The recent commitment by the governments of Rwanda and the Republic of Tanzania will dramatically improve trade especially along the Central Corridor.
The Central Corridor is key to Rwanda as it covers a shorter distance to the sea port of Dar es Salaam compared to Mombasa port on the Northern Corridor. The local private sector has for the past many years complained about the numerous non-tariff barriers (NTB) along the Central Corridor, saying this was affecting their businesses and competitiveness.The route has hitherto been characterised by many NTBs, forcing Rwandan businesses to opt for the Mombasa route.
The central corridor has been characterised by un-harmonised trade policies, numerous checkpoints along the route, congestion at Dar es Salaam port, and theft, among others. However, as the two governments move to foster trade relations, experts are optimistic the move could turn around trade between the two countries. Experts say the development opens doors for trade partnerships and accelerated investments between the two countries.
Francois Kanimba, the Minister for Trade and Industry, said that improving business and bilateral ties between Rwanda and Tanzania will increase trade flow, boosting Rwanda’s exports to Tanzania.
The minister argued that Rwanda and Tanzania have been important trading partners, noting that the new development will foster trade and cooperation in different aspects.
According to statistics, Tanzania was Rwanda’s third largest trading partner in the region last year, with total trade between the two countries amounting to $68 million, down from $70.8 million in 2014. This, however, reflects a decrease of about four per cent, which experts attribute partly to challenges businesses faced while trading with their Tanzanian counterparts.
Benjamin Gasamagera, the chairman of the local Private Sector Federation (PSF), is confident about the development, saying it paves the way for the private sector to open new partnerships that will augment the country’s trade volumes and earnings with Tanzania.
“This can be done through enhancing partnerships between business people from both countries, identifying and solving barriers faced by entrepreneurs in a timely manner, and increasing facilitation to strength regional trade and investment in select sectors,” Gasamagera noted.
He added that as Rwanda’s captains of industry, they envisage trading with global partners, not only for profitable businesses, but also as a step towards affirming the mutually beneficial relationship between Rwanda and other countries, including Tanzania.
This is important for Rwanda because the country’s total trade with Tanzania represented 12 per cent of Rwanda’s intra-EAC (East African Community) trade in 2015. However, Rwanda imported more goods from Tanzania compared to its exports to the country.
According to the Ministry of Trade and Industry estimates, imports constitute 97.1 per cent of all trade. This is a challenge requiring Rwanda’s private sector to increase production and quality of their products so that more Made-in-Rwanda goods are exported to Tanzania.
Fred Seka, the chairman Rwanda Freight Forwards Association, said the growing relations between the two neighbours is crucial for Rwanda’s export and import trade.
Dar es Salaam port recently overtook Mombasa as the main port for Rwanda, handling 70 per cent of Rwanda shipments. Also, over 90 per cent of Rwanda’s exports, apart from tea and coffee, go through the Port of Dar es Salaam. Therefore, the new development could prove a turning point for business to flourish between the two counties.
However, Tanzania will have to do more to eliminate NTBs along the Central Corridor, which remain a nightmare for businesses using the Dar. These have often resulted into unnecessary delays at the port and increased cost of doing business, according to experts.
Kanimba said though the government of Rwanda acknowledges efforts made by Tanzania in facilitating trade by reducing physical barriers to trade, such as weighbridges, police roadblocks and inadequate infrastructure at the port, new technical barriers to trade have emerged. He said businesses also often report difficulties in obtaining certificates of origin in Tanzania. He noted that a trader buying goods in Rusumo is required to go to Dar es Salaam to get a certificate of origin.
“This is time consuming and costly. In addition, permit requirements for clearing and forwarding agents in Dar es Salaam cause an extra cost for businesses and the risk of theft of high value cargo containers has increased cost insurance cover for companies,” he said.
These and many other issues are some of the constraints the local private sector will be looking to see how they will be addressed going forward.
Both states acknowledge a lot needs to be done to create a more business friendly environment to facilitate trade and investment between the two countries. For example, NTBs along the Central Corridor must be eradicated to improve transport on the route and reduce the cost of operations.
When achieved, this will help attract more traders to use the route, further strengthen trade between the two countries.
Monitoring and Evaluation
Meanwhile, a permanent commission was recently set up to help monitor the implementation of joint projects being undertaken by Tanzania and Rwanda.
The commission is also expected to play a critical role in elimination of existing NTBs along the Central Corridor.
Last week, the two countries held the first ever Tanzania-Rwanda trade forum in Kigali. Experts say such forums will be crucial in strengthening further bilateral ties and trade relations between the two countries.
The forum, according to Gasamagera, aimed at fostering cooperation between the private sector from both Rwanda and Tanzania in areas of common interest, such as joint ventures opportunities, exchange of information, as well as finding ways to benefit more from the opportunities presented by regional market.