Why $500m chilli deal with China is a huge opportunity for Rwanda

On September 13, 2019, Rwandan young agribusiness entrepreneur, Dieudonné Twahirwa, landed a deal to supply 50,000 tonnes of dried chilli worth $100 million (about Rwf100 billion at the current exchange rate) every year to China, a move expected to significantly boost Rwanda’s agricultural exports. The anticipated revenue is more than what’s presently generated by tea, or coffee, the two long-time major traditional cash crops for Rwanda. The five-year deal was signed at the Rwandan Embassy in Beijing between Twahirwa and the Chinese GK International Enterprises, a trading company dealing with import and export of different items, including food items, solar coating, among others. Women dry chilli at a farm in Bugesera District last year. Photo: Jean de Dieu Nsabimana. Overall, the agreement means that dried chilli worth $500 million will be exported to China in five years. Also known as Diego, Twahirwa is the Managing Director of Gashora Farm, which specialises in chilli exports. Speaking to The New Times, Twahirwa said that the five years of the agreement are counted from the time the export protocols are obtained, which is this year 2021. Therefore, he said, the contract is expected to come to an end in 2026. China on Wednesday last week received the first sample of dried chilli from Rwanda – consisting of 200 kilogrammes of the product, while the first major consignment was expected to be dispatched this week. According to Twahirwa, this week, they will dispatch 60 tonnes in four containers. This followed last month’s approval of dried chilli from Rwanda by the General Administration of Customs of the People’s Republic of China, making it the first African country to penetrate the lucrative market. Currently, the available chilli production cannot meet the above-mentioned demand, a situation that requires concerted efforts from actors in the chilli industry, including farmers so as to increase production and ensure sustainability of supply. What are the strategies to meet the demand? Twahirwa said that there is a huge demand for the Rwanda grown chilli in China, pointing out that what is needed is increased chilli production in the country. He said that the strategies include expanding the chilli plantations and mobilising more farmers towards this, adding that his firm has already engaged some farmers whom they are working together. To this end, he said, the firm he manages helps farmers to access financing and timely farm inputs such as chilli seeds, which can help increase chilli produce. He said that a kilogramme of seeds of the chilli variety called ‘Teja’ that they grow costs Rwf650,000 and is planted on four hectares. “Supplying that market requires joint efforts. That is an opportunity for many people. So the strategy is to increase the cultivated area for chilli, both s for our plantations and those of the farmers we work with,” he said. Currently, he said that they have been growing chilli on 600 hectares – including 255 hectares for the firm and 345 of the farmers they work with. Twahirwa explained that one hectare produces five tonnes of chilli, meaning that 600 Ha can generate 3,000 tonnes of chilli produce. The plan, he said, is to expand the area to 2,000 Ha in the next season which will start from January and ends in June 2022, while they target to reach at least 10,000 hectares in 2023 that can generate 50,000 tonnes of chilli produce. He said that farmers have expressed commitment to grow chilli as it has proven to be more profitable especially given that the Chinese market offers good price and is reliable. Talking about financing, he said that the frustration he has is that financing process takes long, and the loan security requirements are a challenge. “They (financial institutions) provide loan that is commensurate to the value of the collateral you have, yet the deal I have requires a lot of money such that I don’t have enough collateral,” he said, indicating that for the $100 million annual chilli market to be met, it requires over $40 million in investment. There should be another model of financing where not only collateral is considered, rather other aspects such as formal market deal, he said. Rwanda, he added, is the eighth country which has gotten access to the Chinese dried chilli market, adding that the specific Teja chilli variety had only been imported into China from India. “They (Chinese clients) liked the Chilli from Rwanda so much,” adding that it costs less money than that imported from India. He said he is working closely with government entities such as the National Agricultural Export Development Board (NAEB) to effectively utilise the chilli deal. Government promises support Claude Bizimana, the Chief Executive of NAEB said that Twahirwa receives support from the Government of Rwanda including access to loan from the Development Bank of Rwanda (BRD), advisory and storage assistance from NAEB. He said that the Chinese deal is not an opportunity for Twahirwa alone, but also for the entire country. “The acceptance of and signing of the protocols between the [two] countries is the first major step. Now that the market is available, we are going to ensure that at least they get what they need from Rwanda, especially because they conducted a test for the first shipment and found that it met the standards they want,” he said. He said that safety assurance is a top priority for NAEB to ensure that the produce from Rwanda fulfills set standard requirements. Available data from NAEB indicate that in the financial 2018/19, Rwanda exported more than 721 tonnes of chilli which generated $1,036,613. These statistics imply that both the volume and revenues of chilli that the country exported slightly more than doubled from 357 tonnes for $484,341 in 2017/18. As per the NAEB annual report for 2019/20, chilli was produced on 881.2 Ha at different sites of Rwabicuma, Muyanza, Musha, and different scattered individual farms located at Kayonza Ndengo and kabare sectors, Nyagatare, Kicukiro, Bugesera and Rusizi District.

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Why $500m chilli deal with China is a huge opportunity for Rwanda