500 jobs on the line as PSF and standards body disagree on packaging

A WRANGLE between Rwanda Standards Board (RSB) and Private Sector Federation (PSF) is likely to cost the economy some 500 jobs and billions in tax revenues unless government intervenes. Since April 2014, RBS has been pushing local gin manufacturers, a budding industry of about 10 players, to start packaging their products in glass bottles of volumes ranging from 250ml, 500ml, 750ml and 1,000ml. The manufacturers currently use plastic bottles (polyethylene terephthalate) in packaging of the gin products mainly consumed by low income earners with the price of the smallest gin bottle costing less than Rwf400. The standards body claims that the plastic bottles are poisonous, hence pose health risks to consumers. RSB has thus given the manufactuers until next month to have complied. The claim that plastics are poisonous is contested by the manufacturers, who contend that RSB has no scientific evidence. Also, at the centre of disagreement are claims by the industry players that RSB failed to involve them in the decision making process as required by law and is only pushing the controversial standard down their throats. In essence, packaging in glasses means manufacturers have to abandon their current production lines which some producers claim, they allegedly acquired on the advice of RSB authorities, a claim the standards body vehemently denies. According to RSB director-general Dr Mark Cyubahiro Bagabe, they couldn’t have sanctioned the manufacturers to use plastic packaging well knowing that it poses health risks to consumers. Nonetheless, the gin makers say they are ready to eat a humble pie and comply with RSB demands on condition that they are given enough time of at least three years to migrate from the plastic packaging to glasses instead of just eight months. August deadline The gin producers have been engaging RSB through PSF’s advocacy department that was until recently being headed by Antoine Manzi. Although they managed to get the deadline extended, the two parties have failed to reach a mutual agreement for a lasting solution. In principle, the industry players concede that glass bottling is better than the plastics but they disagree with the claim that plastics are poisonous to consumers. After failing to reach consensus, PSF petitioned the Ministry of Trade and Industry to intervene on behalf of its members. In a January 2, 2015 letter, Trade and Industry minister Francois Kanimba requested Dr Bagabe to institute a thorough study with analytical evidence showing the rationale behind the need for glass and not plastic packaging. On June 26, Dr Bagabe met with the local gin producers and reminded them that whoever will not have complied with the glass packaging regulation by August 1, 2015, will be shut down. But PSF officials say RSB hasn’t provided any such study as requested by the ministry. Heavy losses PSF has described RSB’s conduct as “dictatorial and tantamount to economic sabotage,” arguing that the August 1 deadline will force the entire industry to close, costing people jobs, investors their funds and revenue to government. PSF’s Antoine Manzi said they carried out a situation analysis study on six of the over ten gin manufacturers affected and found that at least 533 jobs will be lost if RSB goes through with its stringent demands. The six cases studied that include Esperanza Ltd and Kasese Distillers, if forced to close, will lose an estimated investment of about $4 million, according to Edmund Tumwine, an official in PSF’s office in charge of private-public-dialogue. PSF also estimates that Rwanda Revenue Authority (RRA) will miss at least Rwf180 million worth of VAT that the tax body collects from the industry every quarter of the year. Collectively, the six factories studied contribute over Rwf2.6 billion in taxes annually. Court intervention The use of polyethylene terephthalate (PET bottles) has been challenged elsewhere by several lobby groups and NGOs in other countries, including in 2013 in India, but those attempts were defeated in courts. Between November 2012 and March 2013, five court cases opposing the use of plastic bottles filed by NGOs in various States of India claiming were dismissed separately and Rwandan gin makers say they could consider having a similar battle with RSB. Esperanza Ltd, which is the largest investor in the sector with an investment of over $2 million, has been at the centre of the battle against RBS’s aggressive regulations. The firm says it will consider all options at its disposal, including suing the standards body. When The New Times visited the Kabeza-based factory, workers anxious idled about as many were not sure whether they will have a job to wake up to come next month. The company has close to 100 employees on its payroll, with hundreds of others indirectly employed in the supply and value chain. According to the EAC standard on packaging, gin will be packaged in suitable food grade containers without specifying whether in glass or plastics. “Plastics are being used by our counterparts in the region, glasses will only increase our costs of doing business and reduce our competitiveness,” said Augustin Ngamije, the managing director of Esperanza Limited. Rwanda’s industrial sector is still quite small contributing on average around 15 per cent of GDP. The national target under Vision 2020 is for the sector’s contribution to reach 26 per cent of GDP. PSF says manufacturers need supportive not destructive policies, especially if the industrial sector’s contribution to employment targets of 200, 000 off-farm jobs per year is to be enhanced; the sector currently employs only 4 per cent of the total workforce.

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500 jobs on the line as PSF and standards body disagree on packaging