Rwanda must diversify commercial agriculture to reduce her heavy reliance on coffee and tea to stimulate growth and increase foreign exchange, the World Bank has advised.
In its Rwanda Economic update report, the World Bank calls for diversification of agricultural production, in particular agricultural export goods especially in horticulture and flowers.
“It appears that without more concerted efforts to address investment challenges in this promising export sector, Rwanda is likely to continue to depend on traditional export crops of coffee and tea,” the report reads in part.
Birgit Hansl, World Bank’s Senior Economist Africa Region said Rwanda needs to actively invest in non-traditional export crops, such as fruits, vegetables, and cut flowers, essential oils and silk.
While the Minister of Agriculture, Agnes Kalibata, acknowledged the unexploited huge potential in the horticulture industry, she said that government has directed efforts towards attracting investors.
“It is a process but since our last meeting on agribusiness investment forum, we (government) are seeing many investors interested in the sector,” she said, last week, during a meeting with some 30 large local fruits and vegetable producers and processors.
The one day meeting aimed at discussing ways to increase horticultural production as well as coordinate the whole value supply chain.
Rwanda had a secured market for organic products in the Middle East and the Europe but experienced a temporary ban because of failure to comply with required quality standards.
This is despite the country having favourable climate and soil conditions to develop a vibrant horticulture industry with high-value export crops.
Export crops contributed an average of 48.1 percent to Rwanda’s total export earnings in the past five years that accounted for 1.1 percent of GDP. Coffee and tea dominated with more than 90 percent of the value of export crops.
Overall, production volume of horticulture crops remains low as it is done by groups of small-scale producers.
Ndambe Nzaramba, the Director General of RHODA said horticultural exports, especially flowers, have been declining since the global financial crisis.
Horticultural farmers cite limited access to finance as one of the major challenges to the industry. Others, however, say it is more to do with technical challenges, where most farmers have limited capacity to control or prevent diseases attacking their crops.
Emmanuel Nzabonankira, a member of a pineapple growing cooperative in Ngoma District, Eastern Province, said they lack knowledge of the whole process from planting to post harvest storage.
“We don’t know how we can prevent or control pests and diseases, planting is still traditional, (farmers are) not able to identify the quantity needed to be grown per hectare,” he observed.
He, however, hailed government’s efforts to address the challenge of capacity by allocating one agronomist at the district level and agriculture carders in every sector.
“This is impressive. To have such a high level dialogue with the Minister is in itself a sign of government commitment and a platform to address our challenges to improve quality and increase production,” Nzabonankira added.
Limited access to finance
Last year, only 2.1 percent of the total loans approved by banks went to agriculture—a sector that accounts for 80 percent of the country’s workforce and contributed 36 percent of the overall economic growth as well as generating 45 percent of the export revenues in the last five years.
This confirms the World Bank’s report that Agriculture suffers from insufficient access to finance and insufficient investment capital for farming, agro-processing and export development.
Banks continue to shun the sector, saying it is not creditworthy because most players lack collateral and hardly can one trace their credit history with banks, which in theory makes them risky clients.
Nzaramba explained that:“This is a capital and skill intensive sector and a vast majority of them do not have collateral to pledge with the lending banks to secure loans.”
The World Bank report cited that low productivity and high vulnerability of the sector makes banks reluctant to offer financial services to rural farmers. Banks also lack relevant information on the profitability of the sector’s value chain activities.
Finance Minister, John Rwangombwa, said the global economic crisis had a significant impact on growth of Small and Medium Enterprises (SME) finance for the last two years.
“This has resulted in a lower credit provision to this sector compared to the recent past. Due to global economic crisis, the banks (also) adopted a cautious approach in lending to the agriculture sector since it is considered a risky sector,” Rwangombwa said.
The challenge, according to Kalibata, “is that all the funds are in the banks and they (banks) are taking long to pick interest in agriculture projects.”
Acting Head of Agriculture Development in Rwanda Development Board (RDB), Tony Nsanganira, said the five years National Export Strategy that was recently approved will identify prioritised actions that respond to issues that affect Rwanda’s upgrade to high value-added products in export clusters.
The strategy provides an action plan to increase export growth in the decade ahead through an emphasis on crosscutting issues, targeted sector strategies and coordinated implementation of export policies.
If appropriately supported, horticulture has the potential to be the growth engine of the economy due to its ability to create jobs, foster entrepreneurship, and to provide depth to the industrial base of the economy.