Investors decry high production costs

High costs of production and logistics services are hurting investors by reducing their profit margins while leading to an increase in prices on the market. Investors argue that high energy, taxation and land cost as well as transport charges, especially for importing raw materials are impacting heavily on the amount of operational capital.
Workers in a Rwandan water bottling plant; Manufacturers have decried the high costs of production in the country.The New Times /  File.
Workers in a Rwandan water bottling plant; Manufacturers have decried the high costs of production in the country.The New Times / File.

High costs of production and logistics services are hurting investors by reducing their profit margins while leading to an increase in prices on the market.

Investors argue that high energy, taxation and land cost as well as transport charges, especially for importing raw materials are impacting heavily on the amount of operational capital.

“The aspect of land is challenging in Rwanda. We don’t have enough land to grow wheat to cater for the high demand on the market,” Mounir Bakhressa, the Managing Director Bakhressa Milling Industry told Business Times.

Bakhressa noted that the industry is heavily dependent on wheat imported from Tanzania which is affected by high transport costs.

Statistics show that transport costs account for 40 percent of the total value of imports to the country.

“We are trying to control our supply chain and also look at setting pilot farms for wheat growing to cut the costs,” he added.

The manufacturing sector has been rated last among sectors in the country contributing only 4.3 percent to the Gross Domestic Product (GDP) calling for action to streamline the sector.

An economist Dr. Peter de Valk, recently said that the manufacturing sector is struggling with multiple bottlenecks including, limited supply of skilled labour among others.

The Minister of Trade and Industry, Francois Kanimba, noted that government is developing means of addressing these trade barriers by helping local industries to access cheaper imports from the East African Community region.

The Ministry with the support of the World Bank group is conducting a study for the development of a logistics and distribution services strategy for Rwanda aimed at developing a viable trade logistics industry.

The study, according to experts, will define establishment of agro centres to host added-value logistics services for agro-exports, regional distribution centres and an air cargo centre to support development of an air cargo hub which are the country’s potential market segments in logistics and distribution.

Ends

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