NOTE ON RWANDAN TEXTILE INDUSTRY
1. INTRODUCTION
Rwanda has an estimated population of more than 11 million, and this
population needs textile articles in their everyday life. The current size of the
Rwandan textile manufacturing industry is particularly small with only one
major manufacturer, UTEXRWA and small handcraft cooperatives which
produce handmade clothes. Currently, almost all fabrics are imported – cotton
from EAC member Countries and artificial fabrics, primarily polyester, from
South Africa, Taiwan, Korea and Indonesia. The local textile articles demand is
higher than national production, thus the Country imports almost all textiles
products.
In the past Rwanda has tried to reduce this competitive disadvantage by
producing cotton domestically, but the soil and climate are not appropriate for
the production of competing quality cotton. However, neighboring countries
like Burundi could be good suppliers of quality cotton to Rwandan textiles
manufacturers.
2. OVERVIEW OF RWANDAN TEXTILE INDUSTRY
The textile and apparel industry in Rwanda is one of strategic importance,
primarily due to the amount of entry-level skilled labor jobs it has and may
continue to create, and for trade balance implications (decrease on foreign
imports). However, the sector is small with only one textile manufacturing
company, knitting cooperatives and silk sector which is still at its infancy
stage.
2.1 The local textile manufacturing company “UTEXRWA”
UTEXRWA is a composite textile mill consisting of spinning, weaving and other
section of cotton and synthetic fibers. It started in 1984, and has been the first
textile manufacturing company in Rwanda. It is currently runs at 40%
capacity, produces about 12,000 meters/year, and has a turnover of USD $ 23M.
2.2 Rwanda knitted clothes
This sector is composed by artisans’ cooperatives, their products include:
Knitted clothes , Hand knitted hood, Hand woven cardigan, tailored clothes,
kids clothes and shoes, Hand bags and accessories made from cloth, batik
NOTE ON RWANDAN TEXTILE INDUSTRY
fabric, Decorated fabric, screen printed fabrics, etc, but the production from
the sector is still very small compared to the existing demand.
2.3 Rwanda silk sector
In the past, Rwanda has tried to produce cotton domestically, but the soil and
climate are not appropriate for the production of competing quality cotton.
However, preliminary studies and tests indicate that the country could be very
well suited for the production of silk.
Currently, there is a National Sericulture Centre with four Provincial
Sericulture Centres (PSC) and 40 pilot sericulture cooperatives distributed
countrywide. Both the centres and cooperatives receive logistical and technical
support for sericulture operations.
Rwanda’s advantages for sericulture (rearing of silk worms for production
of cocoons):
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Rwanda’s natural conditions provide almost constant temperature of 2028°C throughout the year. These are excellent conditions for rearing
silkworm. Furthermore, field temperature of 20-35°C with consistent
distribution of rainfall between 1,200-1,700 mm/year is good for
mulberry cultivation.
Abundant supply of cost effective labour with a variety of successful
engagement models between investors and farmers delivers a productive
workforce at all levels of the value chain.
IFAD and Government funding is already providing support and training
to local farmers in both mulberry cultivation and cocoon production.
Government plans to extend mulberry cultivation from its current 350 ha
to 10,000 ha by 2017
Rwanda’s National Sericulture Centre and the Rwanda Agricultural
Board are working together to upgrade silkworm stock through
germplasm enrichment with robust and high yielding races adaptable to
Rwandan conditions
Based on existing activities it is estimated that mulberry density will
reach 15,000 per ha. This will provide a yield of 30 boxes of cocoons per
ha/year.
3 MARKET OPPORTUNITY
Rwanda is a member of various trading regimes that include but unlimited to
the East African Customs Union, COMESA, AGOA and others that guarantee
NOTE ON RWANDAN TEXTILE INDUSTRY
broad market access potential. At a more regional level, for example, COMESA
offers a market of 400 Million people that require at least 2.4 Billion meters
of fabric per annum, at an average per capita consumption of 6 meters only.
On the other hand, under the AGOA initiative, Rwanda has duty and quota free
access to United States of America. Rwanda has a population of around 11
million people, requiring 66million meters per annum at the average of 6
meters per capita. At an East African level, the Region has a population of 135
Million people which translates into a market size of 810 Million meters per
annum.
The table below shows a five-year trend of increasing demand for various
categories of textiles in Rwanda as determined from the value of imports.
Table 1: Five-year import values of textiles to Rwanda
HS
code
50
PRODUCTS
2008
2009
2010
2011
2012
Silk
16,910
20,110
60,003
38,442
3,689
51
Wool
2,765
281,349
2,092
7,158
5,208
52
Cotton
2,801,931
1,565,829
2,841,140
2,158,833
2,144,654
53
Other vegetable
textile fibres
Man-made
filaments
Man-made
staple fibres
Wadding,
felt
and nonwovens
Carpets
and
other
textile
floor coverings
Special woven
fabrics;
embroidery
Impregnated,
textiles
for
industrial use
Knitted
or
crocheted
fabrics
Clothing
accessories,
knitted or
crocheted
Clothing
accessories, not
knitted or
60,119
38,517
114,509
20,548
60,838
709,160
385,772
605,962
1,091,290
1,332,304
54
55
56
57
58
59
60
61
62
5,289,704
1,119,163
1,068,713
3,398,760
4,819,389
6,781,406
6,416,691
1,270,330
609,437
517,415
892,403
586,396
602,784
678,162
790,461
431,054
385,512
591,661
264,388
286,264
205,282
265,657
24,627
85,570
4,599,383
3,711,751
326,312
204,922
301,235
508,282
304,617
292,412
4,100,246
5,199,176
5,673,828
3,777,908
2,951,152
3,775,641
5,899,276
3,709,286
NOTE ON RWANDAN TEXTILE INDUSTRY
crocheted
63
Other made up
textile articles;
sets
26,843,540
46,783,593
26,104,902
52,758,796
5,922,674
43,960,519
47,590,40
6
68,097,574
40,952,359
TOTAL
IMPORTS(USD)
71,252,287
Source: National Institute of Statics of Rwanda
This market size is quite significant to justify promising investment in Rwanda
in addition to the COMESA and AGOA market potential both of which offer
quota and duty free market access.
4 VALUE CHAIN FOR THE LOCAL TEXTILE COMPANY
4.2 Raw materials
Most of the raw materials used within the textile industry will come from
outside Rwanda (mainly in Burundi and Democratic Republic of Congo (DRC)
for cotton. Principle raw materials used in textiles manufacturing process are
elaborated upon below:
a) Fibers
Cotton is imported from producers within the East African region, and the price
is consistent with the prevailing price on the world market. Cotton, like most
NOTE ON RWANDAN TEXTILE INDUSTRY
commodities, experiences significant and often rapid fluctuations in price that
result in increased or diminished returns for textile manufacturers, as prices
for finished garments and fabrics are not able to fluctuate at the same pace.
The other raw fiber used in large quantities, polyester, exhibits some
correlation to the price of cotton. Polyester rather than being an agricultural
product like cotton is a synthetic fiber manufactured in industry, resulting in
lower levels of price volatility.
Viscose fiber, another synthetic, has historically been imported and used in
production of yarns.
b) Yarns and Grey Fabric
Some pre-spun yarns and pre-woven fabrics may be imported as the company
could not have the capacity to produce the material required (i.e. polyesterviscose yarns) or can purchase for less than it can produce (i.e. pure polyester
yarns).
c) Dyes and Chemicals
Dyes and chemicals are used in the processing division to bleach, chemically
treat, dye and print fabrics. They could be imported from Kenya.
d) Accessories
Accessories are affixed to garments in the garment division. Examples of
accessories used in production are zippers, buttons, buckles, and embroidery
thread. Accessories are mainly imported from China.
e) Fuel and Other Utilities
Furnace oil (also called black fuel) is used to heat the boiler that powers the
processing department. Electricity and water are purchased from the national
supplier ( EWSA).
5 INCENTIVES RELEVANT TO THE SECTOR
Investment Benefits:
 Free initial work permit & visa for investor and foreign workers
 Assistance with land acquisition and concessions
 Waiver of import duties, withholding and VAT for imported machinery,
equipment and raw materials
 Waiver of duties for 1 personal vehicle; personal property import
NOTE ON RWANDAN TEXTILE INDUSTRY

Waiver of duties for special vehicles, trucks & heavy machines
Optional:
 Income tax “investment allowance” of 40% inside; 50% outside Kigali
 Tax deductible training and research expenses
 Tax discounts based on the number of jobs created (900+ jobs = 7%
discount)
 Export earnings may secure tax discounts (5 Million USD exported = 5%
discount)
6 SECTOR OPERATING COSTS
6.2 WAGES
There is no legal minimum wage in Rwanda. However typical private sector
salaries faced by investors are indicated in the table.
Position
Senior manager
Unit
Value
Year
Comment
USD
1500-3000 2012
per month
Middle manager USD
800-1500 2012
per month
Graduate entry
USD
300-700
2012
per month
Engineer
USD
300-700
2012
per month
Office assistant
USD
200-600
2012
per month
Highly skilled
technician
USD
150-200
2012
per month
Shop assistant
USD
100-200
2012
per month
Driver
USD
100-200
2012
per month
Unskilled
laborer
USD
80-100
2012
per month
Security guard
USD
70-90
2012
per month
NOTE ON RWANDAN TEXTILE INDUSTRY
6.3 ELECTRICITY AND WATER
a) Electricity
The Government is working hard to exploit alternative energy sources. By the
end of 2012, we expect that methane gas, extracted from lake Kivu will
increase supply by 25 MW and double supplies by 2014. This will enable the
government to reduce rates for industrial users.
Current rates are shown in the table below:
Time day
Cost/ KWh (USD)
7h00 - 17h00
0.21
17h00 - 23h00
0.28
23h00 - 07h00
0.16
Source: EWSA
b) Water
Water is provided at the following rates.
Unit Value
Water
USD 0.94
Year
2012
Comment
1 m3 industrial
consumption
Source:EWSA
6.3 TRANSPORT
Rwanda is developing air transport links with a number of key markets in
Africa. A new international airport is being planned in Bugesera District with
the aim of positioning the country as a central African transport and logistics
hub. Road links and border crossings are being upgraded to reduce travel
times and costs to EAC neighbours.
6.4 TAXES
a) Corporate tax
NOTE ON RWANDAN TEXTILE INDUSTRY
All companies must register at the Rwanda Revenue Authority. The corporate
tax year is based on the calendar year. A taxpayer wishing to use another date
must apply to the Minister of Finance and Economic Planning for permission.
Losses may be carried forward for up to five years, earlier losses being
deducted before later losses.
Companies with turnover of less than 200 million RWF may choose to pay their
PAYE and VAT on a quarterly instead of monthly basis.
Turnover (RWF)
Greater than 50 million
Tax rate
30 % of profits
12,000,001 to 50 million 3 % of turnover
10,001,000 to
12,000,000
300,000 RWF
7,001,000 to 10,000,000 210,000 RWF
4,001,000 to 7,000,000
2.000,000 to 4,000,000
120,000 RWF
60,000 RWF
b) VAT
VAT is payable at 18 per cent. Exports of goods and services are zero-rated
and, barring need for further verification, refunds take place within 30 days of
a claim being made.
c) CUSTOM DUTIES
As a member of the East African Community (EAC) customs union, all goods
manufactured in one EAC country and sold in another and which meet rules of
origin criteria (at least 35% value addition) are treated as if they were
manufactured locally, by virtue of there being no internal tariffs between
partner countries. The same countries also levy a common external tariff for
goods entering the EAC, with the aim of promoting manufacturing and the
processing of raw materials.
Category
Tax rate
Raw materials
0%
Intermediate
goods
10 %
Finished goods
25%
NOTE ON RWANDAN TEXTILE INDUSTRY
d) WITHHOLDING TAXES
A number of withholding taxes are payable. These are specified in the table.
Item
Tax rate
Withholding tax on payments: dividends; interest
on deposits, bonds; royalties, management and
technical fees; and performance payments
Flat rate of 15 %
Withholding tax on imports
5 % on CIF of value of
goods imported for
commercial use
Withholding tax on public tenders
3 % of the sum of the
invoice
Quarterly prepayment
Quarterly prepayment of
25 % of previous income
tax declared
e) PERSONAL INCOME TAX
Annual income or
benefit
First 360,000 RWF of
annual income
Between 360,001 and
1,200,000 RWF of
annual income
Rate
0%
20 %
All annual income above
30 %
1,200,000
Company car
10 % of employment income excluding the value of
the benefit in kind
Accomodation
20 % of employment income excluding the value of
the benefit in kind
Interest on loan
10 % of income gained as a result of difference
between interest paid and what would have been
paid if the rate offered to commercial banks by the
BNR had been used
All other benefits
Full market value is added to employment income
and taxed as such