Business round-up

Rwanda joins EAC Customs UnionFollowing its official admission into the East African Community (EAC) on June 17, 2007, Rwanda officially joined the region’s Customs Union.

Rwanda joins EAC Customs Union
Following its official admission into the East African Community (EAC) on June 17, 2007, Rwanda officially joined the region’s Customs Union.

This means Rwanda adopted a three band tax structure, which imposes an import duty of 25 percent on finished goods, 10 percent on intermediate products and zero percent on raw materials and capital equipment.

There are also exemptions on sensitive goods and computation of taxes based on Cost, Insurance and Freight (CIF) of the port of first entry into the community.

All these are to cause a financial loss of up to Rwf12.4 billion. However, Rwanda Revenue Authority (RRA) the tax body says that it will mitigate this fiscal revenue loss by intensifying recruitment of tax payers since government will have to heavily rely on domestic taxes. 

Reactions from the business community on Customs Union
A mini-survey by The Business Times indicated that local traders, especially those in Mateus were still ignorant about the Customs Union while others were optimistic.

Elévanie Mukantabana, The Managing Director of La découverte, said that the new tax regime under the regional Customs Union will possibly favour the business community unlike before.

“There are tax reductions which will definitely affect us positively.

One of the proprietors of Simba Supermarket, who spoke on condition of anonymity, said that Rwanda joining the regional Customs Union will not only benefit local traders but also the consuming public.

“The benefits will be a two-way traffic. Business will benefit from low taxes as well as the public.

“The public should expect a drop in prices due to tax reductions.”

Despite RRA conducting trainings countrywide about the likely benefits and tax policy reforms of the EAC Customs Union, majority of the traders especially those in Mateus, the leading trading centre in Kigali town expressed ignorance and scepticism.

Mobile phone dealers, Hello Phone, said they had not received any training from RRA citing business demands that kept them too busy to attend any workshop.

Wilson Ndibyoko, a wines and spirit dealer shifted the blame to the authorities saying that it had not carried out enough public awareness campaigns.

Financial deficit halts flower exports
Rwanda has not registered any flower exports this year due to tightening liquidity in the banking system and uncertainties on the international market, according to Rwanda Horticulture Development Authority (RHODA).

“The low liquidity in the banks that makes it impossible for investors to access loans has been noted as a major impediment to the growth of the sector,” Peter Muvara, the Chairperson of RHODA said.

Because the flower industry profitability, government introduced the ‘one flower park’ project to pull together local and foreign investors to grow quality flowers, mainly for export.

The $17.5 million project introduced in 2008 would help cultivate 50-200 hectares of flowers to boost the crop’s export receipts to Rwf323 million in 2009 from Rwf14 million registered in 2008.

The flower industry attracted two foreign investors including the East African growers from Kenya and Myire estate. 

The investors have since pulled out of the Rwandan market citing the uncertainty on the international flower market due to the current global economic downturn.

He said that this is likely to causes situation where government misses its revenue target from flowers, as prices on the international market also decline.

PSF pleased with budget
The Private Sector Federation (PSF) has applauded the 2009/2010 budget saying it is pro-growth and development since it addresses issues raised by the federation’s stakeholders.

Key issues addressed from the Federation’s position paper include; harmonisation of tax policy to the East African Community (EAC) common external tariff and the removal of Value Added Tax (VAT) reverse charge on foreign transporters.

Emmanuel Hategeka, the PSF CEO, said that that shows government’s efforts to support private sector growth by trying to incorporate some of their needs and concerns in the budget.

He observed that the various tax exemptions and reductions in various areas will enhance industrial development and competitiveness of the private sector in the region.

Rwanda adopted the East African three tax band under the Customs Union effective July 1.

According to Hategeka, the decrease in the tax burden will spur industrial growth and investments.

Agaseke to acquire international patent rights
The popular Rwandan traditional basket known as Agasake is set to acquire international patent rights by the end of this year to protect it from duplication, according to the Private Sector Federation (PSF).

The federation’s Chamber of Craft, Art and Artisans said it has partnered Gever, a Belgium company to complete the legal procedures.

“It is our right to protect our products from duplication by other people around the world, and we have received information that china has started to manufacture Agaseke though we are yet to confirm,” said Marie Chantal Magnifique, the Director Chamber of crafts, arts and artisans.

Along with agaseke, imigongo, a traditional item which was traditionally used for decoration in the king’s palace will also be protected.

The move has been prompted by the high demand the products have enjoyed from the European and the US market.

Ends

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