With the signature of the common market protocol by the EAC heads of state recently, small and medium enterprises (SMEs) should start looking for ways of taking advantage of this new business environment.

The common market protocol will open up a market of an estimated population of 126 million people, a combined GDP of US$ 60 billion, an average GDP growth of above 6% and a GDP per capita of US$ 424.

On the other hand, it will also put Rwandan SMEs face-to-face with about 2 million similar companies. As a result, the question that should be on every Rwandan entrepreneur’s mind now should be: are we ready to compete?

Here, Rwanda’s private sector is certainly handicapped: compared to other member states, it is still small, less vibrant and hasn’t yet got the required exposure. Trade between the country and the region is skewed, with much more goods being imported than exported.

Moreover, SMEs in other EAC countries will do more than just defend their turf: they too are looking for possibilities to maximize the opportunities resulting from the protocol by tapping into new markets, and Rwanda with its still weak private sector seems ideal. And they could also look further, to the Eastern DRC and Burundi – markets in which Rwandan companies have at least gained some foothold.

According to Robert Ssali, the permanent secretary in the ministry of East African Community affairs, there is a lot of work to be done to make the private sector competitive.

Speaking during a workshop on opportunities for SMEs in the EAC last week, he suggested that a lot of energy should be put into innovativeness and change of strategy, and pointed out that it might be more beneficial to target niche markets.

“It is high time that Rwandan SMEs start thinking beyond the country’s borders, by forming partnerships with counterparts in other EAC countries,” Ssali said, adding that it would ensure that they thrived in the market.

One of the areas where the Rwandan SMEs might have a competitive advantage is in agribusiness, in which they can target the market for specific agricultural products such as maize, beans, coffee, fruit processing and dairy products.

Yet that sector too faces serious challenges such as lack of skills, partnerships and inputs which are not readily available on the market. Furthermore, low production coupled with high prices of agricultural products and inputs compared to other countries in the region impact on quantity as well as competition.

For Emile Mutsinzi, of the agricultural enterprise Hirwa, crop intensification is needed to increase the quality and the quantity of the yield. “One hectare should be able to yield around five tons rather than two,” Mutsinzi observed.

Satisfying local demand

In some sense, however, the embryonic state of the private sector is a blessing. Since enterprises at this moment are not even able to satisfy the local demand, they can use the domestic market as a testing ground for their supply efficiency before they start targeting regional markets.

On top of that, they could use the momentum to build competitiveness and strengths internally in order to be capable of taking on a far bigger market.

In any way, partnerships will be essential for Rwandan companies to survive. Not only does it make them bigger players, it can also act as leverage to their skills capacity as SMEs can learn from their partners and ensure that the skills gap is bridged.        

Yet while partnerships are important for the local SMEs in order to get hold of a wider market, strategies that can work are also required.

According to Leonard Kamau, a Kenyan steel manufacturer, it is imperative that entrepreneurs ensure consistency in quality and quantity if they are to succeed.

“If entrepreneurs are to be trusted by their customers, quality and quantity consistency should be highly observed, otherwise they could lose confidence,” Kamau remarked.

Jean de Matha Ouedraogo the country director of Dutch development organization SNV, pointed out that SMEs should therefore apply regional standards. He said that it would help them to compete by supplying goods that are on par with their EAC counterparts.

“In our efforts to develop SMEs, we have offered them a value chain approach which is a necessary tool that they could use regionally,” Ouedraogo remarked.

Seven months are left before implementation of the EAC common market protocol. It is now up to Rwandan SMEs to get their act together and step up their play.

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