Rwanda: How Can the 40,000 Job Deficit Be Fixed?

16 January 2020

The Government's target to create 200,000 off-farm jobs every year is yet to be achieved.

According to the Labour Force Survey Trends for Q3 of 2019 released by the National Institute of Statistics of Rwanda (NISR), there is an annual shortfall of an estimated 40,000 jobs.

This, it says, affects mostly the youth who constitute 44.2 per cent of over 7 million working-age population.

Unemployment among the youth (16-30 years old) rose from 18.2 per cent in May 2019 to 20.6 per cent in August.

Yusuf Murangwa, the Director-General of NISR, said during last month's National Dialogue Council that when the economy grows by 8 per cent it creates only 160,000 new jobs.

He explained that to meet the job creation target, the economy needs to grow by two digits, noting that the industrial sector would need to consistently grow by 15 per cent, services by 12 per cent, and agriculture 8 per cent.

The three sector are the main drivers of the economy.

In the third quarter of 2019, the service sector grew by 13 per cent driven mainly by an increase in wholesale and retail trade activities of locally made and imported products, transport services and financial services.

Industry grew by 14 per cent with the main contributors being construction activities and manufacturing activities growing, while agriculture grew by 8 per cent in quarter three.

In terms of GDP share, services sector contributed the most, 49 per cent, agriculture sector contributed 27 per cent, while industry contributed 17 per cent of the GDP as of September 2019.

'No magic wand'

Teddy Kaberuka, an economist, told The New Times that, to create additional jobs, there is need to come up with a holistic strategy, adding that even the 8 per cent GDP growth is largely driven by public investments.

He said that, while large infrastructure projects are a welcome source of much-needed jobs especially for the youth, these opportunities are not sustainable.

Kaberuka said that private sector should be the main driver of job creation especially through investing in manufacturing sector.

"Factories should be the main source of permanent jobs," he said. "For example, if you look at the value chain for a milk processing plant, it creates jobs for producers, middle collectors, suppliers, milk processing, sellers and retailers, and many others."

To shore up economic growth, he said, there is need to thoroughly look into the country's investment strategy.

Yet there is no magic wand, he warned. "Private investment must go hand in hand with entrepreneurship. We should not only focus on big investments but also small investments, people need to access capital to start small businesses."

Sam Kamugisha, Director-General for Industry at the Ministry of Trade and Industry, told The New Times that there were specific challenges that continue to undermine industrial growth.

He cited small local market, high transportation costs to access regional markets, difficult in accessing a port, and constraints related to trade logistics.

He added that the Government was trying to overcome these barriers through trade facilitation measures, creation of shorter routes to the neighbouring ports, among others.

Other challenges include high energy costs as well as lack of expertise in the local workforce, he noted.

In order to promote industrial growth and deliver more off-farm jobs, Kamugisha said that some key initiatives were on course.

He said the growth of garment factories and tailoring workshops in the community could boost the creation of new jobs.

"We have decided to gradually phase out the importation of second-hand clothing and footwear to grow competitive local garment and leather sectors," he said.

He said that while duties on imports of finished products had been increased, the removal of import duties on raw materials has been extended to local garments and leather sectors.

Kamugisha revealed that the proposed Rwanda Centre for Design and Clothing - to be established by Rwanda Polytechnic - will provide expertise in style and fashion designs, a crucial element in the garment industry.

He also pointed at the growing number of local factories that produce construction materials as a key contributor toward job creation.

"This creates jobs along the whole chain, from production to supply to construction sites. More investors have also expressed interest in production of iron, steel, cement and other construction material, and a master plan has been developed to guide the development of the sector," he said.

Post-harvest losses

As part of promoting the Made-in-Rwanda policy, Kamugisha added, the procurement law was revised with the aim of prioritising local sourcing.

Local producers now have a 15 per cent preference on their bid scores, provided they are able to demonstrate 30 per cent local value-addition.

According to Kamugisha, besides big agro-processing factories, the development of Community Processing Centres (CPCs) are key to value addition in agriculture, thus creating more job opportunities.

These centres provide firms with access to technology and innovative thinking. Six community processing centres are currently operational namely in leather, dairy, Irish potato, wood, ceramics and honey.

According to Eugene Kwibuka, the Information and Communication Programme Manager at Ministry of Agriculture and Animal Resources, there is a need to scale up technology uptake in the sector.

"We need to adopt improved technologies to increase productivity on small plots," he said, citing green houses and hydroponics. "For instance, we must figure out how to minimise post-harvest losses."

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