Rwanda govt plan to waive 25pc customs duty on imported fabric

The Ministry of Trade and Industry confirmed that there is a plan to waive the 25 percent Customs duty on imported fabric, a move that is meant to boost the production of locally-made garments. But this could spell doom for Rwanda’s only textile factory, L’usine Textile du Rwanda (Utexrwa) struggling to stay in business due to competition from imported fabrics.

The mill, which opened in 1984, is also grappling with high production costs, making its fabric too expensive for ordinary Rwandans. Because the majority of Rwandans prefer secondhand clothes, the mill has been forced to cut production.

The mill is currently operating at a loss, and sources believe that the removal of tax on imported fabric could be the final blow, and could also discourage investors eyeing the sector.

According to textile expert, if taxes are waived, every tailor and fashion designer will go to China to import the fabric and this will benefits not Rwandan textiles but those in China, Thailand, Bangladesh and India.

The number of garment makers and co-operatives is increasing in Rwanda in anticipation of a wider East African market after the Industrialisation Policy, adopted recently at an EAC Heads of State Summit is implemented.

The policy seeks to, among other things, stimulate local industries by banning the importation of second-hand clothes.

Industry analysts argue that, on the one hand, Rwanda’s fashion and tailoring sectors would experience a boon once the Industrialisation Policy comes to effect; but on the other hand, they could shrink and potentially disappear due to stiff competition from cheaper imports from Asia.

Many co-operatives prefer to buy cheaper fabric from Asia, mainly China, India, Taiwan and Indonesia, rather than from Utexrwa as they are not satisfied with the quality and quantity that Utexrwa produces.

Alvera Mukantwari, chairperson of the Rwanda Tailoring Association said that it is true that they mostly buy fabric from China and India, but that does not mean that they don’t want to buy from Utexrwa. But their fabric is expensive and even then, they are unable to provide the required quantity and quality that they expect.

The association boasts 227 registered tailors in Kigali and plans to expand across the country.

According to Ritesh Patel, the general manager of Utexrwa, cheap imported fabric remains a challenge. With the waiver of 25 percent customs duty, there are no signs that this tax will be increased in order to support their growth. Utexrwa has capacity to produce 15 million metres of fabric per year, which is sufficient for Rwanda’s textile market, but was only producing 10 million due to stiff competition from cheap imports.