Carnegie in Rwanda: The next wave of investment in Africa? (Original photo by oledoe –

Universities are often the catalysts for creative destruction. Cities and towns that host quality universities are more resilient to change, and are often at the forefront of new innovations that drive new products, services and industries. Think of the close relationship between Stanford University and the rise of the scientifically and technologically trendsetting Silicon Valley. Closer to home, Stellenbosch would not be growing as fast if it was not for its recession-proof university.

Yet only four of the top 500 universities are in Africa, according to the Times Higher Education 2011/2012 rankings: the University of Cape Town, Stellenbosch University, Wits University (all of them in South Africa) and the Alexandria University in Egypt. The reasons for Africa’s dismal performance in this respect is probably similar to the reasons for its low income levels: low savings,  low investment (in physical and human resources, which causes brain drain), weak institutions, low state revenue, low state spending, low income, low savings, etc. So are universities endogenous to growth, or can they actually – if somehow exogenously created – cause long-run growth? That is an experiment that may pretty soon become a reality, as Rwanda – one of the smallest and poorest countries in Africa – is about to open Africa’s first campus operated by a top US university. The Carnegie Mellon University of Rwanda will “operate a master’s degree-granting program in Rwanda because of CMU’s strong culture of research and innovation”. According to CMU’s website,

the reputation of CMU and the quality of education that will be delivered at CMU-R will be unique in the region and should attract the best students from the world to come to study in Rwanda. We expect major information technology (IT) companies to partner with CMU-R and provide job opportunities for its students to collaborate with their best employees. With this critical mass of expert skills, Rwanda is on its way to becoming a leader in developing the breakthrough ICT solutions needed for the future of Africa.

The trade in education services is not new. A few years ago Emile du Plessis and I investigated the large and growing market of foreign students studying in Stellenbosch (mode 2 exports) – now totaling more than 2500 students annually, a potentially lucrative market for the university, property owners in Stellenbosch and local tourism operators. Importing education services was usually restricted to African students studying abroad (mode 2 imports). But this was limited to the fortunate few: universities in Europe and the US are expensive, is culturally dissimilar and students, having integrated into the foreign culture and with good job prospects, were less willing to return.

With a growing African middle class, however, now estimated to be somewhere in the region of 300 million consumers, and with governments unwilling or unable to provide the quality education kids demand, expect to see more foreign firms (schools, colleges and universities) bringing quality education to Africa (mode 3 imports). There will be tensions: this might lead to within-country brain drains as the best students leave public universities to study at private universities. Where African states are weak, who will be responsible for quality control, although, presumably, students will be able to vote with their feet. Overall, though, this should be a huge positive for African countries and hopefully governments will welcome such investment (as the Rwandan government has clearly done). Perhaps the South African government – having now decided to build two new universities – could consider this model: imagine Oxford and Harvard opening campuses in Kimberley and Nelspruit. The ivory towers of existing South African universities will shudder. Talk about a catalyst for creative destruction.