Why targeted support in agric sector will spur exports growth

photo

Farmers sort tomatoes. Agro-processing is central to Rwanda's export strategy. / Courtesy

There is currently a drive to diversify agriculture exports, and National Agriculture Exports Board (NAEB) is already promoting horticulture, including flower farming and growing of fruits, to achieve this objective.

This initiative mainly seeks to increase non-traditional cash crop exports. Besides, the slow pace of growth for traditional agro-exports has raised concern among sector players who are calling for new interventions.

They say new mechanisms will help propel growth toward the second Economic Development and Poverty Reduction Strategy (EDPRS II) targeted growth 28 per cent per annum by 2018.

Betty Ingabire, a trade analyst and horticulture exporter, called for a clear and targeted export strategy that supports farmer and exporter needs, including availing them credit facilities.

Such a strategy should also promote value addition among farmers and exporters “because agro-processing is essential to boost value and enhance quality of Rwanda’s exports.”

“This way, you are able to give assurance to all players along the whole value chain, and also create strong market linkages,” she said.

Ingabire also said ensuring that farmers access quality inputs, including fertilisers, is equally important. This should be complimented by provision of extension services within communities and constant monitoring by agronomists, she added.

According to Hungo Harada, the managing director for Bloom Hills Rwanda, a Japanese flower export firm based in Musanze District, horticulture has the potential to turn around Rwanda’s export sector.

He said there is need to introduce new flower species in the country, which are more competitive and profitable.

Rwanda sold close 13.9 million kilogrammes of vegetables and fruits in the first two months of 2017, earning about $7.6 million in exports.

Eugenie Mukamana, a pineapple farmer in Kibungo District, said it is crucial for farmers to access new crop varieties and embrace modern farming technologies like irrigation to help improve Rwanda’s exports.

For Donatille Nibagwire, the managing director of FLORIS, an export firm, this also calls for more investment in the sector, particularly under the public-private partnership (PPP) arrangement.

“The government alone cannot turn around the export sector, calling for collaboration between the public and private sectors to inject more funding into agriculture. However, there must be some targeted incentives to help lure more investors into the sector,” she said.

Targeted support is one of the strategies government is using to help improve the country’s exports and earning, as well as create more jobs.

Government has previously signed deals with selected firms in its drive to increase Rwanda’s exports, a move that is also geared at helping to reduce the country’s huge trade deficit and spur forex reserves.

These and other efforts by government and private sector are generally aimed at helping the country achieve 28 per cent growth rate in exports per year as per the country’s development blueprint. This would be an increase from about 20 per cent.

However, with the is current sluggish growth in export volumes and receipts, experts and stakeholders say there need to review and draft a more elaborate and targeted strategy to realise this ambitious target within the specified time frame.

Agro-export receipts drop

The call by sector players comes on the heels of a recent report by NAEB indicating that traditional exports, including coffee and tea, plus horticulture produce posted “less than encouraging” performance in the first half of this financial year, as well as in the months January to February, 2017.

According to the report, the traditional exports - coffee, tea, minerals, as well as pyrethrum and hides and skins fetched $219 million in 2016 lower than $265 million earned the previous year.

Rwanda recorded $44.4 million from tea exports in the first half of the fiscal year (July-December, 2016), down from $47 million recorded during the same period of the previous financial year, or a drop of 5.63 per cent in revenue.

The export body attributed the drop to low volume sold in the first half of 2016/17 compared to the previous period, or 12.25 per drop in volumes. NAEB added that the prices were also low over the reporting period.

1491846710plantains
NAEB is promoting product diversification to expand the country’s agriculture export base. / File

The country produced 63.6 million kilogrammes of green leaf and sold almost 13 million kilogrammes of ‘made tea’ in February at $3.17 per kilo

Meanwhile, the report indicates that the country earned only $1.6 million from coffee exports in February, down from $2.5 million fetched over the same period the previous year. This represents a decline of over 36 per cent in expert revenues recorded.

This was poor performance was attributed to the small quantity of coffee sold in February (663,476 kilogramme) against over one million kilogrammes exported over the same period last year, indicating a decline of 42.6 per cent in volumes.

Overall, Rwanda’s export receipts increased to $598 million in 2016, up from $558 million recorded in the previous year, according to the National Bank of Rwanda (BNR) figures.

Experts believe boosting local production and value addition while encouraging consumption of locally manufactured goods could help boost exports.

However, NAEB and trade experts say the country should have earned more revenues during the first two months of the year given the fact that prices for coffee were relatively impressive averaging at $2.45 per kilo compared to $2.2 per kilo same period in 2016.

Early this year, the central bank projected an improvement in commodity prices and positive agriculture and export performance, which it said would drive economic growth this year. This should give investors confidence to inject more funds into the sector, according Emmanuel Twizeyimana, a financial expert in Kigali.

The big question is, therefore, how the country can turn around the tide and ensure growth across all export-oriented sectors.

What’s being done so far

A fortnight ago, Rwanda’s lead development financier signed deals with BPR and I&M Bank to fund SMEs and export-focused firms under government’s Export Guarantee Fund.

This came on the back of an earlier deal between Rwanda Development Bank (BRD) the Private Sector Federation (PSF) to revitalise the exporters forum.

The fund that has grown from Rwf1 billion in 2015 to Rwf8.5 billion this year is expected to expand by 76.4 per cent in 2017 to support more export firms, help reduce the widening trade imbalance and boost the country’s foreign exchange reserves.

This has, however, not dampened the enthusiasm of government agencies that are charged with this daunting task.

Already, NAEB is projecting to fetch more revenues from tea exports, from $65 million (about Rwf44.2 billion) to $147 million (about Rwf100 billion) by 2018, while coffee export earnings are expected to more than double from $73 million to $157 million during the same period.