By KABONA ESIARA
In Summary
- Traders may need alternative packaging for their exports to Rwanda as the government considers imposing a ban on imported products packaged in non-biodegradable polythene material.
- The move comes on the back of growing pressure from the Rwanda Private Sector Federation for the government to lift the 2006 ban on domestic manufacturing of non-biodegradable plastic. According to the private sector, the ban raises production costs for local firms.
- However, banning imports packaged in plastic, could have a positive impact on the country’s trade balance as it could increase local production, reduce the country’s import bill and create jobs as firms expand to fill the gap left by imported products.
Traders may need alternative packaging for their exports to
Rwanda as the government considers imposing a ban on imported products
packaged in non-biodegradable polythene material.
The move comes on the back of growing pressure from the Rwanda
Private Sector Federation for the government to lift the 2006 ban on
domestic manufacturing of non-biodegradable plastic. According to the
private sector, the ban raises production costs for local firms.
Rwanda’s Minister of Trade, Industry and East African Community
Affairs Francois Kanimba said there were plans to restrict imports
packed in plastics.
“Goods that directly compete with what is on the domestic market
will be restricted by the Rwanda Environmental Management Authority
(Rema),” said Mr Kanimba.
John Bosco Kanyangoga, a consultant at Trade and Development
Links in Kigali said the ban would need the approval of the EAC Council
of Ministers. The East African Common Market Protocol and Treaty
provides for import bans on grounds of health concerns, environment
protection and security.
Mr Kanimba said the decision would only apply to selected
products since a total ban on imports packaged in plastics would be in
violation of WTO trade systems, which forbid discriminatory restrictions
on imports and exports.
Manufacturers blame their poor performance on the high cost of
packaging. Sosoma Industries, a Kigali-based food processing and
packaging company, said the price of its packaging material increased
from $0.03 to $0.12 after the ban was enforced.
When Sosoma packed its products in aluminium bags, the cost of
the final product increased from $0.24 to $0.31 per unit. At Inyange
Industries, the cost of packaging increased from $0.06 to 0.30. At
Uruburtso, it increased from $0.04 to 018 and at Ruhango Cassava from
$0.10 to $0.43.
The ban also affected local plastic manufacturers as they suffered a drop in investments and return, resulting in downsizing.
With a small manufacturing sector, Rwanda imports most of its
goods and products from Uganda and Kenya. Data from the central bank
shows that Kigali’s trade balance with its East African partners
averaged $260 million between 2014 and June 2016.
Boost on trade balance
However, banning imports packaged in plastic, could have a
positive impact on the country’s trade balance as it could increase
local production, reduce the country’s import bill and create jobs as
firms expand to fill the gap left by imported products.
The country is grappling with a widening trade deficit,
depreciation of the Rwandan franc and the pressure on foreign reserves
as a result of the ballooning import bill.
The central bank projects the franc to further depreciate against the dollar by almost 10 per cent before the end of this year.
Despite its ban on polythene and plastics, the country spent
$9.7 million on imported polythene packaging in 2015, according to the
August Rwanda Public Private Dialogue (PPD) Paper on Oxo-Biodegradable
Plastics in Rwanda. This shows that when the biodegradable plastic
manufacturing industry is allowed to grow, the country could drastically
reduce pressure on its foreign currency.
To support the growth of the biodegradable plastics
industry, the private sector is pushing for fiscal incentives, including
zero-rating VAT on industries producing alternative packaging
solutions.
Proponents of lifting the ban also argue that Rwanda will
continue facing challenges in enforcing the ban as long as regional
partner states do not implement the EAC Polythene Materials Control Bill
of 2011. Uganda, Kenya and Tanzania are yet to implement the ban as
they argue that local alternative packaging industries are yet to be
developed.
While the value of investment in the Ugandan plastic industry is
estimated at $400 million, the country’s environmental watchdog, the
National Environmental Management Authority said the country produces
953 tonnes annually but only 6.5 tonnes is recycled, leaving huge
amounts of plastic unaccounted for.
Kenya has the biggest plastic manufacturing plants in East
Africa. The country hosts 42 manufacturers who have invested about Ksh43
billion ($44 million)
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