Despite ambitious projects, trade in the region and in the country continues to face significant challenges that have excluded a number of players or reduced the returns on investments. However, experts remain ambitious on the potential of trade in driving growth in the country and in the region. The New Times’ Collins Mwai spoke to Arancha Gonzalez, the executive director of the International Trade Centre on various aspects of local and regional trade and ways to tap into opportunities.
There has been a lot of talk on the potential of e-commerce in raising the profile of Rwanda and East African products and increasing exports. How realistic is it in the short term?
This is an area we are working together with the government to open a window through which companies in Rwanda can trade directly with the rest of the world through e-commerce. They do that without mediators to capture a greater part of the value. That is easy to say but difficult to do.
There are some challenges linked to digital gaps – digital infrastructure divides—where the Ministry of Youth and ICT has made clear commitments. Partly, it has to do with softer issues like connecting to online payments. Others have to do with financial regulation and legislation.
At times it has to do with attracting traffic to your platform and products. On all of these, we are working with the government and a handful of companies to roll out e-commerce hopefully by the summer this year which will then serve as inspiration to the rest of the firms.
What are the pre-conditions for Rwanda to successfully do this?
The pre-conditions in this case are good connectivity, good logistics and the capacity of the company to produce good products and services for the international market.
There has been debate on whether or not the East Africa Community should sign the economic partnership agreement with the European Union. Some countries such as Rwanda have already moved to sign the agreement but others are still hesitant saying that it could lead to unfair competition.
My view on this is that countries ought to negotiate what is good for them. I think EAC has negotiated a good deal with the EU. It is a deal that has the EU opening their market immediately but countries within the EAC region open their markets very gradually. This gives time to companies here to become more competitive.
There is nothing such as an imminent threat of being eaten alive by cheap imports. In every economic partnership agreement, there are clauses against unfair trade. You can always regulate what you consider as fair trade.
EAC has already started implementing a move on second hand clothes; nothing prevents EAC from having further initiatives like that.
At the moment, intra-regional trade is relatively low, both in the East African region and continentally. However, this has been an ongoing conversation for years. What seems to be the challenges?
The regional dimension of trade is really important. For many companies, their first experience of international trade will be within the region. My view is that we have paid a lot of attention to hard infrastructure issues –which is important – but next to hard infrastructure, we also ought to pay attention to “soft infrastructure.”
We are not paying enough attention and this means entrepreneurship, skills, quality, attention to diversification, empowering the poor. This in my view is what will help tap more into intra-regional trade.
The final aspect is dealing with non-tariff barriers which stem from differences in regulations and standards. EAC is doing a lot in this regard.
At the moment, the growing levels of trade have brought little change to other national aspects such as level of employment. The 2014 ITC summit held in Rwanda specifically focused on how to create employment through trade. Any suggestions on the way forward?
Youth employment is a priority especially in a continent or region that is still relatively low and employment can be the difference between youth dividend and youth time bomb. What we need to do in my view is look at which sectors are today the generators of employment through trade and also which future sectors can be generators of employment.
We need to look at the competitive opportunities for a country like Rwanda. Among them is the digital world which offers immense opportunities, leveraging technology, E-Solutions, E-enabled businesses among others.
There are also niche agricultural products that can be huge. Products such as certain chilli and spices, the spices can go to the value chain of cosmetics, medicines, food products etc. The question is to identify where the niche exists.
Rwanda is aiming to develop the local manufacturing sector through the Made-in-Rwanda campaign. Any ideas how the campaign can increase exports to balance the trade deficit?
There is a big untapped potential in branding. Branding goes beyond the product to the country. For example, Rwanda has made a very good name as a tourism destination. In my view, the best branding is that which starts with the country.
Where people can associate the country to value and quality.
People are fast realizing that this is a new Rwanda that is worth investing in and that it is a country worth buying from.
We have to do country branding and leverage that. Made-in-Rwanda is a very nice step towards that so that people begin identifying the country with quality, sophistication and Authenticity.
During your interactions with local and international producers, what have they cited as their biggest constraints for the Made-in-Rwanda campaign?
Every investor and producer wants stability and facilities to do business. That has already happened here through ways such as being able to open a business here in one day. That is greatly appreciated.
They also want infrastructure that functions, access to internet and reasonable energy prices.
In Rwanda, an issue that has to do with the size of the country is that most production is usually small scale. One of the issues that suppliers in Rwanda face is ability to supply in sufficient quantities at a stable level of quality.
The level of quality they can achieve but the sufficient quantities is where there is a bit of a concern, that is where more work needs to be done to facilitate mechanisms to aggregate production.
Assuming that quality is the same across multiple producers, these can be done by aggregating small quantities produced by multiple producers.
Previously you have said that developing countries can do more in terms of value addition to increase their competitiveness in the global market. What are we not doing right?
Value does not mean that you have to invest a lot of money. Value addition is dependent on smart investments. We have been working with a group of companies to get them organic certification.
Organic certification in itself is value addition because products that are certified can fetch twice or thrice as much prices than products that are not.
The question is identifying what are the niches of doing value addition. I can give an example of an investor coming to start a plant to process chilli in Rwanda. They will be processing too extract oil. It is better to sell the essence than the chilli.
Value addition through technology is relatively easy because it is dependent on skills and not hardware. This can take various shapes through products such as animation films.
Recently, ITC in partnership with the government of Rwanda launched She-Trades, an initiative that could see more women connected to the international market. What informed this move?
She-Trade is motivated by a very simple fact. Countries that include women in their economies grow faster, companies that are more diverse are more competitive and societies that empower women economically reduce poverty faster.
It is this triple bottom line that led us to work on women economic empowerment. We have called it She-Trades, what we want through it is to connect one million women entrepreneurs to markets by 2020 by working on seven key constraints that limit their ability to be part of the economy.
Access to credit, lack of enough access to public procurement, not enough suppliers to corporations, unfair policies among others. We want to fix these seven areas towards connecting these women to the international market.
What particular challenges did you find to be very dominant in the East African region and Rwanda specifically?
For two years, we were scoping the market. We were talking to stakeholders across the world. The most significant thing we found is that the seven problems are common all across the world.
They take different proportions but they are all there.
We also found that issues of women economic empowerment are not just issues in the south of the world, there are also issues in the north of the world. We have rolled out the same initiative in Finland among other places. They too realize that they have to address bottlenecks that limit their participation to the global economy.
What we know is that for the world if we were to eliminate discrimination that women face, it would be like adding a new economy into the world that is the size of China and America combined. What we are talking is big numbers.
Women empowerment is not about charity or social welfare, it is about the strength of the growth.
If the goals of the initiative are achieved what will be the impact in terms of economic growth?
Trade is a means, it is not an end. It’s a tool to generate growth. When the government sets a trade target, it’s only a means to generate growth. What matters next is how to distribute growth.
What we are seeing across the world is that lots of people are questioning the value of trade not because it is not good but because they do not get to see the benefit of trade.
What counts is the growth that can be generated through trade and also the way in which you distribute growth, working with Small and Medium Enterprises is one of the ways to make sure that the growth can be distributed all across.