Rwanda moves to promote local textile factories

Saturday September 24 2016

The garment section at Rwanda's Utexrwa. Textiles and leather industries are accorded a special protection status as the region gears towards abolishing imports of second hand clothes. FILE PHOTO | CYRIL NDEGEYA

The Rwandan government has waived taxes on imported raw materials and accessories to support local textile industry.

Traders previously complained of high taxes levied on raw materials, saying they were affecting growth of the sector.

The waiver is relief to many dealers in the textile industry, who are facing an uphill task of fast-tracking growth to provide alternatives to imported second hand clothes.

“Taxes on inputs were posing challenges because over 60 per cent of our expenditure used to go on taxes, this was a problem,” said Janet Nkubana, managing director and co-founder of Gahaya Links.

Over the past few years, a number of garment and shoemakers started serving the local market, but the products have been unaffordable due to high cost of production that is passed on to consumers.

“This is going to impact on the final prices of locally produced products, the price will go down,” she added.


The textile companies also complained that high cost of energy is affecting local production of goods because textile and shoemaking is high energy intensive.

In a meeting with textile and shoe manufacturers, Minister for Finance and Economic Planning Claver Gatete, said the government has noted that energy costs are still high in Rwanda, revealing that there are plans to bring them down.

“Energy costs are still high and it is a challenge; the government is trying to step up generation. We are working hard to ensure that energy prices come to the level with the rest of East African countries,” he noted.

The government is responding to a regional call to progressively ban second hand clothes to protect local textile industries from competition.

This has seen the duty on imported second hand clothes raised from $0.20 to $2.50 per kilogramme, while import tariffs on used footwear were raised from $0.50 to $5.00 per kilogramme, starting July 1 this year.

However, analysts raised the red flag over immediate ban on second hand clothes, saying local industries do not have capacity to meet the demand.

Up to 20 per cent of domestic production is usually focused on uniforms. Utexrwa, the sole government clothes-maker serves the military and schools.

The government has earmarked 15 hectares of land in Bugesera Industrial Park for a Tannery Park and has also increased tariffs on exports of raw hides and skins to ensure that local shoe manufacturers have enough raw materials to work with.

Early this year, an Italian investor, Pluripell inked a deal with the government to build a shoe manufacturing factory and a tannery in the Bugesera industrial park.

“The Italian investor wants to start building a tannery but the government was expected to first put up a water treatment plant, this hasn’t even been started, this is delaying them from kicking off, they want the government to speed up the process,” said Mukama Wellaris, a local consultant working with Pluripell.

Two companies — a Burundian leather products manufacturer Rwantan Ltd and Albert Supply, a Guangzhou-based textile maker — have entered the Rwandan market. They both secured 2.5 hectares in the free economic zone, where construction has already begun.

Currently, C&H is expanding its production, with the Chinese company in final stages of its new premises, which will be used for production of garments for the local market.

READ: New textile firms enter Rwanda

High taxes on second hand clothes has had an immediate effect on their importation, where the market has recorded a 99 per cent drop since the new tax tariffs.

Prior to July, when the new tariff was effected, a monthly average of 2.5 million kilogrammes imports of second hand clothes were recorded. This dropped to 28,000kgs per month.

The second hand clothes that dominate the market at the moment seem to be remnants of the stockpiled cloths from June.