Country Session 2: Rwanda

The Rwanda session was chaired by Richard Newfarmer (IGC Rwanda). Rocco Macchiavello (Warwick University) presented preliminary results of IGC work in understanding the downstream structure of coffee value chains. Coffee washing stations play a crucial role in the coffee value chain in transforming commodity coffee into specialty coffee, a process that can grab up to 2.5 times higher prices. This presentation focused primarily on trust relationships between coffee farmers and washers and their effects on different players’ abilities to obtain necessary pre- or post-financing, and recommendation to include an integrated approach to washing station finance and using the role of downstream buyers as collateral.

Jit Bajpai (Columbia University) presented the urban sector review for Rwanda to highlight some of the long term implications of Rwanda’s visualised urbanisation strategy. Jit highlighted some key observations about the general states of Rwanda’s urbanization and housing markets as well as the key issues for Rwanda’s rural–urban transformation. Finally, he outlined a framework for action to ensure a successful and effective transformation for Rwanda. Some of these elements included further coordination across sectors to manage urban-rural transformation, synchronised national strategies, and increases in investments in affordable housing. Matthew Collin (Oxford University) also discussed urbanisation in Rwanda, noting the complexity of urbanisation issues and that the government focus should perhaps be on increasing Kigali’s ability to function effectively and absorb further residents rather than on how to prevent further movement into Kigali through fringe towns and satellite cities.

Doreen Kagarama from the Rwandan President’s office then responded to these two papers, highlighting that the expansion of the number of coffee-washing stations as well as the current and future gains in Rwanda’s urbanization has been and must continue to be a result of well thought-out, conscious decisions translated into effective government planning.

Lennart Flood (University of Gothenburg) discussed Rwanda’s tax policy, specifically the scope for the implementation of a flat tax. The primary advantage of a flat tax is its simplicity, leading to, under reasonably low tax rates, increased compliance, a widening of the tax base, and as a result, lowers the tax rates. This is especially pertinent for Rwanda as, as Flood pointed out, the vast majority of the country’s tax burden falls on the few wealthy individuals and companies and the tax base in Rwanda also remains quite small. However, Flood also noted that Rwanda would be required to set quite a high flat tax rate in order to maintain the same revenues collected currently. Nada Eissa (Georgetown University) discussed these findings, remarking that Rwanda’s skewed income and taxation profiles are massively important for policy. She also noted that Rwanda’s current taxation revenues remain too low and that, in addition to searching for optimal ways to achieve its current revenue takes, Rwanda needs to also focus on how to increase this amount by increasing compliance and registration.

Olivier Cadot (University of Lausanne) presented a paper on inter East-African Community (EAC) trade. He highlighted some trends observed in many other places around the world: (i) the firms that exported within the EAC region were very rarely also firms that exported to global markets (and vice versa), and that (ii) firms that export within the EAC region were generally smaller and more manufacturing based than global exporters. Using variations in the exchange rates within the EAC, this paper tests for the presence of significant concentrations in selling power (or ‘market power’) among sellers within the region, the results of which would be generally higher prices for consumers. His results are suggestive of excessive market power existing within the EAC and he notes that in the future, the scope and reach of this paper will increase. Andrew Zeitlin (Georgetown Public Policy Institute) was the discussant for this paper, highlighting the potential role of transportation costs in this trade and potential demand-driven effects of the observed exchange-rate fluctuations.