Silk sector profile. Alice NIKUZE RDB/Trade and Manufacturing 6/25/2013

Transcription

1 2013 Silk sector profile Alice NIKUZE RDB/Trade and Manufacturing 6/25/2013

2 SILK SECTOR PROFILE 1. SILK SECTOR DESCRIPTION Silk is produced in the wild by a variety of insects such as the Cecropia moth from North America, the Tussah, Muga and Eri moths from India, the Anaphe moth from Africa and indeed by some spiders! However, the only silk used in commercial textiles is produced from the cocoons of the silkworm fed on mulberry. Sericulture is an agro-based industry. It involves rearing of silkworms for the production of raw silk, which is the yarn obtained out of cocoons spun by certain species of insects. The major activities of sericulture comprises of food-plant cultivation to feed the silkworms which spin silk cocoons and reeling the cocoons for unwinding the silk filament for value added benefits such as processing and weaving. In many countries silk is still used for clothing, including light weight suits, coats and slacks, jackets, shirts and neckties, robes, loungewear, underwear, hosiery, and gloves. Silk is also used in lace, napery, draperies, linings, narrow fabrics, and handbags. 2. OVERVIEW ON RWANDA SILK SECTOR VALUE CHAIN Silk is a fine translucent fiber produced from the silkworm. The manufacturing process of silk starts with the rearing of cocoons. There are many varieties of the silkworm from which the silk fiber can be obtained. However, it is found that the fiber obtained from the larva of Bombyxmori is of commercial value. The process of obtaining silk fiber from Bombyxmori requires careful nourishment of the cocoons which is put through the spinning process. The making of silk is different from that of other natural fibers. There are many steps involved in silk production: Mulberry cultivation (Moriculture) Rearing of silk worms to produce Cocoons Silk reeling to produce silk yarn Production of silk finished products (dyeing, weaving, cloth designs) 2.1 Mulberry cultivation (Moriculture) Mulberry leaves, particularly those of the white mulberry, are ecologically important as the sole food source of the silkworm. Other Lepidoptera larvae also sometimes feed on the plant including common emerald, lime hawk-moth, and sycamore moth. 1

3 The bulk of the commercial silk produced in the world comes from this variety and often silk generally refers to mulberry silk. Mulberry silk comes from the silkworm, Bombyx mori L. which solely feeds on the leaves of mulberry plant. These silkworms are completely domesticated and reared indoors. Mulberry takes only six months to grow for commencement of silkworm rearing. Mulberry once planted will go on supporting silkworm rearing year after year for years depending on inputs and management provided. Five crops can be taken in one year under tropical conditions. In Rwanda, there are 40 farmers cooperatives distributed countrywide and 4 Provincial Sericulture Centre. Mulberry plantation at the cooperatives and provincial centres is close to 280 hectares plus another 70 owned by individuals and private entrepreneurs. The area available for mulberry expansion is estimated to be around 650 hectares scattered all over the country. For development of sericulture sector, the Government is willing to expand mulberry plantation at 10,000ha. 2.2 Silk worms Rearing to produce Cocoons The process of rearing silkworm for the production of raw silk is called sericulture. Silk fiber is a continuous filament fiber consisting of the fibroin, which is connected together with the silk gum, sericin. This natural protein or fibroin is secreted from two salivary glands. There are four stages in the life cycle of the moth which are as follows: The egg, which develops into a larva, or caterpillar the silkworm The silkworm, which spins its cocoon for protection, to permit development into the pupa The pupa transforms into an adult moth which emerges from the cocoon Female moth lays eggs, so continuing the life cycle. 2

4 They may be hatched three times a year. The female moth lays around 350 to 400 eggs and the moths die soon after. The larval instar 5 will grow to its maximum size of about 5 grams, it stops eating, changes color (creamish yellow), and is about 10,000 times heavier than when it hatched. The silkworm is now ready to spin a silk cocoon. The silkworm attaches itself to a compartmented frame, twig, tree or shrub in a rearing house to spin a silk cocoon over a 2-3 days at C. For about six weeks the silkworm eats almost continually. After growing to its maximum size of about 3 inches at around 6 weeks, it stops eating, changes color, and is about 10,000 times heavier than when it hatched. The silkworm is now ready to spin a silk cocoon. The silkworm attaches itself to a compartmented frame, twig, tree or shrub in a rearing house to spin a silk cocoon over a 3 to 8 day period. This period is termed pupating. Silkworms possess a pair of specially modified salivary glands called sericteries, which are used for the production of fibroin a clear, viscous, proteinaceous fluid that is forced through openings called spinnerets on the mouthpart of the larva. Liquid secretions from the two large glands in the insect emerge from the spinneret, a single exit tube in the head. The diameter of the spinneret determines the thickness of the silk thread, which is produced as a long, continuous filament. The secretions harden on exposure to the air and form twin filaments composed of fibroin, a protein material. A second pair of glands secretes a gummy binding fluid called sericin which bonds the two filaments together. Steadily over the next four days, the silkworm rotates its body in a figure-8 movement some 300,000 times, constructing a cocoon and producing about a kilometer of silk 3

5 filament. The larvae will then enter into a pupal phase enclosed in a cocoon made of raw silk produced from the silk glands. 2.3 Silk reeling to produce silk yarn At this stage, the cocoon is treated with hot air, steam, or boiling water. The silk is then unbound from the cocoon by softening the sericin and then delicately and carefully unwinding, or 'reeling' the filaments from 4-8 cocoons at once, sometimes with a slight twist, to create a single strand. As the sericin protects the silk fiber during processing, this is often left in until the yarn or even woven fabric stage. Raw silk is silk that still contains sericin. Once this is washed out (in soap and boiling water), the fabric is left soft, lustrous, and up to 30% lighter. Technological process for silk reeling Estimated yields in the transforming process of producing Silk Fabrics Apparently, one hectare of Mulberry yields around 30 tons of leaves / year which will produce around 750 kg of cocoons, giving 100 kg of raw silk. Silk has always been a luxury product; Silk is the queen of textiles and the most expensive natural animal fibre. 4

6 Mulberry land Mulberry leaves Cocoons Silk yarn Tie 1ha 30 tons 750kg 100kg 3. MARKET OPPORTUNITY 3.1 WORD SILK MARKET International silk market is also favourable for Rwanda sericulture. The world price of quality silk yarn has doubled from $30 to $60 per kg over the past 5 years. Production by China, the world s largest producer has declined by 20% since 2008 due to: Increasing labour costs (average costs have increased from $1500/yr in 2000 to $6500/year in 2010) Labour shortages in rural areas due to shrinking working age population with over 65 s doubling from 4.3% in 1970 to 8.5% Reduction in available farmland for mulberry cultivation due to growing urbanisation This means that there is an opportunity for new producers of high quality yarn to enter the market. 5

7 Table 1: Price trends for silk yarn Year Price USD/KG World raw silk production India, the second largest silk producer, is the No.2 in silk import. 6

8 Table 2: Raw silk production in the major sericulture countries in the world (ton) Country China 67,113 45,090 87, ,420 98,620 92,455 95,778 India 15,045 14,432 15,445 16,245 15,610 16,322 16,360 Vietnam 1,550 1,000 2,250 2,250 2,250 2,250 2,250 Uzbekistan 1,300 1,100 1,100 1,100 1,417 2,447 2,100 Brazil 2,468 1,389 1,285 1,220 1, Thailand 1,075 1,230 1, , Iran Japan 3, Total 92,519 65, , , ,514115, ,211 Source: International sericulture commission The world s imports for this product increasing year by year. Italy is the first in silk imports. Table 3: World silk imports ( in USD thousands) Importers Imported value in 2010 Imported value in 2011 World 2,477,357 2,824,513 Italy 329, ,721 India 372, ,073 United States of America 162, ,374 Japan 149, ,402 Hong Kong, China 223, ,420 Viet Nam 66, ,745 Republic of Korea 112, ,121 Germany 93, ,399 France 89, ,777 China 7

9 124, ,137 Romania 57,631 92,504 United Arab Emirates 73,666 78,162 United Kingdom 64,376 66,366 Spain 54,128 55,357 Turkey 39,865 44,647 Source: Trademap There are international silk markets when Rwanda produces high quality of raw silk. The major silk importing countries: India, Romania, Vietnam, South Korea, Japan and Italy In 2011, South Korea alone imported 500 tons of raw silk from China the projected raw silk production in Rwanda out of 1,000 ha of mulberry field will be 100 tons, which will cover only 20% of demand from Korea. When Rwanda produces high quality raw silk, the above countries are ready to buy Rwandan silk. Unutilized market niches in Madagascar, South Africa, Zimbabwe, Egypt, Italy, Spain, Middle East, India, South Korea and elsewhere for raw silk / spun silk Silk handcrafts: tourist and duty free shops, local and abroad, South Africa, USA and Europe Silk Market study under PRICE (IFAD Project) will generate more market information 3.2 SILK MARKET IN RWANDA Rwanda has an open trade regime. It is a member of the World Trade Organization and of two subregional economic groupings, EAC and COMESA. As a member of the EAC single market, all goods manufactured in one EAC country and sold in another are treated as if they were manufactured locally, by virtue of there being no internal tariffs between partner Countries. The country has only one textile manufacturing company UTEXRWA, and small handcraft cooperatives which produce handmade clothes. The local textile articles demand is higher than national production, thus importing almost all textiles products. Clothes imported increased by 39 % (49 million USD in 2010 compared to 59 million USD in Exports were only 122 thousands USD both in 2010 and This is due to the lower local production capacity of textiles industry. 8

10 However, preliminary studies and tests indicate that the country could be very well suited for the production of silk. Production of silk handcrafts and textiles including the popular traditional ladies attire (imishanana) would attract both local and export markets. The market of silk yarn by Gahaya Links Ltd for production of silk handcrafts and souvenirs is largely unutilized because of limited cocoons for silk reeling. 3.3 INVESTMENT OPPORTUNITIES 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. Government of Rwanda aims to attract an investor to work with existing support structures to ensure that the Silk Value chain develops on a commercial and export focused basis.the Governments new Economic Development and Poverty Reduction Strategy (EDPRS2) focuses on reducing poverty through increased farm gate prices for farmers and cooperatives. The Silk value chain has thus become a priority for government support. Putting in place a system where farmers deliver cocoons and are paid promptly will stimulate increased cocoon production to several orders of magnitude. At NSC, close to 5 tons of dried cocoons have been accumulated over the last one and a half years and these have to be converted into yarn as a matter of urgency lest they should go stale. 3.4 WHY SILK INDUSTRY IN RWANDA? The current size of the Rwandan textile industry is particularly small with only one major manufacturer, UTEXRWA and small handcraft cooperatives which produce handmade clothes. Currently, all fabrics must be imported cotton from Tanzania, Kenya and Uganda and artificial fabrics, primarily polyester, from South Africa, Taiwan, Korea,China 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, preliminary studies and tests indicate that the country could be very well suited for the production of silk, as shown below: 1. Natural conditions almost constant room temperature of C is best for silkworm rearing, and field temperature of C with well distribution of rainfall of 1,200-1,700 mm/year is good for mulberry cultivation. 2. Social conditions - The abundant cheap labour in rural areas gives Rwanda a comparative advantage in sericulture. 3. Government support - The Rwanda government supports sericulture for poverty alleviation and increased household incomes. 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. 9

11 4. High quality Rwandan Silk: Samples of Rwandan raw silk tested at Central Sericulture Research and Training Institute (CSRTI) of India was ranked 4A which is a grade attainable by experienced sericulture farmers and not beginners like in Rwanda. Experts now believe that Rwandan silk may range from 4A - 5A based on observations on cocoons produced at present. Interestingly, foreign silkworm races reared in Rwanda perform much better than they do in countries of origin. This is with respect to cocoon weight, shell weight, shell ratio and other commercial parameters. 5. Research commitments: ISAR, a research institution of MINAGRI has mobilized funds to undertake research activities in sericulture 6. Strong interest by farmers: Rwandan farmers have demonstrated interest in sericulture given the large tracts of mulberry plantations distributed all over the country. As demonstrated by the table below, silk compares favourably to other available crops and represent a strong revenue opportunity to the farming community. Table 4: Silk revenue compared to other crops Rank Product Revenue ha/year(rwf) Profit/ha/year (RWF) Profit margin 1 Cassava 1,750,000 1,143,800 65% 2 Silk 4,560,000 1,891,352 41% 3 Potatoes 2,000, ,500 41% 4 Coffee 194,880 76,720 39% 5 Maize 750, ,100 30% 6 Beans 450,000 65,000 14% 7 Tea 819,840 68,880 8% Source: Karisimbi Business Partners analysis march 2012, MINAGRI 4 LOCAL COMPANIES ACTIVE IN THE SECTOR & LEVEL OF COMPETITION As indicated in the foregoing, there is only one major textile manufacturer, UTEXRWA and small handcraft cooperatives which produce handmade clothes. Currently, all fabrics are imported. UTEXRWA has been constrained in its silk operations by enormous energy costs. Currently, the company has bought and is in the process of installing a biomass boiler that will consume agro-waste. This will enable the company to process silk cocoons at a rate of 240 kg per 24 hour day, producing approximately $48 kg of silk yarn. On this scale it can handle over 7 tons per month. Below is some information on the company. Table 5: General information on UTEXRWA Company name UTEXRWA Year establiashed 1984 Employees 600 Annual turnover( ) USD $5-6m Capacity Utilization 40% Source: IGC, Understanding Rwanda s Agribusiness&Manufacturing Sectors 10

12 In the context of the EAC internal market, Rwanda may be considered to be an interesting location to use as a base for wider market penetration since there is no domestic competition. Investor testimonial: Rwanda was similar to the place I come from southern India where Sericulture activities were creating employment.rwanda is good for Sericulture as it has Fertile Volcanic soil and climatic conditions rain fall over 8 months in a year, good to grow Mulberry and rear Silk-Worms to produce quality Cocoons by Raj- Rajendran/UTEXRWA 5. RESOURCE AVAILABILITY & INSTITUTIONAL FRAMEWORK 5.1 Specialized sector focused support institutions The Ministry of Agriculture has set up a Natural Sericulture Centre in charge of sericulture promotion at national level. In each Province, there is a Provincial Sericulture Centre in charge of coordinating sericulture activities in the Province. Specifically, the Natural Sericulture Centre is in charge of: Improve silkworm germplasm, Promote increased cocoon production, Provide regular advisory services and training to sericulture farmers in mulberry cultivation and silkworm rearing, Promote silk value addition initiatives through acquisition of silk reeling and weaving machines and creation of cottage industries for production of silk handcrafts for both domestic and export markets, Strengthen farmer organizations and cooperatives, Conduct market research and link farmers to prospective markets (domestic and abroad), 11

13 ORGANISATIONAL STRUCTURE MINAGRI/NSC: -Coordinate sericulture activities -Supply of silkworms/eggs -Reseach Provincial Sericulture Centre/East Provincial Sericulture Centre/Western Provincial Sericulture Centre/North Provincial Sericulture Centre/South Private Farmers and Farmers Cooperatives -Mulberry planting -Silk worm rearing and cocoon producton 5.2 LAND, SITES AND BUILDINGS AVAILABLE FOR THE INVESTOR AND RELATED COSTS a. Land for mulberry cultivation Currently, Mulberry plantation is close to 350 hectares. The area available for mulberry expansion is estimated to be around 650 hectares scattered all over the country. For development of sericulture sector, the Government is committed to expand mulberry plantation at 10,000ha by b. Land for industrial use The Government of Rwanda is in the process of developing a number of Industrial Zones around the country, such as the Special Economic Zone in Kigali (SEZ). This is a very high specification 276 ha (682 acre) site close to the Airport. Infrastructure includes waste treatment, water, electricity, fibre optic cables and roads. Space is available to purchase in the Zone, access is immediate and cost of land in the SEZ is RWF 20,000 per sq m (USD 33). The Zone is being developed in Phases, with Phase 1 almost full; there is still some space available. The second phase is under construction has 178 ha. Seven 7 companies have already booked space and the Land price is around $40 per M2 The third phase which will be developed in the future has 134 ha. 12

14 Additional sites outside SEZ include: Bugesera zone (serviced): $15 M2 Rwamagana zone (un-serviced): $4,750/ha. Construction permits Obtaining a construction permit takes 30 days and can be done at the Kigali One Stop Centre. The documents that are obtained include deed plans, location contract, building permit, occupational permit and access to utilities such as water, electricity and telephone. 5.3 Skills (graduate output, training centers, vocational skills etc.) A. Farmers Skills Silk sector is labor intensive and doesn t require high technology. Rwanda has an estimated population of more than 11 million, and around 85% are living on agriculture. As the GoR is promoting sericulture, there is already 40 pilot sericulture cooperatives distributed countrywide. These cooperatives receive logistical and technical support for sericulture operations; the NSC and PSC are providing necessary skills and advisory services to farmers. B. General skills Literacy rates for the age group are at 77 percent. Education is free for the first nine years of school. Primary school enrolment is therefore 96 percent. Enrolment in the 405 secondary schools is at 22 percent. There are seven public universities, with a total of 30,000 students enrolled. This is complemented by a further 14 private universities. The most prominent universities are the National University of Rwanda in Butare and the Kigali Institute of Science and Technology (KIST) in Kigali. With the aim of addressing the skills gap, the education system now accounts for 15 percent of the national budget. About 36% of enrolments in Rwanda's educational programme are in its technical and vocational education training system. The Ministry of Education's Workforce Development Authority offers short courses in a range of trades through schools, training centres and at the workplace to suit the needs of different employers. This is complemented by the state-run Integrated Polytechnic Regional Centres (IRPCs). In addition, vocational courses are offered by a vast network of NGOs and private institutions. 13

15 5.4 Raw materials There is a plan of Silkworm breeding to avoid import from foreign countries Breeding new varieties by crossing the existent Kinshu x Showa and the newly introduced lines from Korea and Bulgaria, followed by field test. Reproduction of disease-free silkworm eggs by introducing the advanced technology to produce more than 5,000 boxes of eggs is also ongoing. Raw materials for a silk yarn factory which are cocoons is still not sufficient but hoping to have enough production by For a big plant, there is a need of 700 tons of cocoons and 1,000 ha of mulberry plantation. 6. SPECIFIC GOVERNMENT POLICIES RELEVANT TO THE SILK SECTOR INCLUDING TRADE AGREEMENTS 6.1 Trade Agreements and Treaties A. AGOA The African Growth and Opportunity Act (AGOA) builds on the existing Generalised System of Preferences (GSP) scheme and offers duty-free and quota-free market access to the United States for approximately 7000 products. Rwanda Qualifies for AGOA textile and apparel benefits. AGOA IV provides duty-free and quota-free treatment for eligible apparel articles made in qualifying sub-saharan African countries through Qualifying articles include: Apparel made of U.S. yarns and fabrics; Apparel made of sub-saharan African (regional) yarns and fabrics, subject to a cap until 2015; apparel made in a designated lesser developed country of third-country yarns and fabrics, subject to a cap until 2012; Apparel made of yarns and fabrics not produced in commercial quantities in the United States; Certain cashmere and merino wool sweaters; Eligible hand loomed, handmade, or folklore articles and ethnic printed fabrics; and Textiles and textile articles produced entirely in a lesser-developed beneficiary country. Reference: 14

16 B. COMESA Rwanda is a member of the Common Market for East and Southern Africa- COMESA. This implies while trading with the other members of the common market Rwanda has to adhere to COMESA Rules of origin. For the purposes of implementing the protocol on rules of origin, COMESA member states are considered as one territory. Among 20 COMESA Member States, the commonly used independent criteria are based on products that are wholly produced or those that have gone under substantial transformation, as follows: Goods should be wholly produced in member states. Such products do not contain any imported materials at all. These include products such as: Products obtained from live animals within the member states and vegetable products harvested within the member states. Goods should be produced in the member states and the CIF value of any foreign material should not exceed 60% of the total cost of all material used in their production. Goods should be produced in the member states and attain a value added of at least of 35% of the ex-factory cost of the goods (The value of the total inputs required to produce a given product). Table 6: COMESA preferential rates Countries Reduction level Rwanda Tariff National Rwanda 100% Final product: 30% Semi-finished:15% Raw material: 5% Equipment:0% Djibouti Egypt Madagascar Malawi Mauritius Sudan Zambia Zimbabwe Burundi Libya Comoros 100% Final product: 30% Semi-finished:15% Raw material: 5% Equipment:0% COMESA Tariff to be applied 0% 0% 15

17 Eritrea 80% Final product: 30% Semi-finished:15% Raw material: 5% Equipment: 0% 6% 3% 1% Angola Seychelles Ethiopia Swaziland Democratic Republic of Congo No published COMESA Tariff Final product: 30% Semi-finished:15% Raw material: 5% Equipment: 0% 30% 5% 0% Source: C. EAC East African Community (EAC) Member states started implementing the Common Market Protocol. This implies Rwanda, Uganda, Kenya, Tanzania and Burundi entered into a single market with free movement of factors of production based on the principles of non-discrimination, most favored nation and transparency. Some of these rights include free movement of goods, persons and labour. In a Customs Union a Common External Tariff (CET), applies to all other countries outside the Union. Therefore, for application of the EAC legal instruments, the EAC Common External Tariff has been adopted. Below is a table illustrating the tariff retes. Table 7: EAC Tariff Product EAC rates Raw Materials 0% Capital 0% Intermediate 10% Finished 25% Source: EAC Common External Tariff, version2012 For more information on EAC tariff, please read the EAC Common External Tariff, Incentives Relevant to the Sector 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 and raw materials Waiver of duties for 1 personal vehicle; personal property import Waiver of duties for special vehicles, trucks & heavy machines 16

18 Optional: Construction projects greater than 1.8 Million USD: 10% flat fee for imported materials 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) 6.3 GOVERNMENT POLICIES/PROGRAMS Rwanda s National Sericulture Centre and the Rwanda Agricultural Board are working together to promote cocoons production in Rwanda. The Government is promoting mechanization to ensure that the market-oriented producers have access to the necessary and appropriate equipment for modern farming techniques. The National Agricultural Export Development Board was set up to facilitate exports. Below is important document related to silk sector: Rwanda Vision 2020 Economic Development and Poverty Reduction Strategy (EDPRSII) Rwanda Trade policy National Industrial Policy National Export Strategy Handcraft Strategic plan.. 7. SECTOR OPERATING COSTS 7.1 WAGES There is no legal minimum wage in Rwanda. However typical private sector salaries faced by investors are indicated in the table below. Table 8: Salary estimate for Rwandan Workers Position Unit Value Year Comment Senior manager USD per month Middle manager USD per month 17

19 Position Unit Value Year Comment Graduate entry USD per month Engineer USD per month Office assistant USD per month Highly technician skilled USD per month Shop assistant USD per month Driver USD per month Unskilled labourer USD per month Security guard USD per month Source: theiguide.com 7.2 ELECTRICITY AND WATER A. ELECTRICITY The RDB also provides assistance, with in-house EWSA staff to help businesses connect to electricity and water. The EWSA client charter limits waiting times for connections for water and electricity to two days upon application and payment. EWSA ( is the organisation responsible for provision of electricity. The voltage in Kigali, is 15 Kv with a frequency is 50Hz There is no load shedding currently; should such a problem arise on a specific hydro power plant, a schedule can be discussed with EWSA. There are no restrictions on generator type permitted in Rwanda Power sources in Rwanda are: Thermal (40%) Hydro (50%) Methane, Solar (1%) The electrical power tariffs for factories are subsidized and dependent on time of use. Table 9: EWSA new industrial tariff as of May 1st 2012 Classification Time Rwf/Kwh USD/Kwh Mid peak 7h00-17h Peak 17h00-23h Off-peak 23h00-7h Source: EWSA B. WATER 18

20 Water is provided at the following rates. Table10: Water rates Unit Value Year Comment Water USD Source: EWSA 1 m3 industrial consumption 7.3 TRANSPORT Rwanda is developing air transport links with a number of key markets in Africa. A new international airport is being planned at a location south of Kigali 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. Table11: Container haulage rates to Kigali by Road ITEM COST (USD) Port Time 40 FT CONTAINER 20 FT CONTAINER 40 FT CONTAINER 20 FT CONTAINER $6000 $3,000-3,500 $ $2,500-2,800 Mombasa-Kigali Dar-es-Salaam- Kigali Sources: interview with track drivers & /or Transporters 35 days 14 days (2 to 3 weeks) 7.4 TAXES a. CORPORATE TAX 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) Tax rate Greater than 50 million 30 % of profits 12,000,001 to 50 million 3 % of turnover 10,001,000 to 12,000, ,000 RWF 7,001,000 to 10,000, ,000 RWF 19

21 Turnover (RWF) Tax rate 4,001,000 to 7,000, ,000 RWF 2.000,000 to 4,000,000 60,000 RWF b. Value Added Tax (VAT) VAT is payable at 18 percent. 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. Agricultural products, pesticides and fertilizers used in agriculture, health services and supplies, education services and the supply of education materials to learning institutions, bus transport services and water supplies to rural areas are exempt from VAT. Soft drinks and alcoholic beverages as well as cigarettes and telephone communications are subject to excise duties specified in the table. 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 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. Investors in free economic zones (FEZs) are exempted from paying import duties. Category Raw materials 0 % Tax rate Intermediate goods 10 % Finished goods 25 % 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 Flat rate of 15 % fees; and performance payments Withholding tax on imports Withholding tax on public tenders 5 % on CIF of value of goods imported for commercial use 3 % of the sum of the invoice 20

22 Item Quarterly prepayment Tax rate Quarterly prepayment of 25 % of previous income tax declared e. Personal Income Tax Annual income or benefit Rate First 360,000 RWF of annual income 0 % Between 360,001 and 1,200,000 RWF of annual 20 % income All annual income above 1,200,000 Company car Accomodation Interest on loan All other benefits 30 % 10 % of employment income excluding the value of the benefit in kind 20 % of employment income excluding the value of the benefit in kind 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 Full market value is added to employment income and taxed as such f. Double Taxation Agreement Double taxation agreements to which Rwanda is signatory are as follows: Partner Belgium EAC Mauritius South Africa Type of agreement Income and capital Income Income Income 21

23 RESOURCES AND LINKS: 1. Reinvigorating the Rwanda silk sector, Karisimbi Business Partners, march IGC, Understanding Rwanda s Agribusiness and Manufacturing Sectors, Silk-worm+cocoons,+reelable/51-Production+Quantity/5001-World+++(Total)