PUBLISHED ON December 10th, 2014

Government unveils new plans to support logistics sector

Government has intensified efforts aimed at improving Rwanda’s logistics industry. Already, the government has signed business deals with sector investors. Government has also announced the construction of logistics hubs at the Mombasa and Dar es Salaam ports and a dry service port (Kigali logistics hub) in Kigali, besides upgrading the air cargo facility at the Kigali International Airport.

Also, plans to construct more facilities to facilitate collection of fresh produce are ongoing.

These efforts are also geared towards boosting the country’s service and logistics industry, reduce the cost of doing trade and support the export sector, according to Francois Kanimba, the Minister for Trade and Industry.

The government has also been discussing with investors from Singapore on how to establish a logistics fund to finance local businesses in the sector.

Industry players say these developments will greatly change the dynamics of cross border trade.

Minister Kanimba said the country currently lacks a world class logistics sector that is capable of handling the growing regional trade volumes.

“That’s why the Kigali dry port is critical… We are confident that the dry port and facilities that will be set up at Mombasa and Dar es Salaam ports are key to reducing operational costs, as well facilitating a quick turn-around,” he said.

He said though the cost of cross-border trade, especially shipping; the country’s logistics service strategy will help address some of these challenges.

“The idea is to improve cargo handling services and also help lower costs incurred by exporters, truckers and freight forwarders to boost intra-regional trade,” the minister told Business Times.

He, however, challenged the private sector to take the lead in all the initiatives proposed by the government.

Leonard Mungarulire, the programme co-ordinator, Ministry of Trade and Industry, said these initiatives aim at ensuring that Rwanda is land-linked to trigger logistics industry growth and competitiveness.

“The idea is to develop a world-class logistics hub that will ease way of doing business and ensure environment protection,” he said, adding that the project is being implemented with TradeMark Africa.

“We are developing modern cargo infrastructure that will help remove obstacles to logistics sector,” Mungarulire said.

He assured private operators that projects would not be developed as monopolies that could create unfair competition.

Mungarulire noted that to strengthen the local logistics sector, there is need for a strong logistics and distribution service strategy and supportive strong regulatory frameworks.

He said bonded warehouses would be set up in Rubavu and Rusizi districts to facilitate the growing trade between Rwanda and the DR Congo.

The DR Congo is a huge market for Rwanda.

However, these developments have caused uneasiness among sector players.

“The government liberalised Magerwa to allow the private sector run it; if they are now coming back into the same business, what does that mean?”

“The government should partner with the private sector to make it more competitive in the fairest way,” a source told Business Times.

According to Lambert Nyoni, the chief executive officer of Magerwa, government should allow private operators develop their owner facilities based on their capacity and market projections.

Nyoni argued that government facilities could create competition and eat into their revenues, adding that there is need for a strong price regulatory framework.

He said internal customs laws should be streamlined, noting that currently, our regional customs law does not allow transshipments between member states.

Nyoni said cargo designated to other countries is not allowed to be offloaded here, as a result.

Reuben Chia, the general manager of Pan African Logistics, said the projects will help address the unnecessary delays and ease port congestions.

Call for more tax reforms to support the sector

Chia said the new initiatives should come with tax reforms to lure more investors into the logistics industry, arguing that the current tax regime erodes return on investment.

Investing in logistics must go hand in hand with tax incentives, he added

Chia’s company recently signed a deal with government to commit about $10 million and 150 trucks into the logistics industry.

This is a huge boost to government’s efforts to grow the sector.

Amin Lalu, a trade advisor at TradeMark Africa, called for efficient approaches that help reduce the cost of transport to improve Rwanda’s logistics industry.

“This will help generate more revenues and enhance access to regional and world markets,” he said.

He, however, said the initiatives should be integrated with other regional projects, such as the Northern Corridor railway line project, as well as the air cargo handling to have an impact on cross-border trade.

Rwanda’s cross-border trade strategy seeks to create more jobs and improve income of both the formal and informal sector players as well as help boost the country’s trade balance.

Strategy is closely aligned with the trade policy goal of “growing sustainable and diversified products and services for trading locally, regionally, and internationally, with the aim of creating jobs, increasing incomes, and raising the living standards of Rwandans”.

Source: The New Times

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.