Local firms face tight competition from EAC

Rwandan companies are experiencing thin margins following the establishment of the East African Community (EAC) common market, which calls for free movement of goods, labour, services and capital within the region. While the move aims at boosting trade and making the region productive through increased investments, local manufacturers are struggling with high transport costs of both imported raw materials and exported finished goods. 

Rwandan companies are experiencing thin margins following the establishment of the East African Community (EAC) common market, which calls for free movement of goods, labour, services and capital within the region.

While the move aims at boosting trade and making the region productive through increased investments, local manufacturers are struggling with high transport costs of both imported raw materials and exported finished goods. 

Established on July 1, 2010, the common market aims at emphasising pro-market, pro-private sector and pro-liberalization economic policies.

Rwanda is still a net importer of raw materials which makes its final products expensive and thus reducing their competitiveness on the export market. 

Local industries are at a relatively nascent stage and analysts have suggested that opening up the local market has exposed them to tight competition from large firms within the region.

“Some local factories are likely to close due to other products from Uganda, Kenya and Tanzania,” François Munyentwari, the Country Director, Accord International Rwanda observed.

He noted that there is hardly any Rwandan company and labour going to these countries yet many products, companies and labour move to Rwanda.

But there is yet another bottleneck that pulls back Rwanda from equal sharing of the now larger market of over 120 million people.

While the country is considered to be transparent and strives hard to implement the integration, other countries have failed to put what was agreed on paper into action.

“Rwanda is transparent but when we go to the other side of Uganda and Kenya what they actually talk is different,” Rama Kant Pandey, the General Manager of Inyange Industries, told Business Times in an interview.

Experts say the level of readiness for the EAC common market in Uganda and Kenya is still dreary.

The countries are struggling with national identification for citizens’ issuance of certificates of origin, harmonisation of tax and increasing presence of non-tariff barriers.

“We have to research where there  are issues and see whether there is a comparative advantage,” Munyentwari said, adding that to achieve common market in totality, policies must be harmonised across the borders.

Transport dealers are not left in this whole ordeal as they go through a hassle of pleasing corrupt officials and delays in clearing products. Clearing products on the Rwandan side is done in a tickle of a clock yet it takes hours and bureaucracy in other member states.

But still to mention is that Rwanda has benefited from the regional market.

Robert Ssali, the Permanent Secretary in the Ministry of East African Affairs said: “There are numerous gains for us, as Rwanda, from the Common Market and that is why we decided to join the Community.”

“The ball is in our hands to see how we fully benefit in the Community.”

Rwanda’s export receipts increased to US$45m in January and February in 2011, compared to US$31m in the same period, last year, with an increase of 18.9 tonnes in value from 14.8 tonnes.

Ends

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