Posted on January, 14, 2019 at 09:31 am
By Julius Bizimungu
Three years ago, the Government created an export growth facility to support local businesses to export their products to international markets.
It was also part of the bigger strategy to narrow the trade deficit.
The fund was designed as a single facility with three separate windows including an investment catalyst arm, the matching grant fund for market entry related costs, and an Export Guarantee Facility.
Since its establishment, the Government, together with the Development Bank of Rwanda (BRD) and KfW Development Bank, have injected millions in the facility, which export-oriented businesses are able to access in form of credit and grants.
Statistics from BRD show that the Government has until now invested Rwf2.5 billion into the facility of which Rwf1.2 billion has been utilised, while KfW, a development bank owned by the German government, has injected in Euros 8.5 million (approx. Rwf8.6 billion).
However, exporters continue to decry stringent and bureaucratic processes they have to go through to access the funds, and the lender has been criticised for not relaxing the eligibility criteria.
Following this, the government last year during the 15th National Leadership Retreat (Umwiherero) recommended BRD to raise the effectiveness of the Fund to increase the number of beneficiaries.
BRD later revised the previously prohibitive eligibility criteria which required businesses to have previously exported 40 per cent of their products in order to qualify for financing. This requirement was removed.
According to Benjamin Manzi, BRD’s Export Investments Senior Manager, the revision of the eligibility criteria has enabled more firms to benefit from the facility, highlighting that only last year 16 exporters benefitted from the Fund from ten exporters who had previously received funds from the facility.
In 2016, only five exporters received funding from the facility.
The investment government makes into the fund acts as the grant and helps to subsidise interest that exporters are charged by BRD on loans and other commercial banks that work with BRD.
Garden Fresh is one of the businesses that have benefitted from the facility. The firm exports fresh vegetables like green beans, sugar snaps, broccoli, hot chilli, lettuce, tomatoes, zucchini, and avocadoes, among other products.
“We applied for the grant, went through the process and waited for two months to get it. Our budget had mainly two components including market reach and certification,” said Emmanuel Harelimana, the company’s Chief Finance Officer.
He disclosed that they applied for Rwf78 million of which Rwf40 million have been already disbursed. This, he said, has facilitated them to attain international safety food standards as well as expand their market rich.
“We are currently selling to one of the two biggest companies in Netherlands. We are also selling to three clients in UK who are really happy about our products. However, when we applied for that grant we had only one client from UK,” Harelimana said.
Previously, the fund benefitted only non-traditional exporters like those in horticulture, artisanal mining, and manufacturing. Following complaints from other exporters, the fund was opened up to other sectors like coffee and tea.
Sorwathe, one of the oldest tea factories, is one of those players in traditional sectors that have received funds from the facility.
Rohith Peiris, Sorwathe’s Director General told The New Times that they applied for and received a loan under the Export Growth Fund which enabled them to establish a new tea factory.
“We have already finished a green tea factory with the loan and it [the factory] is in operation also. It was a $1 million new project and out of that we got half a million dollar from the Export Growth Fund,” he said.
Sorwathe now exports its green tea to US, Canada, UK and Germany, among other countries.
BRD says more than 31 projects have directly benefitted from the Fund since its establishment. Through the same facility, eight projects have benefitted from line of credit extended to five commercial banks by BRD.
Overall, Rwf4.4 billion of investment has been approved to these projects in the past three years, almost Rwf500 million interest subsidy has been given out and Rwf758 million worth of grants have been approved.
Nevertheless, exporters who have talked to this paper still believe the process to access these funds is still very long. Both Harelimana and Peiris said BRD should work to minimise the process it takes to access the facility.
Expanding the facility
Manzi said the fund is expanding to introduce more options to enable more businesses to benefit from the Export Growth Fund.
“We revised the eligibility criteria last year in August and we have now revised them again as had been recommended from the National Leadership Retreat. We are waiting for approval authority from MINICOM to go ahead,” he said.
Under the second revision, BRD has designed another window which will see the Fund open up to people with potential ideas.
They say the aim is to encourage private sector investments into startups projects that recapture domestic markets and promote export related activities.
If approved, the new window will consider those whose proposed business projects have potential to export at least 40 per cent of what will be produced in the third year of operation, they said.
Source: The New Times