August 9, 2022

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World Bank: DRC is Rwanda’s most promising trade partner

The neighbouring Democratic Republic of Congo has great trade potential with Rwanda, with data from recent years showing growing trade and currently is Rwanda’s biggest regional trading partner.

The latest World Bank report on Rwanda themed ‘Boosting regional trade integration in the post-Covid era’ observed that DRC is a growing trade opportunity for Rwanda.

Exports have grown considerably in the last decade, analysts said adding that Rwanda exports to DRC are more than to East African Community countries combined.

By 2019, Rwanda had exported more goods to the DRC than to the EAC. The main exports to the DRC include livestock and crops, but cross-border trade in services, such as finance, transportation, and wholesale trading, are also important, the report noted in part.

Non-EAC neighboring markets have proved to be more dynamic in recent years, the report noted, adding that it’s expected to grow especially in the advent of the African Continental Free Trade Area.

This is also at a time when statistics from the World Bank show that since 2012 Rwanda’s exports to the East African Community have somewhat stagnated. 

Data shows that when Rwanda joined the EAC customs union in 2009, exports of goods to EAC partners more than doubled in the following three years to 23 per cent of the country’s total goods exports.

However, since 2012 Rwanda’s exports to the EAC have almost stagnated with Rwanda’s total exports increasing substantially on average 17 per cent per year from 2010-19.

Analysts say that this has seen the country not be able to benefit from regional integration beyond price reduction conferred by tariff reduction.

Among the reasons for such outcomes is the similarities of export products among EAC partners as most countries export almost the same set of products.

However, experts noted that exports to EAC partners is a unique opportunity for Rwanda to learn to export relatively sophisticated products through value addition to bigger markets.

Calvin Djiofack, World Bank’s Senior Economist for Rwanda said that data shows a growing opportunity in neighbouring DRC where Rwanda exports more than to EAC countries combined.

Non-EAC neighboring markets have proved to be more dynamic in recent years, the report noted, adding that it’s expected to grow especially in the advent of the African Continental Free Trade Area.

“Rwanda’s trade with other sub-Saharan African countries (beyond EAC and DRC) has been low, declining from 7 per cent of Rwanda’s exports in 2010 to just 2 per cent in 2019. This underscores the importance of the opportunity that AfCFTA represents for Rwanda,” the report read in part.

Djiofack called for rethinking Rwanda’s Regional trade noting that it had been impacted more than exports to global partners during the crisis.

“The pandemic severely depressed Rwanda’s trade in 2020. Total exports of goods and services fell by 14.4 percent by value in 2020, despite the 130 per cent increase in gold exports following the establishment in Rwanda of Aldango Ltd,”

“Rwanda regional trade of goods was less resilient in 2020 compared to its trade with global partners. While Rwanda’s merchandise exports to the world increased by 40 per cent in 2020 compared to 2019 (thanks to the unprecedented increase in gold exports), exports with EAC partners actually declined by 41 per cent,” the World Bank report noted in part.

Antoine Kajangwe Director General Trade and Investment Ministry of Trade and Industry that the similarity in exports from the region had had a negative impact on the competitiveness on Rwandan exports to EAC. 

He noted that Rwanda’s response to the challenge involves value addition and high value products that can compete in the region and beyond. These sectors he said include electronics, textiles, pharmaceuticals and medical products among others.

“We have started to see investments in these high value products. We have also seen an opportunity in value addition of minerals, we are already seeing demand in Gold, Tin and Cobalt,” he said.

Another sector that bears opportunity is specialized services such as ICT, Finance sector, he added.

Kajangwe added that the DRC-Rwanda border offers a great opportunity for cross border trade and a huge opportunity diversification and upgrading exports.

“We also have an opportunity in continuing to pursue standards as it will set us apart in accessing and retaining markets,” he said.

Rwandan businessman Dennis Karera, who is the East African Business Council (EABC) Vice Chairman said that the pandemic showed that EAC still has challenges in integration as trade was severely affected across the bloc.  He said that the severe trade interruptions across the bloc was proof that much could be adjusted regionally to improve trade.

Other aspects that he called for include the operationalization of a regional dispute resolution mechanisms which could affect the pace of business, trade and integration as well as inclusion of the role of the regional legislative assembly.

Karera added that liberalization of regional skies would be impactful to trade in the region including for Rwanda but added that the concern has been pending for years unresolved.

Amina Rwakunda the Chief Economist at the Ministry of Finance said that other plans underway that could impact Rwanda’s regional trade outcomes include establishing a foreign based multi-services centre targeting the country’s point of entry like Dar es Salaam and Mombasa, continued investment towards becoming a regional trade hub as well as reprioritizing and restrategizing following the pandemic.

Among the key recommendations by the World Bank Group is that Rwanda should continue its efforts to develop, improve efficiency in and strengthen coordination across the trade logistical infrastructure required for a regional logistic hub.

Other recommendations include improvements that could significantly reduce both external and internal trade costs include improving the efficiency of trucking firms and capitalizing on the potential for increased handling of transit trade to and from Democratic Republic of Congo.

SOURCE: THE NEW TIMES

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