Rwanda's economy has proved to be resilient despite the many hurdles that surface one after another. From recovering from Covid-19 to inflation caused by second-round effects of Russia-Ukraine war and poor agricultural production domestically.
However, the Central Bank projects the economy to grow to 6.8 percent and the average annual inflation of 12 percent to withdraw back within the band of 2 and 8 percent towards the second half of 2023.
The New Times' Alice Kagina had an exclusive interview with Antoine Kajangwe, Director General of Trade and Investment in the Ministry of Trade, to have an overview of how Rwandan traders have been fairing amidst the current economic environment.
Below are excerpts:
Rwanda has been directing incentives in the manufacturing industry to increase local production, to what extent has this improved the industry?
Over the last five years, the industrial sector has grown from 17.3 percent to 20.3 percent as a share of GDP and it contributes to 20.4 percent of all formal jobs, that's one-fifth of all jobs. It's incredibly good progress.
There are four key components that drive this growth including manufacturing, construction, mining, and electricity. Manufacturing leads with 45 percent contribution to the industrial sector at an annual growth rate of 90 percent over the last five years.
Construction is another important sector that contributes about 34 percent of industry growth.
If you look even deeper into manufacturing, you find that food, beverages, textile and clothing, furniture and manufacturing as the largest contributor and this is attributed to the incentives that have been put in place such as establishing industrial parks in terms of business cost-effectiveness.
Also, the Manufacture to Build and Recover program has really geared towards providing customs exemptions to industries that are willing to establish in key priority sectors which have allowed businesses to diversify their products and expand manufacturing products available in the country, and recapturing part of the domestic market from imports.
These include cement, edible and cooking oils, iron and steel, as well as agro-processed products.
Rwanda is among pilot implementers of trading under the AfCFTA, are there new developments around that?
This is something we are monitoring on a regular basis just to see how countries and businesses are trading amongst themselves. We're working with the private sector to mobilize and raise awareness.
Recently, the ministers of trade approved the protocols on investment to facilitate a conducive environment for the trade of goods and services, these are intellectual property and competition such as trademarks and patents.
So, in the pilot phase that is still ongoing, three Rwandan companies are participating. That is Igire coffee, Gorillas coffee, Rwanda Mountain tea and as more trade happens, that list will continue to expand.
DR Congo is reported to be Rwanda's main export destination, with the current political tensions, how is the trade outlook with this country? And to what extent are informal traders affected?
DRC is an important trading partner whom our private sector has looked to grow relations with and the government has put in place different initiatives to facilitate this trade.
Despite political challenges, commerce continues. Between 2020 and 2021, total trade increased by 55 percent this is on the back of Covid-19 outbreak, and if you compare 2021 and October 2022, total trade has increased by 12 percent.
Between 2020 and 2021, exports alone increased by 54 percent and again comparing this year until October with 2021, they increased by 10.4 percent. Similarly, imports increased 94 percent between 2020 and 2021 and they have increased by 56 percent between 2021 and October 2022.
There are some challenges, especially with cross border trade where hours have been reduced to 3p.m and broadly there has been a slight decrease in numbers of traders, however, there is continued growth. Statistics show that informal exports increased by 17 percent while imports increased by 16 percent.
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The government has been intervening in cushioning global price shocks over the past months, are there plans to increase or subsidize other sectors?
One of the important aspects is to realize that subsidies are not infinite and there will come a time to be removed because of the impact that they have on other sectors of the economy, primarily, the budget.
So, we monitor this on a regular basis to ensure that consumers are not unfairly affected by the increase in global prices, but we also have to realize that global prices have increased for all commodities.
The dollar has gradually appreciated, what impact does this have on traders?
As the dollar appreciates, the cost of inputs also rises vis-à-vis all currencies because it is the transaction currency. The challenge is that traders have to spend more to import, however, our review of the government's import cover bill still stands very positive, which is close to five months of import cover.
