United Nations Conference on Trade and Development

Expert Meeting of LDCs in preparation for the 4th United Nations

Conference on the Least Developed Countries

Export Diversification in Rwanda: Promoting Sales of Handicrafts and Horticultural Products

Case study on Rwanda1

Prepared by

Daniel J. Plunnkett

May 2008

1 The opinions expressed in this report are those of the author and do not necessarily reflect the views of UNCTAD or of the organisations and institutions with which the author may be connected. The document is reproduced in the form and language in which it has been received. The designations and terminology employed and the presentation of material in this report do not imply the expression of any opinion whatsoever on the part of the United Nations concerning the legal status of any country, territory, city or area or of the authorities or of its frontiers or boundaries.

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Introduction This initial report was drafted by Daniel J. Plunkett, consultant to the UNCTAD Secretariat in Geneva. The initial mission to Rwanda was conducted from 29th January through 5th February 2008. This initial report is intended to form the basis for a follow-up workshop in May 2008 regarding the development of cluster strategies for promoting Rwandan exports in both the handicrafts and horticulture sectors. These sectors were identified as trade priority areas and were included in the Action Matrix of the Diagnostic Trade Integration Study for Rwanda, whose findings and recommendations were validated in September 2005. An UNCTAD mission in June 2006 resulted in the drafting of rather-sensible action plans for promoting Rwanda’s exports in the handicrafts and horticulture sectors (UNCTAD 2006c). Those action plans are found in Annexes One and Two. A third sector identified as a priority for export diversification, hides and skins, is also a subject of a separate UNCTAD consultant report. List of Acronyms AGOA African Growth and Opportunity Act (US GSP program) COMESA Common Market of East and Southern Africa EAC East African Community EBA Everything But Arms (EU GSP program) EPA Economic Partnership Agreement GAP Good Agricultural Practices GSP Generalized System of Preferences KORA Rwanda Artisans Association. MAGERWA Rwanda Customs Service MINAGRI Rwanda Ministry of Agriculture MINICOM Rwanda Ministry of Trade and Industry RHODA Rwanda Horticultural Development Agency RIEPA Rwanda Export and Investment Promotion Agency RRA Rwanda Revenue Authority VAT Value Added Tax

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Table of Contents

I. Executive Summary......................................................................................................... 4 II. Overview ........................................................................................................................ 5

I.1 Framework for Exporting to Europe and the United States ...................................... 7 III. Handicrafts.................................................................................................................... 9

III.1 Basketry and Weaving .......................................................................................... 13 III.2 Pottery ................................................................................................................... 15 III.3 Paintings (imigongo)............................................................................................. 16 III.4 Wood Carvings and Masks ................................................................................... 18

IV. Horticulture................................................................................................................. 20 IV.1 Cut Flowers (Floriculture) .................................................................................... 23 IV.2 Pineapples ............................................................................................................. 30 IV.3 Avocados .............................................................................................................. 32 IV.4 Bananas................................................................................................................. 35 IV.5 Passion Fruit ......................................................................................................... 36 IV.6 Snow Peas............................................................................................................. 38 IV.7 Chili Peppers......................................................................................................... 41 IV.8 Essential Oils ........................................................................................................ 42 IV.9 Other Products of Interest..................................................................................... 43

V. Main Findings and Recommendations......................................................................... 43 VI. Bibliography ............................................................................................................... 48 Annex One ........................................................................................................................ 52 Action Plan for Rwandan Exports of Handicraft Products............................................... 52 Annex Two........................................................................................................................ 53 Action Plan for Rwandan Exports of Horticultural Products ........................................... 53

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List of Tables Table 1: Summary of Rwandan Handicraft and Horticulture Exports Table 2: Recommended Emphasis for Rwandan Export Growth Table 3: Rwandan Handicraft Exports Table 4: World Imports of Pottery Table 5: World Imports of Works of Art Table 6: Major Importers of Roses in 2005 Table 7: Major Exporters of Roses in 2005 Table 8: Major Importers of Other Types of Cut Flowers, including Buds Table 9: Major Exporters of Other Types of Cut Flowers, including Buds Table 10: Rwandan Exports of Roses Table 11: Rwandan Floriculture Exports Table 12: Rwandan Exports of Pineapples Table 13: Aggregate Data on Rwandan Exports of Pineapple, Avocados and Guavas Table 14: Main European Import Markets for Pineapples Table 15: Average European Import Prices for Pineapples Table 16: Main European Import Markets for Avocados Table 17: Average European Import Prices for Avocados Table 18: Rwandan Exports of Avocados Table 19: Rwandan Exports of Dessert Bananas Table 20: Rwandan Banana Exports Table 21: Rwandan Exports of Passion Fruit Table 22: Rwandan Other Fruit Exports (including passion fruit) Table 23: Rwandan Exports of Edible Vegetables, Including All Types of Peas Table 24: Main European Import Markets for Green Peas Table 25: Average European Import Prices for Green Peas Table 26: European Imports of Chili Peppers and Green Peppers Table 27: Average Import Prices for Chili Peppers and Green Peppers Table 28: World Imports of Essential Oils Table 29: Recommended Emphasis for Rwandan Export Growth List of Figures Figure 1: Map of Rwanda List of Boxes Box One: Buyer Influences For Woodware Box Two: Tips for Shipping Wood Handicraft Products to the US Market Box Three: Constraints Identified in Rwanda’s Horticulture Sector Box Four: Elements Required For Successful Cultivation of Flowers Box Five: Potential Product Mix for the Passion Fruit Sector

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I. Executive Summary Rwanda can diversify its exports by addressing the market organization of its handicraft and horticultural sectors and improving the physical infrastructure for export logistics. Total horticultural exports amounted to $1.4 million in 2007, with edible vegetable showing the strongest growth in recent years. Handicraft exports totaled under $450,000, with sculptures and statuary the leading export to date, although sectors such as basketry and woven shopping bags may have stronger potential for export growth. Private and public actors in the exporting sector should embrace the notion that expanding Rwandan exports means expanding the quantity and value for existing exporters (mature exporters moving to higher value-added products or activities) and welcoming new entrants and assisting them to thrive. Successful export diversification will require cooperation among Rwandan exporters, as opposed to competition amongst them. For handicrafts, Rwanda has a broad range of products, including such traditional crafts as pottery, basketry, weaving, painting, wood carvings and masks, many of which are quite modern in presentation. The sector is hampered by the small size of the companies involved, as well as input supply problems like lack of raw fiber materials for basketry and weaving in some areas. There is ample talent within Rwanda to produce high-quality handicrafts meeting modern marketing requirements, but Rwandan exporters need to improve their techniques for market penetration. For horticulture, there are promising export opportunities for several fruits and vegetables, but the extra transportation costs for a landlocked country and the small-scale of the industries are challenging. It is noteworthy that a Rwandan businesswoman has shown that cut flowers (roses) can be grown in Rwanda and exported to Europe, despite logistics difficulties. For other horticultural products of interest, including pineapples, avocadoes, bananas, passion fruit (maracuja), and snow peas, among others, Rwanda has the possibility to expand exports for its present markets within the region or in small grocery shops in Europe, which do not require Global GAP standards. Additionally, Rwanda is engaged in the long process of upgrading its product standards and product quality into order to penetrate the larger, supermarket-oriented sector in Europe. For chili peppers and essential oils (geranium oil and patchouli), perishability is less of a factor, and the U.S. market is worth targeting. The main findings are that for handicrafts, Rwanda lacks a coordinating body to bring together the needs of upstream (input supply) and downstream (export marketing) in a coherent manner. For horticulture, this study can re-affirm that there are institutional and coordination constraints over the whole value chain. The main recommendations for handicrafts involve steps to improve the ability of Rwandan exporters to stage export-ready products at the main maritime ports in Kenya and Tanzania, as well as how to exploit new markets and re-position Rwandan products to meet emerging global demand. For horticulture, the main recommendations relate to addressing gaps in the cold chain, stimulating trade leads, and developing horticultural exporter associations. Attracting new investment in cut flowers should be a priority,

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while better selection of export-quality produce will lead to higher-value sales for the other horticultural sectors. II. Overview This report aims to provide market information regarding the products of export interest in the handicrafts and horticulture sectors, as well as suggestions for intensifying the cluster effect in each value chain linking production, marketing, and exporting. In order to promote exports in both sectors, Rwandan economic operators will need to develop an ethic of cooperation rather than competition as the best method for expanding markets. For handicrafts, Rwanda’s Ministry of Trade (MINICOM) should seek to create the equivalent of RHODA for the handicrafts sector, that is, an apex organization to be the face of Rwandan handicrafts. It is advisable to create exporter associations in each of the handicraft product categories, with useful services for all levels of participant (artisans, artisan-entrepreneurs, traders). With its “peace baskets,” Rwanda is well-positioned to boost the possibilities for “emotion purchases” by consumers in Northern markets, for example by developing exporting arms for AVEGA, a crafts association employing the widows of genocide, and for APROHADA, another crafts association employing handicapped artisans. MINICOM and MINAGRI should coordinate input supply activities to encourage sustainable supply of the raw materials for handicrafts in targeted areas of the country. For horticulture, the institutional structure for promoting exports can be reinforced in several ways, while the infrastructure for exporting requires concerted attention. Several suggestions for improving the cold chain for exporting are discussed. With disruption in neighboring Kenya, the time is opportune to seek to improve the investment base and viability of cut flower production in Rwanda, both to increase the export volume of existing exporters and to encourage new entrants. Roses are one of the few horticultural exports meeting the stringent Global GAP standards. Most Rwandan horticultural exports go to small retail shops in Europe targeting African populations resident there, not to the chain supermarkets requiring the Global GAP standards. Rwanda should seek to expand both the non-GAP exports and pursue the setting, adoption and recognition of national GAP standards, resulting in an eventual Rwanda GAP. Rwanda is understandably seeking to diversify its export base. Coffee has typically accounted for 75% to 90% of Rwanda’s export earning, followed by tea at 10%. Other major cash crops for Rwandan farmers include pyrethrum (insecticide made from chrysanthemums), bananas, beans, sorghum, potatoes and livestock. Tourism and mining are other backbones of Rwanda’s economy. The 2005 UNCTAD Investment Review for Rwanda points out that there has been little FDI in these two sectors identified as suitable for export diversification, handicrafts and horticulture. Most inputs for industry and virtually all capital goods are imported into Rwanda. The human resource constraint results in a lack of technical expertise and entrepreneurship (UNCTAD 2005b). In both handicrafts and horticulture, Rwandan exporters generally lack knowledge of end-point consumer preferences (size, shape, and color) specific to each product market.

Figure 1: Map of Rwanda

Source: ITC.

In Rwanda’s Poverty Reduction Strategy Paper, horticulture was identified as the top sector for export promotion. Rwanda has a nearly ideal climate for certain types of horticulture, including floriculture. Hilly and mountainous, with a model tropical climate and no winter, Rwanda can produce exotic fruits and vegetables throughout the year. Without the need to provide heating, the costs of production are considered to be relatively cheap in Rwanda. Other attractive features are that Rwanda has plenty of available fresh water via artesian wells for use in irrigation, with the water of a quality sufficiently high to consider bottling for drinking. The cost of water is relatively inexpensive, as is the cost of labor, in part due to widespread unemployment. Almost 90 percent of Rwandans are engaged in subsistence agriculture. Table 1: Summary of Rwandan Handicraft and Horticulture Exports 2007 2007 2007 3-year

average 3-year

average Net weight

kg Rwandan francs

US$ Kg US$

Total handicraft exports 32,661 241,612,091 $439,295 44,877 $329,436Total horticulture exports 4,562,144 783,461,367 $1,424,475 44,527,624 $827,991 of which: Floriculture 153,100 174,117,334 $316,577 131,652 $349,647 Fruit 650,793 75,556,892 $137,376 41,167,760 $74,850 Edible vegetables 3,758,251 533,787,141 $970,522 3,228,212 $403,494Source: MAGERWA; author’s calculations. 550 RWF per dollar.

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Table 1 shows 2007 export data from Rwanda’s Customs Service (MAGERWA) for the handicrafts sector (including furniture) and for the main elements of the horticultural sector. Handicrafts registered robust growth with $439,295 in exports during the course of 2007, of with a detailed breakdown of the export categories to be found in Table 3 further along in Section II. In 2007, horticultural sector exports accounted for $1.4 million, with strong growth in Rwandan exports of edible vegetables. For horticulture, Rwanda is off to a good start by creating RHODA and putting in place an attractive FDI regime. The establishment of a publicly available cold room at the Kigali airport in 2006-2007 is a significant step in addressing the need for an assured cold chain, but exposes the absence of other critical links in that cold chain. According to RIEPA, the fee per day per ton is 50,000 Rwandan francs ($90). The lack of an accompanying pack-house operation to provide sorting, washing, boxing-up and labeling results in a higher percentage of Rwandan horticultural exports being shipped out of the country already deteriorated below export quality. For handicrafts, the possibilities are very promising, as Rwanda has distinctive products tending to strongly reinforce the national brand or cognitive association made by the consumer with the product. For handicrafts, a number of steps are recommended in order to devise a suitable cluster strategy, related to internal organization of the sector and the external orientation of Rwanda’s export infrastructure. With AGOA and EBA, duty-free entry into the EU and U.S. markets is possible for most handicrafts produced in Rwanda. The U.S. is a $10-billion market for handicraft imports per year, while the EU is a €20-billion ($29 billion) market. Table 2: Recommended Emphasis for Rwandan Export Growth Sector Main Target Market Mode of Transport Handicrafts U.S. Ocean freight Horticulture Europe Air freight

I.1 Framework for Exporting to Europe and the United States The difficulties facing Rwandan exporters are considerable, as the closest distance to the sea is 1,867 kilometers and the country has no railroads, with only 8 percent of roads paved. Exports heading for shipment by ocean freight must either go north through Uganda to Kenya’s port of Mombasa, or east to Tanzania’s port of Dar es-Salaam. About 60 percent of Rwanda’s sea freight goes through Mombasa (UNCTAD 2005b). At the international level, Rwanda has an excellent framework in place for taking advantage of export opportunities for handicrafts and horticulture. At the multilateral level, Rwanda joined the GATT in 1966 and the WTO in 1996. In terms of regional groupings, Rwanda joined COMESA in 2004 and forms part of the sub-group of 11

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countries of COMESA that set up a free trade area amongst themselves in 2004.2 In 2007, Rwanda joined the East African Community (EAC), which has internal free trade among its members and a Common External Tariff with duty rates of 0% for raw materials and capital goods, 10% for intermediate goods and 25% for final consumer goods.3 While regional sales are a key part of the suggested cluster strategy for certain horticultural exports, most attractive for export diversification is Rwanda’s bilateral access to the US market (for handicrafts) and to the EU market (for handicrafts and horticulture) under GSP programs. Under the US’ African Growth and Opportunity Act (AGOA) and the EU’s Everything But Arms (EBA), Rwandan exports enjoy duty-free access to these enormous markets. Rwanda’s 2006 exports under AGOA and its GSP provisions were valued at $864,000, representing ten percent of total Rwandan exports to the United States (USTR). An AGOA National Workshop was held in Kigali in March 2007, with nearly 100 Rwandan businesspersons participating. Rwanda may wish to consider requesting US assistance in devising a national AGOA Export Strategy, as was accomplished in Burundi in 2006. The US and Rwanda negotiated a Trade and Investment Framework Agreement (TIFA) in 2007 and are negotiating a Bilateral Investment Treaty as well. While most Rwandan handicrafts can enter the U.S. duty-free under AGOA, potential Rwandan horticultural exports to the US face much-stiffer challenges in terms of distance-to-market and phytosanitary restrictions. As for trade with Europe, it is revealing that EUROSTAT numbers show that Rwandan imports from the EU-27 have grown from 55 to 155 million Euro from 2000 to 2006, with Rwandan exports shrinking from 45 to 43 million Euro over the same period (EUROSTAT 2007). Nevertheless, Rwanda has duty-free access to the EU market for handicrafts and horticulture under EBA. Rwanda is presently negotiating an Economic Partnership Agreement (EPA) with the EU, as a successor to the series of Lomé (and Cotonou) Conventions, which should have little impact on the present level of market access for Rwandan exports to Europe. Rwanda suffers the “competitive consequences of high transport costs for exporters,” including poor performance on the timeliness of delivery (UNCTAD 2005b). Unfortunately, these structural characteristics hinder Rwandan exporters from benefiting more extensively from the tariff benefits available under AGOA or EBA. While Rwanda has a favorable investment regime, one source indicates that Rwanda is one of the costliest countries in the world in which to start a business (ECA Trade Hub 2005).4 The elimination in recent years of the “export tax” assessed by the Rwandan Customs Service (MAGERWA) is an encouraging sign, as is the 0% VAT on exports. MAGERWA has made efforts to facilitate export procedures in recent years, allowing on-site shipment inspections for exporters of perishable goods (UNCTAD 2005b).

2 The 11 COMESA members participating in the COMESA free trade area are Burundi, Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Zambia and Zimbabwe. The other COMESA members are Angola, Comoros, the Democratic Republic of the Congo, Eritrea, Ethiopia, Namibia, Seychelles, Swaziland and Uganda. 3 EAC members are Burundi, Kenya, Rwanda, Tanzania and Uganda. 4 Based on an indicator comparing the costs associated with starting a business divided by per-capita income.

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III. Handicrafts For Rwanda, handicrafts are a new sector of interest for exporting, although it is a traditional and ancient sector intimately linked with Rwandan traditions and culture. The distinctive characteristics of Rwandan handicrafts—and the stories behind them—are strong selling points for foreign market penetration. Until 2005, handicrafts were not a focus for exports. Rwandan artisans waited for foreign visitors to arrive and purchase items to take away with them, certainly a passive approach to exporting. In 2005, a Decision by the Government of Rwanda related to promoting the diversification of exports put a focus on handicrafts. Since then, the Government has sponsored the participation by different artisans in international fairs. In 2005, handicraft exports amounted to an estimated $190,000 (UNCTAD 2007a). According to RIEPA, Rwandan handicraft exports were $500,000 in 2006, although MAGERWA export data show 2006 handicraft exports at $342,465. The national goal of attaining $1 million in exports of handicrafts products in 2007 fell short, as Table 3 shows 2007 exports of $439,295. The category “Other sculptures, statuary” ranks as the most prominent export product, followed by “paintings and drawings”.5 In recent years, the bulk of exports were made by one Rwandan firm, Gahaya Links, although at least one other established firm is active in the field and small-scale exports are made by many market participants on an ongoing basis. The cluster strategy must involve promoting the expansion of exports by existing firms and the establishment of new entrants into the cadre of exporters. Table 3: Rwandan Handicraft Exports Handicrafts (HS4419 4602; 9502 to 9706) 2007 2007 2007 3-year

average3-year

average

Net weight kg

Rwandan francs

US$ Kg US$

4419 Tableware & kitchenware of wood 56 90,286 $164 540 $1054420 Wood marquetry & inlaid wood 2,705 2,526,048 $4,593 2,435 $5,9884421 Other articles of wood 250 144,607 $263 NA NA4602 Basketwork, wickerwork, plaited 45 905,289 $1,646 1,444 $32,7409502 Dolls* 687 747,488 $1,359 353 $6869503 Other toys, models 300 988,785 $1,798 354 $3,1109506 Exercise equipment 771 6,974,911 $12,682 280 $4,9819601 Worked animal bone or horn 230 311,410 $566 NA NA9602 Carvings 1,430 4,158,327 $7,561 2,390 $16,5509701 Paintings, drawings 4,633 19,639,097 $35,707 14,997 $41,9279703 Other sculptures, statuary 17,065 173,551,509 $315,548 19,889 $197,1839705 Collectors’ pieces 1,389 1,899,560 $3,454 591 $3,8069706 Antiques over 100 years old 3,100 29,674,773 $53,954 1,999 $27,118Total handicraft exports 32,661 241,612,091 $439,295 44,877 $329,436Source: MAGERWA; author’s calculations. 550 RWF per dollar. NA= no data available.

5 As the MAGERWA export data are self-reported, the figures reported must be seen as indicative and not definitive in nature.

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Final columns for 4419 and 9502 are a 2-year average (2005 and 2007). With AGOA and EBA, Rwandan handicrafts can enter duty-free into the EU and US markets. The US is a $10 billion market for handicraft imports per year, while the EU is a €20 billion ($29 billion) market. Unlike horticultural products, handicrafts are generally not perishable products. For Rwanda, this means that the marketing chain for expanding exports can rely on ocean freight, which is much less costly than air freight. However, the fact that handicraft exports are not time-sensitive due to perishability does not obviate the need for Rwandan handicraft exporters to ensure on-time delivery to foreign buyers. For practical purposes, this means that the contracted shipments for handicrafts must reach the ports of Mombasa and Dar es-Salaam in time to meet the ships on which they are scheduled for departure. For the most part, the products exported go by truck from Kigali through Uganda to the Kenyan port of Mombasa, where they are shipped by ocean freight. In Europe, the exported products are met by intermediaries for the eventual retail sellers. As for Gahaya Links, when exporting to the US, upon arrival the exported products are picked up by marketing intermediaries, who sell them to Macy’s. This need for a “middleman” in the US evidently reduces the market power of the exporter, also reducing the profitability of the trade. The goods are either sold by contract upon departure from Rwanda or considered sold upon safe arrival in the US, in which case losses incurred during transit may be deducted.6 Rwanda faces all of the challenges cited by Razzaque: weak supply-side capacity, including infrastructures; structural disadvantages such as geographical location, remoteness, smallness, etc.; very poor state of trade facilitation; and high cost of doing business (Commonwealth Secretariat 2007). Most elementally, a cluster can be characterized by geographical proximity and sectoral specialization (World Bank 2007). Clusters derive efficiency gains, swifter acquisition of knowledge and technology, easier adaptation and dissemination. Rwanda would appear to have the required skilled labor force needed for a successful handicrafts cluster, but will require information from outside Rwanda in order to keep up with global trends in marketing styles and techniques. In the case of handicrafts, new ideas increasingly come from specification by clients, catalogs and magazines, visiting domestic trade fairs, hired designers and visiting trade fairs abroad. Rwanda should seek to intensify these market interfaces. In terms of developing the cluster strategy, it is useful to view handicrafts with three categories of actors: (a) Trader Entrepreneur (artisan or not), (b) Artisan Entrepreneur and (c) Artisan Worker, who sells his labor (World Bank 2006b). The final category in Rwanda likely involves a million people or more, with several categories of skilled laborer. Rwanda should seek to bring those participating in the sector at all levels into greater formal organization, and promote movement among the categories. In East Africa, one of the more successful handicrafts clusters is Mwenge, in the Kindoni District of Dar es-Salaam in Tanzania, with roughly 2,200 firms employing 15-20 person

6 This is less the case for basketry than for ceramics, pottery and paintings.

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each. In addition to arrangements related to the use of workshop space, organized groups at Mwenge include the dealers association and the group of carvers. According to the World Bank, “the cluster lacks collective marking and export support and still finds it difficult to compete outside the national borders” (World Bank 2006). There are many producer organizations for handicrafts in Rwanda. One of the biggest, the Rwandan Association of Artisans (KORA) represents producers of basketry, furniture-making, metalworking, sewing (couture), and leatherworking (cordonnerie) in 3 provinces. Much of the production of its members moves beyond handicrafts into functional areas such as furniture.7 KORA does not represent artisans producing artwork such as imigongo or statuary. KORA has 4,500 members, of which 1,000-1,300 are women, with training provided by the International Labour Bureau (BIT). Women represent about 80% of those active in couture, with very few involved in producing items in the other industries, although women are often involved in selling the output in those sectors. KORA, transformed into a cooperative in early 2008, is responsible for supporting its members with assistance on production, financial support, and expertise to increase output, but most of the production is not competitive. KORA could use assistance in marketing and in rendering its website operational. . There are handicrafts centers in Rwamagana and Gitarama, both involved in filling an order for baskets from the upscale retailer Macy’s in New York. Kigali also has the Center for the Formation of the Arts, and Caplaki, a center for Rwandan crafts. These handicraft centers provide links with tourism. One example of the organization of retail sales of handicrafts within Rwanda is the Kigali Arts, Crafts and Cultural Village located at the main Rond-Point de Kacyira in the capital. The indoor facility includes 21 small shops (3 meters x 7 meters each) selling all types of handicrafts, including some imported from Congo, Tanzania and Uganda. Each shop pays 85,000 FRW ($153) per month in rental fee, including electricity, lighting and cleaning services. Each shop generally contains two or three sellers who share the costs of the rental, buying their items from artisans in the villages outright (rather than selling on a consignment basis). The sellers affirm that they pay taxes based on their sales. They noted that the Ministry of Commerce occasionally visits the Village soliciting participation by some of the sellers in crafts fairs outside of the country, sometimes paying for all of the expenses of the participants, other times paying the costs of transit but not the booth fees (or vice versa).8 One category of artisans worth promoting in order to increase exports are the survivors of genocide, or other disadvantaged or handicapped workers. In this case, organization of the artisans is a key part to generating available supply, but “telling the story” of those creating the products is also a key to marketing. The ILO website has interesting information regarding the market for the sale of handicrafts made by people with disabilities (www.ilo.org). In Rwanda, the Association for the Victims of the Genocides (AVEGA) is a loosely organized group of basket makers, many of them widows. AVEGA has worked with 7 In Tanzania, there is an example of a successful furniture cluster at Keko. 8 Curiously, when asked if they knew about KORA, the sellers interviewed at the Village acknowledged having heard of it, but asserted that “it is only a bank.”

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Rwanda’s ministry of gender, among other groups. AVEGA is not set up as a formal company, as such, but remains a loose association that serves to aggregate or collect the products of its members. In fact, Gahaya Links has been exporting the AVEGA products. Rwanda has an association of the blind and the handicapped known as APROHAD that makes table cloths and has worked with the ILO. Other groups include artisans with family members in prison or whose family members have been released from prison. In order to “tell the story” of each handicraft product, handicraft marketers may benefit from prior sociological or anthropological work detailing Rwandan life. Folk tales, legends and traditions appeal to consumers and inspire impulse purchase. In viewing the item, the consumer calls to mind the story behind it and is perhaps transported mentally to a far-off, exotic place. There are several trading firms operating in the sector in Rwanda. Gahaya Links is the main exporter, selling “peace baskets” to the large, high-quality department store Macy’s in the US. Further reinforcing the trade relationship, the president of Macy’s visited Rwanda. Modis International, a company which was involved in exporting in the past, had not been exporting recently. During the UNCTAD consultant’s mission, the head of Modis International was in the U.S. looking for market opportunities. Part of the resulting national strategy for handicraft exports, as explained by MINICOM and RIEPA, is to penetrate the medium- and lower-value markets in the US, which are considered to be enormous. Rwandan handicraft exporters need assistance with market information, trade leads, and technical help. The government should approach NGO groups such as Aid to Artisans, which offer specialized assistance to developing country handicraft exporters. RIEPA has sponsored Rwandan artisans’ participation in the Global Village trade fair in Dubai, UAE. For this 3-month-long, annual fair, RIEPA pays the transport for participation by Rwandan handicraft traders in the fair and pays for the stand. The artisans or traders are permitted 300 kilos of product per company. In the fair starting in December 2007, 25 Rwandan companies are participating, in rotating fashion. As one exhausts the sale of his or her products, the next arrives. For handicrafts, there are relatively fewer bureaucratic steps and less paperwork necessary for exporting than for horticultural products. The Rwandan government operates two export promotion offices known as “Nodo” offices, one in Canada and the other in China. A third could soon be opened in India. In the case of the office in Canada, which is responsible for the whole North American market, the staff person is a Rwandan national already living in Canada. This type of arrangement obviously serves to lower the costs of supporting such an office, compared with dispatching someone to start up an office overseas and having to pay for lodging costs and the like. Another avenue for export promotion is reinforcing the role of the commercial attaché at Rwanda’s embassies and consulates around the world.

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One practice that has been found to be effective elsewhere in Africa is to establish a dedicated warehouse for Rwandan exports in each of the two available ocean ports.9 Storage facilities in the ports would permit Rwandan exporting firms to “park” goods packed for export within arms’ length of the outgoing ships. In this way, Rwandan exporters would be able to assure rapid delivery to foreign buyers in Europe, North America and Asia, as the export-ready products parked in the port warehouses could be quickly loaded on the next-departing ships. The Rwandan government could establish the national storage warehouses in Mombasa and Dar es-Salaam, hopefully paying for their construction, maintenance and operation via fees charged to exporters based on throughput. It might also be possible for the Rwandan government to award the right to establish a national warehouse to a private company, with the government overseeing the facilities’ operations and regulating the applicable fees. While it would be ideal for the warehouse management company to be of Rwandan origin, in terms of maintaining control and taking advantage of links related to language and currency, it could also be possible for a Kenyan or Tanzanian firm, for example, to undertake these operations. RIEPA explained that the Government of Rwanda already has an interest in the Tanzanian port of Dar es-Salaam, involving partial ownership or exploitation rights of part of the land within the port area. To date, RIEPA appears to be making the linkages between local production and export marketing, but creation of a new structure, most likely based within the MINICOM, would free up the RIEPA staff to focus more intensively on export promotion.

III.1 Basketry and Weaving One of the largest categories of handicrafts, baskets and weaving accounted for a world import market of $1.26 billion in 2005. Annual growth in world imports since 2000 was estimated at about 8 percent per year. For the European market, Germany was the leading importer at $131 million in 2005, followed by France, the UK and Italy between $50 million and $70 million. Rwanda has become known in recent years for its “peace baskets.” Following the upheavals of the period of genocide, artisans from both Hutu and Tutsi backgrounds found themselves working together to produce baskets for their livelihood. The “peace baskets” have become a symbol for national rebuilding, working together and cooperating. Rwandan basketry is generally known as agaseke and can include baskets of many sizes (including nesting baskets), cradles, cases, shopping bags, glass mounts, table mats, floor mats, hammocks and lampshades. The raw materials used are various grasses, sisal, banana peel, papyrus, osiers, willow, bamboo, palm, and rattans. The role the baskets play in Rwandan society can be seen in that baskets figure on the Rwandan currency and on the national seal.

9 For example, another landlocked country, Mali, maintains a national storage warehouse in the port of Abidjan in Côte d’Ivoire.

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Rwandan artisans produce a range of attractive baskets, many of which have accompanying stories related to the traditional use of the basket or its decorate imagery. Recognizable by its conical top, two of the most common themes of agaseke are baskets light in color representing “day” and baskets dark in color representing “night.” Rwandan artisans also make sewing baskets, with or without handles. Two other notable styles are the “thousand hills” and “zigzag” styles. Many baskets depict a bird’s wing, representative of the power of the Rwandan king. Fruit baskets or fruit plates, made of sisal, have a delicate nature to them and come in different colors and designs. The fruit baskets usually have a small bit of woven string discreetly along the outside edge so that they may be hung from the wall. Large baskets known as inkangara, often one meter high, that are used for marriage ceremonies, into which friends and family place wedding gifts or traditional celebratory foods such as beans or sorghum. Easter hamper baskets and Christmas baskets are also seasonal items capable of being made in Rwanda. There are also Valentine’s baskets, with red and white color. Another tourist purchase item is small baskets woven in bamboo, called “penny holders,” as they are intended for the storage of coins. It is somewhat ironic that consumers will pay $5 to $10 for an item in which to store their pennies. Rwandan artisans also use sisal to produce large plates or platters, often used locally for production of foods using manioc or sorghum paste. Other decorations include woven wall hangings with attractive designs and decorations and unusual Christmas ornaments made of woven fibers. Each of these products has a story behind it that will enhance the attractiveness to consumers. A certificate of origin must accompany each product, as well as a description of the materials from which it is made. These finely crafted, delicate baskets are made from natural fibers and woven using a technique that has been practiced for almost a thousand years. The baskets, with their unique form only made in Rwanda and neighboring countries, have served many functions in Rwandese history including holding food, celebrating weddings, and carrying secrets from one woman to another. Rwandan exporters must ensure that all of these products are fumigated before being sent to the US, generally by a company called Agrotech operating in Rwanda. One improvement to this system would be to provide a certificate of fumigation that would accompany the products. There are various retail distribution channels but most vendors distribute their products through gift specialty stores segment, either national or individual specialty stores. There is evidence that websites are becoming increasingly important for sales of baskets. According to one source for export information (EACExport), “Trends in colors and shades in the EU indicate a preference to shades of brown because of the ‘natural look’ especially for utility and household items. However, in the summer when most products

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are purchased for accessorizing, brighter colors are more popular.”10 Banana leaf in particular is a sturdy natural fiber with attractive possibilities for natural shading or dying. It is also suggested that supply stores for gardening and beach-going are possible outlets for Rwandan woven products.

As for knitting, several hundred sewing machines were donated to Rwanda, along with over 1,000 skeins of yarn by the Craft Yarn Council of America. The company Rwanda knitting employs many female survivors of genocide in its knitting operations.

III.2 Pottery Rwandan pottery includes large plates and platters, casseroles, flower pots and decorative items. ITC data show Rwandan pottery exports of $2,000 in 2001, with no data for subsequent years. Pottery is a traditional industry in Rwanda, with many regional variations. The distinctive characteristic of Rwandan pottery can be explored further. Pottery exports are disadvantaged by the heavy weight of the products vis-à-vis the price level. Ocean freight is a viable option, as deliveries to international markets can be timed around heavy gift-giving seasons. Losses in transit are common. The artistic ability and creativity of the craftsmen and women making the pottery play an important role in developing effective pottery exports. However, many large-scale mass marketers in Northern markets insist on standardization of the output, at least within a narrow range of colors or styles. China is said to be the leading exporter of earthenware products in the world, with growth of 10% in 2006. Vietnam, the second-leading exporter, was growing at a 5-percent pace. Other traditional exporters were seeing sales fall, including Mexico, Thailand and Italy (EACExport.com). World imports of pottery totaled $6.86 billion in 2005, representing 21-percent growth since 2001. The U.S. is by far the largest market for pottery imports, but is one of the slower-growing markets, with imports up only 5% from 2001 to 2005. As a result, the U.S. share of world imports fell from 33.8% in 2002 to 28.1% in 2005. Among markets with imports above $100 million in 2005, the fastest-growing are Sweden (120%), Spain (67%), Belgium (61%). Among markets with over $50 million in imports in 2005 (but less than $100 million), notable import growth rates from 2001 to 2005 were observed in Turkey (417%), Russia (142%), Greece (122%), South Korea (113%) and Poland (112%). Table 4: World Imports of Pottery (thousands of dollars)1

10 The same source suggests that information about what’s hot in terms of fashion, color and material can be found at http://www.cbi.nl/ or (http://ambiente.messefrankfurt.com/), the website for one of two important arts and crafts fairs in Germany, Ambiente and Tendance.

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2001 2002 2003 2004 2005 World total 5,663,735 5,578,048 6,244,371 6,672,811 6,862,311 USA 1,831,335 1,886,906 1,991,644 1,919,264 1,925,420 Germany 425,655 363,883 442,462 484,544 485,918 UK 339,128 326,930 377,999 421,531 441,172 France 264,041 270,241 321,236 354,622 391,340 Italy 247,552 237,429 269,821 298,683 338,054 Japan 282,205 271,564 301,892 326,842 326,275 Spain 149,170 150,079 181,084 224,826 249,604 Canada 188,612 203,216 224,664 224,181 233,274 1 Includes pottery for both ornamental and functional purposes (SITC 666). Source: International Trade Centre. Two nearby markets for Rwanda are Saudi Arabia (imports of $45 million in 2005) and South Africa ($39 million), with robust growth observed in both countries (increases of 55% and 146%, respectively, since 2001). Price information for pottery is rather difficult to interpret, as the price paid can vary greatly, depending on the size and shape of the item, the glazing and coloring, the reputation of the exporter, the functionality, and above all, the perceived artistic quality.

III.3 Paintings (imigongo) Rwanda has a precious national asset and valuable export commodity in the cow dung paintings known as imigongo. These brightly colored paintings—usually in square or rectangular wooden frames—are immediately noticeable in any room, with both traditional and newer styles. The imigongo paintings are produced in different regions of Rwanda, including along the border with Tanzania. The paintings are packaged for shipment in boxes, with rubber in between each painting. The Rwandan company Modis International has been the most active in selling imigongo to Germany. ITC data show Rwandan exports of works of art of $73,000 in 2001, $36,000 in 2002 and $99,000 in 2003. The European market is the main destination for exports of imigongo, in particular Germany. In the German market, demand for imigongo can be said to greatly exceed supply. To date, the imigongo paintings are not considered eligible for entry into the U.S. market. One RIEPA official was told the paintings are deemed to be “toxic,” perhaps due to the use of cow dung in the production process. In general, imigongo are made from natural pigments and ochres. It is worth investigating this aspect in order to satisfy the U.S. concerns and permitting their entry.

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Analysis of trade data for paintings, such as Rwanda’s characteristic imigongo, is perhaps not as satisfying as for many of the other products discussed in this study. Paintings fall under SITC 896, which includes all works of art, collectors’ pieces and antiques. As art is truly in the eye of the beholder, there is often no real logic to the prices paid for artwork, nor for the types of artwork that may be popular in a given market at a given time. In addition, trade statistics include a whole range of products, from single pieces of artwork with a value of several millions of dollars, to mass-production posters worth less than a dollar each.11

Successful exporters of art can be characterized by the singular nature of their work, the identification by consumers of the artwork with a particular school or movement (in a sense, a type of brand recognition), and by the sellers’ ability to convince consumers that their artwork is worth owning (skill at marketing). Artwork is a highly variable industry, highly dependent on trends in disposable income, exchange rates, and taste. World imports of works of art reached $13.87 billion in 2005, an increase of 21.6% since 2001. The U.S. is by far the largest import market for works of art, although the U.S. share of world imports fell from 48.2% in 2001 to 39.8% in 2005. U.S. imports of works of art have stagnated at around $5.5 billion in recent years. The U.K. and Switzerland are the two other countries importing more than $1 billion in works of art per year. The fastest-growing substantial markets for works of art (those above $100 million in imports in 2005) were South Korea (212% growth between 2001 and 2005), Italy (153%), Australia (148%), France, Canada and Hong Kong (all between 90% and 95% over the period). Table 5: World Imports of Works of Art (thousands of dollars)1

2001 2002 2003 2004 2005 World total 11,406,180 11,110,958 10,124,272 12,491,880 13,870,853 USA 5,495,775 5,218,808 4,415,898 5,338,159 5,516,451 UK 2,777,041 3,183,719 2,755,178 3,302,871 3,494,047 Switzerland 944,948 711,094 855,213 1,022,909 1,515,886 Spain 286,655 172,611 217,339 347,554 478,691 Germany 468,403 292,806 228,055 418,270 376,755 France 188,991 224,142 285,587 391,984 367,691 Japan 232,084 222,139 205,432 301,992 308,013 Hong Kong 139,385 155,284 169,783 200,447 267,874 1 Includes works of art other than paintings, as well as collectors’ pieces and antiques (SITC 666). Source: International Trade Centre. Among markets with imports above $20 million in 2005 (but below $100 million), the fastest-growing markets over the period include Iran, Portugal and Venezuela (all with imports growing more than tenfold), as well as Norway, Sweden and Singapore (import growth of more than 150%). South Africa, perhaps the nearest real buyer market to Rwanda for works of art, imported a high of $39.9 million in 2004.

11 The world-record price paid for a work of art exceeds $80 million.

In today’s world, competing suppliers in other countries will quickly seek to imitate successful product lines. Rwandan handicraft exporters should seek to protect their intellectual property through the copyrighting of design elements. This is particularly true for imigongo. This is an area where the Rwandan government can provide handicraft producers and exporters with assistance and technical expertise, as the level of knowledge needed to effectively protect intellectual property is probably beyond the capacity of most economic operators in the Rwandan handicrafts sectors. While the protection of intellectual property rights in handicraft markets is a difficult task, the enforcement of those property rights may be even more difficult. Knock-off imigongo, for instance, would have to be seen in the consumer purchase outlets in importing markets, the fraudulent suppliers identified, and action taken to seek redress and stop the fraudulent production and sales, wherever it might be occurring in the world. Of course, as the proverb states, imitation is the highest form of flattery. Thus, if others around the world one day start imitating imigongo, or any other type of Rwandan handicraft, this can be seen as an admirable sign of success. The best method for combating unfair competition is through the cultivation of brand recognition of Rwandan products by consumers, through effective and appealing labeling. In fact, authentic imigongo could one day carry a price premium over knock-off imigongo. Parallels can be drawn between Rwanda’s imigongo and bogolán, or mud paintings, produced in many countries of West Africa. Both “movements” are immediately identifiable by knowledgeable consumers, require very-specific and unusual production processes that are not easily imitated by those outside the region, with prices ranging from a few dollars to thousands of dollars per piece. In many respects, exporters of bogolan can be considered to be direct competitors of exporters of imigongo, as those in Northern markets interested in owning distinctive African works of art may find themselves choosing between the two in a gallery. On the other hand, imigongo and bogolan can be seen as similar to apples and oranges, two products that are not identical but both with appealing characteristics for a consumer’s basket of African art purchases.

III.4 Wood Carvings and Masks Handicraft products made of wood include two-person dishes, platters, carvings, statuettes and masks, among other products. Rwanda has some distinctive products such as gorilla statuettes and beaded sticks. East African producers typically use hard woods (teak or ebony) or soft woods (pine, rubber) for making their woodwares by hand. Various stages of the craft include carving, sanding, polishing and painting, not to mention marketing. Wood products can be shipped to the European market without difficulty. Box One describes the elements buyers take into consideration for these products.

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Box One: Buyer Influences For Woodware

• Price • Store location • Fair trade • Product assortment and quality • Service

Source: www.EACexport.com. RIEPA noted problems in shipping Rwandan wood products, such as carvings, to the US market. U.S. authorities require a certificate that the items have undergone heat treatment in order to eliminate pest threat. Box Two describes some of the other factors to consider. The Fair Trade label is increasingly present on wooden products from developing countries being sold in the US. Fair Trade labels suggest an enlightened approach to ensuring the well-being, social standards, economic status and environmental impact of those producing the goods.

Box Two: Tips for Shipping Wood Handicraft Products to the US Market

• Items should be well dried before packing to avoid molding and warping during transportation.

• Paints and stains should be thoroughly dried before packing to avoid sticking to the product and leaving marks.

• Stickers should be attached only in non-visible places. • US laws calls for wood packaging materials to be heat treated or fumigated

with methyl bromide and marked with an approved international mark certifying that treatment.

Source: EACExport.

For wood marquetry and inlaid wood (HS 442090), China is the leading world exporter at $93 million in 2005, followed by Poland and Lithuania. EU imports of marquetry and inlaid wood were about €700 million in 2005, with Germany and France the leading EU importers among many countries bringing in wood products in these categories. For statuettes and other ornaments of wood (HS 442010), China is also the world leader, with $132 million exported in 2005, followed by Indonesia and Thailand. Germany, France and Spain were the leading EU importers under this tariff line, with $143 million combined. Within the region, there are reports of Kenya having exported $1.3 million of wooden statuettes and $115,000 of wood marquetry to the EU, while Tanzania registered at $144,000 of wood marquetry exports to the EU (EACexport 2008). Rwanda has the potential to export wooden furniture as well, but this is generally not considered a handicraft.

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IV. Horticulture In 2006, Rwanda had 93,512 hectares dedicated to production of horticultural products, with estimated output of 1,238,715 tons. The Government of Rwanda has identified horticulture as a “jobs-intensive” and “investment-attracting” sector. An estimated 1.5 million are employed in horticultural production, handling and marketing in Rwanda. Further, “Rwanda is blessed with the natural climatic conditions necessary to win in horticulture: the right soils, temperatures, rainfall, and sunshine, as well as an abundant and hard working labour force” (Government of Rwanda 2006). The country cultivates a rich assortment of fruits, including passion fruit (maracuja), pineapples, citrus, avocados, mangoes, Japanese plum, apple bananas (also known as dessert bananas), gooseberry, strawberry, watermelon, papaya (pawpaw), and guava. A variety of vegetables, ornamentals, chili peppers and essential oils are also widely cultivated. Arable land for expansion of horticultural production is considered to be easily available in Rwanda. Horticulture accounts for about 8% of arable area and about 10% of area under production. As far as value-added activities, Rwanda currently has 18 agro-business processing units with capacity of less than 10 tonnes per day. The processing equipment is inadequate and much processing done by hand (RIEPA). Rwanda’s existing agricultural strategy highlights three conditions paramount to the realization of Rwanda’s vision in Horticulture—create a production platform, attract and sustain investment as well as to identify and access opportunities (Government of Rwanda 2006). The strategy involves “undertaking core investments that are necessary to kick-start the industry.” This translates into a focus on quality and not on quantity. The strategy recommends creating an attractive investment promotion package, comprising fiscal, land, financing and transport benefits. These are all a good start towards a successful cluster strategy. For inspiration in the role that horticulture can play in diversifying its export base, Rwanda need only look to Kenya, its nearby neighbor and fellow partner in the East African Community (EAC) and COMESA. By 2004, horticulture bypassed tourism as the second-largest source of foreign exchange earnings in Kenya, following the main traditional export of tea (UNCTAD Kenya Investment Guide 2005). Kenyan horticultural exports rose from $201 million in 1999 to $346 million in 2003. By 2006, horticulture bypassed tea as Kenya’s most important export (PWC 2006). In recognition of the importance of the horticulture sector, as part of its agricultural strategy, Rwanda established the Rwanda Horticulture Development Agency (RHODA) under the Ministry of Agriculture at the end of 2006. RHODA has a mandate to oversee, coordinate, mobilize, streamline and champion the sector, with an export strategy of “not mass production, but high-value goods for maximum benefit.” RHODA is encouraging products for export in three area: 1) high-value and low-volume; 2) high value and high volume (air freight); and 3) cut flowers (high quality). As can be seen in Box One, the constraints identified in the government’s horticultural export strategy are formidable.

RHODA, with 21 staff members, aims to improve the professionalization of farmers and plays an advisory role on legal and standards issues, in collaboration with Rwanda’s Private Sector Foundation. RHODA places an emphasis on seed supply, relying on the decentralized structure of the Ministry of Agriculture to mobilize extension agents to work with farmers. Supply of quality seeds and adequate planting materials has hampered Rwanda’s horticultural sector in recent years, one unfortunate result of the country’s landlocked location. Rwanda’s hilly topography provides challenges, including dependence on rain-fed irrigation.

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Box Three: Constraints Identified in Rwanda’s Horticulture Sector Inputs Limited specialized extension services Lack of access to financing

Limitation in seed quality control Low use of fertilizers Limited efforts allocated to Research & Development

Production Choice of crops (selection, prices, risk) Quality and quantity technical know-how as far as production is concerned Land size and ownership Limited capacity as for diseases control Irrigation Limited rural organization as for horticulture producers

Post Harvest Crop handling know-how Packaging State of secondary rural roads No established trading network

Absence of storage facilities Post harvest technical knowledge

Processing Limited raw material supply Competition, ingredient and unfair import tariffs Packaging Market knowledge Use of by-products

Product differentiation Lack of skilled labor in processing units

Poor quality control during processing

Export Absence of cold storage facilities at the airport Discrepancy in certification standards between Rwanda and target markets Cost of transport and reliability (air and land) Inconsistency in supply frequency Absence of adequate insurance products

Lack of market linkages

Source: Rwanda horticultural export strategy (Government of Rwanda 2006).

In 2000, horticultural exports amounted to only 272 tons, but grew to 3,159 tons in 2005. RHODA estimates that the value of horticultural exports was less than $1 million in 2005, but grew to $4.5 million in 2006. The main exported products are cut flowers, pineapples, dessert bananas, avocados, passion fruit, and essential oils.

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Most of Rwanda’s horticultural export products are shipped to Europe, going in non-refrigerated containers via air freight from Kigali airport to Nairobi airport (most often), from where the Rwandan products are placed on flights to several different European countries. Rwanda’s cut flower exports follow a distinct path from other products, with shipments mainly handled via Kenya Airways, linking into Kenyan air freight shipments to the Netherlands. Much of the growth in Rwanda’s exports other horticultural products (fruits and vegetables) in recent years has been to other East African markets (PWC 2006). In Rwanda, as in most countries, the export of horticultural products requires greater documentation than for most handicraft products. The forms required for exporting include a phytosanitary certificate, a certificate of quality (if applicable), and a certification of origin. According to RIEPA, to export horticultural products from Rwanda to Europe, a EUR-1 form is required, typically issued by the government. Aside from cut flowers, most of these exported products are assumed to not meet the production, process and quality standards of the international buyers’ standard-setting group, Global Gap (formerly known as EUREPGAP). Rwandan exporters cannot sufficiently ensure traceability of production throughout the production and marketing chain, limiting their capacity to penetrate high-value markets.12 An interesting aspect of Rwanda’s existing horticultural trade is that, with the notable exception of cut flowers, most Rwandan horticultural exports go to small retail shops in Europe targeting African populations resident there, not to the chain supermarkets requiring the Global GAP standards. That non-GAP segment of the market is believed to have excellent expansion potential. RIEPA projects horticultural exports to increase to $21 million by 2010, accounting for 6,000 jobs. This projection seems to assume that Rwandan horticultural exports will only meet GAP standards in cut flowers. Rwandan exporters will need to undertake substantial investment of time and money in order to meet those highly demanding GAP standards, but this is an unavoidable long-term step in order to establish Rwanda as an exporting success story and enable horticultural exports to play the catalytic role possible for meeting the ambitious poverty-reduction goals. Rwanda’s government and private sector should band together to establish a system for national certification of compliance with the Global GAP standards, with sub-groups for each filière for each of the half-dozen products of interest in this sector. In most cases, the Rwanda Bureau of Standards would normally be in charge of setting national standards and enforcing the standards once set, although GAP standards are voluntary in nature. As Kenya GAP was recently granted recognition of providing equivalent standards by Global GAP, all efforts should be made to bring about Rwanda GAP within the next 5 years. Organic certification is another form of voluntary standard that is worth pursuing. According to RHODA, plans are underway for exporting organic fresh fruit and organic

12 A recent list of the EU regulations on the import of horticultural products can be found in a Sustainability Impact Assessment for Horticulture within the EU-ACP partnership (PWC 2006, page 31).

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dried fruit to Europe, using European-based inspection services for the GAP and organic certification requirements. One enticement for attracting new entrants into the sector is the policy package for foreign direct investment in agri-business laid out concisely in the UNCTAD Investment Review for Rwanda (UNCTAD 2005b). Annex IV of the OTF report (Government of Rwanda 2006) discusses the tax breaks offered to investors registered with RIEPA, including depreciation benefits. RIEPA operates a one-stop centre for investment registration which has reduced the registration time to only 7 days. An inter-sectoral Horticulture Working Group has been established, bringing together public and private actors in the industry. The government has been assisting with air freight costs for exporters, providing an export subsidy of US$0.70 per kilogram. The rate of subsidy is intended to place Rwanda’s transport costs between those of Ethiopia and Kenya. Beyond this incentive, RIEPA is looking to reduce the time for export, particularly important for perishable horticultural products. The establishment of a publicly available cold room at the Kigali airport in 2006-2007 is a significant step in addressing the need for an assured cold chain, but exposes the absence of other critical links in that cold chain. According to RIEPA, the fee per day per ton is 50,000 Rwandan francs ($90). The lack of an accompanying pack-house operation to provide sorting, washing, boxing-up and labeling results in a higher percentage of Rwandan horticultural exports being shipped out of the country already deteriorated below export quality. While the U.S. market for horticultural products amounted to an estimated $50 billion in 2005 (USDA), few opportunities likely exist for Rwandan exporters to penetrate the U.S. market, due to geography and the difficulty of air freight logistics. One notable exception for exporting to the U.S. is the possibility for Rwandan exports of essential oils, which would not require air freight or refrigeration.

IV.1 Cut Flowers (Floriculture) International trade in cut flowers is a rapidly evolving industry that requires significant capital investment, expertise, and labor force training. Potential Rwandan exporters will need to react quickly to changing tastes and preferences. While profits can be high, losses can be high as well, making the cut flower sector one of the most risky horticultural endeavors. This highly dynamic global industry poses several barriers to entry: the need for capital, know-how and infrastructure. Time-to-market is exceptionally important for cut flower trade, with assured control of humidity, temperature and air quality along the entire chain of handlers, storage and transport (ILO 2001). Cut flowers require cool transport and storage, using refrigerated containers. Producers must schedule production peaks around specific dates and markets, while strictly ensuring such quality factors as vase life and whether or not the bud will open.

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Around the world, cut flowers are typically sold to consumers in bunches or in bouquets mixed with green foliage.13 Retail outlets include single-seller flower shops (florists), multi-seller flower markets (such as those in the Netherlands), and, increasingly, in supermarkets. High-income consumers around the world are avid purchasers of new varieties and new types of flowers. Consumers are increasingly interested in the conditions under which cut flowers are grown, leading to higher ecological and labor standards in order to penetrate the mass supermarket trade. Packaging—a technical barrier to trade—can be an issue too; Zimbabwe has had shipments to Germany rejected because packaging didn’t meet environmental standards. Aside from price, key elements of competitiveness in the main import markets for cut flowers include time-to-market, proper handling, assured refrigeration from door-to-door, and the overall appearance, color and aroma of the flowers themselves. Crop specialization is increasingly important, as buyers are increasingly demanding specific varieties of flowers. Cut flowers are highly perishable, with numerous critical control points for maintaining quality. Cut flower demand follows a highly seasonal pattern, centered on such holidays as Valentine’s Day, Easter and Mother’s Day. Growers and shippers concentrate production around these key dates, when retail prices rise sharply due to intense peaks in demand. During these peak periods, cut flower demand can be considered to be price-inelastic, as consumers are willing to pay often-exorbitant prices in order to have flowers to present to loved ones at these critical times. Outside of these peak periods, demand for cut flowers becomes much more price-elastic. USDA analysis suggests that “floral crops are more sensitive to changes in income than food crops such as fruits and vegetables.” Per-capita spending on flowers is generally higher in Europe and Japan than in the U.S.

According to the ILO, tastes and preferences may be highly differentiated according to a particular market. In the U.K., carnations are a more popular type of flower to purchase than roses; in Switzerland, carnations are not a very popular flower.

Cut flowers that are traded internationally are usually grown in the ground, in greenhouses, to permit tight control of production and harvesting conditions. Greenhouses provide protection against temperature fluctuations, pests and plant diseases. Most cut flowers require some sort of vertical support, whether made of wire or netting, in order to ensure straight, upright growth and lessen the incidence of breakage. Upon harvesting, cut flowers are placed in a solution including sugar, nutrients and plant protection bacteria and must be kept cool in order to maintain the quality of the appearance of these highly fragile, delicate plants (USDA).

13 Roses, like other flowers, are generally traded in cut form, as plants with soil attached to the roots are usually prohibited from international trade.

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Table 6: Major Importers of Roses (HS060240) in 2005 Value ($1,000) Quantity (tons) Unit value ($/ton) World imports $129,201 29,094 $4,441 Germany $16,226 3,935 $4,124 USA $15,172 3,164 $4,795 France $15,095 3,148 $4,795 Switzerland $8,446 1,465 $5,765 Russian Federation $8,378 3,815 $2,196 UK $7,219 1,449 $4,982 Netherlands $6,740 1,405 $4,797 Italy $5,272 1,145 $4,604 Austria $4,768 1,118 $4,265 Sweden $3,987 1,075 $3,709 Canada $3,819 796 $4,798 Belgium $3,628 787 $4,610 Japan $2,705 564 $4,796 Source: Trade Map. Not all importers shown. Unlike most other horticultural products, cut flowers are usually sold at flower auctions. The Dutch set up the world’s first flower auction in the early 1900s as a means of providing equitable treatment and fair prices for their flower producers. The Dutch auctions quickly attracted not only flowers of Dutch origin, but also imports from other countries. In this way, the Netherlands became not only a leading producer of cut flowers, but also one of the world’s major importers and exporters.

Germany, the U.S. and France register as the world’s three $15-million import markets for roses (Table 6). As for exports of roses, six countries were above $10 million in sales in 2005, led by the Netherlands (Table 7).

Table 7: Major Exporters of Roses (HS060240) in 2005 Value ($1,000) Quantity (tons) Unit value ($/ton) World exports $211,990 44,271 $4,788 Netherlands $60,211 12,256 $4,913 Denmark $45,882 8,497 $5,400 USA $23,703 4,825 $4,913 Uganda $20,854 5,479 $3,806 Canada $14,498 2,951 $4,913 Germany $10,730 2,408 $4,456 Poland $7,170 1,459 $4,914 Zambia $4,975 734 $6,778 Belgium $4,373 938 $4,662 --Kenya $398 64 $6,219 Source: Trade Map. Not all exporters shown. Unit values for some countries questionable. As with roses, the US and Germany rank among the main importing countries of other types of cut flowers, including buds, joined at the top by the UK (Table 8). The price paid

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for flower or bulb exports can vary greatly depending on the variety, the presentation and the season. As a major exporter of buds, and as a global transit point, the Netherlands dwarfs all other exporting countries for flower trade other than roses (Table 9). Japan and the U.S. are the largest flower-consuming markets in the world, followed by Germany. Japan meets most of its own needs through local flower production. According to the ILO, in two other large consuming markets, China and India, “purchasing power is too low for sizeable imports to take place and quality is too low for sizeable exports to develop.” Table 8: Major Importers of Other Types of Cut Flowers, including Buds (HS060310) in 2005 Value ($1,000) Quantity (tons) Unit value ($/ton) World imports 5,947,146 1,571,610 3,784 UK 984,018 141,742 6,942 USA 974,477 161,779 6,024 Germany 946,848 164,952 5,740 Netherlands 587,930 130,161 4,517 France 506,135 650,167 778 Russia 257,846 36,614 7,042 Japan 225,794 34,114 6,619 Italy 203,836 32,152 6,340 Switzerland 165,135 15,037 10,982 Belgium 130,554 29,130 4,482 Canada 98,451 16,345 6,023 Austria 97,715 15,691 6,227 Source: Trade Map. Not all importers shown. Table 9: Major Exporters of Other Types of Cut Flowers, including Buds (HS060310) in 2005 Value ($1,000) Quantity (tons) Unit value ($/ton) Netherlands 3,291,324 783,994 $4,198 Colombia 960,466 223,156 $4,304 Ecuador 433,617 104,105 $4,165 Kenya 412,931 121,310 $3,404 Israel 140,388 33,833 $4,149 Italy 76,087 9,882 $7,700 Belgium 70,952 11,749 $6,039 Thailand 70,288 24,727 $2,843 Spain 60,531 30,472 $1,986 Germany 46,564 6,162 $7,557 Mexico 44,852 19,822 $2,263 USA 42,138 10,101 $4,172 Source: Trade Map. Not all exporters shown.

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The U.S. market for cut flower imports relies on suppliers in the Western hemisphere, in particular Colombia, Ecuador and Mexico, as well as exports from the Netherlands. The U.S. imports mainly roses, chrysanthemums and carnations (USDA). In recent years, U.S. growers have lost some of their competitiveness in those flowers and focused increasingly on higher-value flowers such as orchids, lilies, tulips and gerbera daisies. Three-quarters of U.S. flower production is in the state of California. In 2005, imports of cut flowers represented two-thirds of U.S. flower consumption. In terms of exporting countries around the world, suppliers tend to ship to the main demand centers within their region. In this way, New Zealand and Taiwan supply Japan’s import needs. Hong Kong is supplied by China, Taiwan, Malaysia, Singapore and New Zealand (ILO).

Despite considerable barriers to entry -- the need for capital, know-how and infrastructure, to name but a few -- the industry is continuously attracting new entrants. Kenya, Ecuador and Zimbabwe, the rapidly growing exporters of the last decade, are already "established" suppliers to their ambitious new competitors in China, India, the Republic of Korea, Malaysia, Malawi, Mexico, Palestine, Peru, South Africa and Zambia, and a host of other countries.

--USDA “Floriculture Crops” Certainly, one of the main impetuses behind Rwanda’s interest in exporting cut flowers is the example of nearby Kenya, which in the past 15 years has become a leading supplier of cut flowers to the European market. Kenya accounted for 40% of EU imports of roses (from non-EU countries) in 2004, with the value of exports growing every year from 1992 through 2004 (PWC 2006). In Kenya, about 40,000 to 50,000 people are employed directly in floriculture, with another 60,000 to 70,000 employed indirectly (source). In terms of the size of each identified cluster, the Lake Naivasha cut flower cluster in Kenya includes 24 firms with a range of staff sizes, from 50 to 6,000 employees each, producing for export to Europe. It is estimated that Kenya ships 60% of its cut flower exports to the Dutch auctions. Unfortunately, the recent political and social turmoil in Kenya has wreaked havoc with Kenya’s flower industry, as much of the ethnic fighting has taken place in western regions of the country, where the main flower-growing areas are located. Another neighboring country, Uganda, has also achieved some success in exporting roses, as has Tanzania and Zambia. Malawi is similar to Rwanda as a landlocked country seeking to promote cut flower production in order to diversify away from a principal export crop—in Malawi’s case, tobacco (UNCTAD 2001). For a perspective on Rwanda’s regional competitors in exporting floriculture products, interested readers can consult an excellent 2007 study “Sustainability Impact Assessment of the EU-ACP Economic Partnership Agreements: Horticulture in Eastern and Southern Africa” (PWC 2007). The study looks into the impacts of cut flower exports in economic, environmental, social and trade terms and is also a good source for details on the regulations applicable to cut flower exports. The study also notes that there is no regional market for cut flowers in East Africa, so all exports must leave the region.

Rwanda has a rather ideal climate for the cultivation of cut flowers, with mountainous and hilly areas and no winter. This allows for year-round production. Planting, cultivation and harvesting of cut flowers is usually a very labor-intensive industry. In many Northern countries, where labor costs are high, cut flower production is therefore becoming increasingly mechanized and automated. For Rwanda, an emphasis on the labor-intensive cut flower industry provides an opportunity to provide thousands of jobs to rural workers, in line with the national poverty reduction strategy. In addition, cut flower production requires a reliable and well-trained work force.

Rrsec Ia1f Caho R“h2ks

Box Four: Elements Required For Successful Cultivation of Flowers

• Good physical conditions: high light intensity, abundant water, clean soil, good climate

• Appropriate seeds and planting material • Capital for investment and working capital • Productive labour • Expertise in growing techniques • Good management and organization • Pesticides and other chemicals • Energy for heating • Infrastructure • A high level of quality consciousness all along the production and post-harvesting

chain.

International Labor Organization (2001). “The World Cut Flower Industry: Trends and Prospects.” Geneva.

wandan exporters have a nearly ideal climate for growing roses. Available colors are ed, white, green, and blue roses. Based on the elements laid out in Box One for uccessful cultivation of cut flowers, the observed advantages for Rwanda include low nergy use for greenhouses, the capacity for year-round production, and lower labor osts.

nterestingly, one of Rwanda’s traditional exports is a floriculture product. Pyrethrum is n insecticide made from chrysanthemums. Export data for pyrethrum show shipments of 4.5 tons in 2001, 13.2 tons in 2002 and 5.6 tons in 2003, presumably via ocean freight rom Dar es-Salaam or Mombasa.

ut flowers fall under RHODA’s second category within the schema of potential exports, s a high-priced, but low-volume product. In 2006, Rwanda had an estimated 100 ectares devoted to production of flowers and ornamental plants, with a total estimated utput of 5,000 tons. Of this, 6.5 hectares were planted to cut flowers.

wanda’s existing agricultural strategy paper recognizes that floriculture for export represents significantly higher investments per hectare than with other areas of orticulture, as well as requiring very high technical expertise” (Government of Rwanda 006). It is considered that “investors in this segment would bring their own production nowledge and marketing linkages” (Government of Rwanda 2006). The agricultural trategy report estimates that, to increase area under cut flower production to 81 hectares

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from the current 7 hectares, a new commercial investment in floriculture of $18.5 million would be required. Given the favorable investment regime, RIEPA hopes to increase area under cut flower production to 100 hectares by 2010. The turmoil in Kenya could prove an unexpected windfall in increasing the attractiveness of floriculture investment in Rwanda. Table 10: Rwandan Exports of Roses (kilograms) 2000 2001 2002 2003 2004 2005 109,123 66,945 11,000 NA 52,803 95,000 Source: RIEPA. NA= data not available. Table 11: Rwandan Floriculture Exports

2007 2007 2007 3-year average

3-year average

Floriculture (HS 0602 to 0604) Net weight kg

Rwandan francs

US$ kg US$

06029000 (live plants) 25,900 11,385,502 $20,701 32,987 $27,01406031000 (cut flowers) 126,700 262,665,150 $477,573 98,413 $322,57006049900 (parts of plants, buds) 500 66,682 $121 253 $63Total floriculture 153,100 274,117,334 $498,395 131,652 $349,647Source: MAGERWA; author’s calculations. 550 RWF per dollar. Data for 06031000 include small volume exported in 2005 under 06039000. Data for 06049900 are a 2-year average including data under 06049100 for 2005. Rwanda’s one flower exporter made a substantial investment in a feasibility study and €200,000 per hectare in order to get set up. As with most new entrants into the world cut flower market, Rwanda’s initial exporting firm, Rwanda Flora, has chosen to concentrate on roses. Roses are the favored starting point due to roses’ attractive value-to-weight ratio and the sheer size of world demand for roses. Within about 6 months following the turnkey investment, the company was able to deliver export-quality roses in a refrigerated truck to the Kigali airport, to meet the departing plane for export. Data from RIEPA (2006) in Table 10 show Rwanda’s exports of roses, implying export sales of $253,000 in 2004 and $455,000 in 2005.14 MAGERWA data in Table 11 show cut flower exports at $477,573 in 2007. The flower farm presently exporting roses supports 200 families, with 80% female employees. In discussing the lessons learned from Kenya’s experience in promoting floriculture exports, the managing director of Rwanda’s exporting firm pointed out the lack of a horticultural degree in the Rwandan university system. This echoes the government’s own finding of a “pronounced lack of horticulture production expertise” (Government of Rwanda 2006). At the beginning of this decade, the ILO estimated that air freight is the largest component of overall cost for African exporters of cut flowers, representing 50% of costs in Kenya, 62% in Uganda (ILO 2001). The Rwandan exporter reports her experience is

14 Based on the Dutch import price for roses reported in Table 5. Another source cites Rwandan exports of roses to the EU at €164,000 in 2004 (Price Waterhouse Coopers 2007).

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consistent with estimates of transport amounting to 50% to 60% of the total costs of the delivered price of the flowers to the Dutch market. One of the pitfalls of being the lone exporter of cut flowers from Rwanda is the small volume being exported, requiring payment of a higher freight rate. Another pitfall is the risk of electricity volatility, which resulted in the loss of the flower producer’s compressor in one notable instance. Rwanda’s flower exporter does not use the government-run cold room at the airport, with the flowers going directly from the company-owned refrigerated truck to the Kenya Airways cargo service. As can be imagined, the reliability of air connections is another difficulty facing Rwanda’s present and future flower exporters.15

In addition to expanding the exports of existing producers, Rwanda should continue to encourage new entrants into the cut flower sector. In order to penetrate the Dutch flower auctions, it is advisable for potential Rwandan cut flower exporters to hire a Dutch or Belgian agent to receive the flowers arriving by air freight, bring them to the auctions and handle their sale. To the extent possible, Rwandan exporters should seek to sign long-term contracts directly with European supermarket chains, which can result in the exporter benefiting from pre-harvest financing.

Attaining Global GAP certification is a necessity for exporting cut flowers. Rwanda may wish to develop a Flower Code of Conduct such as that operating in Kenya in recent years. Two levels of certification are offered, the first related to the Global GAP standards and the second an ISO 14001 with stricter social and environmental standards (PWC 2007).

As there is no way of knowing if the buds of exported cut flowers will open, the reputation of the exporters is paramount in obtaining the best sales and the top price. Rwandan exporting firms, both existing and future, have a common interest in working together to ensure quality and enhance the Rwanda brand.

Rwandan flower exporters should also look beyond the European market for sales opportunities, as Dubai, India and other countries are building up stronger auctions (World Flower Project). Given the lack of direct air freight between East Africa and the U.S. market, it is improbable that Rwandan cut flower exports could reach the U.S. in a timely manner and without compromising quality. Nevertheless, since one of the predominant trends in U.S. horticulture markets is the search for new and unusual varieties, the intense color of Rwanda’s roses could someday be attractive for small-scale shipments, if the shipping logistics could be arranged (for example, via South Africa).

IV.2 Pineapples Pineapples are another horticultural product of export interest for Rwanda. Rwanda has several types of high-quality pineapples as part of its native flora, including some

15 There are several options for air freight of cut flowers from Rwanda to Europe. The only company operating direct flights from Rwanda to Europe is Brussels Airline SN (formerly SABENA) is not set up to handle cut flowers on passenger aircraft. Ethiopian Airlines may be an alternative as well, given Ethiopia’s growing flower exports.

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smaller, very sweet varieties. In addition to exporting fresh pineapples, two value-added opportunities for Rwanda for pineapples are dried pineapple slices and pineapple juice. The former could be sold to the U.S. market, while the latter sector may find the best opportunities exporting to regional markets in East Africa. Pineapples are considered to be an investment requiring less capital than for exporting to Northern markets. In 2006, Rwanda had 2,864 hectares dedicated to pineapples, with average yield of 20 tons per hectare, for total estimated production of 57,280 tons. Most producers have only a handful of trees tended with few inputs and sell to traders aggregating product for transport to demand centers within the country and for export. The production mix between direct commercial production versus out-grower production remains to be determined, although both can be effective export models. Rwandan trade data for pineapples (Tables 12 and 13) show very minimal export volumes, although pineapple shipments leaving the country via trucks may be under-recorded. Table 12: Rwandan Exports of Pineapples (kilograms) 2000 2001 2002 2003 2004 2005 2006 2007 510 1377 1270 58 Source: RIEPA. Table 13: Aggregate Data on Rwandan Exports of Pineapple, Avocados and Guavas

2007 2007 2007 3-year average

3-year average

Net weight kg

Rwandan francs

US$ Kg US$

08043000 Pineapples, avocados, guavas, other fruits

320 421,867 $767 285 $392

08044000 Other types of pineapples, avocados, guavas, other fruits

950 789,178 $1,435 495 $732

08045000 Other types of pineapples, avocados, guavas, other fruits

250 238,888 $434 415 $431

Source: MAGERWA; author’s calculations. 550 RWF per dollar. NA= no data available. Final columns are 2-year averages (2006 and 2007) for 08043000, 08044000, and 08045000. As for the world market, EU imports of pineapples amounted to $915 million in 2005, up 134% from the level observed in 2001 (Table 14). Over that time period, Belgium emerged as the largest EU import market, registering 278% growth, although much of it may have been re-export trade. Other fast-growing markets included the Netherlands (351% from 2001 to 2005), the U.K. (244%), Germany (118%) and Italy (101%). The main suppliers to the EU market, and therefore Rwanda’s potential competitors, include Côte d’Ivoire, South Africa. For the past half-dozen years or so, EU import prices have been consistently within a range of between $900 and $1,100 per tonne (Table 15).

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Table 14: Main European Import Markets for Pineapples (thousand dollars) 2001 2002 2003 2004 2005 EU-27 390,520 517,056 696,755 853,075 914,998 Belgium 68,555 108,792 170,911 224,828 258,863 Germany 53,751 68,733 69,924 96,115 117,246 France 98,779 95,689 119,601 127,217 106,289 Italy 53,583 79,672 96,832 111,632 107,460 Netherlands 17,874 24,709 54,224 61,028 80,648 U.K. 23,006 28,528 38,786 67,243 79,342 Spain 38,635 50,744 56,842 63,500 65,496 Portugal 13,384 32,597 50,084 48,527 39,422 Source: FAO. A range of value-added products are possible using pineapples as the raw material. Pineapple juice and canned pineapple chunks are well-established product markets. A new product in international markets in recent years is high-quality pineapple slices, packed in juice, sold in glass jars or plastic jars. The Dole brand in particular has pioneered this type of product presentation, which permits the consumer to see the product being purchased via the see-through glass or plastic. In return, a much-higher price is charged than for traditional canned pineapple. Table 15: Average European Import Prices for Pineapples (dollars per ton) 2001 2002 2003 2004 2005 Belgium 680 1,002 1,180 1,053 964 Germany 897 905 1,049 1,098 958 France 607 612 881 906 893 Source: FAO. Dried pineapple slices are also a potential export product, for consumption as a snack or as a component in “trail mix,” which also usually includes nuts and a variety of other ingredients such as dried coconut. Dried pineapple may be a possible export to the U.S. market, as dried fruit is not considered to carry any risk of pest infestation and may enter the U.S. without special phytosanitary certificates.

IV.3 Avocados Avocados, considered a category of fruit, grow on trees and thrive particularly well at higher elevations. There are several dozen varieties of avocados grown around the world, but the most important type traded internationally is the Hass variety, featured in Rwanda. Avocados are picked from the tree while still firm and usually sold to end-use consumers right at the moment when the flesh is softening. Unusual for a type of fruit, avocados are relatively high in calories and rich in fat, but it is considered that the fat found in avocados is the “good” type of fat (much like that found in olive oil).

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Avocados are usually consumed sliced fresh in salads. One popular type of salad, salade avocat, combines avocados with shrimp in a pink dressing. Avocados are also the main ingredient in guacamole, in which the flesh of ripe avocados is gently puréed and mixed with lemon juice and perhaps other ingredients such as diced tomatoes, onions and hot peppers, depending upon consumers’ tastes and preferences. Whether in salads or in guacamole, avocados are usually consumed uncooked, although they can be served cooked in some types of Mexican cuisine, for example enchiladas. The Hass variety of avocado has a thin but strong layer of inedible skin, with small, pebbled indentations, that surrounds the edible flesh. One noteworthy aspect about the marketing of avocados is that the skin of the Hass avocado has a remarkable color, a combination of brown, black and green that often seems to change color depending on the light and the angle at which it is held. Consumers generally purchase avocados at fruit stands or in supermarkets. Since, at the moment of purchase, consumers cannot see the avocado flesh underneath the skin, the color and appearance of the pebbled skin is one of the key determinants of product quality. Consumers tend to select avocados with skin that is not damaged in any way, and will tend to avoid purchasing individual pieces of the fruit if the color is blotchy and not uniform. These aspects of consumer preference are somewhat ironic, as the external appearance of the avocado has little bearing upon the quality of the flesh inside. Another key element in the consumer purchasing decision is the degree of firmness of the avocado at the moment of sale. Consumers prefer to purchase avocados that are ready to eat that day, in other words, riper avocados that are soft to the touch. Many supermarkets will instruct their in-store fresh produce handlers to find the softest avocados and place these on top of the display, or will even reserve a separate part of the display for the ripest avocados with a sign “Ready To Eat Today.” At the same time, avocados that are overly ripe or mushy will often be rejected by consumers and cannot be sold. Desirable visual characteristics of the avocado flesh itself include a bright green color with layers of darker green close to the skin and layers of yellow closer to the very-large seed in the middle of the fruit. The preferred characteristics when eaten are that the avocado flesh should be smooth and creamy, but not overly soft or runny. In supermarkets, consumers may often damage perfectly good avocados by squeezing them to test for firmness, and then not purchase the ones they have squeezed too hard. There are a handful of value-added products in the avocado chain that it is possible to produce and market, specifically fresh guacamole (in plastic tubs containing roughly 200 grams) and avocado paste (in small tubes). Frozen guacamole is generally not considered as desirable by consumers as fresh guacamole. Many consumers prefer to make guacamole themselves, as it is fast and relatively simple to make. Industrially produced avocado pulp is also traded internationally, in particular for the mass production of packaged guacamole. For these value-added products, the external appearance of the skin is not important, and these products are often made using varieties other than the Hass avocado, including some quite-large varieties with unattractive external appearance. The EU market for imported avocados amounted to $453 million in 2005, up 86 percent from 2001. France, the largest importer, saw avocado imports grow 40% from 2001 to

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2005, but other markets have been growing faster for many years now. France’s share of total EU-27 imports declined from 66% in 1991 to 37% in 2005. Table 16: Main European Import Markets for Avocados (thousand dollars) 2001 2002 2003 2004 2005 EU-27 243,424 252,428 371,738 371,761 452,811 France 120,889 118,857 171,086 165,019 169,187 Netherlands 29,163 31,665 52,685 53,145 81,469 U.K. 34,974 37,512 51,467 50,526 80,122 Germany 17,584 18,733 29,810 28,376 30,711 Spain 7,600 7,354 19,975 19,894 27,552 Sweden 6,685 8,022 10,585 15,642 16,665 Denmark 4,954 5,190 7,711 8,627 12,636 Belgium 9,085 13,537 12,217 11,917 12,264 Source: FAO. The Netherlands and the U.K. are the two other large EU markets for avocado imports, with vigorous growth in imports from 2001 to 2005 (179% and 129% respectively). Among the other EU markets for avocados with imports greater than $10 million per year, the fastest-growing markets from 2001 through 2005 included Spain (263%), Denmark (155%), Sweden (149%) and Germany (75%). Table 17: Average European Import Prices for Avocados (dollars per ton) 2001 2002 2003 2004 2005 France 1,225 1,198 1,909 1,601 1,646 Netherlands 1,385 1,216 1,944 1,734 1,648 U.K. 1,507 1,298 1,944 1,702 1,397 Source: FAO. In 2006, Rwanda had 4,000 hectares planted to avocados, with an average yield of 20 tons per hectare for total production of 80,000 tons. Rwanda grows both the Hass variety and the fruité variety. Rwandan avocado producers tend to have very small plots with 4 or 5 trees. Aggregation of supply into exportable quantities therefore emerges as a key issue for the viability of larger-scale exporting, as does the assurance of quality along the route. Table 18: Rwandan Exports of Avocados (kilograms) 2000 2001 2002 2003 2004 3192 1008 1576 1255 25 Source: RIEPA. Table 18 shows Rwanda successfully exporting avocados at the beginning of the decade, with less certainty about the level of exports in recent years. In Table 13 in the section above, avocados are included in the MAGERWA export data for HS code 0804 along with pineapples and guavas.

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According to RHODA, the company Reese is involved in exporting avocados from Rwanda. Avocados leaving Rwanda for Europe are often packaged in containers or partial containers along with other horticultural products, making proper estimation of export volumes difficult. For best care, avocados are to be shipped via air freight. However, with proper planning, avocados could be transported from Rwanda to Europe utilizing ocean shipping, with arrival timed to coincide with the desired ripe appearance in end-use retail outlets.

IV.4 Bananas Rwanda produces a variety of specialty banana known as apple banana (or dessert banana) that serves an identifiable market niche. The apple banana grown in Rwanda and elsewhere throughout the Great Lakes region of Africa is much smaller in length than the main type of banana traded in the world, the long, yellow-colored type known as the “Costa Rican banana” or the “banane Gros Michel.” Rwanda’s apple banana is very sweet in flavor, and pleasingly yellow in color. The EU-27 is by far the largest banana import market in the world, with a long and complex history of tariff preferences for banana imports from the ACP countries. EU banana imports reached $4.87 billion in 2005, with the value of imports increasing by two-thirds from 2001 to 2005. The main European banana trading companies are located in London, Germany, the Netherlands and Belgium. The Rwandan company Reese is involved in exporting Rwandan bananas. Bananas can be shipped either by air freight or by ocean freight, with somewhat different harvesting and handling practices depending on which mode of transport is to be used. Bananas to be shipped by ocean freight must be picked earlier and often have a shorter shelf-life upon arrival in the destination country. Shipping by ocean freight is also riskier due to higher incidence of spoilage. In 2006, Rwanda had 25,000 hectares planted to apple bananas, with an estimated yield of 10 tons per hectare, for total production of 25,000 tons. This makes bananas the most widely cultivated and important horticultural crop for Rwanda. Rwandan banana exports to the EU amounted to $144,000 in 1999. Two sources, RIEPA and MAGERWA, offer data on Rwandan banana exports in recent years, with 2007 exports registering at $39,000 (Tables 19 and 20). The dip in export volumes observed in the RIEPA data in 2004 and 2005 are difficult to explain, although export data in general cannot be considered to be as reliable as import data. Table 19: Rwandan Exports of Dessert Bananas (kilograms) 2000 2001 2002 2003 2004 2005 64585 36045 43248 41615 1855 21734 Source: RIEPA.

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Table 20: Rwandan Banana Exports

2007 2007 2007 3-year average

3-year average

Net weight kg

Rwandan francs

US$ Kg US$

08030010 Bananas, including plantains 30,743 21,720,276 $39,491 21,823 $25,33608030090 Other types of bananas 8,897 $10,124Source: MAGERWA; author’s calculations. 550 RWF per dollar. NA= no data available. Side-by-side with its longer-length competitors in the fruit aisles of supermarkets in Northern countries, the Rwandan banana stands out visually, which can be an advantage in attracting the interest of consumers. Often mistaken for a “baby banana” that might be picked before reaching full size, the Rwandan banana does not have the typical red color of the external peel characterizing many of the other types of small bananas found in European markets. As a distinct product, the Rwandan banana stands in need of a catchy hook or marketing slogan. A sticker with a phrase like “short but sweet” might have a positive effect on foreign sales. In terms of value-added products, two possibilities stand out for Rwanda. One manufacturer is producing banana wine, which is a very-sweet type of alcoholic drink. Another possibility is dried bananas, for example, banana chips, which as a dried product would generally face lesser phytosanitary restrictions when traded internationally.

IV.5 Passion Fruit Passion fruit, also known as maracuja, is grown throughout Rwanda, with many small-scale producing marketing the harvest from their 4 or 5 trees. Many families also have one or two fruit-yielding trees on their grounds, for home use. In 2006, there were 2,752 hectares planted to passion fruit in Rwanda, with an average yield of 10 tons per hectare for total production of 27,520 tons (RIEPA 2007). Passion fruit grown in East Africa are relatively small. It is relatively easily bruised in transit and the soft skin of the fruit may display blemishes on the outside that do not reflect the quality of the flesh and juice of the fruit inside. Yet consumers often purchase passion fruit on the basis of external appearance, highlighting the need for proper techniques for selection and packing. Very little data is readily available on international trade in passion fruit. A RIEPA document provides the Rwandan export data for fresh passion fruit shown in Table 16. It is reported that most of these passion fruit exports go to neighboring Uganda. In Table 21, passion fruit are included in the MAGERWA export data for HS code 08109010 (“Other fruit, fresh”), a category worth $94 million in 2007.

Table 21: Rwandan Exports of Passion Fruit (kilograms) 2000 2001 2002 2003 2004 2005 9263 12342 9024 13885 60783 10878 Source: RIEPA. The turmoil in Kenya can be expected to disrupt shipments of maracuja leaving Rwanda headed for there. At present, there is a disease amongst the growers of maracuja throughout the East African region, with only Rwanda spared. The combination of these circumstances present opportunities for investment in Rwandan passion fruit production, processing and marketing. Table 22: Rwandan Other Fruit Exports (including passion fruit)

2007 2007 2007 3-year average

3-year average

Net weight kg

Rwandan francs

US$ Kg US$

08011900 Macadamia and other nuts NA NA NA 55000 $3,82008059000 Citrus fruit, fresh or dried NA NA NA 2,500 $3,09008109010 Other fruit, fresh 614,530 51,839,535 $94,254 208,820 $34,65608109090 Other fruit, fresh NA NA NA 5,494 $5,68708134000 Dried fruit NA NA NA 57,699 $6,03208140000 Citrus peel, melon peel, etc. 4,000 547,148 $995 NA NA Source: MAGERWA; author’s calculations. 550 RWF per dollar. NA= no data available. Data for 08011900 are for 2005. Data for 08059000 are for 2006. Final columns are 2-year averages (2006 and 2007) for 08059000. Final columns are 2-year averages for (2005 and 2006) for 08134000. In Rwanda, passion fruit producers are nearly all smallholders. There are local links to small-scale processors, private companies transforming the raw material into value-added products. One key traded product is passion fruit syrup. One Rwandan company called Passion Group, and several other individuals who produce passion fruit, participate in the Horticulture Working Group set up as an advisory body for the sector. Inande Industries is an active exporter of passion fruit and passion fruit products, as well as juice from apple bananas. Chema Fruits also exporting passion fruit juice and syrup to France, as well as some fresh fruit. The company Reese is involved in exporting passion fruits as well.

Box Five: Potential Product Mix for the Passion Fruit Sector Whole fresh passion fruits—for export to the region, to Europe and Middle East Passion fruit juice—to be exported regionally, consumer-ready Passion fruit syrup—to be exported regionally, for mixing into drinks Dried passion fruit—probably not a possibility Passion fruit pulp—for use in food industry Passion fruit flavoring—for use in food industry Passion fruit slices—high value product in juice in a glass jar

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In terms of value-added products, beyond the current options of passion fruit juice and passion fruit syrup, it is certain the international food industry would find ways to use passion fruit pulp or passion fruit flavoring in desserts and fruit salads.

IV.6 Snow Peas Rwanda’s exports of edible vegetables amounted to nearly $900 million in 2007 (Table 1 in the Overview), suggesting a sector thriving under the present agricultural strategy. Most of the horticultural product areas recommended for action in this report do not relate to edible vegetables, with the notable exception of snow peas and snap peas. Snow peas, also known as Chinese snow peas, are grown in very few agro-climatic zones around the world appropriate for production. Production of snow peas has proven successful in Kenya around Mount Kenya, but according to the Director for RHODA, there is no room for expanding production in those zones. Rwanda has suitable, high-altitude areas for snow pea production. While no Rwandan production data for snow peas could be obtained during the mission, it can generally be assumed that vegetable production employs about 16 people per hectare (Government of Rwanda 2006). Snow peas could be assumed to yield about 3 or 4 tons per hectare, in line with other types of peas. Customs Service data in Table 23 show Rwandan exports of all types of peas at over $1 million in 2006. The data for 2005 ($103,000 in exports) and 2007 ($50,000) may be more representative of a typical export year. Snow peas and sugar snap peas are two of the highest-value types of green peas traded internationally. These two types of peas also represent only a small part of total trade in green peas around the world. The most common type of green peas traded are the familiar petits pois, which are of lower value and are usually traded cooked in canned form or cooked and then frozen and sold in plastic bags of 500 grams or 1 kilogram. Canned green peas are generally traded via ocean freight, while frozen green peas may be traded via ocean freight in temperature-controlled containers, or via air freight in some cases. Table 23: Rwandan Exports of Edible Vegetables, Including All Types of Peas

Edible vegetables (HS0701 to 0714) 2007 2007 2007 3-year average

3-year average

Net weight kg

Rwandan francs

US$ kg US$

07011000 Types of potatoes 305,880 15,691,800 $28,531 NA NA07019000 Types of potatoes 295,900 20,075,000 $36,500

108,377 $12,482

07031000 Onions, garlic, alliaceous vegetables

40,000 2,915,000 $5,300

NA NA

07081000 Types of fresh peas 6,000 318,000 $578 NA NA07082000 Types of fresh peas 2,502,410 430,152,293 $782,095 1,801,205 $439,69407089000 Types of fresh peas 20,000 900,000 $1,636 NA NA

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07093000 Other types of vegetables NA NA NA 3,004 $10,18607095900-6000 Other types of vegetables

5,828 11,202,994 $20,369 220 $31

07099000 Other types of vegetables 550 74,725 $136 837 $18307101000 Types of semi-processed vegetables

222,450 15,931,000 $28,965 114,325 $15,037

07102100 Types of semi-processed vegetables

5,700 570,000 $1,036 NA NA

07102200 Types of semi-processed vegetables

3,600 144,000 $262 NA NA

07102900 Dried vegetables NA NA NA 370,215 $25,96607104000 Types of semi-processed vegetables

25,000 2,530,000 $4,600 NA NA

07108000 Types of semi-processed vegetables

5,133 2,361,187 $4,293 2,667 2,249

07109000 NA NA NA 215 11507122000 Dried vegetables 2,000 150,000 $273 NA NA07131010 Types of dried peas 23,500 1,092,500 $1,986 NA NA07131090 Types of dried peas 3,600 180,000 $327 NA NA07132090 Types of dried peas NA NA NA 55,000 $3,84907133110 Types of dried peas 3,700 148,000 $269 NA NA07133190 Types of dried peas 33,800 1,567,000 $2,849 28,200 $4,58907133290 Types of dried peas 15,000 1,500,000 $2,727 57,500 $4,83707133390 Types of dried peas 98,000 22,225,642 $40,410 1,272,000 $371,78407133910 Types of dried peas 17,200 688,000 $1,251 NA NA07135090 Types of dried peas NA NA NA 50,000 $3,49307133990 Types of dried peas NA NA NA 255,300 $18,05507139090 Types of dried peas NA NA NA 1,700 $2,00207142000 Roots and tubers 43,000 2,570,000 $4,673 NA NA07149000 Roots and tubers 80,000 800,000 $1,455 85,171 $5,952Total edible vegetables 3,758,251 533,787,141 $970,522 3,228,212 $403,494Source: MAGERWA; author’s calculations. 550 RWF per dollar. NA= no data available. Final columns for 07082000, 07101000, 07108000 are a 2-year average (2006 and 2007). Data for 07093000 and 07133990 are for 2006 only. Data for 07122090 and 07139090 are for 2005. EU imports of all types of green peas reached $152 million in 2005, an increase of 180% from 2001 (Table 24). Table 24: Main European Import Markets for Green Peas (thousand dollars) 2001 2002 2003 2004 2005 EU-27 63,948 81,380 108,956 136,356 152,203 U.K. 18,695 19,442 26,314 45,235 54,461 Netherlands 12,146 18,664 25,179 32,548 35,734 Belgium 14,579 21,291 28,138 22,921 24,384 France 8,254 8,845 11,526 14,312 12,296 Germany 4,286 4,652 6,454 7,656 11,876 Denmark 1,139 1,232 1,912 2,794 2,770 Sweden 746 1,037 891 1,699 2,485 Ireland 936 1,245 1,468 1,691 2,130 Source: FAO.

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The two largest European import markets for green peas are also two of the fastest-growing, as between 2001 and 2005 imports into the U.K. and the Netherlands nearly doubled, while Belgian imports grew by two-thirds.

Table 25: Average European Import Prices for Green Peas (dollars per ton) 2001 2002 2003 2004 2005 U.K. 2,360 2,614 2,976 3,336 4,144 Netherlands 1,317 1,221 1,311 1,408 1,503 Belgium 220 240 288 310 360 Source: FAO. The price data for European imports of green peas suggest that each market has a different mix of types of green peas being imported. The U.K. import price above $4,000 per tonne observed for 2005 suggests that the U.K. is an importer of high-value green peas such as snow peas or sugar snaps. The Belgian import prices, sharply lower than those in the U.K. or the Netherlands, suggest that Belgium may be importing peas for use in animal feed rations. Snow peas and sugar snaps are typically consumed raw, in the pod, as a component part of salads, or simply by themselves as a nutritious snack. Snow peas are also a common ingredient in stir-fry cooking, as exemplified by Asian cuisine. Whether in salads or in stir-fries, snow peas may be cooked whole or sliced. Top-value snow peas in world markets are characterized by a uniform light-green coloring, with a certain degree of translucence that makes them seem to almost magically glow. Another aspect appreciated by consumers is the “snap” associated with snow peas and sugar snap peas. The attraction for the consumer from this aspect combines the mouthfeel of the pea snapping between the teeth as well as the sound produced. While snow peas and sugar snaps require refrigeration after harvest and during shipping, they are not particularly fragile or delicate to transport. Bruising and discoloration are the main risks. From the samples of snow peas available at the RHODA office, it can be said that Rwandan snow peas have many of the intrinsic characteristics necessary for successful international marketing. The snow pea samples would seem quite attractive in a small-scale market in European city with many African residents. It can also be said that there remains room for improvement. Discoloration may be a problem hampering the marketing of Rwandan snow peas, or if not the marketing, then the securing of the highest-level prices for the product. Blotching of the uniform green color and patches of brown color on the samples seen suggest that Rwandan snow peas, at the moment, rank in a second tier of quality, although better sorting procedures could easily solve this aspect. The quality of the packaging of Rwandan snow peas was also more in line with small-scale retail. The folded plastic bags, secured with tape, at present do not have the level of sophistication necessary for final retail sale in top European supermarkets, which demand

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zip-locking type of bags. The labeling of the Rwandan snow peas is at present in a fairly basic form, as well.

IV.7 Chili Peppers One niche market of interest to Rwanda is chili peppers, which are typically dried in the zone of production. Chili peppers are one type of horticulture product that are not highly perishable and can be exported using ocean freight. Rwanda produces a variety called Bird’s Eyes Chilies that are highly prized in international trade. Rwandan producers are also seeking certification for organic dried Bird’s Eyes Chilies. One company active in this sector in Rwanda is known as Chilli Business. As a dried product, chili peppers face fewer phytosanitary restrictions when traded internationally. This would open up the U.S. market to Rwandan chili pepper exports. The attractive aspects of chili peppers for Rwanda is that they are neither perishable nor bulky, require little insecticide or fertilizers, and can be quite profitable. The main value-added product from chili peppers is a type of hot sauce known as piri-piri. Produced via the distillation of chili peppers, piri-piri is typically sold in small glass containers. Rwanda is also said to be producing another value-added product made from another type of pepper, paprika. Essential oil of paprika is said to have an effect similar to Viagra. The EU import market for chili peppers (a data category that also includes green peppers) reached $1.7 billion in 2004 before falling slightly in 2005. Even so, import growth from 2001 to 2005 tallied 69%. Germany consistently accounts for one-third of total EU-27 imports. Table 26: European Imports of Chili Peppers and Green Peppers (thousand dollars) 2001 2002 2003 2004 2005 EU-27 977,847 1,033,812 1,403,977 1,700,051 1,655,644 Germany 358,328 378,768 484,326 560,940 516,424 U.K. 168,787 168,982 222,042 269,290 284,648 France 110,845 105,080 157,662 195,924 185,917 Netherlands 54,166 61,397 103,571 151,156 142,431 Italy 43,463 56,760 83,506 87,841 85,377 Austria 53,878 51,311 71,589 82,385 77,760 Sweden 39,689 39,398 55,588 68,257 62,473 Czech Rep. 24,394 29,578 34,199 41,582 52,066 Source: FAO. As the composition of imports among the different types of chili peppers and green peppers changes from one country to the next and from one year to the next, these import

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price data cannot accurately pinpoint what Rwandan exports would receive in the EU market. Table 27: Average Import Prices for Chili Peppers and Green Peppers ($ per ton) 2001 2002 2003 2004 2005 Germany 2,602 2,371 2,920 3,053 2,985 U.K. 1,850 2,213 2,258 2,330 2,457 France 2,968 3,446 4,033 4,097 4,490 Source: FAO. Increasingly, sophisticated consumers of chili peppers are requiring detailed information on the variety of the pepper, its degree of “hotness,” the growing region, and the growing conditions.

IV.8 Essential Oils Trade in essential oils is one of the fastest-growing product markets around the world, rising 75 percent between 2001 and 2005 to reach $14 billion.16 The U.S. import market for essential oils grew by a stunning 513% over this period, fueled by consumers’ embrace of homeopathic medicines and natural remedies. The U.S. overtook France as the leading world importer in 2003. In the U.S., what was once considered a niche market for only a few well-educated, high-income consumers—and available only in specialty health food shops—has seen considerable expansion such that essential oils are now widely available in mass-market outlets such as supermarkets. Even in France, long the world leader in the production of perfumes, imports of essential oils grew by more than half from 2001 to 2005. The nearest substantial import market to Rwanda for essential oils is South Africa, where imports amounted to $97.6 million in 2005, representing growth of 55% since 2001. Table 28: World Imports of Essential Oils (thousands of dollars)1

2001 2002 2003 2004 2005 World total 8,001,903 8,930,886 11,433,249 13,122,521 13,966,353 USA 415,503 467,446 1,406,744 2,121,979 2,547,991 France 1,011,053 1,157,486 1,355,226 1,477,434 1,562,173 UK 636,980 735,366 820,248 991,482 1,033,038 Italy 383,050 442,992 617,671 702,602 747,393 Germany 453,660 488,448 590,240 669,593 723,358 Spain 369,385 432,947 596,316 615,983 632,530 Mexico 238,362 299,727 395,546 434,048 524,024 Japan 351,410 355,703 382,350 434,599 443,809 1 Includes materials for production of perfumes and flavors (SITC 551).

16 Note that this category includes materials for production of perfumes and flavorings, although essential oils are the largest component.

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Source: International Trade Centre. Rwanda’s primary types of essential oils are geranium oil and patchouli, with exports of the latter expected to begin in 2008. Rwandan producers of patchouli have received assistance in the past from the ITC, in order to make linkages with international perfume companies. Pyrethrum, derived from chrysanthemums, could also be considered one of Rwanda’s essential oils. Another essential oil being produced in Rwanda is from paprika, which is reported to have an effect similar to Viagra. In 2006, Rwandan had an estimated 2,000 hectares devoted to production of essential oils, with estimated yield of 2 tons per hectare, for total output of 4,000 tons. Essential oils is in some respects a cross-cutting sector, as one can envision Rwanda eventually exporting oils or flavoring products from the nation’s harvest of bananas, pineapples and passion fruit. ITC data show Rwandan exports of essential oils at $3,000 in 2001, increasing to $15,000 in 2002 and then falling to $6,000 in 2003. No ITC data are available for subsequent years. This suggests that trade in essential oils is starting from a very low basis; however, given the galloping import growth of this product market around the world, exporting essential oils could become an important element of the overall export strategy for Rwandan horticulture.

IV.9 Other Products of Interest

Baby carrots Strawberry juice Tomalitos (tree tomatoes) Silk cultivation Macadamia nuts Guava Apples Jackfruit.

V. Main Findings and Recommendations Beyond the concrete actions for the short term and for the long term offered below, this report encourages Rwanda’s public and private stakeholders to consider formally accepting two principles considered key to ensuring the success of Rwanda’s cluster strategies for expanding exports in handicrafts and horticultural products. Expanding Rwandan exports means:

1) Expanding quantity and value for existing exporters (mature exporters moving to higher value-added products or activities);

2) Welcoming new entrants and assisting them to thrive.

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Successful export diversification will require cooperation among Rwandan exporters, as opposed to competition amongst them. The best path to success is a focus on consistent, high-quality products, and a combination of trust, solidarity, and peer pressure to ensure quality and cooperation. In successful cases of establishing strong exporting nations, such as in Chile, success for one is seen as success for all. For handicrafts, Rwanda lacks a coordinating body to bring together the needs of upstream (input supply) and downstream (export marketing) in a coherent manner. Recommendations 1, 2, 3 and 4 offer some suggestions for short-term actions that could provide large payoffs, such as capitalizing on the global trend against plastic supermarket bags. Recommendations 5 through 10 address longer-term ideas such as the need for an input supply strategy for handicrafts, the creation of a Rwandan Handicrafts Development Agency, permanent arrangements to improve export logistics, capitalizing on links with tourism and. For horticulture, as stated in the existing horticultural trade strategy (Government of Rwanda 2006), this study can re-affirm that there are institutional and coordination constraints over the whole value chain. Recommendations 11 through 15 and various comments throughout this paper seek to give more thrust to the horticultural clusters with an emphasis on marketing and product quality. Recommendations 5 through 10 made for handicrafts are also applicable for some horticultural export products as they relate to export logistics. Recommendations for Promoting Rwandan Handicraft Exports

1) Based on the example of Macy’s, stimulate trade leads by inviting marketing executives from targeted U.S. importers of handicrafts to visit Rwanda. For handicrafts, an initial target list might include U.S. retailers of African handicrafts such as Bloomingdales’, K-Mart, Marshall’s, Pier One, Ten Thousand Villages, and TJ Maxx.

2) Commission a feasibility study—highlighting options for ensuring product safety—in order to remove non-tariff barriers for Rwandan exports to the U.S. market of imigongo, (traditional dung paintings).

3) Efforts are underway around the world to reduce the use of plastic supermarket bags. Rwanda has a suitable replacement product, with durability, sturdy handles and an attractive story behind it. Therefore, establish an initiative to market Rwandan woven bags as environmentally friendly, re-usable shopping bags made from banana grasses.

4) Reinforce the market information systems of the handicraft sector associations. Identify the needs of existing associations such as KORA, Aprohada and AVEGA in order to permit the capturing of sales volumes and sale prices for standard products. This step would increase these producer groups’ marketing power vis-à-vis existing and potential exporters.

5) Establish a Rwanda Handicrafts Development Agency (RHADA) under MINICOM to address supply chain issues and serve as a central link for promotion of the sector. This group should work in collaboration with the Chambre pour l’Artisanat, the Bureau International de Travail, and the artisan associations.

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6) Develop national in-bond warehouses in The Port of Dar es-Salam, Tanzania and The Port of Mombasa, Kenya. As RIEPA reports that the Government of Rwanda already has an existing national interest in The Port of Dar es-Salaam, this is a logical starting place, followed by Mombasa and then Entebbe.

7) Collaterally, pursue bilateral agreements with these three countries in order to implement the COMESA and EAC Bond Guarantee Schemes; this would permit export products destined to the Rwandan national warehouses in The Port of Dar-es-Salaam and The Port of Mombasa, Kenya to travel duty-free and hassle-free.17

8) These two actions above would allow Rwanda to pursue all available export pathways over the longer term. Creating the conditions for Rwandan trucks to more easily deliver goods for export (particularly handicrafts) to the two available maritime ports (Mombasa and Dar es-Salaam) and the airports of Kenya, Tanzania and Uganda is a sound approach to building the necessary long-term trade facilitation infrastructure for sustained rapid export growth. With more than one road or mode for exporting, price competition between the competing pathways can operate. Furthermore, in a crisis, such as that in Kenya, Rwandan exporters would have viable alternatives readily at hand.

9) In collaboration with the Rwanda Tourism Board (ORTPN), commission a study examining how to boost the linkages between Rwanda’s tourism industry and export promotion for handicrafts and horticulture.

10) In both handicrafts and horticulture, the competitiveness of Rwandan products suffers from inputs costing more and being difficult to obtain, in part due to the country’s landlocked nature. For handicrafts, MINAGRI should undertake to improve the system for planting, harvesting and marketing of such basketry inputs as sisal and banana leaf, particularly in regions where the artisans have difficulty in obtaining the necessary inputs. As in many countries, Rwanda will have to overcome the inherent disconnect between the ministries of agriculture and trade in relation to promoting agricultural trade.

Recommendations for Promoting Rwandan Exports of Horticultural Products

11) Address gaps in the cold chain in partnership with the companies presently exporting horticultural products. Several identified gaps in the cold chain will continue to reduce the quality and shelf-life and increase spoilage of exported Rwandan horticultural products unless addressed. The risk may be greatest for flowers, followed by avocado and maracuja (passion fruit). For apple bananas and pineapples, the risk may be slightly lesser. Address one of the identified gaps in the cold chain by buying refrigerated trucks to meet exporting firms’ needs for cold-ensured transportation to the airport. This might be accomplished by the selling of one or both of the government-owned cargo planes, presently available to exporters but underused, and using the proceeds

17 According to UNCTAD (2007c), an ideal transit system would have: “the use of a single administrative document or declaration covering the whole transit transport system; access to the transit system for all traders who meet the prescribed conditions, though with simplified procedures for experienced bona fide operators; a single security or guarantee provided at departure that will be valid across all the countries in the system; risk-management systems in place, including end-to-end computer control to acquit transactions and goods movements; customs acceptance of controls carried out by members’ administrations; and arrangements for mutual assistance.”

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to purchase refrigerated trucks.18 Alternatively, purchase one or more refrigerated containers for each of the existing government cargo planes and install the equipment necessary for their operation. In return for these steps, the existing established firms already exporting, or interested in exporting, would undertake the investment necessary to develop cold rooms at their packing sheds. If these steps are taken, it is presumed that the private airlines are capable of providing regular cold-assured air freight from Kigali.

12) Maintain the present export subsidy of US$0.70 per kilo on the transportation of horticultural products. Consider raising the export subsidy to US$1.00 per kilo for cut flowers in order to reinforce the competitiveness of existing exporters in this premier sector and to attract interest and investment in the potential for Rwandan floriculture during this time of crisis in the exporting regions of Kenya.

13) Develop horticultural exporter associations for each of the identified priority export products (cut flowers, pineapples, avocados, maracuja, essential oils). Undertake team-building training for Rwandan horticultural exporting firms (and government officials from MINICOM, MINAGRI, National Bureau of Standards) to build an ethic of cooperation instead of competition amongst all horticultural export stakeholders. Commission a study to explore alternative cooperation models, such as export promotion boards, proven successful in developing horticultural exports around the world (Chile). The study would recommend an appropriate model for Rwanda, with an eye on the example of other landlocked countries. Rwanda’s exporter associations should take the lead in working with Rwanda’s Bureau for Standards on developing a Good Agricultural Practice (GAP) standard.19

14) Similar to Recommendation 10 for Handicrafts, study options for improving

input supply conditions. While RHODA is rightfully focused on improving the supply of quality seeds and irrigation, the packaging needed for export of horticultural products is more costly than for many of Rwanda’s competitors. Further, most Rwandan exporters must first import the packaging to be used and in some instances are paying customs duties on bringing in those inputs. It may be possible to establish purchasing cooperatives or service cooperatives in order to achieve reductions in the unit price of packaging by aggregating the demand of all exporters of a particular product.

15) Based on the example of Macy’s in the handicrafts sector, stimulate trade leads by inviting marketing executives from targeted U.S. importers of essential oils to visit Rwanda. For essential oils, an initial list might include U.S. essential oil manufacturers such as HerbPharm and Young Living Essential Oils.

Table 29: Recommended Emphasis for Rwandan Export Growth Sector Main Target Market Mode of Transport

18 The small fleet of refrigerated trucks could be run on a fee basis, with the initial operations the responsibility of the government or a government-created entity. Ideally, the business could then eventually be spun off to private sector operators. 19 In 2007, the standard promulgated by Kenya’s Fresh Produce Exporters Association for fruit, vegetables and flowers, Kenya GAP, was recognized as equivalent by Global GAP (formerly EUREPGAP).

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Horticulture Europe Air freight Cut flowers Europe Air freight Bananas Europe Air and ocean freight Passion fruit Europe Air freight Avocados Europe Air freight Essential oils U.S. Ocean freight Chili pepper U.S. Ocean freight Handicrafts U.S. Ocean freight Pottery U.S. Ocean freight Paintings Germany Ocean freight Baskets U.S. Ocean freight Wood carvings U.S. Ocean freight

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Annex One

Action Plan for Rwandan Exports of Handicraft Products

Constraint Actions Indicator of Success Stakeholders Contributions Weak administrative, legal and regulatory support structures in place

Facilitate capacity building programmes and training in the areas of product development, marketing , Enact laws that provide for the organization of the industry Facilitate the improvement of the legal, regulatory and fiscal framework of the industry

Number of artisans trained Enactment of laws Rate at which strong support structures are implemented.-

MINICOM MINIJUST CAPMER PPPMER GTZ

Facilitation of training Drafting of laws Organization of private sector Technical and financial support

Poor quality of crafts products

Facilitate provision of technical capacity on production skills Establish partnerships with other countries to facilitate transfer of technology and manpower Establish production centers for hands on training programmes

Number of farmers trained Number of production centers established Number of partnerships signed

MINICOM PSF PPPMER GTZ RIEPA( Trade Point)

Facilitation of Training Development of international partnerships Establishment of production centers in rural areas

Limited access to Working Capital

Encourage the development of functional cooperatives to build capacity for funds sourcing. Strengthen negotiations and partnerships with financial institutions which provide lines of credit to the cooperative societies.

Number of functional cooperative societies established Percentage at which cooperative societies are provided with lines of credit

MINCOFIN PSF PPPMER GTZ

Developing partnerships with financial institutions

Lack of markets locally and internationally

Build capacity to access international markets through regional partnerships and collaboration Facilitate a strong local and international presence by participating in a number of local and international crafts fairs

Rate at which access to international markets is achieved Number of local and international fairs participated in

RIEPA PSF PPPMER GTZ

Marketing and access to the export market

Lack of Standards and branding of products

Develop and implement internationally recognized standards for the arts and crafts products Develop a training programme on intellectual property rights Carry out a series of awareness and publicity campaign on the Rwandan arts and crafts products which will build into the branding of the products

Rate at which standards are implemented Number of artisans trained on intellectual property Rate at which branding of the products is facilitated

MINICOM RBS PSF CAPMER PPPMER GTZ

Facilitate capacity building in intellectual property rights Development of standards Organization of artisans in private sector Technical and Financial support

53

Annex Two

Action Plan for Rwandan Exports of Horticultural Products

Constraint Actions Indicator of Success Stakeholders Contributions Limited growth of the sector and low levels of production

Strengthen extension services by development of training and demonstration farms. Ensure farmers are provided with quality seeds Support organic production Facilitate capacity building programmes and training in the areas of horticulture technical expertise

Number of training and demonstration farms established Number of farmers with access to quality seeds Rate at which organic production is implemented Number of farmers trained

MINAGRI MINALOC ISAR PSF

Extension services Extension services Expertise, research and development Organization of private sector Technical and financial support

Disjointed and poor rural organization for the production of the horticulture crops

Develop horticulture cooperatives and producer associations Facilitate training of cooperative members on land consolidation and methods of production.

Number of cooperatives formed Extent to which fragmented individual farmers lands are consolidated and developed jointly.

RIEPA MINAGRI

Development of business development centers Facilitation of Training Consolidation of land

Lack of developed infrastructure in rural areas

Facilitate development of feeder roads in rural areas Ensure continuous supply of water by irrigation projects Develop centralized centers for collection points for the harvested products

Number of feeder roads Number of irrigation projects finalized and being utilized Number of collection centers established

MININFRA MINAGRI

Development of roads Irrigation schemes Collection centers

Lack of targeted investment promotion strategy and beurocratic investment environment

Develop specific horticulture incentive package for foreign investors Develop horticulture promotion campaigns for the domestic and foreign market Develop and implement feasibility and market access studies

Implementation of special horticulture package Number of campaigns carried out Rate at which feasibility studies are implemented

RIEPA RIEPA RIEPA

Marketing strategy Investment Promotion Package Development of studies

Production of low value horticultural products which are not internationally competitive

Support high value production e.g. in areas of product freshness, packaging at source, branding, technical expertise

Rate to which horticultural products from Rwanda will be branded. Number of organic experts engaged.

RIEPA MINAGRI ISAR

Product branding Training Capacity building in organic production

54

Hire organic experts and establish organic demonstration and training centers Carry out countrywide sensitization of organic production

Number of organic centers established Rate to which stakeholders are sensitized on organic production

PSF Coordination of the private sector

Lack of internationally recognized export standards

Develop horticultural standards Sensitize stakeholders on standards Provide capacity building and training on standards to farmers

Rate at which standards are implemented Number of stakeholders trained Rate at which farmers understand and implement standards

RBS MIN AGRI

Development of standards Implementation of standards Capacity building