Rwanda seeks new interventions to prop up declining export receipts

A narrow export base and declining volumes, coupled with the widening trade deficit driven by the mismatch between import bills and export receipts, have been one the biggest challenge for government strategists and the private sector this year.
Promotion of flower growing is one of the interventions aimed at increasing export receipts.
Promotion of flower growing is one of the interventions aimed at increasing export receipts.

A narrow export base and declining volumes, coupled with the widening trade deficit driven by the mismatch between import bills and export receipts, have been one the biggest challenge for government strategists and the private sector this year.

With the international commodity prices dropping and the continued poor performance of the global economy, Rwanda’s traditional markets in Europe, China and America scaled down on imports, which hurting the country’s export receipts.

 

The government targets to grow exports by 28 per cent annually under the second Economic Development and Poverty Reduction Strategy (EDPRS II). However, the country’s exports were at 16.5 per cent in August while trade deficit rose by 2.2 per cent during the first eight months of the year. Low inflows of the greenback saw the franc depreciate by 6.9 per cent by mid-August against the dollar.

 

With government increasing interventions geared at supporting the private sector to help spur export volumes and earnings, the question remains what else Rwanda can do to achieve its export targets.

 

According to central bank figures, total exports dropped in value by 2.4 per cent in the first half of 2016, to $268.57 million from $ 275.12 million on the back of a 6.3 per cent decline in the same period last year. However, exports volume rose by 16.5 per cent, driven by a 10.9 per cent growth in coffee exports and 54.1 per cent increase in re-exports.

However, the mining sector that contributes significantly to Rwanda’s export revenues, declined by over36.6 per cent due to low appetite for metals by world’s biggest consumer, China.

Coffee exports increased by 10.9 per cent in volume, but contracted 9.2 per cent in value due to the fall in the unit price on global market. The global price for the beans dropped by 18.2 per cent, from about $3.22 per kilo to $2.63 a kilogramme in the first half of the year.

National agriculture export Board (NAEB) attributed the increase in the volume to good crop in the first quarter of 2016, especially in the Northern Province, reaching 5,956.9 tonnes compared to 5,141 tonnes in 2015 same period. By October of 2016, total coffee revenue from had amounted to $46.8 milliom lower that what was generated same period in 2015.

Tea sector

Equally, tea exports decreased in both value and volume by 5.7per cent and 0.3per cent, respectively due to the fall in unit price of about 5.4per cent from $2.68 a kilo to $2.53 per kilo in the first half of 2016. This reduction in unit price led exporters to keep some of their production in the stocks, leading to a slight decline in volume exported, according to NAEB.

Tea exports raked in about $52.8 million in the first 10 months of 2016, a decline from $62.2 million earned during the same period last year. The country’s tea production increased to 85.5 million kilogrammes, up from nearly 85 million kilos. ‘Made-tea’ production decreased to over 20.8 million kilogrammes during the first 10 months of 2016, down from 21.4 million kilos over the same period in 2015.

Metal exports drop

The mining sector continued to record poor performance, declining by 36.6 per cent in value, and 17.4 per cent in volume mainly due to falling international metal prices. By first half of 2016, cassiterite and coltan prices had plunged by 23.0 per cent and 41.5 per cent, respectively. Wolfram shed 38.2 per cent value, leading to a decline in its exports earning of 46.9 per cent.

Pyrethrum rises

Pyrethrum exports volume edged up by 116 per cent in the first quarter of 2016, from 6.70 tonnes in 2015 to 14.49 tonnes, while price rose by 10 per cent from about $173.90 per kilo in 2015 to $190.69 in the first quarter of the year. This propped up earnings from the sector by 137 per cent, from $1.17 million registered in the first quarter of 2015 to $2.79 million during the same period this year.

Challenges

Apart from falling international commodity prices, exporters say high cost of transport and other logistics, as well as packaging problems are a nightmare and affect export sector’s performance. Donatille Nibagwire, the managing director of FLORIS Export Company, which exports horticulture produce to the Middle East and Europe, says, “The cost of transporting exports to the market is still high, which affects the competitiveness of the sector.”

Grace Umuhorakeye, from the Association of Coffee Exporters, says packaging is one of the issues exporters will have to address going into the New Year to become more profitable.

Initiatives to bolster export earnings

The government and private sector players have over the past two years been working more closely to find ways of improving the country’s exports and reduce the import bill. There are so far many initiatives that are already in place to achieve this, export promotion and diversification.

Under the export diversification strategy, flower growing has been identified as one of the areas that can help the government achieve it target in a short time.

Already, the country’s flagship project, Gishari Flower Park in Rwamagana, could start flower exports early next year. Managed NAEB’s Bella Flowers kicked off raising hopes that the sector could boost exports in 2017. Bloom Hills Rwanda, a Japanese flower export firm based in Musanze District, has also started flower exports. The sector earned $56 million during the first 10 months of 2016, according to NAEB statistics.

Made-in-Rwanda initiative

The private sector and government launched an initiative to encourage Rwandans to consume locally-made products two years ago to reduce imports and spur foreign exchange earnings. The campaign is under the Ministry of Trade, Industry and EAC Affairs’ local market recapturing strategy.

However, the country needs to address issues like high fees for industrial power, poor packaging, branding and marketing.

There is also an urgent need to improve the logistics sector, providing facilities like cold facilities along the value chain of horticulture produce, and ensuring quality to make Rwandan products more competitive in regional and global markets going into 2017.

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