Investment Policy Review - Rwanda - UNCTAD Virtual Institute

Investment Policy Review of Rwanda
The success of this industry in neighbouring Kenya, and to a lesser extent in Uganda, in exporting to
Europe points to what can be achieved. Indeed, the horticulture and floriculture industry in sub-Saharan
Africa as a whole has now overtaken the traditional exports of coffee and cocoa. The Rwandan industry
is clearly in its infancy: apart from the notable pioneering effort of Rwanda Flora (chapter I, box I.2), these
significant changes in African agriculture have not reached Rwanda yet. The disruptions caused by the
genocide may be partly responsible as the take-off of this industry in Africa occurred in the 1990s. Yet,
the success stories in neighbouring countries show that an industry can develop quickly from humble
beginnings and that business leadership can resolve many issues such as transport logistics, adherence to
sanitary and phytosanitary standards and smallholder support, some of which have traditionally been the
preserve of governments (box III.3).
Box III.3. FDI and horticulture and floriculture in Kenya
Kenya’s success in providing high-quality products at competitive costs and in fulfilling strict sanitary
and phytosanitary standards (SPS) is the result of private investment and initiative, as the flower, vegetables
and fruit sectors have been subject to relatively little government intervention through extension services
to farmers or public marketing boards. Exports by these three sectors have consistently increased as a share
of total exports over the past decades, growing to an aggregate of close to 23 per cent in 2003, equivalent
to $550 million, from less than 6 per cent in 1980.
Horticulture and floriculture were initially launched by small investors (e.g. Homegrown) with very
little capital. A number of the initial investors have grown considerably, however, and large firms currently
dominate the sector, with 24 industrial operators accounting for 72 per cent of total export volume. The
dominance of large firms is not due to capital intensity, however, but results from the need to meet the
demanding standards of buyers for food safety, traceability, environmental impact and labour standards.
Indeed, flower, vegetable and fruit production are very labour-intensive, and cut flowers alone employ 40-
50 000 people directly and another 60-70 000 indirectly. While the distribution side of the three sectors is
dominated by foreign investors, linkages with the domestic agricultural sector are sizeable – particularly in
the flower and vegetables sectors – as locally-owned outgrowers frequently take part in production.
Two key areas of technological competence are essential in distributing and selling products to the
EU and US markets. The first is to ensure adequate traceability and environmental standards. While this is
widely recognized to act as a disincentive to small-scale producers, some of the largest (foreign-owned)
exporters use small-scale outgrowers, and provide them with the extension services they need to sustain
their market position.
The second key area of technological competence lies in the control of logistics. Kenyan growers
and packers add value to fresh vegetables by undertaking the full range of pack-house activities, including
washing, packing and labelling the produce with store-specific packaging and labelling. Their control over
logistics and production allow their European customers to change their purchase requirements up to the
middle of the day of dispatch in large airplanes flying to Europe every night. Similarly, logistics in the flower
sector enable the full cold-chain storage of flowers immediately after picking, which allows supermarkets to
guarantee their produce for one week after sale from the store.
Source: Investment Policy Review, Kenya, UNCTAD (2005).
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