Low cost of production, affordable loans, and technology transfer and development, are key to the development of industrialisation in Rwanda and would help capture a $450 million market per annum and bridge the country’s negative trade balance, industrial players have said.

Presenting the highlights of the findings of the Domestic Market Recapture Strategy (DMRS) (2015), Annette Karenzi, Director General of Industry and Entrepreneurship Development at the Ministry of Trade, Industry and EAC Affairs (MINEACOM), said there were three priority sectors so far identified in the strategy where Rwanda can produce products that can rival imports on the local market and even compete on regional markets.

Those areas, according to Karenzi, would save some $450 million per year in the medium term (representing 17.8 per cent of import bill), if all measures to boost local production were successfully implemented.

She was presenting, on Friday, the state of industrialisation in the country, during the celebrations of Africa Industrialisation Day 2016 at Kigali Special Economic Zone.

The three proposed sectors are construction materials (taking up $ 206 million) and include cement, iron and steel, aluminum products, paints and varnishes, plastic tubes, ceramics and granite tiles.

Another sector is light manufacturing (with $ 124 million worth of imports). It consists of textile and garments, pharmaceuticals, soaps and detergents, reagents, packaging materials, wooden furniture and insecticides.

The third is agro-processing sector (accounting for $ 112 million) comprising of sugar, fertilisers, edible oil, dried fish, maize and rice.

"When you add up all that, you see how much we still spend out of the country. So, through ‘Made in Rwanda’, can we mobilise our markets to buy the locally made products? And we can make all these items to required standards,” she said, noting that the ‘Made in Rwanda’ campaign can help boost their strategy.

François Kanimba, the Minister for Trade, Industry and EAC affairs, said Rwanda, like many other developing countries, aspires to transform its economy into a modern and industrialised state, allowing it to diversify economic activities, create higher quality jobs and build stronger, more stable markets.

The minister said the first three quarters of 2016 had seen a remarkable 241 per cent increase in the number of investments registered with Rwanda Development Board in the industrial sector, with investment in non-agriculture based manufacturing alone receiving more than 513% registered investments than the same period a year earlier.

The number of firms in operation over the same period also witnessed a 15 per cent increase from the previous year.

Addressing challenges

He noted that, while the industrial sector was considered a main driver of economic development, it is growing slower than the targets set under the EDPRS II, with 14 per cent annual growth for the sector by 2020.

"At the current average growth rates of 6 per cent, we will struggle to reach our 2020 target of industry contributing 20 per cent of GDP,” Kanimba said.

The chairperson of Rwanda Association of Manufacturers (RAM), Félicien Mutalikanwa, said industrialisation was very critical to the transformation of any country’s economy, mainly through job creation and value-addition to goods, noting that there had been a positive trend in industrial growth in the country.

However, he observed that the foremost challenge facing the sector was lack of affordable finance whereby banks charge unrealistic interest rates (18 per cent) in short-term paybacks.

"It is high time we thought about this issue and come up with strategies that will reduce high interest rates on loans. If not, we will almost certainly remain in a situation where industries are not growing as fast as they should,” he said.

Other challenges, he said, were high costs in transportation and electricity to power industrial works, which makes the cost of production to remain very high.

Manufacturers expressed concerns over lack of long-term loans to finance long-term industrial projects (beyond 10 years’).

Bank of Kigali Chief Executive Officer, Dr Diane Karusisi, agreed with manufacturers, adding that it was due to low culture of long-term savings in financial institutions, whereby money owners withdraw it on short-term basis.

Dr Joseph Mungarurire, the Director of National Industrial Research and Development Agency, cited a raft of challenges facing the sector.

They include high cost of production and technology acquisition, limited innovation and financing, low productivity, lack of appropriate packaging materials, limited inter-firm cooperation and business oriented networks and limited availability of quality and timely market information among others – which Mungarurire said need urgent attention to address.

The contribution of industrial sector to the country’s Gross Domestic Product is currently 14 per cent, while Vision 2020 target is 20 per cent.

It accounts for 14.4 per cent of employment with over 85 per cent covered by non-industry sectors.

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