The government is considering investing in the packaging industry after small and medium enterprises complained that they are missing out on export markets due to poor packaging.
Rwanda imports almost all packaging materials — including sacks, folding non-corrugated paper, corrugated fibreboard and laminated UHT milk packets.
Official data shows that in 2012 the country spent Rwf20 billion in the importation of packaging materials. But despite this huge potential, the local packaging industry has not attracted serious investors, even when the banks in the country are ready to fund the industry. This has sparked concern by the government.
The government, which is implementing its export growth strategy, finds itself in a fix when small-scale exporters, especially those of non-traditional cash crops, are locked out of the export markets.
The strategy, partly, is to address the trade balance by creating a critical mass of exporters of diversified products to offset the trade deficit.
The packaging challenge has locked small-scale exporters out of the African Growth and Opportunity Act (Agoa) partly due to poor packaging.
Regional manufacturers also make it hard for Rwandan small-scale businesses to penetrate new markets, even when their products are competitive. The SMEs are required to order packaging materials in bulk, yet they are constrained by lack of enough capital.
In acute shortage is the corrugated boxes used in horticulture exports. The few Rwandan exporters spent Rwf12 billion in 2012, according to a Rwanda Development Board (RDB) study, Packaging Plants in Rwanda by Karisimbi Business Partners.
The study found that 75 per cent of the corrugated boxes were sourced from Ugandan manufacturers such as Riley, who were willing to offer rock-bottom prices and even hold extra stock to guarantee quick turnaround for customers.
“It is clear that many SMEs realise their packaging is inferior and are willing to pay more for superior packaging in the hope that it will raise their product profile and lead to exports,” points out the study.
But the aantage is that some manufactures discriminate against small imports.
“We recently went to import packaging materials from Kenya but came back empty-handed because we needed a sample as required by our Dubai customers but a Kenyan firm declined to manufacture the small quantity,” said Christine Murebwayire, the chairperson of agriculture and livestock chamber at the Rwanda Private Sector Federation (PSF). “We wish to have locally produced standard packaging materials.”
Against this background, Minister for Trade and Industry Francois Kanimba said he would sell the idea to the Cabinet to push for investment in the packaging industry.
He asked traders to seek alternative supplies up to February, when the government might intervene in the industry.
Mr Kanimba said: “We have noticed that the big challenge facing SMEs is packaging yet packaging sells a product at over 50 per cent.”
He added: “You may have a good product but when it is packed poorly, selling it is hard. We want to have efficient packaging materials produced locally in the near future.”
SOURCE: THE EAST AFRICAN