Aug 28, 2009 (Focus Media/All Africa Global Media via COMTEX) -- Although export revenue is increasing, the trade balance deficit is still getting bigger. Therefore, a strategy is being implemented to diversify exports products and add value to them.

Although there was a marked increase in exports last year, with revenue amounting to US$ 256.69 million compared to US$ 176.7 million in 2007, there was also a large increase in the value of imports as a result of increase in commodity prices, which resulted in an increased trade balance deficit.

The average exports performance over the last four years has been relatively low, with a value of US$ 160 million on average, which represents a mere 29.8% of the imports during the same period. The recurrent trade balance deficit underscores the importance of substantially widening the Rwandan export base.

Participants in a workshop on banana fiber extraction last year; it is one of the potential export products that have shown potential. (file photo)

According to Pippien Hakizabera, the director of exports promotion at Rwanda Development Board (RDB), dependency on traditional exports such as tea, coffee and mining - most of which are exported in raw form - is not likely to reduce the trade balance deficit. "We need to increase and diversify our export base," Hakizabera points out.

The current global economic crisis has already affected export revenues, according to the 2009 first semester export performance statistics, with tea and tourism being the only products that performed better compared to the same period last year.

"This shows that we need to explore other potential export areas which would generate more revenue for the country," Hakizabera says.

Hakizabera indicates that the government has put in place an export development strategy which he says will encompass development of export products, enterprises that make those products, destination markets as well as strategies to deliver selected products to targeted markets.

The export development strategy is expected to look at reinforcing the existing export sectors such as coffee, tourism and tea by ensuring that quality and quantity are maximized. It will also involve close collaboration between the RDB export promotion department and other export supporting institutions such as both OCIR The and Cafe to strengthen the capacities of the exports.

"We are looking at branding, diversifying and value addition to ensure that the existing sectors are fully strengthened," Hakizabera notes.

Niche products

In addition to the existing sectors, Rwanda must develop new export products and services. There are a number of new products that have been identified as potential export revenue earners. One sector with great potential is hides and skins, but in the past they have been exported in untreated form and have fetched peanuts. That is about to change.

"We have already established a center for treatment of hides and skins in Masaka; now we are trying to make sure there is sufficient supply of raw materials to process into finished leather ready for exports," Hakizabera says.

Other areas identified include the textile sector, where plans have been elaborated to develop silk production, which already exists but is embryonic. Horticulture, honey and banana fiber products are other sectors that are being explored.

Apart from strengthening and diversifying Rwanda's export base, the strategy focuses on high-value niche products that the country has the capability to produce and for which consumers are ready to pay any price. Such products include honey, silk apparel and banana fibers.

To crack open such markets, however, vigorous marketing strategies are required. "There are a number of issues one needs to look at: identifying a market, having the right product for the market, accessing the market through getting the necessary paper work such as the export certification, ensuring that products meet hygiene standards as well as anti-terrorism legislations," explains Tony Nsanganira, the officer in charge of export development at RDB.

In order to target niche markets for Rwanda's exports, value addition and branding are necessary. For instance, Rwanda currently sells its coffee through Starbucks stores all over the world, even though it does not sell a finished product which could be go for more than the coffee beans.

"It's an improvement compared to the past when Rwandan coffee was sold through intermediaries such as Belgium; today, the coffee packs sold at Starbucks explicitly mention that the commodity comes from Rwanda," Hakizabera says.

However, the point is that eventually Rwanda will be able to add value to its coffee beans through processing, packing and branding, thus increasing their value on the international market.

"We have been approached by local investors who are willing to add value to coffee so that they can sell it as a fully finished product," Nsaganira points out.

EAC branding

Value addition will not only ensure more revenue from exports, but also that Rwanda has a comparative advantage when it comes to regional competition. The EAC member states have almost the same export products and therefore Rwanda will need a brand that would resonate with high-end consumers.

For instance, there has been suggestion that coffee from EAC should be branded as such, especially given the fact that Rwanda is also a member of the East African finest coffee growers association. However, Nsanganira thinks that at the moment Rwanda should concentrate on having its own specific brand which would differentiate its coffee from the rest.

"Having one brand for EAC coffee would be feasible when the integration process is completed, and that is something that does not happen overnight," Nsaganira explains.

Apart from developing strategies to expand the export base, the government has for the past years facilitated exporters to attend different international trade fairs so as to market their products and establish business contacts. This has had mixed results, however, since often entrepreneurs see such exhibitions as a sales point rather than a marketing and networking occasion.

"We have been sending entrepreneurs to exhibitions, but then after two days they inform us that they have nothing to exhibit because they have sold all their products; this in turn does not benefit them as they miss an opportunity to showcase their products for a wider range of prospective buyers," Pipien Hakizabera remarks.

Janet Nkubana, the managing director of Gahaya Links - a success story when it comes to handicrafts exports - also thinks that exhibitions should be used to establish business relations and contacts. Therefore, she suggests that before the government sends entrepreneurs to exhibitions, they should be trained on how to exploit trade fairs to seal future business deals.

"Rwandan entrepreneurs need training from experts to know how to manage the exhibitions and to understand the dos and don'ts in international fairs," Nkubana says. "For instance, having a lot of products in your stand might seem a good strategy, but it can also confuse potential clients about what your specialty is, and they might even doubt whether your products are genuine."

<<Focus Media. Distributed AllAfrica Global Media (allAfrica.com). -- 08/31/2009>>