Financial crisis slows Rwanda, US trade; PSF

•Exports down by 60 percent Rwanda’s exports to the United States last year fell by 60 percent, a decrease that has largely been attributed to the surging Global Financial Crisis.
PSF Secretary General Emmanuel Hategeka.
PSF Secretary General Emmanuel Hategeka.

•Exports down by 60 percent

Rwanda’s exports to the United States last year fell by 60 percent, a decrease that has largely been attributed to the surging Global Financial Crisis.

Trade between Rwanda and the US is facilitated by a framework called the US- Rwanda Trade and Investment Framework Agreement (TIFA) that was signed in 2006.

According to the Private Sector Federation (PSF) the export revenue from the U.S reduced from of about Rfw 5bn in 2007 to Rfw 2bn in 2008 (Freight On Board).

“The fall is largely attributed to the financial crunch. Coffee exports to the U.S were most affected, despite efforts in value addition. The situation could worsen in 2009,” cautioned Emmanuel Hategeka, Secretary General, PSF, during a meeting of trade experts from both countries including Florizelle Liser, the Assistant U.S Trade Representative for Africa.

According to Hategeka, coffee exports were severely hit, falling from Rfw 1.3 billion in 2007 to Rfw 425 million in 2008. The total export volume to USA fell from 1,124,829 Kg in 2007 to only 329,195 Kg.

According to the Ministry of Commerce, Trade and Industry (MINICOM), there was also a decline of exports to the U.S. in 2008 under the Africa, Growth and Opportunity Act (AGOA).

Coffee exports reduced from $2.4million in 2007 to $0.77 million in 2008 while ores and concentrates exports reduced from $4.61million in 2007 to $1.74 million in 2008. 

There was also a notable reduction of Pyrethrum extracts exports from $3 million in 2007 (3,296kg each unit sold at   $116) to $382,858 in 2008 (3,8274kg each unit at $78), according to a presentation from MINICOM.

Agricultural products (mainly coffee), tea, pyrethrum, minerals, handicrafts and gift articles comprise the bulk of Rwanda’s current exports to the U.S.

Apart from falling commodity prices due to the financial crisis, supply side constraints related to infrastructure, energy and transport that limit production also account for the decline in exports.

Currently only a few Rwandan enterprises are exporting to the US market, despite the U.S providing a relatively stable market for Rwandan products.

Gahaya Links a local handicrafts marketing company, Rwanda Basket Company, Gallerie Beaux Arts, Sopyrwa (Pyrethrum) and Utexrwa (Textile) are companies currently exporting to the US.

Challenges cited by local enterprises that derail exporting to the US include meeting the strict quality standards and regulatory requirements of the US market and generating sufficient production capacity to consistently satisfy demand.

The high cost of market entry for some products like pyrethrum, less product awareness and lack direct access to markets were also identified as key constraints for exporters to the U.S.

According to David Rwiyamirira, the General Manager of SOPYRWA, his Company was charged $ 1.6 million by the U.S Environment Protection Agency (EPA) for market entry, in addition to $ 3000 annual subscription.

Tight market conditions were also cited at the meeting as posing charges to Rwandan exporters. For instance for Pyrethrum the U.S market has only two middlemen who are allowed to import pyrethrum concentrate.

While Gahaya Links also noted that they have to go through a middleman who charges highly to access their major client, Macy’s.

Contradictions

Meanwhile, statistics from the Office of the United States Representative, total trade between the U. S and Rwanda was valued at $ 34.2 million in 2008, a 19 percent increase over 2007.

During the same period, U.S exports to Rwanda were valued at nearly $20.5 million, increasing by 27 percent, and Rwandan exports to the U.S were valued at $ 13.7 million, increasing by 8 percent.

All Rwandan exports entered the U.S duty free during this period, including under U.S preference programmes like AGOA and the Generalized System of Preferences (GSP).

“We reviewed our progress, identified our challenges, and charted the way forward for our future work under TIFA. Now that we know what the issues are. We shall see the best ways to cooperate, to help Rwanda in terms of being competitive on the U.S export market.” Florizelle told The New Times in an interview on Friday.

At the meeting that was held at the MINICOM premises, both countries agreed to share information and harmonise their statistics as one of the key areas in the new action plan under TIFA. 

Ends

 

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