race most likely preceded the arrival of the Bantus by 1,000 years. Although they entered into barter arrangements with the new arrivals, the Hutu’s agricultural background quickly began to marginalize the Twa and pushed them into less favorable, mainly mountainous regions of the country. The final major migratory event for Rwanda was the arrival of the pastoralist Tutsis. They entered into a symbiotic relationship with the Hutus whereby their cattle grazed on agricultural waste and fertilized the fields thereby enhancing yields. Currently the ethnic breakdown is 85 percent Hutu, 15 percent Tutsi and less than 1 percent Twa4, and these breakdowns remain roughly the same for pre- and post-genocide Rwanda.

Figure 1. Population Density (People per Square Kilometer) 1973 - 2005

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1973 – 1989: historical peak reached at 288 people / sq km

Post-genocide growth and security push population density to 366 / sq

kmPre-genocide: refugee flows and the genocide reduce population

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Population pressure on the environment already existed when the Germans arrived in Rwanda in 1894 with an estimated 75 percent of arable land having already been cleared by Hutu farmers.5 After World War II, the peace accord process ceded Rwanda to Belgium. Some aspects of Belgian rule also contributed to an increasing appetite for land with cash crops such as coffee, tea and pyrethrum planted on over 120,000 acres in the mid-1900s in an effort to provide higher incomes for Rwandans and enhance export revenues. Also contributing to the pressure on the environment was the introduction of the potato as a food staple, replacing bananas, whose productivity in terms of 3 Ibid, pg 314. 4 “In the Kingdom of the Gorillas,” pg 123, Bill Weber and Amy Vedder, Simon and Schuster, 2001. 5 Ibid, pg. 124.


calories per hectare was far higher. Throughout the post-World War II period, per capita food production in Rwanda remained stable mainly as a function of land clearing accompanied by investments in agricultural productivity. A major warning sign of population pressure on the environment came in 1958 when the Belgians removed 20,000 acres of Virunga National Park and converted it to farmland. By the 1970s, the population growth rate reached 3.7 percent as fertility rates approached the biological maximum and population density increased to some of the highest in the world at 500 people per square mile or 1,300 people per square mile of agricultural land.6 The dual trends of high population growth coupled with scarce investment in agricultural productivity led to more people competing for a finite quantity of land. As populations increased, communes ran out of land to allocate and young people found it difficult to marry, leave home, acquire a farm and set up their own households. Intergenerational conflicts occurred between children and parents over how to divide scarce resources among family members. Economic pressures also tested the historic communal support provided by more prosperous members to those doing less well—people considered prosperous no longer had anything to spare.7 This decline of resources tore at the social fabric of communities and created a generation of poor, disaffected and disconnected youth ripe for political indoctrination.8

POLITICS Political control of this mountainous nation generated the final long-term factor that contributed to the violence and genocide. Belgian rule generally maintained control over the country indirectly through the Tutsi. Just before independence, however, the Belgians encouraged a coalition of northern Hutus to revolt against the Tutsi leadership, which led to a violent confrontation in 1959. At independence in 1962, a coalition of southern Hutus under the leadership of Gregoire Kayibanda implemented a policy of systematic discrimination against the Tutsi. Perceived regional favoritism and national economic decline led to a coup by northern Hutus, led by Juvenal Habyarimana, whose regime instituted a system of quotas giving Tutsis 10 percent of all government jobs, roughly based on their percentage of the population. Despite this obvious ethnic discrimination, this regime was generally well liked by the international community and benefited from significant foreign aid throughout the 1970s and 1980s. When single party rule began to wear on Western backers, they pressured the Habyarimana government to begin instituting a process of multi-party democracy. Although the government complied with these demands, the late start and slow pace of change caused foreign assistance to begin drying up, and parallel economic misfortunes forced many of the elite to engage in even more corrupt practices to maintain their wealth and lifestyles. Following a Tutsi-led invasion by the Uganda-based Rwandan Patriotic Front9 (RPF) in 1990, ethnically motivated killings increased markedly on both sides, and ethnic divisions emerged as a significant political factor. In addition, the 1993 Arusha Peace Accord requirements for power sharing increased tensions among Hutu extremists.

PROPAGANDA The previous three factors contributed to growing tension in Rwanda, and Hutu extremists began to portray the Tutsi and their moderate Hutu allies as the ones responsible for the problems facing Rwanda. Hate media played a major role in exacerbating tensions and inciting people to violence, and in 1993, soon after the Arusha Accords were signed, Radio Milles Collines (RMC) began transmitting its messages of support for the Habyarimana government and pandering to Hutu extremist groups. RMC portrayed the Tutsi as the root of all evil in the country, a message that

6 Ibid, pg. 130 7 The structure of these social safety nets was generally the same across ethnicities as was the problem of population pressure in terms of creating more potential recipients of a fixed resource—land. Ethnicity played a role once more as conflict drivers which encouraged Hutu attacks on Tutsis came into play. At this time, the rural–urban divide was relatively unimportant as the vast majority of Rwandans lived in rural areas with the major cities comprising less than 10 percent of the population. 8 “Collapse” Jared Diamond, Chapter 10, Penguin, 2005. 9 The RPF rebel force was based in Uganda and comprised both Rwandans from the diaspora and Tutsi who fled Rwanda to join the force.


played well with a generation of disenfranchised males with no real prospects for success or marriage. Though a privately-owned radio station, RMC became the de facto mouthpiece of the government and even began broadcasting the names of Tutsi and Hutu targeted for ethnically based killing. The downing of Habyarimana’s plane as it approached Kigali on April 6, 1994 was the spark needed to ignite the conflict. Within hours of the incident, the radio station began actively inciting Hutu extremist groups to exterminate their Tutsi neighbors and moderate Hutu protectors.

CONFLICT CAPITAL The organizers and implementers of the genocide had access to sophisticated forms of “conflict capital” to achieve their goals. Once initiated, the genocide proceeded rapidly because of the emergence of sophisticated assets such as human resources and traditional organizational structures. Although carried out by mobs with crude weapons, months of training and zealotry fueled by RMC created a killing machine well suited to the environment.

ORGANIZATIONAL FACTORS The communal work structures or umuganda10 in Rwanda provided the perfect cover for concealing the training of the Interhamwe and other militias who would carry out the genocide. Colonel Theoneste Bagosera, a confidante of the president’s wife, was heavily involved with coordinating the recruitment of former soldiers and young, discontented males into the militias.11

HUMAN RESOURCES As noted above, increasing population pressure, economic crisis, the AIDS epidemic12 and the RPF threat created a cadre of angry young male Hutus who were receptive to the idea of a final solution to the Tutsi problem. Inspired by RMC and Hutu Power media, this group was a perfect foil for the political ambitions of Hutu extremist groups.

FINANCIAL FACTORS Rich Hutu businessmen provided enough capital to import one machete for every third Rwandan male. In the absence of a ready supply of guns and ammunition, these machetes and homemade pangas, or nail studded clubs, became the weapons of choice for the Interhamwe and other militias. RMC, the private radio station and mouthpiece of Hutu extremists, was owned by sympathetic Hutu businessmen.

THE STATE’S INVOLVEMENT IN ENCOURAGING CONFLICT RATHER THAN PROTECTING CITIZENS In terms of incentives, the inner circle of Habyramina’s regime, including his wife, began a campaign of corruption and resource grabbing that left the poor worse off than ever before. Their actions included appropriating already scarce land and donor resources for their personal use, which stoked the anger of, and tension between, the intended beneficiaries—rural Hutu and Tutsi.13 Although not targeted specifically at the Tutsi, the propaganda generated in the

10 Although Tutsis were also incorporated into the umuganda structure and were aware of the training that was occurring around them, their political disenfranchisement meant that they were powerless to stop the organization and training of the Interhamwe. 11 Weber & Vedder, pg. 312 12 Early HIV surveillance in Rwanda documented high HIV prevalence in urban areas with HIV widely disseminated into rural areas by 1986. Between 1988 and 1996, HIV prevalence among pregnant women ranged from 21 percent to 33 percent in Kigali, from 8 percent to 22 percent in other urban settings, and from 2 percent to 12 percent in rural settings. Source: “Current Trends in Rwanda’s HIV/AIDS Epidemic”, Sexually Transmitted Infections 2006; 82(Supplement 1 ):i27-i31 13 Ibid, pg. 315


months preceding the genocide assigned blame to this group. The close collaboration between the government and RMC is a clear example of the state’s active encouragement of conflict before and during the genocide.

In addition to the existence of incentives for conflict and sophisticated conflict assets, the state and related institutions created an environment in which violence was encouraged and fostered—not discouraged. As the third leg of the stool, actions undertaken by the state created tailor-made conditions for the ensuing violence and mayhem.

The state also facilitated access to several forms of conflict capital. While the private sector contributed financial resources for weapons, the government provided the organizational resources in terms of existing structures like umuganda, funneling former military into the militias, and training for masses of Hutu youth seeking a purpose in life.

THE ROLE OF INTERNATIONAL SECURITY FORCES AND GLOBAL ECONOMICS Outside forces also had a role in the factors leading up to the genocide and the unfolding of events in 1994. Global commodity markets, international intervention, and trans-border ethnic movement all contributed in positive and negative ways to the evolution of the conflict.

ECONOMIC The slump in global coffee prices created a crisis for hundreds of thousands of coffee farmers. Although commodity prices are cyclical, the timing of this crisis coupled with the IMF-driven devaluation of the Rwandan franc increased poverty levels and competition for scarce resources.

INTERNATIONAL INTERVENTION The Western powers have been criticized in hindsight for their lack of appropriate intervention in the genocide. Although the UN did have a peacekeeping force deployed in Rwanda, the lack of a robust mandate and insufficient numbers combined to ensure the UN did not help prevent the slaughter. The only major power to intervene in Rwanda was France, which is accused of providing cover for the Hutu extremists to flee to eastern Congo in the face of the advancing RPF.

TRANSBORDER ETHNIC MOVEMENTS The invasion of the Tutsi-dominated RPF in the early 1990s facilitated much of the hate propaganda generated by Hutu Power media. The presence of a well-trained and aggressive rebel force in-country gave Habyramina’s regime significant leeway with both Rwandans and the international community to blame the Tutsi for a wide range of problems. However, once the genocide began, the presence of the RPF ended the killing within three months. Without the involvement of this force, the genocide most likely would have lasted longer and taken far more lives.

DESPITE PROGRESS, INCENTIVES FOR CONFLICT STILL EXIST IN POST-GENOCIDE RWANDA On July 17, 1994, the RPF published a declaration concerning the establishment of new state institutions. In this declaration, the RPF affirmed its commitment to the basic principles and outline of the previously negotiated Arusha Accords. In particular they pledged commitment to the rule of law, the construction of a national army open to all Rwandans, and the sitting of a government of national unity based on an inclusive coalition of political forces. They also affirmed the legitimacy of the Constitution of 1991 and the Arusha Accords as the fundamental rules for


governing the nation.14 Since 1994, Rwanda has enjoyed a period of relative peace and stability, especially in the context of its neighbors, the DRC and Burundi. Although Rwanda has become a model of development and security in the region, a comparison of the factors that triggered the genocide and their current status suggests that some of the underlying incentives for the original conflict do exist, although they are mitigated by progress on the other factors.

The table and analysis below highlight incentives for violence as the main risk of another outbreak of violence in the post-genocide environment. The purpose of this case study is to show how OTF’s value chain approach to developing Rwanda’s tourism sector can help reduce the risk of recurring violence. Tourism has the potential to accomplish this by generating off-farm employment that can alleviate the effects of population pressure on the land and create income-generating opportunities for a broad segment of Rwandan society. In addition, further development of the sector will better insulate the country’s economy from the inevitable swings in global commodity markets.

14 Rwanda Democracy and Governance Assessment, 2002, page 19


Figure 2. Comparison of Pre- and Post-Genocide Factors

Factor Current

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The “4 Ps” were all in place, creating the long-term tension and short-term trigger for the genocide.

• Current government has policy of pushing ethnic tensions under the surface.15

• Population density is higher than pre-genocide and growth rates are still high.

• Good overall economic growth, but the Gini coefficient is increasing, indicating growing income inequality.16

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Low

All, including the more sophisticated resources, were in place to enable conflict.

• Organizational: the umuganda structure is still in place with the ability to quickly organize and mobilize the population down to the 10 household-level.

• Human: lack of broad-based prosperity indicates that there is still an “underclass” that may be willing to engage in violence. A rising Gini coefficient and the anecdotal gap between wealth in Kigali and lack of progress in rural areas may further exacerbate the problem.

• Financial: wealth seems to be concentrated in the hands of returnees who have no interest in conflict.

Inst

itut

ions

Low The state and civil society were aligned to encourage and foster genocide.

• The government has put in a place strong security institutions that render genocide extremely unlikely.

• Local civil society and international NGOs preach reconciliation and the mantra “never again.”

Reg

iona

l & G

loba

l Fo

rces

Medium

The RPF created an excuse for the genocide (but also ended it). Unwillingness of international forces to intervene (except for the French on the side of genocidaires) allowed the genocide to begin and continue. The economy was also over-reliant on commodity coffee.

• Remnants of the Interhamwe still exist in Eastern Congo but are not a serious threat to Rwanda’s security.

• General instability in DRC and Burundi could spill over into Rwanda.

• International forces are very likely to intervene in Rwanda if genocide re-occurs.

• Major sectors are shifting from simple commodity production to differentiated goods. Tourism is booming with a focus on high-value segments of the market.

15 Ethnicity and its discussion have been outlawed in Rwanda to promote a culture of healing and unity. 16 Rwanda’s Economic Development and Poverty Reduction Strategy. Government of Rwanda. Draft July 2007.


III. RWANDA TOURISM VALUE CHAIN ANALYSIS

OTF’S PARTICIPATORY 5-STEP PROCESS FOR FORMULATING A NEW STRATEGY FOR RWANDA’S TOURISM VALUE CHAIN In order to mobilize and engage Rwanda’s tourism industry, OTF Group used its proprietary 5-Step Process to develop a national strategy jointly with the Tourism Workgroup of private and public sector leaders in most levels of the value chain. Analytical and process activities were conducted at each stage of the 5-Step VCA. The analytical agenda comprised research and surveys conducted by OTF staff and selected TWG members and the process agenda engaged them in developing a coherent vision for the tourism cluster, providing the requisite knowledge to inform the strategic planning process. Process details are presented in the graphic below. The culmination of the strategy formulation exercise was a comprehensive document with a detailed investment and action plan, the timely execution of which would transform the strategy from document to reality.

From the beginning, OTF included all viable tourism firms in its participatory approach. The size and structure of these firms closely matched that of the Rwandan economy as a whole, meaning it was dominated by MSEs employing 30 or fewer people. Although these firms were established and based mainly in Kigali, they faced serious challenges in terms of access to finance, trained staff, and inter-firm cooperation. The obvious exceptions to the micro and small category were the two large hotels, the Milles Collines and Novotel, both of which had international investors and the government as backers. Although representatives from these large businesses attended the TWG meetings, the agenda was driven by smaller players like tour operators, travel agents and small hotels that needed to collaborate to access critical market information and successfully develop and market Rwanda’s tourism products.


Figure 3. The OTF Group 5-Step Process for Rwanda’s Tourism Industry

Situation Analysis

Step 1 Step 2 Step 3 Step 4 Step 5

Set Industry Goals

Understand Target Customer Needs

Articulate Sector Positioning

Develop Action Guidelines

Assess capital base of the industry (7 forms of capital)

Map value chain and ID gaps in the industry

Understand distribution channels and current market segments

Analyze industry trends

Understand information needs of each component of the value chain

Collect relevant information on needs (i.e., surveys and secondary sources)

Segment the market

Analyze competitors/substitutes and industry’s relative position (high value vs. mass tourism)

Develop overall value chain strategy aligned with target customer needs

Develop branding

Form and engage the Tourism Workgroup (TWG)

Agree on a working schedule with the TWG.

Form a research plan based on initial hypotheses

Use ICT to facilitate research (OTF Insight)

Use findings to stimulate discussion around priority areas within TWG

Involve all subject matter experts in clarifying potential issues

Ana

lytic

al A

gend

a Pr

oces

s A

gend

a

Reach agreement on aggressive but realistic growth targets based on yield and arrivals.

Review potential economic impact of tourism objectives

Identify investment, regulatory and institutional priorities required to serve target segments

Develop priority guidelines for each target customer segments

Build a sense of shared vision within the TWG

Identify core members of the TWG as well as subject matter experts

Communicate action and investment plans to relevant stakeholders

Formalize industry partnerships to ensure sustainability

This process is standard in all tourism engagements that OTF has undertaken around the world. It is, however, self-correcting to the environment. By avoiding a rigid and time-bound process, the 5-Step Process allows the workgroup to move at a measured and self-guided pace that enables it to focus on the specific challenges of the environment. Compared to other countries, implementing the 5-Step Process in Rwanda was analytically more difficult due to the paucity of available data, but easier when it came to the process agenda because of the useful tension in the industry and the receptivity of a wide range of actors to consider, debate and accept new ideas. Although the challenges of rebuilding Rwanda’s tourism sector were enormous at the beginning of the process, the enthusiasm of the TWG to engage in the strategy formulation process and the move into the early phases of implementation made the process more pleasant and gratifying when compared to countries where there is more resistance to change. The TWG did lose some of its early momentum once the sector began to enjoy a measure of success and this is discussed in further detail in the analysis of the research questions.

CONFLICT DESTROYS THE ECONOMIC CAPITAL FIRMS AND INDUSTRIES NEED TO COMPETE IN THE GLOBAL ECONOMY, RWANDA TOURISM INCLUDED Engaging in value chain analysis in post-conflict situations is challenging for many reasons. OTF has found the most challenging issue in these fragile states to be the destruction of the basic and sophisticated assets that industries require to compete. A useful framework for comprehensively assessing—and diagnosing gaps in—country or industry prosperity is given in Figure 4, the 7 Forms of Capital for a Post-Conflict Economy17. In this conceptualization, we see all forms of prosperity: the bottom three or lower forms of capital include natural endowments, financial resources

17 Michael Fairbanks, “Changing The Mind of a Nation: Elements in a Process for Creating Prosperity,” in Lawrence Harrison and Samuel Huntington, eds., Culture Matters: How Values Shape Human Progress, (New York: Basic Books, 2000), Pages 268-281.


and man-made capital. The four higher or social forms of capital are institutional capital, knowledge resources, human capital and cultural capital. When applied to a post-conflict economy or industry such as tourism in Rwanda, the framework highlights some basic truths about the sector that must be accepted as a base to begin building its competitiveness.

Figure 4. The 7 Forms of Capital for a Post-Conflict Economy

CulturalCultural

HumanHuman

KnowledgeKnowledge

InstitutionalInstitutional

FinancialFinancial

Man-MadeMan-Made

Natural EndowmentsNatural Endowments

Social

Tangible ArticulationsNormsMental Models

Physical

Environmental IssuesRaw MaterialsClimate and Location

Transportation, CommunicationPowerWater and Sewerage

Financial SystemsPrivate WealthPublic Wealth

“Good, Clean Governance”Justice SystemConnective Organizations

Qualitative, Quantitative DataFrameworks and ConceptsKnowledge Generation

Health and PopulationEducation and TrainingAttitudes and Motivation

Low trust which limits “distant” business relationshipsSemi-formal institutions (such as the TWG) need significant facilitation and investment to succeed.

Agricultural assets normally suffer because of lack of upkeep.Tourism areas may be destroyed by direct conflict and population pressures.

Depending on the intensity & duration of the conflict, infrastructure may be destroyed or at least unsuitable to support efficient economic activity.

Local banks are normally risk averse and charge high interest rates.Foreign investors are hesitant to re-enter conflict zones.

Usually ineffective for years as they are rebuilt and restaffed.Property rights may be in question because of displacement.

“Survival” mode means that most firms have lost contact with markets.Extended conflict may lead to a loss of local best practices.

High population displacement means gaps in education and skills.Returnees from developed countries may bring new skills to the economy.

Representative Elements What is Different in Post–Conflict Economies

IN 2001, RWANDA’S TOURISM INDUSTRY WAS IN SHAMBLES At the beginning of OTF’s work with Rwanda’s tourism industry it faced serious challenges. International arrivals were estimated at less than 3,000 per year versus 39,000 in 1984. Perception of the security situation was such that the typical tourist who visited the gorillas usually crossed the border from Uganda for just a few hours to visit Rwanda’s gorilla families and drove back to the relative safety of Uganda to spend the night. The country was capturing very little value from these tourists outside of the relatively low price of the gorilla permit.

In addition to the visitor experience, the tourism industry was disorganized and suffered from a lack of the sector-specific assets required to succeed in the highly competitive global tourism industry. With the exception of the world-class tourism asset of the mountain gorillas, key success factors such as international standard hotels and restaurants, a functioning financial system, knowledge of markets, institutions and well-trained tourism industry professionals who could support the sector were entirely lacking. In particular, the limited knowledge of markets left the industry without a solid roadmap for how to configure its tourism assets and operations to serve the most attractive market segments for Rwanda’s tourism experiences. Although this lack of sophisticated assets was an issue before the genocide, the global tourism industry, particularly high value eco-tourism, had changed during Rwanda’s absence from


the marketplace. In response to market demand, competitors had begun investing in upgrading their experiences while Rwanda was sliding backwards.

TO ADDRESS THESE PROBLEMS, THE PUBLIC AND PRIVATE SECTORS ENGAGED IN A COLLABORATIVE VALUE CHAIN DEVELOPMENT PROCESS

BOX 1: A KEY STRATEGIC CHOICE – HIGH VALUE VS. MASS MARKET TOURISM The key metric to watch in tourism is yield or the amount of money each tourist spends (calculated as number of visitors times length of stay times amount spent per day). Rwanda’s choice to target tourists willing to pay high prices to experience the country’s tourism experiences will allow the country to minimize environmental and community impact while achieving its revenue goals.

To address these problems, in 2001 the TWG engaged in a nine-month process to develop a bold new vision and strategy of high-value, environmentally-friendly and diversified tourism in Rwanda. Concrete targets for 2010 included 70,000 visitors, US $100 million in receipts, visitor spending per day of US $200, and a seven-day length of stay. To achieve these targets, the strategy and action plan foresaw large-scale investment into product development, marketing and institutions. Since then, significant progress has been made towards achieving the goals laid out in the strategy. 2006 receipts were ahead of targets at US $33 million versus US $31 million forecast in the original strategy. Investment numbers are also strong with US $53 million versus $62 million in planned investment over five years.

RWANDA TOURISM HAS STAGED A DRAMATIC TURNAROUND In 2007, after five years of strategy implementation and the obvious success of the gorilla product and general image-building, the TWG saw a need to revisit the original strategy to confirm that the industry was on the right track and to look at new opportunities for growth in the sector. Beginning with an evaluation of the 2002 strategy, TWG then took a blank-slate approach to looking at available options.

One key component of the evaluation was the visitor experience. Although Rwanda made amazing progress in improving its image with tourists in terms of key attributes such as safety and distinctiveness, channel partners do not share these positive feelings. Major complaints are a continued perception of a lack of safety, the lack of product diversification, and a nearly non-existent service culture. The difference in opinion between channel partners with a high familiarity with Rwanda and those who do not have firsthand experience with the country shows the potential the country can leverage to market its tourist destinations.


Figure 5. Rwanda Tourism Receipts & Investments

$26$33

$9 $13$22

$31$42

$14

$55

$0

$20

$40

$60

2003 2004 2005 2006 2007 2008

Source: Tourism Workgroup, National Tourism Strategy, OTF Group AnalysisNote: Receipt numbers are estimates from ORTPN. Investment figures: RIEPA

Rwanda Tourism InvestmentsTargets vs. Performance 2003-2008 ($MM)

TargetTarget ActualActual

$7 $7

$20

$13$18 $18

$13 $13$19

$12

$0

$10

$20

$30

2003 2004 2005 2006 2007 2008

Rwanda Tourism ReceiptsTargets vs. Performance 2003-2008 ($MM)

TargetTarget ActualActual

The institutional framework remains an overarching concern in the tourism sector. Although new institutions were created or existing ones restructured to help implement the tourism strategy, they are uniformly weak with the exception of Rwandan Office of Tourism and National Parks (ORTPN), the government tourism board. ORTPN’s leadership is responsible for much of the success that the sector has enjoyed, but despite its commendable performance, an over-reliance on ORTPN to drive change in the industry is putting strains on its limited human and financial resources. In order to sustain growth, the private sector—through the Private Sector Federation’s Tourism Chamber—needs to quickly strengthen its capacity to take a co-leadership role in the tourism industry to create a true public-private partnership.

RWANDA TOURISM’S VALUE CHAIN IS PRIMARILY FOCUSED ON THE HIGH-VALUE INTERNATIONAL TOURIST SEGMENT Below is a basic value chain map of Rwanda’s tourism industry. Although the primary focus of this case study is the emphasis on the international tourism market, the domestic tourist channel is also included in the map so as not to exclude this market segment. Tourism is a domestically consumed export and physical goods do not flow past service providers such as hotels and restaurants because tourists spend money in-country, which benefits a wide range of firms and individuals.


Figure 6. Rwanda Tourism Value Chain Map

End Markets

Travel Agents & Wholesalers

Service Providers

Inputs

International Tourists (n=12,500)

Domestic Tourists

International Channel Partners (n=20)

Tour Operators Travel Agents

Food Other inputs: toiletries, textiles, etc.

FinancialServices

Handicraft Producers Restaurants Hotels

Transport: taxis, buses, car hire, airlines

Other attractions

ORTPN (Tourism Board)

BDS & Training Providers

RwandaTourism Chamber

Domestic Channel International Channel Supporting Institutions

Service Providers

DESCRIPTION OF VALUE CHAIN ACTORS Profiles of the value chain actors, the enabling environment, and the relationships and dynamics between all players are discussed below.

END MARKET Rwanda’s tourism industry emphasizes high-value international tourists with a specific focus on attracting eco-tourists interested in the country’s mountain gorillas and other primates. It has tried to target and activate other segments of the market and needs to diversify its product offerings away from the primate product, but for now the main focus of private and public sector tourism value chain actors remains on primates and the tourists who can pay the highest price possible for the experience. The requirements of both the eco-traveler and the channel partners who are the intermediaries for this and other segments the industry could potentially target are described below.

ECO-TRAVELERS: THE CORE CLIENTS OF RWANDA Eco-travelers are estimated to comprise over 80 percent of Rwanda’s current tourism revenues and are expected to continue to account for the majority of its revenues through 2010. In targeting this group, it is critical that the tourism industry understand two categories of needs—those of both the visitors themselves and of the channel partners who act as the gatekeepers to these valuable customers. As part of OTF’s facilitation of the original tourism strategy in 2002 and the tourism strategy revision in 2007, the team conducted extensive market research of these two groups to understand their needs. OTF structured this research using a customer needs assessment and the Target Visitor’s


Experience,18 an approach that encompasses the visitor experience from the pre-selection stage through post-trip interactions.

Figure 7. Overall Expectations from the Destination, Visitor to East Africa

Importance Ranking of Product Attributes for Tourism Destinations

3.3

3.7

4.1

4.6

4.7

4.9

5.0

5.1

5.5

5.6

0 1 2 3 4 5 6 7

Being pampered

Adequate telecommunication services

Reliable medical system

Lots of different activities

Able to do unique activities

Not very touristic

Allowed to rest

Was safe

Offered wildlife and natural attractions

Could be explored

Source: OTF Group 2002 Tourism Visitor Quantitative Survey n=225

As shown in Figure 7, the third most important expectation from a destination for a traveler19 to East Africa is safety. In the case of a post-conflict country, especially one with such a recent and brutal history, safety was an issue of the Rwanda tourism strategy development process from the outset. Fortunately for the industry, the in-country reality was far different from that perceived by the international market.

As part of the original strategy formulation process in 2002 and the revision in 2007, visitors to East Africa were asked about their perceptions of safety of Rwanda compared to its regional competitors.20 The results of this comparison are shown in Figure 8. What is most striking is Rwanda’s reversal in the rankings— it went from being last in 2002 to first in 2007 and is now seen as the safest destination in East Africa according to respondents.

Much of the rapid change in the safety perception of Rwanda can be traced to two issues. First, the post-conflict status carried forward until a measurable number of tourists visited the destination and gave confidence to the industry that the destination was safe. Second, the post-conflict political solution created a slowly democratizing, benevolent authoritarian government of Paul Kagame. One of Kagame’s primary efforts to quell the resumption of conflict was to forcefully crack down on petty crime. As a result, the country has enjoyed a much lower level of corruption, petty crime and violent crime than the regional average.

18 The Target Visitor’s Experience is an OTF Group framework used to structure customer research. This research takes the form of quantitative surveys, focus group guides and interview forms. 19 The primary research consisted of two different segments, Individual Travelers and Channel Partners. OTF surveyed 225 visitors to East Africa and 23 channel partners. 20 This was a follow-up survey to the original 2002 survey. It did not differentiate between high value and other tourists.


Figure 8. Rwanda and Competitors Visitor Safety Ratings—2002 and 2007

Visitor Agreement Ratings:

"Is safe"5.5

5.1

4.0

4.7

4.9

4.0

5.6

4.4

1 2 3 4 5 6 7

Tanzania

Kenya

Rwanda

Uganda

Agreement rating

20022007

Source: OTF Group Tourism Channel Partner Survey, January 2007, n=90OTF Group Tourist Survey, January 2007 n=176

Channel Partners.21 As noted above, channel partners serve as gatekeepers—a critical source of clients for tourism destinations. For high value and non-price sensitive tourists, these individuals and companies market new destinations, organize tours and guarantee that their clients partake in a superior experience. As for the visitors themselves, security remains one of the most important factors in their decision-making process. In addition to safety, unique nature and products rank highly for this group. To remain competitive in an increasingly crowded marketplace, channel partners have to offer clients progressively sophisticated experiences—the one they sold last year likely has been commoditized and now must be replaced by something new and unique for which their discerning customers are willing to pay a premium. The importance of constant innovation and upgrading is true for channel partners marketing all destinations and it has to inform Rwanda’s approach to marketing and relationship management.

Other segments. The original TWG strategy took a portfolio approach to targeting visitor segments. In addition to the eco-travelers, the industry also sought to engage explorers (cultural travelers), individual business travelers and a grouping of other visitors including visiting friends and relatives and conference travelers. Figure 10 illustrates these segments, proposed experiences, and estimated yield and receipts.

As noted above, except for eco-travelers, Rwanda met with limited success in creating experiences to serve all of these customer segments. This failure stems mainly from the lack of institutional and human capacity in the sector to design and execute a full tourism strategy. A key component of the 2007 Strategy Revision is the focus and cross-sell approach, which makes the primate product the core offering and adds other experiences once a visitor is in Rwanda to visit the gorillas. The TWG and OTF also intend to revisit ways to effectively activate the explorer segment and mobilize the industry to fully exploit the emerging international conference market.

21 Channel partners include international tour operators, travel agencies, wholesalers and destination management companies.


Figure 9. Channel Partner Selection Criteria for African Destinations22

What were the top three reasons that made you consider this country [Top 1]

27% 27%

18%

9% 9% 10%

0%

10%

20%

30%

Security Nature Product InfrastructuresExperience Other

What were the top three reasons that made you consider this country [Top 3]

22% 17% 15% 12% 7%

27%

0%

20%

40%

60%

80%

Infrastructures Nature Security Product Experience Other

How important was it for you that the destination…

4.0

4.0

4.4

4.5

5.4

5.6

5.7

6.0

6.0

6.4

0 1 2 3 4 5 6 7

Approached by Officials

Great incentive

Part of a Larger Deal

Friend or Competitor Ref

Travel mags and medias

Expert recs

Customer Demand

Innovative Product

Great Reputation

Unique Nature

Figure 10. Rwanda Projected Tourism Portfolio (2010)

2010 Receipts Segment Experiences Visitor

Number Spend per

Day Length of

Stay Segment Receipts

Eco-travellers • Primates—“Introductory Primate Certification” • Ornithology—“Nyungwe Name Your Bird” • Other—“Butterflies and Flowers Discovery”

24,500 $320 7.0 $55

Explorers • Culture—“Five Centuries of East African Civilization” • Education— “Intore Dance Workshops” • Interest—“Conflict resolution and Gacaca”

17,500 $220 8.0 $31

Individual Business Travelers

• Business/leisure—“Safe Haven in East Africa” • Relaxation—“Kivu Riviera Excursion”

14,000 $140 5.0 $10

4 Other Segments

• Visiting Friends & Relatives (VFR), Meetings, Incentives & Conferences (MICE), other individual and group travelers

14,000 $25 9.0 $3

Total Average Average Total

Overall Metrics (2002 – 2010) 70,000 $200 7.0 99.0

22 Incentives include benefits to the channel partner and its clients. These include bulk discounts, familiarization (FAM) trips, exclusive services to clients.


RWANDAN TOUR OPERATORS: A SMALL BUT DYNAMIC FORCE IN THE INDUSTRY This group has shown remarkable progress in the past six years. In 2001, the typical Rwandan tour operator was a relatively unsophisticated player selling access to gorilla permits with limited add-ons or selection in terms of other experiences, accommodations, or dining. The TWG understood the important role local tour operators could play in overcoming the perception that Rwanda was unsafe for tourism because they could influence tourists’ movements and experiences to ensure they would have a safe and unique experience.

With the explosion of activity in the tourism sector, this segment of the value chain has seen tremendous growth and the range of products and levels of service have expanded to encompass all of Rwanda’s tourism product offerings. Today, the number of high-end tour operators has grown to about 15 from approximately 6 in 2001. These firms still tend to be small, usually fewer than ten employees including booking agents, drivers and guides.

Barriers to entry into this segment of the market are quite low with minimum requirements a 4-wheel drive vehicle, a small office, access to gorilla permits and, perhaps, relationships with regional or international channel partners. These low entry barriers have created problems of professionalism in the sector and despite the great strides made by many tour operators, complaints still exist about professionalism and training for tour operators and their employees. (To date, there are no plans to provide training for this group.) An excellent example of a tour operator who provides a high-quality experience for Rwanda’s core eco-traveler tourists is Primate Safaris, profiled in Box 2.

BOX 2: PRIMATE SAFARIS – A RWANDAN SUCCESS STORY Primate Safaris, a high-end tour operator has been an active member of the Tourism Workgroup since its inception in 2001. The benefits of the value chain approach to tourism for this firm have been enormous. Starting with a one-room office in a hotel, the company has expanded to become one of the largest tour operators in Rwanda with multiple customized vehicles and strong relationships with international tour operators.

TRAVEL AGENTS’ LIMITED ROLE Travel agents currently play a limited role in Rwanda’s tourism sector, as their main function is the booking of international and domestic airline tickets. Domestic travel agents play a limited role in the international tourism market as most international visitors make their travel arrangements through channel partners located abroad. Usually, it is left to local agents to make last minute ticket changes.

THE REVIVAL OF TOURISM HAS CREATED A BOOM IN HIGH-END HOTEL CONSTRUCTION In 2001, the hotel industry in Rwanda was optimized to serve the business and NGO market. Rwanda’s post-conflict economic environment meant that there was little or no foreign direct investment and expensive capital. Although two hotels operated under foreign ownership, upgrades were long overdue and the few international tourists who came complained regularly about the quality of the rooms and service. Since then, nearly 350 high-end hotel rooms have been built or renovated all over Rwanda and in 2007 the hotel industry was booming. To overcome the early reticence of private investors to build new high-standard hotels, the government stepped in to finance the construction of the Serena Hotel in Kigali and began the design phase of a lodge in Nyungwe Forest. Although hotels should be financed and built by the private sector, the government initiated filled they gap left by a market failure, The rapid privatization of these state-owned assets validates the government’s original intervention while putting responsibility for the hotels back in the hands of private firms. Of particular interest is the handful of high-end regional tour operators who have built or plan to build boutique eco-lodges that accommodate 8 to 12 people, but charge from US $350 to US $600 per person per night. These hotels are making a significant positive contribution to the tourism industry’s yield targets.


Although these hotels are high-end, most have only about 30 employees, a significant percentage of who are hired locally. The main opportunity for MSEs to benefit from the start-up and success of these hotels is through integration into the value chains in the form of input supplies such as food, handicrafts, community tours and other goods and services necessary to create an experience that meets the expectations of Rwanda’s targeted tourist segments.

Figure 11. High-end Hotel Construction Since 2002

Name Location Star Rating Number of Rooms

Kigali Serena Kigali 5 104

Kivu Serena Gisenyi 4 105

Akagera Lodge PNN 4 58

Virunga Lodge PNV 5 8

Gorillas Hotel Kigali 3-4 31

Gorillas Nest PNV 4 40

Total Rooms 346

RESTAURANTS STILL FACE SERIOUS HEALTH AND HYGIENE CHALLENGES Although there are numerous local restaurants located in Kigali, the options decline quickly outside the capital, and very few anywhere in the country meet international standards for health and hygiene. Most international tourists eat the majority of their meals either in their hotels or lodges or as picnics supervised by the tour operator. There are exceptions to this rule. Although relatively few, some enterprising Rwandans, members of the diaspora and even foreign investors have begun to invest in restaurants that target primarily the local expatriate crowd, but are also popular with international tourists. These range from high-end African, Indian, and continental cuisine restaurants to coffee and sandwich shops. For entrepreneurs willing to take the risk, the payoffs can be attractive—a recent US $100,000 investment23 into a restaurant is likely to return a multiple of this investment in just one year. An emerging issue for restaurants and hotels is local procurement of food supplies. For the moment, the majority of food and beverages is imported because of Rwandan firms’ inability to comply with the stringent food safety standards enforced at high-standard establishments. An excellent example of this is the use of imported tea bags at the Kigali Serena because Rwandan suppliers are unable to provide the tea bags in sealed plastic sachets. In a country where tea is one of the top exports, this seems inexplicable.

HANDICRAFT PRODUCERS’ DIFFICULTY IN PRODUCING TO INTERNATIONAL SPECIFICATIONS Local artisans are important value chain participants. They have the potential to increase the yield of tourists and much of the income from handicrafts goes to the poor. Despite this potential, the handicrafts sector is underdeveloped in Rwanda. With the exception of a few groups that have developed linkages with dynamic entrepreneurs, some local artists and the ubiquitous traders who sell Congolese art, the selection of handicraft products is limited and quality is variable. Various NGOs and the GoR are making efforts to mobilize this sector to better serve international tourists and export markets for products like traditional sisal baskets, where Rwanda has a competitive advantage. To date, the most successful model for quality control and business success in handicrafts is one in which savvy exporters actively manage the quality of large numbers of producers. What is critical here is that

23 Business 2.0 Online, August 1, 2007


the exporters reject sub-standard products and pay a premium for high quality work, in effect using cash to transmit market signals.

IMPROVEMENT IN TRANSPORT OPTIONS FROM THE MEDIUM TO HIGH-END Once in Rwanda, tourists must rely on local transport. For the core market segment, most tour operators have purchased specialized safari vehicles from Kenya that can move their clients in comfort and safety. Taxi drivers are often the country’s first tourism ambassadors when someone arrives in Rwanda. The past five years have seen a dramatic improvement in the quality of vehicles and service thanks to the entry of professional taxi fleets established by private operators. Taxis that operate as part of these companies are new, dispatched by mobile phone and normally have English and French speaking drivers. For the independent traveler, hiring a car remains a challenge. There is currently no reliable car rental service that meets the convenience and durability needs of international tourists.

BUSINESS ENABLING ENVIRONMENT

POOR BUSINESS ADMINISTRATIVE ENVIRONMENT Although improving, the poor business administrative environment keeps most firms in the informal sector. According to an International Finance Corporation (IFC) study, the majority of micro and small, as well as some medium-sized businesses in Rwanda—an estimated 900,000 firms—are unregistered and operate in the informal sector. Although business registration procedures are well-designed and continually improving—the time required to register a business recently fell to 16 from 21 days—the requisite capital for registration and licensing fees is prohibitively high; estimated at 315 percent of per capita income.24 Additionally, although the GoR lowered its corporate income tax rate to 30 from 35 percent, small businesses find the tax regime to be overly burdensome. Finally, many MSEs have difficulty accessing information on licensing requirements and meeting those requirements. When coupled with weak government enforcement, these factors provide disincentives for many firms to enter the formal market.

The pervasiveness of informal market activity in Rwanda has diverted resources from the official sector, contributing to a loss of revenue for government and, ultimately, impeding economic growth. Because the business practices of these firms have adapted to an unregulated environment, their potential for scaling up remains limited. Stuck in the informal sector, many enterprises lack access to finance, because most financial institutions are hesitant to lend to unregistered businesses that don’t have clear performance histories. Thus, the legal and regulatory framework in Rwanda has undermined the growth of a large proportion of MSEs operating in the country.

INTRODUCTION OF COMMERCIAL COURTS Rwanda’s lack of specialized commercial courts results in an inability to enforce property and contractual rights or to process credit-related litigation. On a positive note, the government approved the creation of commercial courts in December 2006, which should build investor confidence in the business environment and encourage growth. Unfortunately, this court system is not yet operational and the justice system suffers from a lack of magistrates qualified in commercial and financial matters. The absence of functioning commercial courts has caused serious frustration for private sector actors and created additional costs of doing business.

24 This figure is relatively low for the region; Burundi stands at nearly 10,000 percent of GDP according to recent World Bank Doing Business Surveys. Despite this strong performance, even this level of fees (approximately US $600) is prohibitive for smaller MSEs.


RECENT PROPERTY RIGHT REFORMS There has been much ambiguity concerning land rights, which have been governed under the dual legislation of customary and written law. All land has been state-owned, which individuals and firms have leased from the government, a significant obstacle to potential investors wanting to acquire land and develop sites. Additionally, occupants cannot use land as collateral, because they do not own title. To remedy this situation, the Ministry of Lands, Human Resettlement and Environmental Protection initiated a revised land-use bill in May 2005 that establishes a single law to govern land rights that protects property rights, formalizes the process of collateralizing through a titling system and cadastres registry, and encourages private investment.

IMPROVING MARKETS AND SERVICES THAT SUPPORT TOURISM

FINANCIAL INSTITUTION REGULATION IMPROVEMENT THROUGH INCREASING INDEPENDENCE FROM THE GOVERNMENT There have been significant improvements in the regulation and supervision of bank and non-bank financial institutions in the post-genocide period. Policies have been crafted to mobilize savings and enhance investment, including ensuring the independence of the National Bank of Rwanda (BNR) from government interference. In addition, non-performing banks recently have been re-capitalized or liquidated, and a competitive commercial banking system has been fostered by allowing the entry of many regional banks into the market. Although banking regulations are now in line with international standards, BNR supervision and enforcement still needs to be strengthened as governance, risk management, and internal controls remain weak in most financial institutions.

SHIFT FROM COLLATERAL-BASED LENDING TO MORE FLEXIBLE METHODS IN THE FINANCIAL SECTOR Rwanda’s financial services system is shallow and dominated by six commercial banks, a credit cooperative network (Union des Banques Populaires du Rwanda), a few independent microfinance institutions, a state-owned bank (Banque Rwandaise de Développement) and a mortgage bank (Caisse Hypothécaire du Rwanda). The provision of credit is concentrated in Kigali and primarily channeled towards trade, regional business tourism, property development and manufacturing. Banking systems are highly collateralized and as such, smaller firms are more credit-constrained than larger firms. Financial institutions offer mostly only basic savings and loan products, and maturities tend to be short, generally not exceeding three months for savings and one year for loans. The IFC is developing leasing windows in two commercial banks, which have yet to become operational. This is a positive development and will be attractive for tour operators and transport companies seeking to upgrade their vehicle fleets and perhaps purchase boats.

About 30 percent of bank deposits are from aid agencies, so the financial system is vulnerable to a decline in aid flows. The commercial banking sector is also burdened by non-performing loans, which constitute 34 percent of outstanding debt and result mainly from losses incurred during the genocide and through imprudent investment in new sectors. The high non-performing loan rate has increased risk-aversion in Rwanda’s banks and forced them to increase interest rates to cover these non-productive assets. Studies show that clients need long-term loans and equity finance, lower-cost financing, a wider range of financial services, and more relaxed collateral requirements.

LACK OF BDS, A CRITICAL NEED FOR PRIVATE SECTOR DEVELOPMENT The BDS industry in Rwanda is generally under-developed and the problem is even more acute for tourism-focused enterprises. OTF conducted both a survey to assess MSE training needs25 and an audit of Rwandan BDS providers. A

25 “Rwanda SME Portrait”, January 2002, OTF Group.


comparison of the BDS audit and SME portraits suggests that there is a mismatch between provider offerings and MSE needs.

Figure 12. BDS Mismatch26

• SMEsSMEs • BDS Providers BDS Providers

• Training is main assistance being provided through existing projects

• Focus on rural associations and cooperatives

• BDS providers lack resources to satisfy demand

• BDS providers are often project funded and limited in time

• BDS providers lack coordination among themselves

CurrentOffering

UnmetNeeds

• SMEs are often not aware of existing initiatives

• SMEs struggle to find answers to all questions with one provider

• SMEs want competent business advisors going the extra mile at provincial level

• SMEs are getting some training, assistance and financing help

• Offering is often concentrated in Kigali

• Information is really scarce and a few players “double-dip”

The main issue here is that the vast majority of BDS providers in Rwanda are fully or partially supported by government or donor funding, which reduces their responsiveness to the market. Given the preponderance of donor activity in the sector, few MSEs have developed a willingness to pay full price for key business services with the exception of access to finance (business plan writing) and specific IT training. In the case of tourism, the problem is even more acute with only a handful of tourism and hospitality training institutes providing training that corresponds to the domestic and regional market and not necessarily the needs of the high-value international tourist market.

THE TOURISM BOARD’S KEY ROLE IN BUILDING THE COMPETITIVENESS OF THE SECTOR As illustrated in the graphic below, ORTPN, the Tourism Board, has dominated the ownership and implementation of the Rwanda tourism strategy. In order to create a more sustainable leadership base for the sector, other institutions should accept key roles and responsibilities critical to the success of the sector. These roles are described below. Moving forward, this revised tourism strategy should serve as the inspiration for those involved in the tourism sector to design their initiatives. The strategy should promote coordination and focus and encourage innovation and creativity to improve sector performance.

26 “Rwanda BDS Industry Audit”, September 2005, OTF Group.


Figure 13. Mapping and Gap Analysis of Rwanda Tourism Institutions27

Hotels & RestaurantsHotels &

Restaurants

Travel Agents &

Tour Operators

Travel Agents &

Tour Operators

Tourism ChamberTourism Chamber ORTPNORTPN

MINICOMMINICOM

MIJESPOCMIJESPOC

International NGOs

International NGOs

Private Sector

Public Private Partnership (PPP)

Public Sector

Taxi Association

Taxi Association

Tourism Working Group

Tourism Working Group

National MuseumNational Museum

• Rwanda Bureau of Standards

• RIEPA

• Rwanda Bureau of Standards

• RIEPA

Too strong

Effective

Weak

Legend

ORTPN is currently the public sector “guardian” of the tourism strategy.Leadership will hopefully begin to be shared with the private sector via the Tourism Chamber.

The Tourism Chamber is the private sector apex body for Rwanda’s tourism sector.Although new, the Chamber is eager to partner with ORTPN and other partners to upgrade the tourism industry.

For the past 5 years, OTF Group under the aegis of the RNIC has acted as the facilitator of the Rwanda Tourism Working Group.Although the TWG is a useful forum, it may need to become more formalized to facilitate a transition to local leadership.

Rwanda’s Office of Tourism and National Parks (ORTPN). Since 2002, ORTPN has been the guardian of the tourism strategy and taken the lead in activities ranging from investment to marketing. Much of this involvement has been because of a shortage of private sector leadership to take on essential tasks such as investment in key hotels,28 targeted joint marketing campaigns and active public-private dialog, and problem solving around critical issues. The desired result is that ORTPN should take a less active role in activities that should clearly be private sector-driven and at same time remain actively involved in issues such as conservation, the environment, adherence to high value standards and linkages to local communities that could suffer if purely market forces were left to run the sector.

National Tourism Chamber of Rwanda. Until very recently, tourism’s private sector was relatively disorganized. However, with the creation of the National Tourism Chamber of Rwanda (Tourism Chamber) in 2006 with the support of the Private Sector Federation (PSF),29 this situation is improving. The creation of this body should provide tourism’s private sector with a unified voice to engage the public sector in productive debate and enable the industry to plan and implement activities that benefit the entire sector—targeted training programs for members, an issue-specific seminar series, and targeted policy reform proposals to improve the tourism business environment. The Tourism Chamber is broadly representative of the tourism industry because of mandatory membership and dues requirements. Owing to the nascent nature of the institution, it is still seeking ways to create value for members and stakeholders.

27 Acronyms: RNIC – Rwanda National Innovation & Competitiveness Project (OTF’s project name); MINICOM – Ministry of Commerce; MIJESPOC – Ministry of Culture 28 As noted above, the government became an investor of last resort in the Kigali Serena, Kivu Serena and an eco-lodge at Nyungwe. These properties have since been privatized, per the original plan. 29 The Private Sector Federation (PSF) is an apex organization for Rwanda’s private sector. It is comprised of nine industry chambers with various sub-associations. It currently receives funding from member dues, the government and international donors.


Rwanda Investment and Export Promotion Agency (RIEPA). The line between the role RIEPA and ORTPN play in the development of the sector has been unclear to date. Although RIEPA has a clear mandate to intervene in the sector when it concerns exports and attracting investment, in practice both institutions are actively involved in promoting the sector. Clearly defined roles and responsibilities would help create a broader leadership base for the sector and allow institutions to focus on their strengths rather than over-extending their limited human, institutional and financial resources.

Rwanda Bureau of Standards (RBS). Tourism standards for all sector players are a critical first step in developing targeted and rational training programs for the industry. Given its technical expertise in the field, the RBS should take a lead role in creating these standards in consultation with the Tourism Chamber. Ideally, the RBS should ensure that the standards are technically sound and conform with best practice elsewhere in the region and the world, while the private sector should have a say in how well the standards apply to the Rwandan context and the agreed upon high-value strategy.

Partner institutions. ORTPN will continue to play a coordinating role for government and donor institutions such as MINICOM, MIJESPOC, international NGOs and the National Museum as the ability of these institutions to take a leadership role in the sector in the short- to medium-term is doubtful.

BUILDING PRODUCTIVE HORIZONTAL AND VERTICAL RELATIONSHIPS The success of Rwanda’s tourism industry depends on the horizontal and vertical collaboration of all industry participants; rebuilding trust between these actors is a key component of the reconciliation process. No single firm or group firms has the skills or resources required to continue driving the transformation of the sector from international pariah to emerging high-value primate destination in Africa. Examples of collaborative efforts to date are detailed below.

Tourism Workgroup. A critical piece of the OTF Group approach to upgrading the competitiveness of the tourism sector was has been the creation of the public-private sector Tourism Workgroup to serve as a forum for debate, information sharing and vertical and horizontal collaboration. Initially, TWG’s primary role was as a sounding board for the development of the original tourism strategy. Group members provided the OTF tourism advisors with a rich source of information about the realities of doing business in Rwanda and they also validated the market research and benchmarking data that came out of OTF’s analysis of the global tourism industry. The TWG also supported the entire strategy, which was easy for them to do given that they had been intimately involved in the process from the beginning.

ITB Attendance. ITB is one of the world’s largest tourism fairs. Starting in 2003, the TWG facilitated the collaboration of representatives of the public and private sectors and most value chain functional areas to ensure an effective presence at ITB. Progress has been astounding. Beginning with an exploratory mission in 2003, Rwanda successfully upgraded its performance over the next four years and won the coveted honor of Best African Exhibitor in 2007; beating out regional tourism heavyweights such as Kenya and South Africa. This success and the broad-based collaboration that made it possible has catalyzed the sector to ensure that its marketing success is matched in-country by a world class product. The vast majority of the “Rwanda Tourism” stand and PR expenses for ITB attendance have been paid by the Rwandan government. Private operators pay their own expenses and those for their individual stands if they choose to invest beyond the general Rwanda stand. As the country has built its profile, more and more local tourism professionals have made the decision to attend ITB, creating a virtuous circle of active participation and “buzz” around Rwanda’s offerings.

Tour operators have developed good relationships with local hotels to offer attractive packages. Tour operators in Rwanda have focused on one product only: the mountain gorillas. The gorilla trekking experience is rather standardized as ORTPN controls this crucial part of the event and essential to success has been the ability of


most tour operators to arrange flawless and seamless local logistics for visiting gorilla trekkers—they have become masters at negotiating rates with local hotels.

Rwanda’s tourism private sector has come together to provide their perspective on decisions affecting the overall direction of tourism in Rwanda. In positioning itself on the world stage, the Rwanda tourism industry has made several choices about not only what to do but also what not to do. This is illustrated by ORTPN’s decision to raise gorilla permit prices and the refusal by industry players to allow the charter line, Point d’Afrique, to bring masses of tourists to Rwanda. In both cases, the tourism private sector came together to articulate a common position and express it to the Tourism Board and government. While much of this activity has happened informally in the past, the creation of the Rwanda Tourism Chamber has formalized this form of collaboration and it has vowed to address the capacity gap by facilitating a common solution to training issues.


IV. VALUE CHAIN FINDINGS FROM SUCCESS TO SUSTAINABILITY The renaissance of Rwanda tourism appears to be a success to date, although steps need to be taken to ensure its sustainability. Many of these gaps are captured in the graphic below. Most stakeholders agree that the choice to pursue high-value tourists (versus a mass-market strategy) is the correct choice for Rwanda given the limitations of its tourism destinations to accommodate large numbers of low-yield tourists. To date, the strategy is on target in terms of overall receipts, but this early performance is driven almost exclusively by gorilla tourism; the overall improvement in the perception of Rwanda by the international marketplace; and not by the development of new experiences that would entice high-value tourists to spend more time and money in the country.

Figure 14. Gap Analysis of Rwanda Tourism’s 7 Forms of Capital30

Rating Good Medium Needs

A second factor that may likely contribute to a drop in performance is the lack of training. Although there has been significant investment in the sector, almost all of it has been focused on hard assets such as hotels, restaurants and vehicles. To deliver a high quality experience, investment in training, especially in the area of customer service is

30 Abbreviations: PNV – Parc National des Volcanoes or Volcanoes National Park, home to the mountain gorillas. PNN – Parc National de Nyungwe or Nyungwe National Park, an afro-montane forest in south-west Rwanda that is home to 13 species of primates, numerous birds and orchids.

Cultural

Human

Knowledge

Institutional

Financial

Man-made

Natural wments Endo

Natural Endowments

• A long-term vision for the tourism sector is in place.

• A few small, privately-funded trading

institutes have been created. • The tourism sector has accumulated

excellent primary knowledge of customers through research, trade fair attendance and interaction with customers.

• ORTPN has taken a strong leadership role in the sector.

• Rwanda Tourism Chamber formed to organize the private sector.

• Financing of large, relatively well established hotels

• Government investment into hotels (i.e. Serena and Nyungwe)

• High-end hotels have been completed in Kigali and the PNV are under construction in PNN.

• Conservation programs have succeeded in protecting the gorillas and other primates.

• Awareness of the gorillas is high in the international community.

• Public recognition of tourism professionals. • Enrich national appreciation for eco-tourism, especially

through local linkages to local communities. • Standards for hotels, restaurants and other tourism

service providers • Large-scale efforts to achieve standards.

• Disseminate knowledge to new entrants in the tourism sector.

• Capacity of the Tourism Chamber to effectively respond

to, act upon the needs of the private sector. • Widespread lending to tourism SMEs and micro-

enterprises such as tour operators and handicraft producers.

• Reliable boat transport on Lake Kivu • Upgrade Lake Kivu road • Awareness-raising for Nyungw and its natural assets. e

Improvement Critical Gaps Accomplishments Rating

Hig

her

F

Low

er

There has been progress, but critical gaps remain in training and financing of the sector.


required to justify Rwanda’s relatively high price point in the international tourism marketplace. Attempts to address this issue and the associated challenges are discussed below.

A third concern is the lack of private sector participation and leadership. Although the Rwanda Tourism Strategy has had the unfailing support of the Government of Rwanda and ORTPN, it is now time for the private sector to play an equally important role in developing the sector. Concrete examples include private sector investing in key components of the strategy, engaging in joint marketing of Rwanda and working with ORTPN on developing new tourism experiences, both to defray costs and send a unified message concerning Rwanda’s tourism offerings.

A final emerging concern in the tourism sector is the issue of linkages with the local communities. Various parties from the public, NGO and private sectors have expressed concern about the impact of tourism on communities surrounding the national parks that are directly impacted by tourism and should share in its benefits. As explained at the end of this section, a recent study did find that some income is flowing to local communities, but not as the result of an informed strategy to enhance the well-being of the poor.

To address these gaps and allow the sector to realize its full potential, the TWG developed a revised 2007-2012 action plan. This plan is divided into two major categories: products and cross-cutting areas. The estimated cost for implementing the entire plan is US $9.7 million in public, private and donor funds over five years. Key initiatives include building a Discovery Center and eco-lodges in select areas to complete the primate product, defining “add-on” products such as birding and orchids, and a targeted marketing campaign toward channel partners to improve the relationship between Rwanda’s tourism industry and these important gatekeepers of international tourists.

Figure 15. Action Plan for Rwanda Tourism’s Strategy Revision

Rwanda Tourism Revision – Preliminary Action Plan

Prod

ucts

Prod

ucts

Prod

ucts

Cros

scut

ting

Area

sCr

ossc

uttin

g Ar

eas

Cros

scut

ting

Area

s

PrimatePrimatePrimate

• Build PNV Discovery Center• Complete PNN eco-lodge and upgrade Gisakora

accommodations.• Engage in targeted marketing campaign to select

channel partners• Upgrade capabilities of PNN guides• Develop the Lake Kivu experience with investment in a

small lodge in Kibuye and privately owned boats.

• Build PNV Discovery Center• Complete PNN eco-lodge and upgrade Gisakora

accommodations.• Engage in targeted marketing campaign to select

channel partners• Upgrade capabilities of PNN guides• Develop the Lake Kivu experience with investment in a

small lodge in Kibuye and privately owned boats.

Add-onsAddAdd--onsons

• Eco-tourism add-ons: conduct market research to identify attractive segments for Rwanda’s potential birding and orchid products.

• Conference Product– Define Rwanda’s conference tourism product and

its positioning in the market.– Facilitate the creation of high standard professional

conference organizers to provide turnkey conference solutions.

• Eco-tourism add-ons: conduct market research to identify attractive segments for Rwanda’s potential birding and orchid products.

• Conference Product– Define Rwanda’s conference tourism product and

its positioning in the market.– Facilitate the creation of high standard professional

conference organizers to provide turnkey conference solutions.

TrainingTrainingTraining• Develop clear set of standards for tourism actors (hotels, restaurants, tour operators, etc)• Engage short-term training consultants to move towards standards• Accelerate construction of at least one major tourism training school

• Develop clear set of standards for tourism actors (hotels, restaurants, tour operators, etc)• Engage short-term training consultants to move towards standards• Accelerate construction of at least one major tourism training school

Private Sector Participation

Private Sector Private Sector ParticipationParticipation

• Awareness raising and trust building events between Tourism Chamber & Banking Assoc.• Enforce existing import tax regulations for the import of tourism related equipment• Develop joint marketing programs and materials between ORTPN and Tourism Chamber

• Awareness raising and trust building events between Tourism Chamber & Banking Assoc.• Enforce existing import tax regulations for the import of tourism related equipment• Develop joint marketing programs and materials between ORTPN and Tourism Chamber

Pro-Poor LinkagesProPro--Poor LinkagesPoor Linkages• Create destination level partnerships to encourage local community participation in tourism• Integrate local firms & producers into hotel and restaurant supply chains• Provide BDS support and financing to handicrafts producer

• Create destination level partnerships to encourage local community participation in tourism• Integrate local firms & producers into hotel and restaurant supply chains• Provide BDS support and financing to handicrafts producer


VISION AND STRATEGY CONSTRAINED BY LOW INSTITUTIONAL AND HUMAN CAPACITY Almost all stakeholders in the tourism industry believe that the high-value vision and strategy for Rwanda is the correct one. The incentives for all actors in the value chain are clear. For the moment, the gorillas are the country’s most valuable tourism asset. With only 14,000 permits,31 the sector must maximize yield from each tourist who comes to Rwanda. Hotel owners, tour operators, ORTPN and other value chain actors are, for the most part, convinced that they can make more money, build Rwanda’s standing in the global tourism market and minimize environmental impact by targeting visitors who are able and willing to pay up to $600 per day for a unique primate experience in Rwanda rather than backpackers who are trying to get by on $20 per day. Those who may be opposed to this model are normally those who do not understand the yield equation and believe that simply higher visitor arrivals equates with success in the industry or do not have the capacity to cater to high-value tourists. Currently, few people fall into this category and those who do are usually new entrants to the sector.

Achieving agreement on the problems and potential solutions does not seem to be difficult in the tourism industry, but mobilizing these stakeholders to action is a challenge. Those in the tourism sector clearly have moral grounds for recognizing that the success of their industry can contribute to the continuing reconstruction of Rwanda’s economy. Obstacles do not appear to be linked to the root causes of the genocide (i.e., ethnicity), but to a generic mistrust among competing firms unwilling to share non-critical information and the lack of capacity in existing institutions such as the Tourism Chamber, private associations and ORTPN to execute existing plans. The good news is that the Tourism Chamber was formed in 2006; it is a young organization with the potential to mobilize the private sector in the next phase of Rwanda tourism’s upgrade.

TOURISM’S POTENTIAL TO DEFUSE RESIDUAL CONFLICT INCENTIVES As an important source of economic growth and diversification away from a purely agrarian economy, tourism is considered an important element in the ongoing campaign to address the incentives that led to the genocide and to help insulate Rwanda’s economy from commodity shocks. Lingering effects of the genocide remain, even after years of peace and stability in Rwanda, and tourism is particularly vulnerable to public perceptions of safety and security. These elements are briefly described below and further explored in the research and analysis sections.

Public perception of the destination. Although perception of Rwanda as a safe destination is improving, top of mind associations with the country are still of violence and genocide. This image is reinforced by the popular press, media and recurrent security warnings by diplomatic missions in Rwanda. In reality, the security situation is among the best in the region. Visitors to the country experience few problems walking the streets and exploring the country, even in the capital, an increasingly rare phenomenon in Africa.

Economic diversification. As noted in the incentives for conflict, high population density led to less land per capita. In an economy completely reliant on agriculture, this created tension and hostility between haves and have-nots. With the correct vision, strategy and incentives, tourism can create off-farm employment and mitigate some of the effects of population pressure on the environment and avoid enclave tourism situations in which the benefits of tourism for the local population are limited to a few low-paying jobs.

31 This number is currently up to 18,000 because of migration of a few gorilla families from DRC to Rwanda. It is expected that these families will return across the border and leave Rwanda bringing total annual gorilla permits back down to 14,000. This obviously has an impact on the goal of 24,500 tourists which the industry is addressing through product diversification into birding and orchids. Early research shows that these products could attract visitors that stay up to 12 days, so the 2010 target arrivals could be revised downwards because of higher yields stemming from a longer stay in country.


Income inequality. At the macro level, income inequality in Rwanda as measured by the Gini coefficient has risen from 0.47 to 0.51,32 high compared to other countries in the region. This trend indicates that the rich are getting richer, while the poor are getting poorer.33 In the context of the root causes of conflict, more focus should be put on pro-poor growth in tourism by creating more opportunities for direct employment, improving the quality of souvenirs to enhance incomes, harnessing ad hoc charitable gifts and integrating farmers into the supply chains of local restaurants and hotels. Recent research highlighted in Figure 16 shows how this income currently reaches the poor and could be the basis for developing strategies to enhance the their participation in the sector and further reduce incentives for violence.

Figure 16. Tourist Daily Spending by Segment and Recipient

13

$120

$30 $44 $37$14

$56$42

$44

$11

$12$7

$11

$25

$19$18

$19

$186

$152

$18

$75

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

Holiday,Upmarket

Business Holiday,Budget

Other VFR

Dai

ly s

pend

, US

$

Public Private Less Advantaged General Society

*Source: “Maximizing Tourism’s Contribution to Poverty Reduction”, Michael Grosspietsch, 2007.

All other16%

Drivers19%

Taxi6%

Souvenirs59%

Holiday, Up-market spend to less advantaged

populations

% of total to less advantaged 4.5% 5.2% 8.9% 8.8% 11.9%

32 Rwanda’s Economic Development and Poverty Reduction Strategy (EDPRS), draft July 2007, Ministry of Finance. 33 Agricultural value-added, per worker growth rates equaled or exceeded overall per capita growth rates until the early 2000s, indicating that wealth was relatively well distributed. Beginning in 2003, this same figure began to lag per capita GDP growth rates (Source: World Bank WDI database). Along with the population density figures cited above, this may indicate that land in Rwanda is approaching maximum productivity without significant investment into modernization. One rationale for an intervention in tourism is to create opportunities for off-farm rural employment to reduce dependence on agriculture to create jobs, wealth and prosperity.


V. STATEMENT AND ANALYSIS OF THE RESEARCH QUESTIONS This case study focuses on testing two of eight possible research questions stipulated as part of a series of AMAP-funded case studies concerned with accelerating the transition from conflict to growth in post-conflict settings:

• How can value chain analysis and the value chain framework help us identify and understand the major opportunities for upgrading and the driving constraints to market growth exacerbated by or resulting from conflict?

• How can stakeholders be encouraged to adopt longer-range “win-win” rather than short-term “win-lose” strategies, particularly in shortened decision-making time horizons?

To facilitate the research, the team disaggregated the two main research questions into sub-questions to facilitate the research. They are explored in-depth below.

RESEARCH QUESTION 1 How can the VCA and value chain framework help us identify and understand the major opportunities for upgrading and the driving constraints to market growth exacerbated by or resulting from conflict?

SUB-QUESTION 1A Is a VCA the best tool for identifying structural constraints in post-conflict environments?

Post-conflict environments present at least three simultaneous challenges.

• First, if the population is not actively participating in the economy, a key conflict driver often remains. This argues for a grass-roots focus on employment and MSE support.

• Second, there is a need to rebuild or create the enabling environment necessary for a society and economy to function—behavioral norms, transparent policies, and consistent enforcement are the glue that binds a society.

• Finally, the success of either of the first two challenges depends on the support of the other—societies cannot exist without engaged participation and citizens will not commit to the social contract without trust in the systems that provide the benefits of participation.

VCA offers the best opportunity to simultaneously address these three fundamental challenges. This statement does not discount the incredible value that can be generated by either FL or EE interventions; it merely argues that VCA is the more holistic solution and it can generate sustainable results and contribute to more effective firm level or enabling environment designs.


Figure 17. Relative Merits of FL, VCA and EE interventions in a Post-Conflict Environment34

Enabling Environment

Return on Donor Investment

Direct Impact on Poor/MSEs

Industry synergies increase impact

across wide range of firms

Post-Conflict Importance

Ability to affect regulatory and policy change that impacts entire

economy

Noscale

Institutions and Rule of Law build confidence through precedent. The

inability to accelerate this trust building argues for early EE effort.

“QuickWins”

Supports rapid restart of industries,

trust building and prioritization of interventions

using actual operations

None in short term

Qualified TA with expertise and access to resources can create substantial

improvement at the firm and community level

A VC-level approach pushes the larger firms to support rapid restart of MSME

feeder firms bycreating demand

ValueChain

FirmLevel

Sub-point 1A.i: The VCA provides a holistic view of structural constraints facing an industry by mapping the entire industry and its stakeholders.

A significant value of the VCA is that it looks holistically at the “range of activities and services required to bring a product or service from its conception to its end use…”35 This approach casts a substantially wider net than either a FL or EE approach. In the context of Rwanda tourism, the VCA, identified and addressed at least three factors that would have been missed with either an FL or EE focus alone.

1) The VCA clearly identified the level of inter-firm cooperation and coordination that existed in the industry to set a baseline for improvement. The creation of the TWG at the inception of the process brought together a wide range of vested interests in the industry that represented the full range of domestic value chain partners (hotels, guest houses, restaurants, transport, activity providers) as well as vested parties from government, community representatives interested in increasing access to the tourism industry, and NGOs and donors providing funds and technical assistance. This initial group created three cooperation and coordination outcomes that would have been either more difficult or not addressed by a FL or EE approach.

A. The TWG reflected a broad range of voices that represented the greatest knowledge base of historical tourism activities and data existing in post-conflict Rwanda.

B. The group represented a broad spectrum of, and outreach to, all Rwandans interested in rebuilding the tourism industry. It brought together individuals who had formerly not self-identified as entities that could coordinate for mutual advantage and it augmented the capabilities of ORTPN, an institution that was ill-equipped to take a full leadership role in the strategy formulation process due to a lack of knowledge and institutional capacity.

C. Finally, this group allowed the project implementing the VCA with the tourism industry to simultaneously engage the broadest possible constituency, while also allowing focused project efforts and participant self-selection to create a powerful, and driven cluster workgroup that could study and begin to

34 Although EE interventions may have a high return on donor dollars invested, the impact on MSEs is limited in the short-term. Value chain specific EE interventions can help an industry succeed, but it must be linked to actions at the value chain and firm level as well. 35 USAID – Value Chain Approach to Poverty Reduction


solve complex problems by creating partnerships (government/private sector and national/international partners) that would lead to new and productive relationships to build a competitive and equitable model of tourism for all stakeholders.

2) The TWG became the de facto trusted information repository and clearing house able to quickly achieve a baseline of data which could help justify all positions, decisions and actions. This “democratization of data” was a key component in the effort to overcome a lack of trust that existed not only as a result of the recent conflict, but because of a longer history of controlled and asynchronous information within the industry and society at large. While the information gathered during the secondary research stage of the value chain study could easily have been replicated as part of a robust FL- or EE-based effort, the sharing of the data and the period of open debate and dispute leading to a dataset everyone committed to accepting as accurately reflecting reality would not have been completed. This agreement on the underlying data was critical to the later stages of the value chain effort, which required commitment and investment based on the group’s decisions.

Ever since the strategy was developed and ratified by the Cabinet to ensure government support, the TWG has played an important role in implementation. All industry strategic plans emphasize the importance of collaboration between the private sector, development partners and government and the quarterly meetings allow the group to steer implementation of the National Tourism Strategy and identify solutions to upcoming problems. These meetings focus on five main elements: performance monitoring, resource mobilization, action planning, issue troubleshooting and information sharing. TWG deliberations often have help inform government positions on tourism related issues.36

3) The TWG allowed all self-interested actors in the industry to understand that the industry thrived or failed based on the success or failure of the most tenuous link in the value chain. It is human nature to be self-interested, and in the environment of the TWG, it was natural for individuals to be most interested in the outcome that benefited that individual the most. A key value of the broadly participatory VCA was that it created an environment in which the questions of “what is best for the industry” and “what is best for me” could be considered at both the individual and system-wide level.

This is important because all participants must balance dual objectives: 1) the value chain must be sustainable (i.e., everyone must generate positive results), and 2) individual profitability should be maximized so long as the first objective holds true.

Balancing these two objectives is generally easy in a pair-based transaction—both parties must benefit. But once the system includes three or more participants and once the objectives of those participants differ (e.g., maximize financial returns for the private sector versus a stable and prosperous social system for the public sector), it can be extremely difficult for individuals to understand if their solution is positively or negatively impacting another actor. By bringing together the full range of interested parties and providing a basic framework for how the actions of one actor might impact another, the TWG was able to identify strategic options that satisfied the dual objectives of everyone.

BEST PRACTICE 1A.I Facilitators should create an industry workgroup that represents the broadest possible interests of all value chain components. To keep the group engaged, the facilitator must provoke data- driven debate that leads to concrete actions benefiting individual firms and the entire value chain. In addition, action should be driven by committees focused on specific issues such as marketing or product development.

36 Some of these high impact decisions are highlighted in the analysis of Hypothesis 2.


Sub-question 1A.ii: How can the VCA effectively balance national and sector goals through specific measurable results?

In its Vision 2020 plan, Rwanda has set ambitious goals for its development. Between 2000 and 2020, the country aims to grow its per capita GDP from $US 250 to $US 900 and halve the incidence of poverty from 60 percent to 30 percent.37 Coupled with population growth averaging 2-3 percent, this target implies Rwanda’s economy needs to expand by over 600 percent, requiring an annual growth rate of at least 7 percent. At the beginning of OTF’s engagement in Rwanda, the first task was to help the GoR reflect on how it could achieve these goals. The team responded that a rigourous and participatory VCA could help develop actionable sector strategies that would allow the nation to achieve its growth and poverty reduction goals.

TOURISM ACTION PLAN: REQUIRED INVESTMENTS AND RESPONSIBILITIES The Rwanda Tourism VCA was a comprehensive and participatory action and investment plan that clearly defined actions to be taken, timelines and responsibilities. As with the overall process, the investment plan for the tourism sector clearly shared responsibility for investment and implementation among the private sector, government and international donors. This action plan was predicted to generate approximately US $100 million in annual receipts by 2010, an important figure since coffee, the largest export sector, was only US $25–30 million per annum at the time. Complemented by similar plans formulated by OTF for coffee and tea, these value chain strategies sketched out a roadmap for how Rwanda could achieve its national objectives. A summary of the original tourism action plan appears in Figure 18. In addition to this information, activities were phased in for quick wins that could sustain industry momentum. Examples are attendance to several key trade fairs and the restructuring of ORTPN to better support the implementation of the high-value tourism strategy.

It is unlikely that an EE or FL intervention could deliver an action plan that balances concrete actions with shared responsibility. An FL intervention would deliver customized recommendations, but at a level where national impact would be limited; and an EE intervention would improve the overall business environment, but it would not create real competitive advantage for the sector.

In both FL and EE efforts, there is a critical lack of organic consensus-building as part of the analysis and strategy development effort and this deficiency must be overcome through a parallel outreach, awareness and promotion effort. While such an effort can be effective in creating broad support, it is suboptimal compared to a consensus-building VCA for two reasons. First, VCA establishes a clear delineation between those performing the analysis and those reviewing/accepting it. Second, it creates longer feedback loops that can substantially extend the time required to move from analysis to implementation if there is an unexpected negative reaction to a core component of the analysis or emerging strategy.

A VCA using an industry working group provides this organic feedback system that ensures that as the standard process evolves, consensus and support exists prior to further action. There still exists the potential for an initiative to slow or stall due to lack of agreement, but this approach identifies that issue as it emerges and creates the opportunity for correction before any effort is wasted.

Beyond the value of shared baseline data and objectives, the diverse industry workgroup also created the appropriate conditions for widely distributed actions and investments in support of the emerging industry strategy. While there are examples of either FL- or EE-based approaches generating grassroots support and a diversified pool of investors, the general trend with these activities is that FL-based efforts tend to drive investment within a given firm using traditional sources of capital, while EE-based approaches are apt to coordinate and unlock government and donor-

37 Rwanda’s Vision 2020, MINECOFIN


driven investments. For the OTF project in Rwanda, the VCA proved to be a very effective mechanism to use with the tourism, coffee and tea industries.

Figure 18. Action Plan Example—Overarching Marketing Activities38

Key Areas Detailed Activities Responsible Key Partners Involved

Estimated Total Budget

Advertising and Promotion Increase Private Sector participation in fairs through education of tour operators, hotels and restaurants Tourism Promotion Body Tourism Private Sector,

MINICOM 200

Create a detailed calendar including preparation and training for fair participants Tourism Promotion Body Tourism Private Sector, MINICOM

0

Prepare official launch of Rwanda Tourism Tourism Promotion Body Tourism Private Sector, MINICOM

400

Enhance Rwanda’s presence at international fairs

Invite high level Rwandese officials and icons to participate in international fairs MINICOM New Tourism Promotion Body

0

Establish a list of natural and cultural attractions consistent with Rwanda’s new image Tourism Promotion Body Tourism Private Sector, MINICOM

170

Set up or up-date an information resource center Tourism Promotion Body Tourism Private Sector 10

Develop tourism catalogs and virtual tours Distribute catalogs and virtual tours on targeted websites including Rwanda’s own Tourism Promotion Body Tourism Private Sector 40

Prepare information package and contact information of other experts on Rwanda to facilitate the work of travel writers

MINICOM Private Sector, MINICOM 20

Rwandese Embassies in such countries to identify such travel writers and keep them informed about Rwanda, Commercial Attaches ORTPN, MINAFET, MINICOM

0

Cultivate a network of “friendly” travel writers in main markets Organize two familiarization trips a year to help travel writers get a first hand experience of Rwanda and its high

quality experiences Tourism Promotion Body Private Sector, MINICOM,

MINAFET 60

Internet Propose a structure for website based on Rwanda’s tourism overall strategy Tourism Promotion Body MINICOM, Tourism

Private Sector 10

Mobilize fund to develop Rwanda’s tourism website MINICOM New Tourism Promotion Body, MINICOM

150

Develop a comprehensive website

Propose content for website especially attractions and editorial materials Tourism Promotion Body MINICOM, Tourism Private Sector

10

Create e-mail based loyalty programs to reach the visitors back home and learn about their previous experience in Rwanda

Tourism Promotion Body Tourism Private Sector 10

To develop a comprehensive data-base that is up-dated regularly Tourism Promotion Body Tourism Private Sector 20

Create e-mail based loyalty programs

To keep regular contact with the “ former” visitors and posting them with the current information Tourism Promotion Body Tourism Private Sector 10

TOTAL BUDGET 1.110

BEST PRACTICE 1A.II To create maximum value for all stakeholders, the VCA must have impact at the national, industry, and firm levels. To accomplish this, the action plan resulting from the VCA must be actionable and it must demonstrate that is can visibly affect national economic performance while generating high and rising profits for the broadest possible number of value chain actors.

SUB-QUESTION 1B Is the VCA sufficient to promote growth in post-conflict economies?

Sub-point 1B.i: VCA does not provide the firm level skills required for businesses to implement good strategy.

MSE ASSISTANCE NEEDS VERSUS VCA OUTPUTS The VCA does not provide the firm-level skills businesses need to implement good strategy. However, some VCA attributes can be effective in ensuring that the strategy emerging from the effort recognizes and respects existing skills, identifies those that are missing, and recommends ways to fill the gaps. In tourism, these skill gaps exist mainly in hospitality and include customer service, guiding, international-standard cooking and general management. Some of

38 The marketing component shown here is only one component of a comprehensive plan that covered product development and the development of strong institutions.


these gaps have been addressed by larger firms bringing in regional expertise from South Africa and East Africa (notably graduates of Utali College in Kenya). Although importing skills has partially closed the gap, smaller firms that do not have the resources to recruit, hire and retain expensive, imported labor need access to a well-trained local labor pool.

By following a participatory approach that engages representatives at each level in the domestic value chain,39 barriers to implementation can be identified and discussed to ensure that efforts and investments do not exceed industry capacity.

In Rwanda, the tourism VCA occurred in parallel with other industry VCAs, including coffee. Given the range of other donor-funded programs in the coffee industry (notably USAID’s ADAR, PEARL and SPREAD programs), OTF fully expected that direct support in business services, access to finance, and training would give the coffee industry a substantial advantage over the tourism industry in terms of promoting rapid and sustainable growth.

Figure 19 provides a basic overview of the firm-level assistance that was available to these two industries during the VCA.

Figure 19. Summary of Firm-Level Support Available Through Parallel Donor-Funded Programs

Coffee Tourism

Direct BDS

Business plan writing for washing stations (ADAR) Management training (short-term experts and expatriate

managers for washing stations)

Limited interventions from poorly-focused donor and government BDS programs.

Marketing Support

Study tours/buyer meets (ADAR) Trade Show participation (ADAR/PEARL)

Government support for trade fair attendance.

Access to Finance

Development Credit Authority Agricultural Guarantee Fund 40 percent investment subsidy to agricultural investments

(RSSP/World Bank) Formal banking initiative at the farmer level (PEARL)

None

While the table clearly shows a more active support network of donor activities for the coffee industry, the results of the implementation of the strategic plans demonstrates that the tourism effort now exceeds expectations, while coffee is lagging in some important areas.

Though coffee results are generally excellent—Rwanda moved into a fully-washed coffee product and has made headway into the fine and specialty coffee market with a high-quality product that commands price premiums—success is coming at different rates in various levels of the chain. At the micro-enterprise level, there is much to celebrate. Farmers have seen cherry prices increase from RwF 60 (US $0.11) in 2003 to RwF 130 (US $0.24) in 2006. However, at the processing/export level, less than 10 percent of Rwanda’s coffee is fully washed (against an admittedly unreasonable target of 100 percent fully washed) and most coffee washing stations are struggling to make a profit. Rwanda also remains a relative unknown among coffee-supplying countries.

On the other hand, tourism efforts have exceeded objectives, with receipts exceeding the strategic plan each year since 2003. However, these results obscure some tactical implementation problems within the industry. While results have 39 The domestic value chain refers to all actors physically present in Rwanda. This excludes channel partners and, in the case of tourism, international visitors.


been excellent, progress on key initiatives has been well below expectation. Figure 21 provides an assessment of implementation versus the TWG strategic plan.

Available data prevents us from drawing any conclusions about the cause of the relative performance of coffee and tourism. The sheer number of variables present in a comparison of parallel VCA efforts across various industries makes it unlikely that this is an appropriate approach for future efforts.

And yet, anecdotally, we know that there is benefit to be derived from involving relevant parties from the government, NGO and donor communities. When actors with money to invest in for-profit activities coordinate with private sector participants, it drives closer coordination of donor dollars to address market failures that the private sector alone won’t take on. Concerning training in support of MSE participation in the VCA, research indicates that in Rwanda there is a clear need for coordination among donors, government and the private sector to better understand MSE needs and deliver affordable and targeted training through appropriate channels.

To answer the question of the impact and scalability of firm-level assistance, future VCA comparison exercises should measure the qualitative economic impact of direct assistance at the MSME-level of a given value chain. The nature of value chains tends toward broad-based MSME feeder firms serving a smaller and smaller number of larger firms as the product moves toward the final consumer. This structure would allow the establishment of control groups to test the impact of parallel donor support of direct assistance provision by measuring the growth of supported firms against those in the same industry who are in the control group.

BEST PRACTICE 1B.I In post-conflict environments, BDS should be integrated into VCA project design as it is almost always necessary. Given the low skill base in fragile economies, a good strategy would be to migrate from direct provision of BDS services to the facilitation of BDS markets with local providers.

Sub-question 1B.ii: Does VCA reliance on facilitators rather than implementation staff leave a gap between plans and performance?

The Rwanda Tourism Strategy laid out a comprehensive ten-year action plan in order to achieve the vision. Over the past five years, the TWG and OTF have monitored the implementation status of this action plan, breaking the items down by category (Product Development, Marketing & Distribution and Institutions) and by status (Planned/Complete, Planned/Incomplete and Unplanned/Complete). The news on this front is not encouraging. At best, only one-third of planned action items have been completed for “Marketing and Institutions” and just 29 percent of planned items for “Product Development” have been completed. The good news is that for the country’s core “Primate Product,” the percentage is at 70 percent.40 These implementation shortfalls leave large gaps in Rwanda’s tourism product such as the lack of boats on Lake Kivu and a lodge in Nyungwe as well as insufficient training resources. Although the sector has sustained strong growth to date, these gaps likely render this growth unsustainable in the medium- to long-term and limit spending opportunities available to tourists and, therefore, the overall pro-poor impact of the sector. The implementation status of the action items and a representative list of these items are shown in Figure 20.

40 OTF Group analysis


Figure 20. Rwanda Tourism Strategy Action Plan Implementation

16

Planned, incomplete

62%

Unplanned, complete

9% Planned, complete

29%

Planned, incomplete

50%

Unplanned, complete

14%Planned, complete

36%

Source: Rwanda National Tourism Strategy (2002), Rwanda Tourism Working Group Experience

Planned, incomplete

27%

Unplanned, complete

36%

Planned, complete

37%

Product Development Marketing & Distribution InstitutionsPl

anne

d &

C

ompl

eted

Plan

ned

&

Inco

mpl

ete

Unp

lann

ed

& C

ompl

ete Organize conservation day

Community-based tourism workshop (ORTPN with SNV, ODI)

Development of Cave Tourism, community-based tourism initiatives

ORTPN restructuring 2002

Develop national tourism website

Tourism training curriculum at KIST (2002)

Upgrade existing tourism policy document

National tourism training institution

Tourism donor partner session to determine donor contributions

Statistics development

Creation of Tourism Chamber

Develop community-based tourism guidelines and directives

Kitabi conservation training center (In progress)

Sacola Community Lodge

Hire local PR firm to promote domestic tourism

Target Asian market--Japan trade fair

Representation at annual Rwanda Diaspora Convention

Facilitation of Rwanda-based documentaries, high-profile visits

PNV Discovery Center

Customer facing training for all types of tourism businesses

Lake Kivu boat investments

Equip RIEPA with investment collateral

Tourism catalogs and virtual tours, segment specific experiences

E-mail based loyalty programs

Create multiple “Traveler’s-Huts” programs

Create 5 new local selling points

Enhanced presence at international tourism fairs

Cultivate network of “friendly” travel writers

Establish relationship with high-end international tour operators

Familiarization trips

Guiding and interpretation services in National Parks

Develop selected lodges in Rwanda’s main tourst areas--PNV, PNA and PNN

Develop 8 revenue sharing projects

Based on interviews41 with tourism industry stakeholders, the reason that implementation progress has been so slow is likely the complexity of the original strategy regarding creation of a portfolio of products. This underscores the challenges of working in post-conflict economies where the institutional capacity to assume responsibility for the execution of a value chain strategy is limited. As noted in the comparison with coffee, the absence of a dedicated support institution (like the ADAR coffee project) that could build tourism firm skills and capacity to carry out the strategy contributed to the implementation gap.

BEST PRACTICE 1B.I In post-conflict environments, BDS should be integrated into VCA project design as it is almost always necessary. Given the low skill base in fragile economies, a good strategy would be to migrate from direct provision of BDS services to the facilitation of BDS markets with local providers.

Sub-question 1B.iii: Is VCA the best tool for leveling the playing field by addressing general business environment issues?

The VCA is highly effective at identifying structural constraints, building competitive advantage, productive relationships and trust for Rwanda’s tourism sector. OTF’s approach to value chain strengthening has allowed industry actors to identify the most attractive customer segments and begin to design tourism experiences for these potential clients. Despite the success of the tourism sector, Rwandan firms and tourism sector face serious challenges in their business enabling environment—high transport costs, the difficulty of starting a business, an inflexible financial system and an unskilled labor pool, all of which usually are not the focus of a VCA. The OTF project addressed these issues solely in an industry-specific manner. For example, OTF worked with tour operators to

41 OTF Group stakeholder interviews, August 2007.


benchmark regional import taxes in order to lower tariffs on imported vehicles and addressed access to finance issues by facilitating discussions on tourism financing. What has not been done is to engage in wholesale reform of the tax system or comprehensive overhaul of the financial sector; these fall far outside the mandate of the project.

Although firms of all sizes suffer from deficiencies in the BEE, the problem is most acute for the roughly 70,000 MSEs in all sectors of the economy.42 Figure 21 shows the breakdown of firms. In OTF’s experience in Rwanda, the size allocation roughly follows that of the tourism sector.

Figure 21. Types of Private Sector Entities in Rwanda43

PRODUCTION SYSTEM

Home-based production Dispersed production – small scale Factory type – organized & structured

Informal Informal/Formal Enterprises – units in transition to small and medium Formal – organized enterprises

Family production Microenterprises Small enterprises Medium enterprises

Large enterprises

Approx. 70,000 MSEs Approx. 200 SMEs 30-50 large firms

Artisans; home-based food; preparation/ processing; banana; sorghum beer; basket weaving; etc.

Organized artisans; formal & informal units; production – open air marketplace; retail shops

Organized operations in a specific building-factory type; associations, etc

Organized-structured formal enterprises; modern; registered companies

Organized-structured formal enterprises; modern; registered companies

Family labour Less than 10 employees 10-30 employees 30-100

employees 100 or more employees

The World Bank survey identified a wide range of constraints to developing enterprises including 1) difficulty accessing financing (working capital), finding required equipment locally, and obtaining raw materials and other inputs at reasonable cost; 2) limited markets, access to electricity, and resources to own building space; 3) lack of technical and management training for owners/skilled workers, transport and packing facilities, and diversification; 4) taxes and poor infrastructure; and 5) dependence on subsidies and low profitability.44 Although these findings are for firms in general, they represent major constraints to the tourism sector, which OTF addressed in a very targeted way, as noted in Figure 20.

As noted in Figure 21, in addition to their small size, most MSEs also are informal. A recent FIAS report45 noted the numerous reasons why Rwandan firms stay in the informal sector and the consequences of this choice. Entrepreneurs decide to stay informal because the total costs of entry, operation and exit associated with joining the formal sector are greater than the potential benefits. These expenses include the transactions costs of finding the information and undergoing all the necessary registration and compliance processes. Businesses are willing to forgo the benefits of better protection of property rights and to bear the expense of extra-legality (penalties, expensive finance, etc.) because they see more benefit in remaining informal.

42 P. Nugawela (May 2004), Review and Assessment of Micro and Small Scale Enterprises (MSSEs) in Rwanda, World Bank. 43 Ibid. 44 Source: Review and Assessment of Micro and Small Scale Enterprises (MSSEs) in Rwanda, World Bank, May 2004. 45 Sources of Economic Activity in Rwanda, FIAS, November 2006.


BEST PRACTICE 1B.III VCA practitioners should not divert valuable resources trying to fix big BEE problems. Instead, they should focus on enabling environment issues that are pertinent to the competitiveness of the specific value chain with which they work. This narrow focus has two benefits; 1) it is achievable and 2) it most likely can provide tangible bottom-line benefits to value chain actors.

RESEARCH QUESTION 2 How can stakeholders be encouraged to adopt longer range “win-win” rather than short term “win-lose” strategies, particularly in shortened decision-making time horizons?

SUB-QUESTION 2A Was the VCA the most effective way to create a common and inclusive vision for tourism in Rwanda?

Sub-point 2A.i: In tourism, the VCA is the most effective way to foster the horizontal and vertical linkages necessary to create a sophisticated tourism experience.

As noted in the value chain summary, since 2002 Rwanda has pursued a high-value tourism strategy that targets eco-tourists with an experience that meets or exceeds their expectations at a price point that supports the sector’s yield targets. To create this experience, a broad range of actors, both in-country and internationally, created a complex web of relationships to deliver the product the market required. As an example of this collaborative approach, OTF and the TWG used the “Visitor Experience Model” (VEM) and worked together to design the “Primate Certification Experience,” a high-value product that sought to maximize yield by extending visitor “stay and spend” by utilizing all of Rwanda’s primate tourism assets. The VEM has four components: Planning, Selection, On-Trip and Post-Trip. Different firms and institutions play key roles in each area.

Figure 22 provides details of how the VEM works in the context of a VCA. The TWG envisioned a successful primate experience beginning in the “Planning” stage of a trip with the creation of a pre-trip course website and the recruitment of friendly travel and scientific writers to author and publish positive press about Rwanda’s natural tourism assets and experiences. Success also relied on establishing vertical linkages with potential visitors and channel partners (travel agents, wholesalers, etc.) in the “Selection” phase to ensure that both intermediaries and end-consumers were fully aware of Rwanda’s superior primate experience, safety and security, and long history of conservation. “On-Trip” is where complex horizontal relationships among tour operators, hotels, restaurants, community groups and NGOs provide a world-class experience and the VEM finishes with the “Post-Trip” phase in which tour operators and ORTPN create loyalty programs to “tie” visitors to the country and encourage repeat business.


Figure 22. The Visitor Experience Model: Primate Certification Experience

17

Note: Items marked in Italics represent marketing and distribution activitiesSource: OTF Tourism Visitor Quantitative Survey n=225, OTF Analysis, Tourism Marketing and Distribution Seminar

Create a pre-trip course preparation section on websitewith:

— Endangered species— Travel clothing and gear

— Menu of unique activities — Interpretive services — Lodging and equipment

— Banking servicesInvite travel and scientific writers to write stories about Rwanda’s natural heritage in targeted magazines

Educate travelers and travel agents on the fact that Rwanda has better access to primates than Uganda

Educate travelers and travel agents about conservation efforts (since 1969) and community based programsEquip travel agents with information package including a CD virtual tourto handle detailed questions

Educate travelers on Rwanda’s safetyTrain and certify educated guides able and equipped to interpret experiences

Propose flexible experiences with core “must-do” experiences such as “Gorillas in the Mist” with a multitude of cultural activities such as Intoredancers

Operate ecologically sensitive, partly communityowned lodges Work with scientists such as those with the Dian Fossey Gorilla Fund to promote primate courses

Develop a gorilla adoption program where Eco-Travelers get to learn about specific members of a gorilla family

Collect information on Eco-Travelers’ satisfaction and provide Rwandan primates bi-monthly e-mail

Offer special rates for booking “Advanced Primate Certification” class or other experiences

PlanningPlanning SelectionSelection On-TripOn-Trip Post-TripPost-Trip

Why Rwanda Wins Rwanda wins by safety, delivering a participative and culturally sensitive experience carrying a theme that helps build and layer the activities

being offered, quality of interpretation from guides to scientists, and honesty

The “Primate Certification” Experience

Successful implementation of the VEM would not have been possible with a firm-level or enabling environment engagement. If OTF’s engagement had begun by trying to assist individual firms, it is doubtful that this approach would have created the required sophisticated experience based on so many components (hotels, restaurants, tour operators, handicrafts). The time and transaction costs associated with coordinating all of these enterprises and bringing each one to a level where they could provide a world-class experience would have been prohibitive. Although EE interventions are cost effective, they tend to allow countries to “keep up” with competitors rather than “surging ahead” by creating competitive advantage.

BEST PRACTICE 2A.I The absence of productive relationships and the capabilities to deliver high-quality tourism experiences often found in post-conflict environments require that all players in the tourism sector must collaborate to build world class products. The VCA can act as the vehicle for generating the “value net” of cooperation and customer insights necessary to target, activate and retain premium customer segments.

Sub-question 2A.ii: Is the VCA the best method to create a base of collaboration and common vision?

To build its competitiveness, Rwanda’s tourism industry needed to build an industry that was collaborative and led jointly by the public and private sectors.46 A survey of the TWG in 2001 found that there was good and bad news. Surprisingly, although there were high levels of trust and a belief in the concept of competition by private sector firms, stakeholders believed natural assets to be the key to competitiveness and had an unfavorable view of the role and ability of government to effectively support and lead development of the sector.

46 Public sector involvement was especially critical in the segments that Rwanda chose to target because of the key role the government has to play in conservation and protection of national parks and wildlife, the foundation of the primate product.


Figure 23. Tourism Stakeholder Survey: Trust and Collaboration

100%

83%

50%

50%

54%

46%

0%

0%

30%

7%

15%

8%

20%

31%

46%

0%

17%

43%

Agree (1,2,3)

Mean

Disagree (-1,-2,-3)Neutral (0)

1.6There is a high level of trust within the Rwanda Tourism sector

In order to be successful firms in Rwanda must compete and cooperate at the same time

2.2

0.7The level of cooperation between the private and public sector is low

-0.1Tourism will succeed because of mountain gorillas and landscape

0.8It is possible for all players of the Tourism sector to make profits at the same time

0.4My government's policies should subsidize where necessary to be competitive

Source: OTF Group Tourism Working Group Member Survey (n=15) The OTF 5-Step Process is designed to address these issues. A key component of the process is to bring all players to the table, including government, donors and NGOs—effectively anyone who might be able to contribute to the development of the sector. Although the gathering of these diverse groups often sparked fierce arguments and some counter-productive workgroup meetings47 during the initial nine months, the group evolved and came to understand the data and analysis that OTF brought to the table and how to adapt it to the unique opportunities and constraints of Rwanda’s tourism sector. The VCA process allowed skeptics to voice their concerns in an open forum where other members of the workgroup could agree with, or refute what was said. This type of dialogue created true buy-in and validation of the strategy in a way that could not have been achieved with the one-on-one meetings and customized technical assistance that are the core of a firm-level intervention.

Sub-point 2A.iii: The VCA shifts power dynamics to give voice to “minority” stakeholders.

BEST PRACTICE 2.A.II Attitudes around trust and collaboration should be measured and the results used to drive the VCA process component. Facilitators should receive training in productive communication techniques and be seen as honest brokers by industry and not politically motivated. This neutral role in combination with the power of data allow the facilitator to “lead from behind”

As noted in the conflict section, Rwanda’s genocide was the result of many factors including a growing gap between the haves and have-nots. The OTF 5-Step Process was designed expressly to promote the broadest participation possible and give marginalized48 groups an opportunity to voice their concerns and balance the views of ORTPN and the small firms owned and operated mainly by Rwandan returnees with close ties to government.

47 In OTF’s experience, although not every workgroup meeting can be full of tension, it is productive for industry and government to publicly air differences to show where they stand. The 5-Step Process per se does not provide any guidance on this, but all of our consultants receive training on productive communications and meeting facilitation. 48 Marginalized firms are those owned by the majority of Rwandans without close ties to government. Many firms in tourism, though struggling, tend to be owned by relatively well-connected individuals.


Thanks to this early dialogue and debate, MSEs situated around tourism destinations, particularly the Volcanoes National Park, are integrated into the tourism value chain in two different ways. First, ORTPN instituted a revenue-sharing program with local communities whereby they receive 10 percent of all government tourism revenues—nearly US $80,00049 in 2005. Although not tied directly to MSE development, the funds are invested in infrastructure as decided by community councils, which improves local business enabling environments. A program such as this in which government actually follows through with its proposal is rare in the world—many countries are still in the concept stage.

Second, as noted in the value chain summary, 6.9 percent of all tourism revenues reach the poor through direct employment, transport services, food, handicrafts and other micro and small business activities. Although this money does provide a living for many Rwandans, the industry does feel that with targeted BDS interventions in agriculture and handicrafts, there are huge opportunities for MSEs to become more fully integrated into these supply chains and improve their share of tourists’ daily spend.

The final and most interesting way in which minority voices could shift power dynamics is by harnessing the 16.9 percent of revenues in the form of donations from tourists to local NGOs or charities highlighted in a recent survey.50 This money most likely goes to good causes, but if it were harnessed to create a local microenterprise investment fund or went to supplement the capital base of local microfinance providers rather than being speveryday necessities, these funds could become the basis for financing groups of firms that could tap into Rwandahighly lucrative tourism ind

ent on ’s

ustry.

BEST PRACTICE 2A.III The VCA can shift power dynamics by creating a “line of sight” through a value chain from MSEs to end markets. This data allows these small firms to better serve these segments, earn higher profits and improve their negotiating position vis-à-vis larger and better-resourced firms. With this in mind, market intelligence should be shared as broadly as possible to encourage the maximum participation of MSEs in the chain.

Sub-question 2A.iv: Can the VCA provide a framework for action that creates positive, peer pressure strategy implementation?

A guiding principle behind OTF’s 5-Step Process was that Rwanda’s tourism sector needed to collaborate to compete in the global marketplace. In the early stages of the process and the formation of the TWG, activities mainly focused on debate and consensus building, which culminated in validation of the National Tourism Strategy. Once the strategy had been approved, OTF attempted to use the TWG as a forum for driving its implementation. Many of the action items agreed to in the 2002 action and investment plan required close coordination among two or more stakeholders.

The success of the TWG in pushing implementation over the past five years has been mixed. Implementation of tourism strategy action items has been just 30 percent of total items—a somewhat weak execution rate. What are the causes of this low rate? OTF hypothesizes that for activities where there is a clear, short-term return on implementing a given activity such as ITB attendance or working with hotels to negotiate competitive rates and add-on services, motivation is high. On the less positive side, training is a high priority area where there has been limited progress. This may indicate that TWG members see this as an important issue, but not their responsibility to address. To justify its high price point, Rwanda’s tourism industry must upgrade its services to exceed the levels of regional and global competitors. Despite numerous meetings and acknowledgement of the issue by leaders at all levels of the public and

49 ORTPN website: www.rwandatourism.com. $80,000 represents 10 percent of total government revenues from the parks or $800,000. 50 Ibid.


http://www.rwandatourism.com/

private sectors, no one has taken the lead and concretely addressed this challenge. The implementation problems are likely three-fold: 1) a common complaint in the private sector is that once employees receive training they defect to competitors; 2) training is a soft investment that is not currently well-received by banks and is often eliminated in negotiations for the financing of business plans; and 3) the long-term solution51 is so complex that without full time resources tasked with the problem, it is difficult to gather momentum.

In conclusion, the VCA has had mixed results creating positive peer pressure for tourism sector players to collaborate. Although there has been some success, the approach may have to be reinforced with strategic subsidies to “prime the pump” or the allocation of a facilitator who could more actively coordinate some of these activities. In OTF’s view, the main issue here is not interest or recognition of the need by stakeholders, but rather the capacity to carry out activities themselves or a strong enough connective organization (i.e., the Tourism Chamber) to coordinate group action on key action items.

BEST PRACTICE 2A.IV For value chain members to continue collaborating, momentum around a strategy should be maintained through series of “quick wins” and the creation of useful tension. In the case of Rwanda tourism, there were early quick wins that enabled many players to succeed just enough that they became less willing to engage in collaborative activities.

SUB-QUESTION 2B The VCA promotes productive relationships among stakeholders.

Sub-point 2B.i: The VCA promotes industry sustainability and validates high-impact decisions more effectively than an EE or FL approach.

The private sector must serve as the engine of growth for Rwanda tourism (and other sectors, as well). In post-conflict situations businessmen often are motivated more by short-term profit than in taking a long-term view of industry sustainability and profitability. As a decision-making mechanism for the sector, OTF found the TWG to be an excellent forum for discussing and validating high-impact decisions where there were clear trade-offs between short-term profitability and the long-term vision of Rwanda’s tourism sector. In many cases, if there had not been a clear strategy and dialogue mechanism in place, Rwanda’s brand and positioning could have been irreparably damaged or left much worse off. Examples of the informed decision-making the TWG engaged in follow.

Charter Flights. In March 2004, the charter tour company Point d’Afrique approached a few private travel agents and ORTPN to test the idea of beginning charter package tours from Europe to Rwanda. The company planned to fly in 130 people every 2 weeks at a per person price of 550 Euros (US $605 at the time) for a 2-week stay, airfare included. The same company offered an 8-day package to Mauritania for 348 Euros (US $380). Obviously this was far below Rwanda’s yield targets, but certain tourism professionals and senior government officials found the proposition very attractive on the basis of the boost in arrival numbers and the money that a small handful of private operators might make from the new business.

In a situation where there had been no high-value vision or strategy, Pointe d’Afrique most likely would have begun operating in Rwanda with serious negative consequences to the long-term viability of the industry. In addition to the overall degradation of the destination image, the arrival of charter tourists would have minimal economic impact on the country because charter companies engage in a form of enclave tourism known for revenue leaks, minimal

51 The long-term solution to the tourism training problem most likely includes creating standards, identifying short-term emergency training programs and finally, the establishment of a high-quality training school. The implementation of these activities will most likely take a small team for which resources have yet to be made available.


linkages, and no benefits for local communities. At this point in the implementation of the tourism strategy, everyone involved wanted to provide opportunities to small firms and individuals to profit from the tourism trade. And, given the fragile state of Rwanda’s environment, high volumes of tourists could irreparably damage the tourism assets that the country relied on to attract high-value primate tourists. The EE and FL approaches could not have generated the same kind of informed, unified response from the tourism industry core players.

Gorilla permit price increases. ORTPN sparked a massive debate within the industry when it proposed a gorilla permit price increase. The reason for the price increase was three-fold. First, ORTPN predicted that the permits would sell out within the next year to 18 months, so this was simply respecting the laws of supply and demand. Second, ORTPN saw the price increase as a critical component of their marketing strategy to signal quality with a high price point. Third, the gorilla permit comprises such a small component of the overall price of a tourist’s package to see the gorillas that a price increase would not affect sales. Most private firms were furious with the proposed decision. Although they were in agreement with the principle of charging a high price for a premium product, they thought they needed at least a year of warning to allow channel partners to raise the price of their packages and move the international tourists to more expensive packages.

Numerous TWG meetings were held to discuss this issue and ORTPN finally decided that it would raise prices on June 1, 2007. Much to the surprise of everyone involved, neither channel partners nor international tourists reacted in an overly negative manner to the price increase. In an interesting turn of events, Uganda also raised its permit price to keep pace with Rwanda, creating positive price competition for the regional gorilla product and an additional $1.8 million per year that ORTPN could invest in its tourism promotion and conservation activities. The lesson here is clear. Although ORTPN did not in the end comply completely with the interests of the workgroup, there was a productive consultation with the private sector, and ORTPN was flexible on the phase-in date of the price increase and was following the group-defined strategy of targeting high-value clients. A few months into the price increase, growth in the sector is unaffected, but the high price point does put additional pressure on the industry to raise service levels to deliver an experience that matches the higher price.

BEST PRACTICE 2B.I Once approved, strategies that result from a VCA should be used not only to guide implementation, but also as a lens for evaluating high impact decisions. The guiding principle here is that strategy is often choosing what NOT to do.

Sub-point 2B.ii: The VCA fosters collaborative relationships across ethnicities.

During the research, explicit conversations about ethnicity were difficult to have given the Rwandan government’s current policy of suppressing ethnic identities. As a rough proxy for ethnicity, the team used the integration of the poor52 into the product development process of tourism experiences to respond to this research question.

Based on interviews with TWG members and data they provided, OTF concluded that, although there had been some progress toward integrating MSEs into the tourism value chain, there was much more work to be done. Furthermore, the most progress was made by companies that included expatriate business owners and managers who seemed, perhaps, to have a longer-term view and could more easily disregard ethnic tensions. Two examples of this integration

52 Rwanda’s ethnic breakdown is 15 percent Tutsi, 85 percent Hutu and less than 1 percent Twa. The focus here is on relatively wealthy returnees (often Tutsi) making attempts to integrate the poor as MSEs to create sustained competitive advantage. Taken in isolation, this is a risky strategy as it could reinforce existing tensions. However, given limited project resources (i.e., limited ability to provide firm-level assistance), OTF had to work with the most viable firms in the sector. To be clear, these choices WERE NOT based on ethnicity, but on the level of TWG participation by business owners.


are the New Dawn Associates (NDA) community-based tourism products and the Volcanoes Safaris Business Linkages Challenge Fund (BLCF) project in the Ruhengeri area (home to the mountain gorillas).

NDA is a Rwandan-European partnership that seeks to provide high-quality and intellectually challenging tourism experiences. Its owners have deep experience in tourism operations, academic research and sustainable development. Although NDA sells the typical gorilla packages for which Rwanda has become famous, its most innovative activities are centered on creating high-value, community-based tourism products that allow NDA to maximize yield from its tourists by extending their length of stay. An excellent example of a unique NDA product that commands a premium price and also benefits the local community, is the Millennium Village Tour, an economic development project that seeks to achieve the U.N. Millennium Development Goals (MDGs) in five years through targeted interventions in a wide range of areas. NDA has entered into an exclusive partnership with the project to market the destination and manage all logistics. Although the Millennium Village Tour was launched only in June 2007, initial indications from the market and integration of the poor into the product are encouraging. Small groups of tourists pay $90–$120 per person for a full day tour with approximately 40 percent of this amount reaching the village through handicraft purchases, food preparation, cultural shows and partnership fees.53 NDA estimates that 360 people per month will purchase the MVP once it is in full operation. Without the product development lead of NDA, the integration of Mayange village (home of the MVP) would not have been possible. Tourism has the potential to allow the MVP to achieve and maintain the MDGs through enterprise development even after support by large donors ends.

Volcanoes Safaris, a Ugandan-owned tour operator in Rwanda took a slightly different approach to integrating MSEs into the high-value tourism chain. To defray the investment costs of Rwanda’s first high-end, community-integrated eco-lodge, Volcanoes applied for a grant from the BLCF for a building grant and to provide training and small-scale investments to smaller, locally-owned hotels and restaurants in the region. In 2003 Volcanoes received nearly £420,000 (US $840,000) from DFID,54 which it used to successfully upgrade facilities at Muharabura Hotel (a three-star facility) and at Kinigi Guesthouse, a community-owned hotel adjacent to Volcanoes National Park. In addition, the project provided training for locally hired staff at the Volcanoes facilities and two other hotels. The training programs definitely created opportunities for trainees and Volcanoes reported that the biggest problem it faced with the program was the defection of its newly-trained staff to better paying opportunities elsewhere in Ruhengeri or even Kigali. A few even established their own businesses with the skills they learned. The Volcanoes BLCF initiative is an excellent example of strategically-targeted donor funds used to create competitive advantage by investing in superior facilities and service for an individual firm while promoting broader value chain upgrading by training competitors and communities in how to better serve a new and lucrative client base.

In conclusion, the Rwanda tourism VCA has contributed to the creation of productive relationships across ethnicities. Although the examples to date appear to be driven by expatriate managers and owners, they are role models for purely local firms to emulate in the future.

BEST PRACTICE 2B.II In the absence of collaboration across different ethnic groups or clans, outsiders can be a catalyst for changing mindsets and business models. Donors and government can provide strategic subsidies to encourage foreign investment into innovative and potentially highly profitable areas.

Sub-point 2B.iii: VCA helps horizontal partners choose their vertical partners more efficiently than an FL approach.

53 Email exchanges with Director-General of NDA and NDA website: www.newdawnassociates.com 54 Interviews with Volcanoes Safari staff and Business Linkages Challenge Fund website: www.businesslinkageschallengefund.org


http://www.businesslinkageschallengefund.org/

Good strategy depends on informed choice and/or the availability of data. Most firms, especially the smallest ones, do not have the financial resources to invest in extensive market research to identify and activate new market segments. In the case of Rwanda tourism, the VCA permitted a large number of firms to access normally unaffordable, world-class market research that helped them choose vertical partners and configure their operations to serve up-market customers by building the long-term relationships required to win in the high-value eco-tourism segment.

OTF provided this invaluable customer data to the industry in the form of customer portraits for both channel partners and visitors. Figure 24 shows that the data is valuable to many members of the TWG and helps guide both organizational and industry-level budgeting and investment decisions for nurturing these critical relationships. The VCA not only made this data affordable for all stakeholders, it also focused the industry on key segments of the market and what it would take to activate them.

The key findings of the research and the areas on which Rwanda’s tourism needs to focus are:

• Image and product marketing: Despite excellent security and political stability, Rwanda is still tainted by the genocide. To begin changing these attitudes, the TWG planned and executed a US $500,000 campaign targeting the UK market through a private PR firm.

• Safety: The best way to allay safety concerns about a country is with familiarization or “FAM” trips where the government and local industry host key channel partners to highlight the experiences and facilities available in-country. The TWG mobilized to bring regional channel partners first and then international partners to Rwanda through cost-sharing.

• Creation of sophisticated experiences: High-end channel partners are always looking for non-price factors to differentiate their products and services. As noted above, significant resources have been spent by the public and private sectors to create the basic platform for success. Now that this platform is in place, individual firms, especially small and start-up ones, have the opportunity to compete with larger more established tour companies to provide new add-on experiences that are unique. Without the customer knowledge provided by the customer portrait, small firms would be ill-prepared to compete in this segment.


Figure 24. Customer Portrait of a Channel Partner for East Africa

Beliefs and Associations Beliefs and

Associations Desired

ExperiencePurchase and Desired

Experience

Usage Environment

Purchase and Usage

Environment Most channel partners are tour operators Rwanda is not so well perceived by travelers While business and client satisfaction are the main

sending less than 10,000 mid and up ma et when it comes to important attributes such as rkvisitors to Africa for safaris, camping and drivers to the decision to stick with a destination,

safety, wildlife, distinctiveness and a relaxing security and political stability appear to be the real adventure atmospheredeterminants to channel partner loyalty to a Channel partners perceive political unres t and increasing client expectations as the most important challenge to travel in Sub- Saharan Africa.

Although almost two - thirds of respond nts ehave considered sending travelers to destination Image and product marketing are two areas where Rwanda, they do not perceive the country as Channel Partners believe Rwanda can improvebeing safe Gorillas, Lake Kivu and Culture are t top hethree products that channel partners associated with Rwanda

Purchase and Usage BehaviorPurchase and

Usage Behavior Origination Decision to consider a new destination is based on the breadth of the product that the destination features S lection e Natural endowments, security and infrastructure drive the decision to choose an African destination

work with an African partner Products offering, reputation and an insurance policy appear to be the main determinants of the decision to

R lationships e Channel partners appear to be focusing on creating more sophisticated experiences

Loyalty As long as e business is good, the clients happy and the destination secure, channel partners stick with the thdestination

BEST PRACTICE 2B.III Data is the key to coordination among value chain actors and to targeting and activating new market segments. Aligning all stakeholder interests around segment needs is the most efficient way to create a sophisticated tourism experience for which visitors will pay a premium.


VI. RECOMMENDATIONS This case study provided an excellent opportunity for OTF to take a retrospective view on its work over the past six years in Rwanda’s tourism sector. The study provides a roadmap for its continued role as advisors to the public and private sectors until 2010. Rwanda’s tourism industry has staged a major turnaround since 2001—receipts have surged, public perception of the destination has been transformed, and the country has emerged as the premiere primate destination in Africa, if not the world. Based on OTF’s experience working with Rwanda’s tourism sector and in response to the research questions posed by this case study, the following best practices in post-conflict VCA emerged:

• Create and engage an industry workgroup to guide and validate analysis. From the beginning of the VCA in Rwanda tourism, the TWG served as a valuable sounding board for research and analysis. In addition to providing invaluable technical input, TWG meetings provided a forum for tourism stakeholders to debate issues; agree on important decisions; and build the trust and relationships required to build a competitive tourism industry. A fully-engaged workgroup is also critical to achieve private sector buy-in to the strategy and elicit concrete commitments and investment from both the public and private sector.

• Use the workgroup to validate high impact decisions during implementation. After the initial strategy formulation process is completed, the vision and strategy should be used as a litmus test for major decisions on the direction of the industry. Although infrequent, these decision points can re-vitalize workgroups through active debate and serve to test the ongoing relevance of the strategy and vision.

• Focus on quick wins based on the higher forms of capital. In the absence of the hard assets required to serve high-value eco-tourists, Rwanda’s tourism industry focused on items that could be fixed more quickly and with limited investment. Two examples of this are restructuring ORTPN and organizing trade fair attendance to begin changing customer perceptions of the country. As the sector improved its management capacity and image, efforts were begun to upgrade hotels, roads and transport links.

• The VCA is ideally suited for upgrading the competitiveness of tourism. Given the range of firms needed to create a complex tourism experience, intervening at the industry-level with all stakeholders was the correct approach. A more tactical approach focused on only certain components of the chain would have left gaps in the product that would have been unacceptable to international tourists. As noted above, the VCA is also well-suited to identify structural constraints, but needs dedicated resources (BDS or other) to engage in effective, firm-level assistance.

• Outsiders can drive innovation. As noted in the study, outsiders have been the first to reach across ethnic lines to integrate the poor into tourism products. In general, foreign investors with a healthy appetite for risk and previous experience in tourism can bring cutting edge practice and an understanding of customer needs to new and potentially high-profit ideas.

Despite this success, there are definitely shortcomings in OTF’s approach to VCA in Rwanda tourism:

• Absence of firm-level assistance. Compared to the progress in firm-level skills that OTF witnessed in the Rwandan coffee sector, this component has been almost completely absent in tourism. The key difference is that OTF developed an informal relationship with the USAID ADAR project, whose mission was to enable business people to implement the strategy by providing business planning, production and marketing assistance. In skill areas critical for tourism such as customer service, guiding and general management, this type of support was not provided due to lack of resources in the OTF project. In the future, the 5-Step


Process should be expanded to include both process steps and appropriate partners to integrate industry-specific BDS into the value chain upgrading process.

• Complexity of the action plan. The output of the 5-Step Process was a comprehensive ten-year plan to upgrade the entire tourism industry, including the development of a portfolio of experiences. Based on implementation progress, it would have been prudent to simplify and phase in the action plan to keep the industry focused on one product at a time. A related point is the need to constantly revisit, update and upgrade the strategy to respond to changing domestic industry dynamics, competitor response and customer needs.

In addition to the process learning, OTF developed useful insights into why tourism should be considered in a portfolio of industries to rebuild in post-conflict societies:

• MSE focus. In Rwanda, over 90 percent of the firms that were members of the TWG were considered small or micro (fewer than 10 employees). As the value chain is deepened, the tendency is to engage ever smaller firms as input suppliers for larger, more established companies. The creation of large numbers of small specialized firms is feasible because of the low barriers to entry in many tourism functions such as tour operators, guiding and food provision.55 With dedicated BDS support, information related to customer needs, whether for end-customers or intermediaries such as restaurants and hotels, can be transmitted tothese MSEs to help them to make informed investments into improving their prod

ucts.

• Country brand building. Along with general public relations campaigns and investment promotion, the re-emergence of Rwanda’s tourism sector has accelerated the country’s re-integration into the global economy. Given the fickle nature of the international tourism market, the impression of stability (and the reality on the ground) must be infallible. The synergies between the success of tourism and other initiatives have created a virtuous circle of positive press, recognition and investment into the country.

Although Rwanda and OTF had success in the tourism industry, the following caveats should be considered:

• Security and stability. Safety, security and political stability are key decision criteria for tourists and the channel partners who send these tourists to their destinations. If these factors are questionable, the popularity of a destination can crash overnight. In the case of Rwanda, the country has enjoyed nearly a decade of relative peace and security, which has paid off for the tourism sector.

• Viable tourism assets and strategy. Rwanda is fortunate to be able to lay claim to a significant percentage of the rare mountain gorilla. Using these enchanting primates as the foundation for a high-value tourism strategy is a viable and highly lucrative path. However, not all countries need to have a world-class tourism to consider tourism. In neighboring Burundi, tourism professionals are considering a regional R&R experience to bring expatriates from neighboring countries to Bujumbura to enjoy the diverse cuisine and lakeside beach resorts.

Given OTF’s ongoing role in Rwanda, many of these issues will be addressed in collaboration with the TWG, the Tourism Chamber and ORTPN. The first step in addressing these issues is through the strategy revision process which includes major action items around training, tourism-specific BDS providers and product diversification. The preliminary action plan is summarized in Figure 25, below.

55 Although according to Porter’s 5 Forces, low barriers to entry also contribute to low profit levels in the absence of innovation and upgrading of competitive advantage.


Figure 25. Preliminary Rwanda Tourism Action Plan 2007–2012 Category Item Key Programs Total Cost (US $)

PrimateUpgrade Lake Kivu Road, build PNV Discovery Center, complete PNN eco-lodge, development policy for lakes

$19,676,400

Birding Define birding product, upgrade PNA road network, build high-end lodge in PNA $3,355,000

Conference

Design and build conference center in Kigali, create standards for conference organizers, "meet & greet" sessions for providers and funders

$15,080,000

Add-ons (Lakes & Others)

Create lakes development plan, commercialize cultural products, define orchid product $1,100,000

Training Develop standards, engage short-term training consultants, build tourism training school $1,845,000

Private sector participation

Joint marketing campaigns, partnership with the Bankers' Association, capacity building to Tourism Chamber

$155,000

Economic linkages with local communities

BDS support to producers, destination level PPPs $673,000

Grand Total $41,884,400

Prod

ucts

Cro

ss-c

uttin

g

2007-2012 Summary Action Plan


VII. CONCLUSION At the ITB 2007, Rwanda was named Best African Exhibitor. Taken in the context of the country’s dismal positioning in the market in 2001, this turnaround is astounding. Reacting to this news, a long-time TWG member said “Now that we’ve convinced the world that we are world-class, we must match the market’s expectations with an unbeatable product.”

Over the past five years, the tourism industry has proven that it can succeed and has the potential to become a major contributor to Rwanda’s GDP. Through a combination of political stability, industry leadership and focused product development, Rwanda has become the country to beat in East African high-value tourism. The effects of this transformation are astounding; dozens of new entrants into the tourism industry, new hotels cropping up around the country and regular sighting of tourists in Kigali and the major tourist sites. Despite this early success, there is still work to be done in the sector over the next five years. The industry must upgrade its primate product to be the best in the world; it must invest in training to ensure that Rwanda justifies its high price point; and importantly, it needs to guarantee that tourism becomes a source of prosperity for a broad-base of Rwandans by ensuring that local communities benefit—this must be a priority for all stakeholders. If this can be achieved, tourism will become a life-changing and prosperity-creating force for Rwanda as it seeks to achieve Vision 2020.


U.S. Agency for International Development U.S. Agency for International Development 1300 Pennsylvania Avenue, NW 1300 Pennsylvania Avenue, NW

Washington, DC 20523 Washington, DC 20523 Tel: (202) 712-0000 Tel: (202) 712-0000 Fax: (202) 216-3524 Fax: (202) 216-3524

www.usaid.gov www.usaid.gov RWANDA TOURISM CASE STUDY 55

mR 94 - Rwanda Tourism Value Chain Case Study

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