The number of firms in Rwanda exporting more than $1m has grown over the years, but remains low – and has recently been impacted heavily by Conflict in Burundi and DR Congo, reports a new World Bank study.
The findings are from a research covering the period from 2008 to end of 2016 which was reviewing how much Rwandan firms are taking advantage of global value chains.
The researchers analysed data from three sectors agriculture, mining, and manufacturing – which were found to be the major export portions of Rwanda’s economy.
The number of firms that exported more than $1 million (Rwf 912m) grew from 20 to 36 over the 9 year sample period.
However, increase of exports by large companies grew at less pace in the later years of the reviewed period.
The research says: “The number of exporters grew strongly after the latest global recession (in 2009), more than doubling from 2010 to 2014. In more recent years, the growth has stalled and in the last two years of the sample period the total number of globally engaged firms even declined.”
Reason? The Banks findings show it is “more likely to be the result of civil unrest in Burundi and armed violence in the [DR Congo]”.
“….in conversations with manufacturers in Rwanda, they often highlighted the troubled political situation in the two neighboring countries,” say researchers Garth Frazer and Johannes Van Biesebroeck, in the study published last week.
Rwanda exports to Burundi milk, maize, maize flour, wheat flour, cassava flour, and potatoes. The same is for eastern DR Congo, which depend entirely on Rwanda for food.
Following the failed coup in mid 2015, which the government of President Pierre Nkurunziza blames directly in his Rwandan counterpart Paul Kagame, trade to Burundi nearly dried up.
In July 2016, the Burundian government imposed “export ban” on Rwanda. No goods would be sent to Kigali, and there would be no trade between border communities.
Figures released in March 2019 by the Finance Ministry show that in 2018, exports to Burundi were worth $12 million, compared to more than $20m before Kigali-Bujumbura relations collapsed. This indicates a more than 40% drop.
The World Bank data shows that engagement in global value chains (GVCs) is rather limited for Rwanda, a small and landlocked country. The administrative data illustrates directly that even the total number of registered manufacturing firms is remarkably small.
The findings say: “…the economy of Rwanda is even less well integrated with international markets than most sub-Saharan African countries.”
On the output side, manufacturing firms export only 2% of output, compared to 11% for the rest of the region.
However, more of its agricultural output is exported, but at 6.8% that fraction is still much lower than the 25.4% that is the average for the region.
On the input side, the difference is smaller: 13.3% of inputs in manufacturing are imported, which is similar to the 14.5% average for the region. Inputs to agriculture are almost all sourced domestically, but the same pattern prevails in the rest of the region.
In the mining industry, there are more firms exporting more than $1 million than firms exporting less than this amount.
This reason why mining brings so much, according to the research, is because Rwanda’s mining industry specializes in high-value minerals that are extracted and exported in relatively low quantities.
The minerals exported include tin ore, coltan, wolfram (tungsten), and tantalum.