The move by government to give preferential treatment to local products and services in public tendering processes will not affect quality standards, according to the minister for Trade and Industry Vincent Munyeshaka.
The government has presented a bill to parliament seeking to overhaul the entire public procurement framework to, among other things, support Made-In-Rwanda drive.
While the current law provides for a 10 per cent local preference to regional bidders in economic blocs of which Rwanda is a member like the East African Community and COMESA, the draft law proposes preference for goods produced in Rwanda in support of the "Made-In-Rwanda" policy.
In this interview, Munyeshaka sheds more light on implementation modalities.
Munyeshaka also talked about key issues in local production as well as mechanisms to address them.
There is a move by government to give local firms and producers preferential treatment in public tenders. How soon will this take effect and under what modalities?
This will be realised at some point. We have been able to revise our public procurement law, which is currently under review by parliament after approval by cabinet. After that, it will then be gazzetted. We revised it to give some level of preference to our local products. We have introduced that in two major areas. For locally made products, as well as those produced locally by foreign firms.
This is about revising our legal framework, we wanted to put in place, in partnership with Rwanda Public Procurement Authority (RPPA), a monitoring mechanism to ensure that at least 65 per cent of our public tenders are awarded to local products. What is remaining is actually to implement it.
This however brought about concerns on its impact in regards to quality standards of locally made products. Will they still meet quality standards if you give them preference?
Actually the preferential treatment we are introducing will largely work on assumption. An assumption in that they [local products] match quality requirements. The local products will have to compete on quality. This is in turn an assignment to local producers to work on improving quality. Rwanda Standards Bureau (RSB) will support them to resolve issues around quality, the right technology and packaging.
The new law will work when competing products are similar in terms of quality. Quality will always come first before preference. There will be no compromise in regards to quality.
A large section of local producers say that their major concern is electricity and its impact on their productivity and profits. How are you going to address this?
As far as electricity is concerned, there are two main issues. The first is the cost while the second is predictability in regards to cut offs.
We are in the process of coming up with new tariffs for productive uses and sectors. We aim to have preferential tariffs for productive users. There is an assignment to come up with a system that can allow Rwanda Energy Group to alert users of the power cuts so that they can properly plan their productive process. The negotiations around the productive tariffs are ongoing now [with power sector stakeholders] and we will have the final proposals by January next year. I would like to ask people in business to be a bit patient. The government is very conscious on this issue.
[With the current electricity tariffs, consumers with large industries pay Rwf83 per kilowatt, those with medium industries Rwf90 per kilowatt, while the small industries pay Rwf126 per kilowatt].
The sustainability of Made-in-Rwanda initiative has had several issues, especially due to challenges of supply of raw materials. A number of them say that their production is often affected due to the unreliability of inputs, especially in the agro-processing sector.
This is a real issue. What needs to happen is that we need to go back and work on our value chain. There is opportunity but most of the stakeholders in the value chain are cooperatives who are supposed to produce the raw material to be used at higher production levels. You find that corporate governance issues often have a negative impact on the productivity and functioning of the whole value chain. It is a shared responsibility. As government, we need to go back and restructure our cooperatives too because most of the SMEs are initiated by cooperatives. Where there are issues of governance, it impacts on the whole structure and performance. Corporate governance among cooperatives is a big issue and requires addressing. Another issue is post-harvest infrastructure and facilities that are provided by the Ministry of Agriculture. We can ask the ministry to provide the facilities or we can come up with a contract farming method with our industries in agro-processing to make sure that some functions are transfer
red to the industries, for instance, maize drying and storage when our cooperatives do not have such facilities. We have good relations with the Ministries of Local Government and Agriculture that will help us address all these issues.
Years following the introduction of the Made-in-Rwanda initiative, what is the government’s take on the uptake and progress of the initiative?
As government, we introduced the Made-in-Rwanda policy to tackle the issue of trade deficit. What we are seeing now is a positive trend, exports are going up and imports are declining. As a result, we are narrowing the trade deficit, we are very appreciative of the trend.
[Rwanda’s trade deficit has narrowed significantly in the first six months of 2017 by over 25 per cent compared to the corresponding period last year. Trade deficit in the first half of the year stood at $671.2m compared to $902.3m in the same period last year].
We have, however, not reached our main goal or target. We hope that we can achieve some kind of financial autonomy with a positive balance of payment. We, however, appreciate the trend and the campaign objectives.
Speaking of reforms, the government committed to what most might call ambitious reforms (about 14 reforms) given the short period before the review by the World Bank Doing Business Report review.
Actually, we have been having meetings about doing business reforms, to validate and agree on the action plan to introduce the new reforms which would see Rwanda improve in Doing Business Rankings.
This time, there has been a revision in the cycle in reviewing the Doing Business reforms, which pushes the deadline closer to end April. We have about 5 months before the review. It will be very tight. We have agreed on timelines and managed to put in place a strong monitoring and evaluation framework where we will be meeting monthly to measure major achievements and see where we are lagging to come up with corrective measures. We will have action at both the technical level and at the steering committee level to track the progress.
How achievable are they and what informed them?
While designing the action plan, we are borrowing from the assessment we have done from the previous ranking, taking note of the areas where we did not fare very well. We also want to maintain the momentum on areas where we have done very well as well as improve on aspects where we did not do well.
The action plan is informed by our assessment of our report from last year but also we have been interacting with the business community. There are issues such as energy, where even without consultations, we were well aware that it has been a challenge. The same applies to aspects such as construction permits. It is informed by consultations, performance and self-evaluation.
A recent World Bank report showed that the exporting sector has quite a low survival rate, at 30 per cent, and also supported by a few firms. For instance, 5 per cent of the firms are responsible for nearly 80 per cent of the exports. What is the government’s approach in addressing this?
The major issue is the structure of our industrial sector. You will find that about 98 per cent of our industries are SMEs. What we have done is that we have begun providing technical assistance, it is very selective whereby we target SMEs with high potential for value addition and export. We have also begun working closely with the Rwanda Standards Board to assist them in terms of improving and purchasing the right technologies.
On the financial issues, SMEs are facing issues in getting the right financing for their export processes. We have put up an export promotion facility within the Development Bank of Rwanda. Those are the three instruments we have in place to improve our export capacities.
Is there a skills development component in your intervention as it seems to be the largest issue according to most exporters interviewed?
In the recent deal with the African Development Bank, there is a component of skills and business support, worth about USD84 million. Through our partnership with Workforce Development Authority and other institutions, we have a clear plan of skills building to make sure that we have a critical mass of young workers who have the right skills to work and survive in business.