Rwanda is routinely celebrated as a growth miracle on the African continent. The country’s GDP growth averaged 7.4% annually between 2000 and 2023, one of the fastest in Africa.

Three decades after the 1994 genocide, Kigali has been transformed. It is a services hub, with a gleaming convention centre, a growing airline and a skyline of new hotels. Most scholarship has argued that this has either been driven by party-affiliated firms or through foreign investment.

However, the most significant driver is Rwandan workers’ retirement savings through the country’s pension fund. The Rwanda Social Security Board manages assets of roughly 2 trillion Rwandan francs (about US$1.4 billion to US$1.5 billion). This makes it one of Rwanda’s largest institutional investors. Its portfolio spans government securities, bank deposits, equities, real estate and other investments.

My research examines the politics of economic transformation under contemporary globalisation in eastern and southern Africa. In a new paper, I describe how the ruling Rwandan Patriotic Front has used the country’s pension fund as an instrument of what political economists describe as the new state capitalism. The state capitalism literature refers to how some governments have used state-controlled institutional investments (including pension funds) to invest in strategic assets in their own economies and not just act as regulators from the sidelines.

My paper shows how the Rwandan case demonstrates potential to use pension fund assets for strategic investments in the national economy. However, it suggests that the potential gains of such investments will not be sustained unless they focus on employment-generating sectors. Sustaining structural transformation, as per the arguments of developmental state scholars like Alice Amsden, also requires the support of domestic firms to invest in technological capabilities and become competitive in global markets.

How Rwanda did it

At independence in 1962, the Rwandan government created the Caisse Sociale du Rwanda (Social Security Fund of Rwanda). It was a public institution charged with managing pension and occupational hazard schemes. Since the early 2000s, the Rwandan government has focused on increasing pension fund contributions, as well as mobilising pension fund resources to invest in strategic priorities. Between 2003 and 2020, the number of Rwandans contributing to the scheme nearly tripled from 200,000 to 691,756. As a way to streamline the management of public pension funds, the Rwanda Social Security Board was established in 2010. This was a merger of the Social Security Fund of Rwanda and Rwandaise d’Assurance Maladie, Rwanda’s health insurance system.

The Rwanda Social Security Board’s assets under management have grown from US$212 million in 2012 to US$2.07 billion in 2025.

The fund owns shares in domestic commercial banks and holds significant deposits in several banks. It invests in local and foreign fixed-income investments in government securities, fixed deposits and corporate bonds. There are also local and foreign non-fixed income investments in publicly listed equity, private equity and real estate.

The Rwandan government uses the Rwanda Social Security Board – alongside its party- and military-owned firms – to steer investments in line with its services-first development strategy. In this way, Rwanda’s approach is partially modelled on Singapore. Singapore has used government-linked companies, pension funds and government-owned holdings in Temasek, a multinational investment firm, to steer investment to strategic sectors.

Where the model runs into limits

The Rwandan government’s use of the Rwanda Social Security Board has delivered in many ways. It has provided the government with significant funds, which it directly controls and can use for strategic priorities. The board has also been the key financial driver of the transformation of Kigali into a tourism and services hub.

But my research also shows where pension fund activism may be more fragile than it seems. North American, European and east Asian developmental states all employed pension funds to direct investment into employment-generating sectors, particularly manufacturing. Crucially also, pension fund investment encouraged and worked alongside the growth of domestic firms.

The Rwandan case has differed in two fundamental ways.

First, the Rwanda Social Security Board has directed its investments into bolstering Rwanda’s services-first model, which has not yielded substantial formal sector employment.

Second, the board has done very little to support the growth of domestic firms to invest in technological capabilities. This has reinforced the economy’s reliance on state-affiliated firms and foreign firms.

Rwanda’s youth dominate its demographics but east Asia may show a picture of its future and the possible vulnerabilities a reliance on pension fund investments may lead to. The histories of Japan and South Korea show how ageing demographics place increasing pressures on pension systems. It narrows the once longer-term horizons through which pension fund managers could make investments.

This is because, as societies get older, there are more demands to pay out pensions. There may also be reduced contributions to the pension system if the working-age population shrinks. Rwanda is not yet facing these challenges.

Rwanda is currently experiencing a “youth bulge”: more than 60% of the population is under 25.

The Rwanda Social Security Board estimates that it has a 25-year time span to receive a return on its investments. Most pension contributors are currently in their mid-30s and will only retire in three decades.

While time may be on the side of Rwanda’s pension fund managers, the economy is not. Rwanda’s services-based strategy has not yielded sufficient employment generation. In 2025, unemployment was at 12.4%, far above the government target of 7%.

The employment rate also masks the number of workers who work fewer hours than they wish to. This has resulted in Rwandans working several precarious jobs. Based on the government’s own labour market data, the combined rate of workers who work fewer hours than they want to and unemployed workers was estimated at more than 50% in 2025.

Another source of vulnerability is that the government is reliant on either state-affiliated firms or foreign investors as lead investors in nearly every sector of the economy. The government has failed to use pension funds to invest in supporting domestic private sector firms. One reason is that the government has not developed effective relationships built on reciprocity with domestic private firms. This is partly because some formerly prominent Rwandan business people funded opposition movements outside the country once they had fallen out with the government.

Relying on a single state-owned pension fund has its benefits. It enables the ruling party to concentrate control. However, the pension fund’s investments have not been used to support investments in manufacturing or agro-processing, key sectors that could not only diversify exports but also create employment.

A model for the rest of Africa?

Rwanda is often presented, by the Rwandan Patriotic Front and outside observers, as a template for other African states to follow. However, its economic model is still poorly understood. Its pension fund – perhaps the key institutional investor in the economy – is rarely discussed. However, it is perhaps the most innovative example of state intervention in Rwanda.

The Rwanda Social Security Board has driven the growth of Rwanda’s services-first model. But whether it can sustain economic momentum depends on employment generation, the growth of domestic firms and ensuring that investments are in line with long-term goals rather than short-term profit-making.

Pritish Behuria does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

By Pritish Behuria, Reader in Politics, Governance and Development, Global Development Institute, University of Manchester