The ADF Approves US$ 38 million to Support Rwanda’s Progress in Skills, Entrepreneurship and Jobs

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The African Development Bank’s (AfDB) Board of Executive Directors on April 3, 2013 approved an African Development Fund (ADF) grant of USD $ 25.7 million and an ADF loan of USD 12.6 million for a Skills, Employability and Entrepreneurship Program (SEEP) in Rwanda.

The program will support the Government of Rwanda’s policy reform to promote human capital development, inclusive growth and poverty reduction.

“Our aim is to reduce the mismatch between the supply of skills by the education system and the demand for skilled labor by businesses and develop a culture of innovation and entrepreneurship in Rwanda”, said Agnes Soucat, Director of the Human Development Department, AfDB.

Rwanda has an average skills deficit of 40% and limited quality off-farm job growth and expansion which is a major factor contributing to youth underemployment.

Despite notable progress in education reform, Rwanda still faces challenges in terms of skills gaps, education quality and relevance for the labor market. Critical actions are needed to tackle limited skills availability and low labour productivity which prevail in all sectors of the economy, stifling private sector growth and competitiveness. The SEEP aims to assist the Government of Rwanda in its efforts to create jobs and sustain the remarkable growth it has achieved in the past decade.

Rwanda has been an economic success story and has maintained a strong growth path averaging above 8% a year in the last decade.  Rwanda has also made remarkable progress on the MDGs, particularly in lifting 1 million people out of poverty (MDG 1), and on health (MDG 4, 5 and 6).  The remarkable reduction in poverty has been driven by a combination of improved agriculture incomes, off-farm job creation and public and private transfers.

The program aims to protect job creation schemes and the education sector which are being threatened by protracted aid.  

This Sector Budget Support operation will contribute to the implementation of reforms in skills and employability; and entrepreneurship development to ensure that the notable achievements already undertaken by the Government of Rwanda are not reversed.  The situation could be worsened by protracted aids if no offsetting measures are taken.

The challenges ahead are sustaining and scaling up the skills and employability to create private sector jobs under highly uncertain prospects of donor aid and the global environment.  For the medium term, they include sustaining strong private sector led growth and poverty reduction while gradually winding down Rwanda’s high dependence on foreign aid.

The SEEP was developed jointly by the African Development and the Government of Rwanda and in close consultation with key development partners (Belgium, European Commission, France, Germany, Netherlands, Sweden, Switzerland, UK, USA and World Bank) and the private sector.

Established in 1972, the African Development Fund (ADF) is the concessional window of the African Development Bank (AfDB) Group. ADF contributes to economic and social development in 40 low-income African countries by providing concessional loans and grants for projects and programs, as well as technical assistance for analytical work and capacity-building activities. ADF loans are interest-free; however, the loans carry a service charge of 0.75 percent per annum on outstanding balances, and a commitment fee of 0.50 percent per annum on undisbursed commitments. Project loans have a 50-year repayment period, including a 10-year grace period.

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