EAC customs union excites but also worries entrepreneurs
The Rwandan business community seems to have mixed feelings about the EAC customs union.
During the official launch of Rwanda’s entrance in the EAC customs union, the CEO of the Private Sector Federation (PSF), Emmanuel Hategeka, was upbeat about the readiness of our entrepreneurs to compete in the regional bloc.
“The question has always been: Is Rwanda’s private sector ready to compete? Our answer is: Yes we are!” Hategeka remarked, adding that in any case they have no choice and should be innovative.
Yet during a recent meeting with Rwanda Revenue Authority (RRA), entrepreneurs were less emboldened and expressed concern that they will be overrun by the bigger and stronger East African competitors. The mood was especially gloomy among owners of small and medium enterprises (SME’s) who said that they are not yet equipped to compete. They pointed at issues such as product quality, where most SME’s have still a long way to go. Another factor highlighted is that other EAC companies operate on a large scale which in turn reduces their production cost thus their prices.
They recognized, however, that the customs union gives them access to a bigger market of 120 million people, compared to the 9-million Rwandan market. Moreover, RRA officials also pointed out that measures have been taken to initially protect local industries.
For instance, there are 157 raw and semi-finished products used by Rwandan industries which, for the period of one year, are exempt from import duties. Also, construction materials of projects worth more than US$ 1.8 million will benefit from a flat rate of 5%, whereas heavy trucks will also be exempt from duty.
“All this is in line with protecting our local industries,” Eugene Torero, the deputy commissioner general of RRA told investors, adding that the one-year waiver should be sufficient for local companies to adjust their operations. “You should improve the quality of your products and be innovative in order to compete,” Torero said.
The deputy chairman of PSF, Faustin Mbundu, also pointed out that the situation is nothing new, given that since 2004 the Rwandan business community has been competing with the some of the EAC businesses through the Common Market for East and Central Africa (COMESA).
“Kenyan goods have entering Rwanda tax free, while Ugandan goods were subjected to only a 6% tax,” he remarked. “We have been competing with these goods, so it’s just a question of changing the perception that opening up will lead local companies to be out competed.”
He urged investors to take up guarantees offered by the Central Bank and embark on training people to be more productive.
Caption: Eugene Torero, the deputy commissioner general of RRA. (file photo)