Understanding Rwanda’s agribusiness and manufacturing sectors

In this book Sachin Gathani and Dimitri Stoelinga present the results from their studies of manufacturing and agribusiness in Rwanda. These studies are based on in-depth interviews with leading businessmen and -women in the country. The work is also based on careful statistical analysis of a wide range of data on Rwandan companies. By combining case studies of individual companies with careful quantitative analysis, the study offers a uniquely comprehensive and informative picture of the industrial sector.

The overarching theme of the research is Learning to Compete. The starting point for the research project is the simple observation that there is very little industry in Africa. Lessons from Asia are that industrial growth and exports can be very potent drivers of economic development, poverty reduction and job creation. But this has not yet happened in Africa or Rwanda. It is true that there has been tremendous growth in much of Africa – and certainly in Rwanda – over the past decade. But insufficient job creation and poverty remain problematic. Why is there so little industry in Africa? That is the question to which the researchers have set out to find answers.

The present study documents the origins, capabilities and potentials of firms in Rwandan manufacturing and agribusiness. The book provides general analysis, as well as detailed profiles of individual firms and sectors. The authors focus on the leading firms in the country, i.e. firms that are large in terms of output, employment and exports. Large firms account for most of Rwanda’s industrial output and exports, hence a better understanding of the decisions and performance of these firms automatically implies a better understanding of the overall growth potential of the industrial sector in Rwanda. This should not be interpreted as implying that smaller firms are somehow less important in general. Micro and small firms offer jobs and they sometimes provide an entry point, in particular, for women into the labour market. Occasionally – though not as frequently as one would wish – small firms also grow to become large. The constraints and opportunities of small firms certainly warrant careful analysis too.

Gathani and Stoelinga bring us many findings. Some of them are relatively general and broad. For example, their work confirms that many of the best-performing firms in Rwanda have some foreign ownership, or are run by managers or entrepreneurs with a background in trading. Similar findings have been reported for many other African countries. This book carefully explains why and how this fact is informative about the relevant capabilities for running a successful business in Rwanda. Other results are more specific to the Rwandan context. Sourcing inputs and raw materials is a key constraint for many manufacturing firms, and arguably an important reason as to why few Rwandan manufacturing firms are able to compete internationally.

The study also establishes that large regional conglomerates have performed well in Rwanda recently. They have brought to the Rwandan market large capital investments, skills and know-how. Some of them find Rwanda a strategic location to target the Rwanda–Burundi–DRC markets. There are also domestic investment and holding groups that control significant portions of the Rwandan industrial sector. Small, domestic enterprises, in contrast, often struggle to raise capital and have a hard time finding skilled staff. This is one reason the manufacturing sector has not been able to generate a lot of jobs over the past decade.

Several questions related to policy arise as a direct result of the research presented in this study. For example, what policies would be most effective at facilitating firms to source inputs, e.g. raw materials? How should policies towards international investors be tailored so as to maximize the benefits for ordinary Rwandans? How should competition regulation be designed? Finding answers to questions such as these is generally very difficult, and readers will not find here cookbook-style recipes for policy. But they will find a wealth of facts and results that provide a good basis for advancing the policy discussion further.