The government has stepped up efforts to increase crop and animal production as part of its wider goal to increase exports and foreign exchange earnings. This is also intended to close the big balance of payments gap Rwanda currently faces.
The initiative will also support the country’s development blueprint. Business Times’ Peterson Tumwebaze caught up with the Minister of Agriculture Dr. Agnes Kalibata and other experts who explain how this will be achieved.
Rwanda has stepped up initiatives geared at boosting agriculture production and agro-processing to a move that will help deliver the second phase of the Economic Development and Poverty Reduction Strategy II (EDPRSII) objectives.
According to Dr. Agnes Kalibata, the Minister for Agriculture, the Government is supporting innovative ideas that have the potential to transform the country’s number one driver of the economy.
Kalibata noted the Government is developing relevant policies and an enabling environment to foster investment in the agriculture sector. She added that both the private and public sectors will all play a big role to boost productivity and performance of stakeholders, especially small-scale farmers.
This fiscal year, the Government allocated over Rwf54b to the sector, reflecting an 11 per cent of the total national budget envelope of Rwf1.6 trillion.
According to Amb. Valentine Rugwabiza, the Rwanda Development Board chief executive officer, said the agriculture industry will thrive only through private public partnerships and innovative technology.
“That;s why we want to further streamline the sector to attract private investments. This will help the country thrive economically and realise its EDPRS II growth target,” Rugwabiza noted.
The Government targets to create about 200,000 off-farm jobs annually under the country’s development blueprint, among other targets.
“We need to provide technical support and business development services and promote agricultural diversification, as well as promote agriculture as a business activity,” Kalibata said. She was speaking during the just-concluded ICT for Agriculture summit in Kigali.
Rwanda has established an investment service centre at RDB to attract investors into the agro-sector.
The centre assists foreign investors secure the required approvals, certificates, work permits, tax incentives and land registrations.
Rwanda investment law provides permanent residence and access to land for investors.
The law also fixes the minimum initial capital investment requirement for foreign investors at $250,000 to qualify for tax and other investment incentives.
According to the African Agriculture Status report for 2013, the sector will require average annual net investment of $83b in sub-Saharan Africa, where predominant numbers of farmers are smallholders.
The projected investments in the agricultural sector are estimated at $20b for crop farming and $13b for livestock production.
A further $50b will be needed for downstream services to help achieve a global 70 per cent expansion in agricultural production by 2050 and about $450b to finance productive market-oriented smallholder farming.
“Given these huge financing requirements for smallholder agriculture, it is unlikely that African countries will raise the needed funds through traditional sources, which are limited and volatile during the global crisis,” Dr. David Ameyaw, the director for strategy, monitoring and evaluation at Alliance for a Green Revolution in Africa, said.
Although agriculture accounts for 70 per cent of the labour force and more than 25 per cent of GDP in the region, it is not given priority as far as investment is concerned. The sector receives about 3 per cent budget allocations, according to the 2013 agricultural report on Africa. Currently, countries spending more than 10 per cent of their national budgets increased from 11 per cent in 2003 to 22 per cent. However, 50 per cent of the countries still spend less than 5 per cent of their national expenditure on agriculture development, reflecting a decrease from 57 per cent.
Africa has been unable to attract significant external resources to match the financing needs in the region.
The total foreign direct investment (FDI) inflows shot up from $17b in 2004 to an unprecedented $31b, but the region’s share in global FDI is still low, at just about 3 per cent.
According to Ken Lothento, the Centre for Agriculture and Rural Cooperation co-ordinator technical, FDI inflows to agriculture in the different countries is hampered by lack of accurate data and access to finance, which is one of the major constraints facing millions of resource-constrained African smallholder farmers.
“Lack of access to finance prevents the farmers from investing in agricultural technologies that can help them increase agricultural productivity, limiting their participation in markets,” Lothento said during the ICT for agriculture summit in Kigali last week.
“Farmers also face significant levels of risks from uncertainties in weather conditions, which further reduce incentives to invest in agricultural production and commercialisation,” David Mills, the director of Weather Safe Ltd, said at the summit.
Attaher Maiga, the Food and Agriculture Organisation country representative, said there is a need to understand the financial mechanisms that might best fit the given financial goals and cash flows of each segment in the agricultural sector.
Agricultural experts have suggested that developing pro-poor, smallholder-centred investment models for agriculture financing that provide incentives for all players along the value chain, including financiers, smallholder farmers, traders and agro-processors, will spur the industry.
“Funding mechanisms that are more responsive to the needs of segmented groups of smallholder farmers and diversified rural households will encourage full disclosure of FDI to African agriculture,” experts argued.
According to World Bank forecast Rwanda’s economy is projected to grow at 7 per cent in 2013 and 7.5 percent in 2014.