Country Session 2: Rwanda

The Rwanda session at Growth Week 2012 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 adds more than 100% value to the bean. A nation-wide survey highlighted three important operational constraints: access to finance, competition, and transport costs. Focusing on finance in particular, preliminary analysis shows evidence of moral hazard being a key factor; in particular, experimental data shows that low trust levels between actors in the value chain prevents pre or post financing agreements between buyers, service providers and farmers. Alex Kanyankole (National Agricultural Export Board) indicated that the government of Rwanda was aware of the risks posed by excessive competition in the sector, as it was noted that the number of stations has increased rapidly in the past few years. In order to increase traditional financing mechanisms on the coffee value chain, the government is encouraging financial institutions to study and gear products towards the sector value chain.

Jonathan Argent (IGC Rwanda) presented implications from the interim evaluation of the one cow project on the importance of providing training alongside asset transfer program. The GIRINKA – one cow – project is a government initiated program that aims to provide one cow to poor households in the country. As cows are provided by a range of actors with different array of support services, including training, the supply driven nature of such services can be used to estimate the impact of training in performance. Results from a comprehensive survey of beneficiaries show that having received any sort of training increases the probability of successfully breeding and selling calf and milk production.

Marguerite Duponchel (IGC Uganda) presented the results of a joint World Bank and IGC study on the impact of land titling on credit constraints. Potentially negative impacts of credit constraints on economic development have long been discussed conceptually but empirical evidence for Africa remains limited. The study assess the nature of credit constraints and the impact on productivity through a method of direct elicitation. The analysis focuses on the semi-formal credit sector, as the formal sector is almost inexistent while the amounts borrowed in the informal sector are small and used more towards consumption smoothing. Levels of credit rationing in the semi-formal sector are high (71%), with 32% related to supply-side factors (10% mentioning lack of collateral), and decreases with wealth. An endogenous switching model points towards significant impacts on productivity, suggesting that elimination of all constraints would increase value of total output per ha by about 17%. Whether, and to what extent an ongoing land registration program will be able to eliminate these constraints will be of considerable interest.

Garth Frazer (University of Toronto) presented results from his research that assesses the introduction of the EAC common external tariff (CET) and develops a set of priorities for tariff negotiations with the aims of poverty reduction and removing barriers to export growth. Frazer found that the price changes in key products, driven by the CET, caused a 4% reduction in the real income of low-income households in Rwanda. This is due primarily to the products on the Sensitive Items (SI) list which are subject to a tariff rates of up to 100%. The SI list was responsible for an increase in tariffs on agricultural products of 380%. Frazer found that reductions in the import tariffs on inputs under the move to the CET had a significant positive impact on Rwanda’s exports – it is plausible that this extends to domestic production too although this is something that would require further study. His findings suggest that a further 5 percentage point reduction in tariffs would likely result in a 5-10% increase in exports, mainly through lowered costs of imported inputs.

Audio is unavailable for this session.