Traders may need alternative packaging for their exports to Rwanda as the government considers imposing a ban on imported products packaged in non-biodegradable polythene material.
The move comes on the back of growing pressure from the Rwanda Private Sector Federation for the government to lift the 2006 ban on domestic manufacturing of non-biodegradable plastic. According to the private sector, the ban raises production costs for local firms.
Rwanda’s Minister of Trade, Industry and East African Community Affairs Francois Kanimba said there were plans to restrict imports packed in plastics.
“Goods that directly compete with what is on the domestic market will be restricted by the Rwanda Environmental Management Authority (Rema),” said Mr Kanimba.
John Bosco Kanyangoga, a consultant at Trade and Development Links in Kigali said the ban would need the approval of the EAC Council of Ministers. The East African Common Market Protocol and Treaty provides for import bans on grounds of health concerns, environment protection and security.
Mr Kanimba said the decision would only apply to selected products since a total ban on imports packaged in plastics would be in violation of WTO trade systems, which forbid discriminatory restrictions on imports and exports.
Manufacturers blame their poor performance on the high cost of packaging. Sosoma Industries, a Kigali-based food processing and packaging company, said the price of its packaging material increased from $0.03 to $0.12 after the ban was enforced.
When Sosoma packed its products in aluminium bags, the cost of the final product increased from $0.24 to $0.31 per unit. At Inyange Industries, the cost of packaging increased from $0.06 to 0.30. At Uruburtso, it increased from $0.04 to 018 and at Ruhango Cassava from $0.10 to $0.43.
The ban also affected local plastic manufacturers as they suffered a drop in investments and return, resulting in downsizing.
With a small manufacturing sector, Rwanda imports most of its goods and products from Uganda and Kenya. Data from the central bank shows that Kigali’s trade balance with its East African partners averaged $260 million between 2014 and June 2016.
Boost on trade balance
However, banning imports packaged in plastic, could have a positive impact on the country’s trade balance as it could increase local production, reduce the country’s import bill and create jobs as firms expand to fill the gap left by imported products.
The country is grappling with a widening trade deficit, depreciation of the Rwandan franc and the pressure on foreign reserves as a result of the ballooning import bill.
The central bank projects the franc to further depreciate against the dollar by almost 10 per cent before the end of this year.
Despite its ban on polythene and plastics, the country spent $9.7 million on imported polythene packaging in 2015, according to the August Rwanda Public Private Dialogue (PPD) Paper on Oxo-Biodegradable Plastics in Rwanda. This shows that when the biodegradable plastic manufacturing industry is allowed to grow, the country could drastically reduce pressure on its foreign currency.
To support the growth of the biodegradable plastics industry, the private sector is pushing for fiscal incentives, including zero-rating VAT on industries producing alternative packaging solutions.
Proponents of lifting the ban also argue that Rwanda will continue facing challenges in enforcing the ban as long as regional partner states do not implement the EAC Polythene Materials Control Bill of 2011. Uganda, Kenya and Tanzania are yet to implement the ban as they argue that local alternative packaging industries are yet to be developed.
While the value of investment in the Ugandan plastic industry is estimated at $400 million, the country’s environmental watchdog, the National Environmental Management Authority said the country produces 953 tonnes annually but only 6.5 tonnes is recycled, leaving huge amounts of plastic unaccounted for.
Kenya has the biggest plastic manufacturing plants in East Africa. The country hosts 42 manufacturers who have invested about Ksh43 billion ($44 million).