Farming is a hands-on activity and Rwanda’s State Minister for Agriculture, Tony Nsanganira, knows that fact quite well because he spent the better part of his Friday with farmers in Rutsiro District, in the country’s Western Province, to launch the new planting season.
After long months of harsh droughts, the rains are back, a major relief for farmers who have been patiently waiting; but waiting is also the weak point for Rwanda’s agricultural sector.
It is overly dependent on weather patterns, it’s rain-fed and mechanized agriculture is still a pipe dream in spite of commitment from the government and development partners to change the trend.
The government’s agriculture mechanization program implemented between 2009 and 2013 on an initial budget of Rwf6 billion is one of the previous initiatives aimed at promoting irrigation, to allow farmers to cultivate out-of season to ensure all-year-round production.
Development partners such as the World Bank have also supported the government’s efforts in further promoting irrigation, but the ideal results are still a little out of reach hence explaining why farmers still celebrate the return of rains, a signal that they can plant again.
The effects of not being able to produce during dry seasons can be witnessed in urban areas like Niboye Sector, a few meters from the main Catholic Church in Kicukiro District; a few meters away, is a local pub where they serve beer with roasted Irish potatoes.
“For several weeks now, we are short of Irish potato supplies which has forced us to increase prices,” said Innocent Munyengabo who runs the kiosk.
Previously, two pieces of roasted potatoes would go for Rwf100, it’s now Rwf150, something that has forced away many low income customers such as students at nearby primary and secondary schools as well as bicycle-taxi operators.
Farms for firms
But as Rwanda’s rural areas such as Karongi struggle to keep urban centres such as Niboye well fed, the 4th Integrated Household Living Conditions Survey (EICV4) findings released early this week found a new trend suggesting that more farmers are leaving farms to start firms.
A total of 148,376 new business enterprises were created between 2011 and 2014, according to the survey findings but out of this number, rural based establishments were more than those in urban areas.
For instance, business establishments in urban centres increased to 56,795 enterprises by 2014 from 52,938 in 2011, indicating an increment of 7.3 percent over a three-year period.
Rural establishments, on the other hand, increased from 66,314 enterprises in 2011 to 91,581 in 2014, representing a 38.1 percent growth me.
Deeper analysis of the nature of new establishments created in the last three years also indicated that at least 92 percent of them are classified as micro-enterprises, employing between one to three people.
Small businesses employing four to 30 people accounted for just 7.2 percent of all new enterprises created; medium enterprises employing between 31 to 100 people accounted for 0.3 percent while large ones employing over a hundred people were only 0.4 percent.
From the trend, it’s clear that Rwanda’s private sector is dominated by micro and small enterprises with medium and large establishments only forming a small part of the private sector.
But Agriculture is still an influential factor in the nature of businesses being created. According to the survey findings, at least 92 percent of all new establishments created in the last three years, are dealing in agro-products.
“Establishments selling agro-products almost doubled from 25,613 in 2011 to 50,480 in 2014,” said Yusuf Murangwa, Director General of the National Institute of Statistics of Rwanda.
What’s the significance?
The government is not disturbed by the apparent trend of Rwandans leaving farming for business, in fact, to the contrary. It’s a welcome development according to Minister Nsanganira.
“There’s nothing alarming in our view. We are still committed to further modernisation of the agriculture sector even with few but stronger farmers, in order to achieve better outputs,” said Nsanganira.
He also suggested that Rwandans establishing businesses in rural areas are also farmers who are just diversifying their activities to boost their incomes.
“In fact, if I remember well, the report talks of a huge number of the businesses created are actually agri-business oriented trading in agriculture products,” added Nsanganira.
The Ministry’s Permanent Secretary, Innocent Musabyimana, concurred pointing out that the link between new businesses and agriculture is the kind of value-chain that needs to be emphasised as it would help boost incomes and pull more people out of poverty.
Both the Minister and his Permanent Secretary agree that reduced numbers will create more breathing space on the limited land resources and give way for more commercialised and mechanised agricultural practice hence boost production.
Boasting private sector
According to Private Sector Federation chairman, Benjamin Gasamagera, the new trend of farmers leaving agriculture for business is an inevitable development but a welcome one as it will make the private sector stronger.
“To us, this is very good news since the future growth is supposed to be private sector led with services playing a leading role,” said Gasamagera.
The private sector guru added that the trend is a result of the government’s enabling policies that have created enabling environments for businesses to thrive beyond urban areas.
“Rural electrification has particularly opened new opportunities for rural based Rwandans to venture into activities outside farming,” added Gasamagera.
Innocent Bulindi, the Chief Executive of Business Development Fund (BDF), said creating jobs along the agricultural value chain should be received as good news since most Rwandans in rural areas don’t own land on which they can practice meaningful agriculture.
BDF helps enterprising Rwandans to find credit by providing grants, loan guarantees as well as building capacity in management.
For Rwanda’s new business establishments to thrive, they will need help from institutions like BDF to graduate from micro-establishments to medium or even large firms and create more off-farm jobs.
The target is to create at least 200,000 off-farm jobs a year, but the survey findings indicated that the government fell short of that target by some 60,000 jobs, averaging 140,000 new jobs annually over the past three years.
Of the jobs created in the past three years, micro-businesses contributed 50 percent followed by large establishments with 27 percent and 16 percent by small enterprises.
A decade ago, agriculture used to employ at least 90 percent of the total population but this has since reduced in recent years and is now estimated to employ between 70 and 80 percent of the total population.
PSF’s Gasamagera sees that number further reducing to possibly 60 percent in coming years as Rwandans move to join other sectors.
That seems to be already the trend. In 2005, agriculture’s contribution to gross domestic product was 39 percent, but this had reduced to 33 percent by 2014.
In the meantime, the service sector has been expanding relentlessly from 43 percent in 2005 to 47 percent in 2014 a trend expected to continue.
Government projects that services will account for over half of Rwanda’s economic activities in the medium term as agriculture takes on a more secondary role.