12 November 2018

Rwanda: TMEA Trade Deal to Boost Exports

TradeMark East Africa (TMEA) announced last week that it will be investing $2.4 million in Rwanda (Rwf2.1 billion) to facilitate local business to raise the capacity to access the complex international markets.

The deal is part of the $50 million (Rwf44.3 billion) memorandum of understanding between the Government of Rwanda and TMEA signed last year to improve the capacity of local businesses to export.

Patience Mutesi, TMEA's Country Director, said the support will facilitate local industries in producing products that meet international standards.

"The largest component of the funding will be used in providing support to exporting firms to increase their capacity to export. This could be in the form of putting together export strategies, training them on the standards of the markets they export to, and market linkages where they will participate in sales and trade missions to key markets," she told Business Times.

Rwanda has pursued a raft of reforms aimed at creating a conducive environment for businesses but the economy is rattled with a sustained trade deficit stemming from a weak export sector.

Mutesi believes the productive capacity of businesses to trade beyond borders remain low.

Rwanda was ranked 29th globally this year in the World Bank Group annual series of Doing Business Report.

However, the report ranked the country 88th globally in terms of trading across borders.

"Trade is the way to reduced poverty and increase prosperity and so businesses need to take full advantage of the reforms to increase trade between Rwanda and the world," she noted.

The deal will largely focus on increasing the export of non-traditional exports--commodities that were previously produced solely for domestic consumption--and are seen as having the potential to drive the country's exports.

They include fruits, vegetables, roots and tubers, legumes and cereals, meat, eggs and dairy products as well as live animals.

Officials did not specify which of the products were being targeted during the project's lifespan of two years.

There are plans to expand the project beyond two years. It will also complete the five-year trade and logistics clusters programme to be implemented by the Ministry of Trade and Industry, aimed at increasing export-led manufacturing in the country.

Under its transformation agenda, Rwanda targets to increase exports by 17 per cent over the next seven years.

This export support programme is in line with Rwanda's National Export Strategy, and officials said it will enable Rwandan exporters to compete at the international markets which currently seem to be complex for them.

"Our research shows that some of the constraints faced by potential Rwandan exporters include weak export networks, inadequate exporting skills and low productivity of labour. This programme will resolve some of these challenges," Mutesi said.

TMEA says the two-year programme will include a mix of interventions like on-firm advisory services tailored to respond to company needs. It will also seek to develop a cadre of local export advisors through a training programme with local business development service providers.

Emmanuel Hategeka, the Chief Operating Officer at Rwanda Development Board (RDB), said the partnership comes at a time the country is trying to reduce its trade deficit.

"The partnership with TradeMark East Africa could not have come at a better time. Supporting local exporters will increase employment opportunities for Rwandans while at the same time helping to reduce Rwanda's trade deficit," he noted.

Rwanda's trade deficit narrowed by 2 per cent in the first half of this year, compared to the corresponding period of 2017, to $664.21 million.

This is attributed to the growth of exports which rose to $463.16 million up from $375.91 million over the same period last year.

As the country continues to push for more export markets, it is expected that this strategy could encourage more businesses to start exporting their goods. But analysts think the success of this strategy will depend on how much trade facilitation the country will devise.

"Many businesses will decide to keep at arm's length as the export business tends to be costly as it involves many complex rules that not every business can just afford," one analyst told this paper.

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