Investment Policy Review - Rwanda - UNCTAD Virtual Institute

Investment Policy Review of Rwanda
specialty coffee, and regulations allow full participation of the private sector in the industry. Given these
conditions and the Government’s objective to move up-market and increase local value-addition, foreign
investment could be promoted in the following areas:
• Washing stations. The Government hopes to have 60 per cent of the crop fully washed locally by
2010, compared with 3 per cent currently. This would require investments of around $10 million
in an additional 80 washing stations. There has been little private investment so far, and unreliable
electricity supply remains a problem for washing stations in remote areas. Although prospects for
FDI are unclear, such projects may appeal to small investors from the region.
• Coffee roasting and production of specialty coffee. The main Government objective for the sector
is to produce specialty roasted coffee for exports. While there is local expertise to increase the
quality of coffee, national investors probably have insufficient knowledge of western markets and
branding to be successful by themselves. RIEPA's targeting effort should thus focus on attracting
one major brand with such expertise.
Rwandan tea, in turn, is grown 65 per cent by smallholders and 35 per cent by estates. As for coffee,
there is little domestic value addition or branding, as output is sold largely by tea factories in bulk,
typically by auction in Mombasa. The sector is organized around nine tea factories, which have associated
estates and also process smallholder production. All of these factories used to be state-owned. One
was partially sold in 2004 to Lab International (United Kingdom), one is close to privatization, and the
remaining seven have been earmarked for privatization.
The privatization of these factories and their estates offers room for further domestic and foreign
private investment in the sector and for further improvement in yields, quality and beneficiation. It is
estimated that current yields could be almost doubled if they were to reach the best international
standards. Aggregate investment to acquire all tea factories could be upwards of $40 million, with additional
investments needed for replanting and factory upgrading.
The privatization of tea factories and estates and private investment in the coffee sector could
generate foreign investment in the near future. The two sectors would also benefit from FDI, particularly
to help them move towards better quality production and higher domestic value addition. In many
respects, however, tea and coffee are mature sectors that do not offer significant prospects for sustained
volume growth or FDI attraction in the medium term. Given the current policy environment in tea and
coffee, the sectors should thus not be at the centre of the FDI strategy.
b. Diversification in agriculture
While the coffee and tea sectors are close to maturity, there are a number of activities in agriculture
that have been little or not explored so far, but that have a potentially strong growth potential and
provide opportunities for rural development, FDI attraction, job creation and exports. The production
and export of flowers, fruits and vegetables may be such an opportunity to diversify and enter markets
for high-value products suitable for airfreight.
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