Kayonza Distribution Company Ltd, a local retail firm, has invested $10 million in a cooking oil manufacturing plant.
The investment, according to Uzziel Ndagijimana, the Minister of Finance and Economic Planning, will help trim the import bill for cooking oil as well as improve the country's trade balance.
While presenting the national budget for this fiscal year, the minister said waste from the cooking oil production will also be used in soap production.
The plant, which will begin operations this year, is expected to produce 100 tonnes of cooking oil every day.
"This is a significant investment," said Laurence Mukarugwiza, the External Trade Policy Specialist at the Ministry of Trade and Industry.
The new plant comes after Mount Meru has expanded its operations in the production of edible oils.
With these new investments, Rwanda hopes to gradually reduce cooking oil imports, which peaked at 126,002 metric tonnes last year, up from 121,981 metric tonnes in 2019.
Last year, Rwanda spent a staggering Rwf106 billion on the importation of cooking oil, which is among the top 10 products that are shipped into the country.
However, Mukarugwiza says that impetus is needed in attracting more investors because the existing ones cannot satisfy the local demand.
Rwanda produces at least 80,000 metric tonnes every year and imports an average of 125,000 metric tonnes, making it a net importer of cooking oil.
"There are potential investments in the production of cooking oil, which are still under discussion," she said.
According to retailers, local production of cooking oil could increase competition among investors and thus reduce prices.
Increased competition, cheaper prices
"Recently, there was a rise in the prices of cooking oil," said Patrick Hakuzimana, a retailer in Remera Sector.
For instance, 20 litres, which used to cost Rwf22,000 at wholesale level now cost Rwf35,000.
Officials say that in addition to satisfying local demand, increased investments will potentially boost exports and offset the deficit.
In 2019, Rwanda only exported 37,399 kilogrammes of cooking oil, which generated Rwf257.8 million while re-exports were equivalent to 42,664,161 kilogrammes worth Rwf33,.7 billion.
In 2020, Rwanda exported 20,697 kilogrammes worth Rwf418 million while re-exports were 37,652,496 kilogrammes worth Rwf35 billion.
In this fiscal year, overall growth in export revenue is expected to outpace imports.
Export revenues are projected to increase by 22.6 per cent, while imports will grow by 14.3 per cent, propelled by the importation of construction and manufacturing materials.
According to Made-in-Rwanda policy, $450 million can be saved annually by reducing the trade deficit.
Light manufacturing can save up to $120 million while construction materials can save up to $206 million whereas agro-processing can save up to $112 million per year.
Incentives to local manufacturers
The government is rolling out incentives under the manufacture and build to recover programme targeting to increase the production of construction materials, agro-processing, as well as hygiene and sanitation products.
Companies setting up industries or expanding operations in the above sectors will be exempted from import duty for materials and equipment bought for purposes of setting up the production plants.
The incentives include giving tax exemptions on construction materials, machines to be used in setting up the manufacturing plants.