In 2015, the Rwandan government moved to phase out importation of used clothing and footwear. The aim was to achieve self-reliance and boost local production.
According to Francois Kanimba, the Minister for Trade and Industry, the decision to ban used clothes emanated from the need to promote local production, among others. It was discovered that import of used clothes was stifling local production.
According to experts, the importation of used clothes only meant continuous suffocation of the local textile industry.
As a measure to protect the local textile industry, this year, government through the Ministry of Finance and Economic Planning increased taxes on used clothes from $0.20 to $2.50 per kg.
Equally, import tariffs on used footwear were raised from $0.50 to $5 per Kg a decision that took effect on July 1st 2016.
Claver Gatete, the Finance and Economic Planning minister says the idea is to increase local production by attracting more investors into the country’s textile industry.
He says government is taking yet another bold step to waive taxes on raw materials used in textile production.
Minister Gatete was speaking during a consultative meeting with textile manufactures and used clothing importers, last week on the new steps government is taking to promote local production.
According to Gatete, Cabinet has decided to remove import duties on fabrics and accessories to boost the textile sector and export promotion.
“We are currently working with the Ministry of Trade and Industry together with Rwanda Revenue Authority (RRA) to make sure by end of October everything is in place to start the waivers,” Gatete said.
The bigger question however is whether such initiatives will actually translate into increased production and low cost of production.
Sector experts argue that boosting the local textile industry requires more than tax waivers and the ban on second hand clothes.
While they welcome the government initiative, sector players say that government and sector players need to further look at more ways to reduce the cost of production.
Celeste Impundu, the Managing Director, Inzuki designs says ensuring sustainable and affordable supply of electricity and water, itself is an incentive towards boosting local textile industry.
“This is because when you look at inputs in terms of utility bills, the cost is still high and will most likely be transferred to the final consumer thus affecting the industry,” he said adding that encouraging local production should be done in consideration of that aspect.
Jelome Mugabo, the managing director, Kigali Garment Center Ltd, says there should be a deliberate strategy to produce raw materials for textile industry locally. The cost of production is often high because the country imports almost everything thing in terms of raw materials; it is therefore very imperative to source them locally, he noted.
Current measures to promote domestic production
Minister Kanimba says, government is currently working with stakeholders to establish a textile industrial park in the country.
“We are looking at securing more than100ha of land and hope to use half of it for textile production, the idea is to make it easy for those investing in textile production acquire land,” Minister Kanimba noted.
Besides, the National Agriculture Export Board (NAEB) is supporting farmers in sericulture and cocoon production centres.
The export body recently signed a deal with a Korean-based company, HEWorks Rwanda to improve silk production in the country.
According to the agreement the company will invest up to $5.1 million into silk production.
According to Eric Mbonigaba, the National Sericulture Centre manager, 20 hectares of land have already been allocated in Rwamagana District for mulberry production.
More so, government is supporting the establishment of Kigali Garment Centre Ltd.
For the foot wear, Kanimba says 15ha have of land been earmarked in Bugesera Industrial Park for a Tannery Park.
In fact, government Increased tariffs on exports of raw hides and skins to encourage production of leather and foot ware in the country.
Kigali Leather has been supported to start production of footwear with Rwantan Company acquiring land to start production.
The minister said they are banking on Made in Rwanda Campaign to sensitize the public about locally made products while working with WDA to help in sharpening skills required by the industry.
Reducing import bills
Sector experts are hopeful, the current initiatives will help reduce the importation of textile products in the country.
For example, the importation of second hand clothes averaged at $18.3m per year between 2010-2015. According to statistics from Ministry of Trade and Industry, imports have been increasing from $10.7m in 2010 to $24m in 2015.
“This is a lot of money which Rwanda can save and have it invested in other sectors,” said Felicite Nyampundu, an economist at Business Professionals Network.
Importation of used clothes has started reducing since tax hikes were first enforced in July this year. On average 2.5 million Kgs of second hand clothes were being imported per month prior to the new tariff, however this reduced to only 28,000Kg imported since the new tariffs were introduced reflecting 99% drop in imports.
Local garment production projections.
According to MINICOM, the overall market size for clothing is expected to continue to grow as the economy grows with domestic production projected to overtake second hand imports by 2020.Import of used clothes is still expected to continue but at a lower rate than the rest of the clothing market, Minister Kanimba noted.
According to experts, phasing out second hand clothes is expected to cause changes, and also create new opportunities for market players.
The value of imported wear products, both new and second hand clothes, cost over $100 million out of which 80 per cent or $80 million (Rwf60 billion) were textile
More textile deals
The government recently signed agreements with two investors to establish new clothing and shoe factories at the newly-demarcated ‘Apparel Manufacturing Zone’ at the Kigali Special Economic Zone.
The first agreement was signed between the Ministry of Trade and Industry and Prime Economic Zones Ltd, for 5 hectares of land.
The second was signed between the ministry and two investors in the apparel manufacturing industry (Albert Supplies Ltd and Rwantan Ltd).
The Apparel Manufacturing Zone (AMZ) currently occupies 5 hectares in Kigali Special Economic Zone.
The Government land is to be given to investors engaged in apparel production, requiring them to pay for it over a period of 20 years as a way of encouraging them to invest in the country.
“We realised that one of the major challenges for the investors is that they find it hard to acquire land in the economic zone where a hectare of land costs up to Rwf430 million. This would make them spend a lot of money in buying land and the related processes. So we decided to help them so that their investment will remain in securing machinery and other needed capital,” Kanimba, told The New Times in a recent interview.
The minister said the move was one of the strategic interventions taken by the Government to develop and strengthen the capacity of production units engaged in textiles, and leather production.
Albert Nsengiyumva, the director of Albert Supplies Ltd, said the factory will produce different types of high quality clothes and employ up to 2,000 people. He said the investment in the factory for the start is Rwf10 billion and by July next year, finished products will have been put on market.
Bede Bedetse, a Burundian who manages Rwantan, a leather products manufacturing company, said they will produce different types of affordable leather products, including belts and footwear.
Source: The New Times