Rwanda: High Freight Rates Cast a Shadow Over Horticulture Export Prospects

When Robert Rukundo got a deal to export horticulture produce to France last month, he was expecting business growth and an increase in revenues. But, high airfreight costs are making this development impossible.

Rukundo is the founder and Chief Executive Officer of Almond Green Farm Ltd, a local horticulture export company.

He told The New Times that the Ethiopian Airlines has increased air shipment fee [from Kigali to France] to $2.67 a kilogramme from the previous $2.2 to $2.5 a kilogramme depending on the volumes.

A number of horticulture exporters told The New Times that RwandAir informed them it will increase the airfreight fee on a kilogramme of fresh produce from the current $1.8 to $2, effective August 1 this year.

Currently, RwandAir does not fly to France, but the national carrier announced plans to start flights to Paris by the end of this year.

Yet, they expressed concern that even the current cargo flight charges were high.

Rukundo said that though the sample of his produce was appreciated in France, he can't negotiate a price that covers transport cost and be able to break even.

"I had gotten a market for passion fruits and vegetables in France, but their [airlines'] airfreight charge is pushing me out," he said, indicating that for passion fruits, clients wanted three tonnes, and another three tonnes for chili per week.

Rukundo is also the Chairman of Horticulture Exporters Association of Rwanda.

Talking about the underlying factors for the increase in the airfreight tariff, he said RwandAir mentioned rise in fuel prices mainly occasioned by the Russia-Ukraine war impact.

"We are likely to see that trend [of horticulture exports] from Rwanda going down at the international market," he said of the possible impact of this situation.

"We understand the airlines are into business also, but if they can maintain the airfreight fee to $1.8 a kilogramme as we move forward [that can be helpful]," he observed.

Declining value of the Euro and Pound

Also, exporters argued that the value of the Euro (€) and the Pound Sterling (£) has been weakening against the US Dollar ($) and the Rwandan Franc (Rwf). This makes them incur losses, for instance, when they make exchanges into the local currency in order to buy the produce from the farmers.

According to data from the National Bank of Rwanda, as of March 31, €1 was exchanged for Rwf1,142.8 (for selling) compared to Rwf1,053.7 as of July 27, while £1 went for Rwf1,349.2 compared to Rwf1,251.6 as of July 27.

Emmanuel Harelimana, the Chief Finance Officer of Garden Fresh, another horticulture exporting company which mostly deals in French beans, passion fruits, told The New Times that the increase in airfreight fare comes at a difficult time when the Euro value is declining.

"It is not good timing. You cannot increase the airfreight charge from $1.8 a kilogramme to $2 a kilogramme when the Euro value has fallen yet we mainly export to Europe," he said.

"When you look at how the Euro ['s value] was in the last six months versus the [US] dollar, and the current situation, you realise that we have lost like 17 cents [0.17 US dollars]," he said, indicating that this is eating away exporters' profit margin.

"We wish the Government can put in any kind of subsidy for six months, which can help us to maintain the current cargo flight fee ($1.8 a kilogramme), and we try to make adjustments related to the fluctuating Euro exchange rate, but not increase it by $0.2," he suggested.

The New Times contacted RwandAir for a comment on the issue, but it had not responded by the time of this article's publication.

Could value-addition, sea transport offer a solution?

According to the National Agricultural Export Development Board (NAEB), airfreight charges increased, not only in Rwanda but globally, due to an increase in jet oil prices.

"As NAEB, we are encouraging and supporting horticulture commodity exporters to find niche markets with reliable contracts that can be able to offset these chocks," it stated.

"In addition, we are urging exporters to increase efforts in adding value to their products in order to add more money and diversify their income," it added.

Meanwhile, NAEB said it is recommending using other modes of transportation, such as shipment by sea, indicating that high-end and value-added products can be transported by air, but others should use water transport because it is less expensive.

"Passion fruits and avocados will soon begin being exported via water rather than air as a trial phase."

In the fiscal year 2020-2021, Rwanda's horticulture exports - vegetables, fruits and flowers - generated over $28.79 million; slightly higher than the $28.7 million that the agriculture sub-sector brought in in the previous fiscal year, according to data from NAEB.

NAEB indicates that the country targets $130 million from horticulture exports by 2024.

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