30 January 2016

Rwanda Calls for Removal of Trade Barriers

The Rwandan business community has identified trade barriers that it wants East African governments to remove in order for the country's goods and services to be more competitive in the region.

Currently RwandAir -- the country's national carrier -- is restricted from picking up passengers in Kenya and Tanzania even though, in principle, the EAC airspace has been liberalised.

"There is no free competition in the airline business in the East African Community; it's the East African people who suffer," said John Mirenge, the chief executive of RwandAir, at a breakfast meeting for the private sector and the Ministry of East African Affairs in Kigali.

The 11th Northern Corridor Summit agreed to give regional airlines, like RwandAir and Kenya Airways, the "fifth freedom" of operating without limitation on the corridor.

Under the deal, RwandAir and Kenya Airways ply the Entebbe-Nairobi and Entebbe-Kigali routes as local airlines. But Mr Mirenge said the agreement is only on paper.

The second barrier is the additional costs that Rwandan mineral exporters incur while in Tanzania.

When security lapses in Tanzania led to a number of containers being stolen in the country, mineral exporters hired private security guards from Rusumo to work at the Dar es Salaam port, leading to an increased cost of doing business.

Mineral exporters say insurance firms, transporters and shippers compel them to provide security for their minerals. The cost of transporting a container of minerals from Kigali to Dar has risen by 271 per cent, from $3,500 to $9,500, to cover what transporters call "high-risk valuable minerals."

In addition, the exporters are charged an extra $6,000 to pay private armed guards who escort the minerals. The trucks are also fitted with electronic security devices to beat racketeers -- another additional cost.

"Individual exporters should not pay for the security services when mineral exporters are paying taxes to regional governments. It is not fair," said Denis Karera, chairman of the East African Business Council.

Mr Karera said security along the Central Corridor should be provided by the respective governments. Rwandan traders are also facing barriers at home.

Investors in the transport business who are registered in Rwanda say trailers imported into the country are subjected to 10 per cent import duty.

Trucks with a 20-tonne capacity are exempt from import duty as an incentive for the private sector to invest in the sector.

This was after a 2012 study by the Ministry of Trade and Industry showed that Rwanda was losing $500 million to regional transporters due to lack of their own registered trucks.

"Trucks mean the trailer and its engine. But the Rwanda Revenue Authority is only exempting the engine from taxes," said Abdoul Ndarubogoye, the vice-president of Rwanda Transporters Association.

"We cannot be competitive when the tax body interprets the law wrongly, and when regional peers are enjoying 100 per cent import tax subsidies."

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