Value addition, increased investment in technology, and access to finance will enable Rwanda to boost its agricultural productivity, the latest report by the World Bank has shown.
Value addition in the agriculture sector, which the World Bank describes as cleaning, packaging, and processing of agri-food products, remains low due to the lack of appropriate technologies, expertise, financing incentives and rural infrastructure.
According to the Minister of Trade and Industry, Prudence Sebahizi, value addition will help increase Rwanda’s export revenues.
"We have a goal to double Rwanda's exports from $3.5 billion to $7.3 billion in the next five years and that will be achieved if we focus on adding value to our agricultural products,” he said.
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The minister also noted that land in the country is limited and cannot produce sufficient volumes to meet market demand, adding that processing agricultural products before exporting them will help solve this challenge.
Productivity trends
Current productivity levels in the agricultural sector in Rwanda remains below regional averages and ranges between three to six times less, compared to regional countries with the best productivity levels, a new report by the World Bank has shown.
The ‘Rwanda Country Economic Memorandum’ report notes that after a sharp increase in productivity in the early 2000s, agricultural yields have plateaued or even dropped since 2013, with productivity levels for certain crops and livestock remaining low by international comparison.
The just concluded ‘Fourth Strategic Plan for Agriculture Transformation’ (PSTA-4) envisaged Rwanda’s agriculture sector transforming from a subsistence sector to a knowledge-based value creating sector that contributes to the national economy and ensures food and nutrition security in a sustainable and resilient manner.
However, the sector is still plagued by various challenges that are hampering growth and productivity.
Technology
The uptake of technology and innovation in the agriculture sector in Rwanda is also said to be low, with particular focus on irrigation technologies.
Rwanda has the potential to irrigate more land, but the latest report shows that the country only utilising a small portion of that potential. Only 10 per cent of Rwanda's cropland is currently irrigated, even though 14 per cent of the land could potentially be irrigated.
Qimiao Fan, the World Bank Country Director for Kenya, Rwanda, Somalia, and Uganda, said, "Most of the output growth in agriculture comes from expansion of land instead of the intensification of the use of land, which includes irrigation."
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Fan argued that great potential lies in the use of technologies such as farm alert irrigation systems, which do not require initial large investments and constant maintenance.
Access to Finance
Lack of agricultural finance remains a major constraint in transformation of the sector due to real or perceived risks associated with the sector.
The risk of doing business in the agriculture sector in Rwanda is reflected in the high non-performing loan (NPL) ratio, which for agriculture, as of June 2022 was at 7.8 per cent compared to 4.3 per cent of the total loans for banks.
The under-financing of the sector is attributed to the low availability and quality of data to decrease lenders’ risks, limited financial experience of farmer and producer organisations, limited operational capacity among formal sector banks to serve the agriculture sector, as well as limited availability of medium- to long-term liquidity.
The World Bank commended the government for providing financing for credit lines, aiming to facilitate affordable lending to the agriculture sector as well as efforts to subsidize agriculture insurance products as a means of contributing to the de-risking of the sector.
The suggests that the government must formulate a comprehensive agriculture finance strategy to establish coordinated and effective mechanisms to facilitate increased and sustainable private sector financing in the medium-term, ultimately fostering a fully private sector-led subsector.
Rwanda has embarked on the fifth Strategic Plan for Agriculture Transformation (PSTA 5), which is expected to focus on building resilience and sustainable agri-food systems and seeks to increase agricultural export revenues to $1,981 million from $857 million (in 2022/2023), which is the baseline.
The strategic plan also envisages the creation of more than 644,000 off-farm jobs in agri-food systems from 400,000 to contribute to addressing unemployment especially in the rural areas and among young people in the country.