Be it the fish from Lake Tanganyika of Burundi or minerals crossing via the Bukavu border of DRC or the fresh-cut flowers from western Uganda, Rwanda has the true potential to be the hub for all of them. However, the country has a long way to go in terms of cold chain, air cargo, road, customs and rail infrastructure.
“Rwanda cannot survive if we do not integrate into the regional and continental economic market. That's why Rwanda is a member of the East African Community customs union, and the African Continental Free Trade Area (AfCFTA).”
These are the words of Rwanda’s Minister of Trade and Industry Prudence Sebahizi. He was speaking at the High-Level Forum on Multi-Stakeholder Partnerships 2024 held in Bali, Indonesia in the first week of September 2024.
“And by doing so, we are given access to a continental market of more than 1.4 billion people and more than $3.4 trillion GDP,” he added.
Export landscape of Rwanda
Being a small country landlocked in Africa with a population of just 13 million people, this gives an opportunity for Rwanda. As the minister puts it, “To focus on improving the business environment for big companies to come, establish and make our country a production and distribution hub for the rest of the continent.” Thus Rwanda has plans not only to survive but also thrive and make it a logistics hub for the entire East and Central African region.
According to Sebahizi, Rwanda has been progressing with an average economic development of 8 percent over the last 10 years and is now projecting to achieve steady growth of 9.3 percent over the next five years. In fact, Rwanda aspires to become a middle-income country by 2035 and a high-income country by 2050.
A cabinet meeting of the Rwandan government held on August 23, 2024, approved the second National Strategy for Transformation (NST2, 2024-2029), part of the larger Vision 2050 and a continuation of the 7-year NST1 implemented from 2017 to 2024. The five-year strategy seeks to transform Rwanda by achieving 14 goals including the doubling of private investment from $2.2 billion in 2023 to $4.6 billion by 2029 and promoting local products and industrial growth.
“Export levels are projected to more than double from $3.5 billion to $7.3 billion, fueled by key sectors like agriculture, agro-processing, and mining focusing on value-added exports. Rwanda will become a hub for high-quality, locally-made goods that boost our economy and create jobs,” the release reads.
According to the Observatory of Economic Complexity, the top exports of Rwanda are gold, tin ores, coffee, malt extract and niobium, tantalum, vanadium and zirconium ore, exported mostly to the United Arab Emirates, Democratic Republic of the Congo, Thailand, United States, and Ethiopia. The perishable exports are also growing from the country which requires more air cargo capacity and a robust cold chain infrastructure.
“Rwanda lacks cold chain infrastructure from the production site to even the airport. Truckers move fruits upcountry and by the time they reach Kigali, some will be expired.”
Blair Robert Ayesiga, Association of Cross Border Traders Rwanda
Rwanada's challenges
One of the biggest challenges for Rwanda and its exporters is the geography of the country. Rwanda is famously known as the "Land of a Thousand Hills" due to its landscape of hills and valleys. In the western and central parts of the country, the terrain consists of steep slopes and mountainous regions. Rwanda is also landlocked and shares its border with four countries, the Democratic Republic of Congo (DRC) in the West, Uganda in the North, Tanzania in the East and Burundi in the South. Thus it depends on ports in Kenya's Mombasa and Tanzania's Dar es Salaam to move their goods via sea.
“First of all, you are relying on the road network of another country,” said Blair Robert Ayesiga, Director of Programs, Association of Cross Border Traders Rwanda, while talking about how the landlocked status increases the logistics costs.
The association aims to increase Rwandan exports to other countries by working with government agencies including the National Agricultural Export Board (NAEB).
Ayesiga also notes that political instability in the region and relations with neighbouring countries have affected the movement of goods due to the landlocked borders. He also spoke about the road infrastructure available within the country which he believes are good but not enough.
“Rwanda has very good road network but it is not enough. It doesn't get deep into the villages where those commodities are produced. People have to rely on motorcycles or other means because mountainous regions in Rwanda are difficult terrains to navigate. So people use the manual means of transportation, put them in a designated collection area, let small trucks pick them up and transport them to Kigali,” he added.
Meanwhile, Sebahizi also acknowledges the lack of infrastructure and the resultant increase in logistics costs as one of the important challenges that must be addressed by the country.
“The cost of transport and logistics in our country is more than 30 percent higher than the regional average. So we have to invest a lot in infrastructure,” he said.
Rwanada's infrastructure investments
For instance, Rwanda is building an airport 40 kilometres south of Kigali International Airport in Bugesera district with a dedicated cargo terminal and 150,000 tonnes annual cargo capacity. Aiming to finish construction by 2026, Qatar Airways owns a 60 percent stake in the airport. Along with Qatar Airways' expected acquisition of a 49 percent stake in RwandAir, the flag carrier of Rwanda, logistics companies and shippers in the country are also expecting increased air cargo capacity out of Rwanda.
Ayesiga reported that the construction of the new airport is progressing very rapidly and he believes that the airport is going to position Rwanda as a trading hub of East Africa.
“People dealing with logistics are going to be benefiting from that,” he added.
“The country’s clear vision on the logistics sector, such as the Kigali Logistics Platform and the Kigali Special Economic Zone are cornerstones to the development of hub solutions for the region and beyond.”
Myriam Izabayo, Africa Global Logistics
Myriam Izabayo, Customer Relationship Manager of Africa Global Logistics (AGL) Rwanda, believes that the new Bugesera Airport coupled with additional freight capacity with RwandAir will boost the export volumes from Rwanda but she also informed that shipping lines such as MSC are increasing their capacity from Rwanda and get positioned for exports, especially the reefer containers and food grade containers.
In April 2024, AGL Rwanda announced the extension of its logistics warehouse located within the Kigali Special Economic Zone (KSEZ) by 5,000 sqm, offering a total space of 21,000 sqm for bonded and non bonded facilities, with an investment of $10 million. Izabayo also informed that the facility will have dedicated cold chain capabilities for perishables.
According to Izabayo, AGL, which is an MSC subsidiary, is the leading logistics player in Rwanda with predominant market shares in various verticals and corridors both sea and air import and export, and handles more than 700 TEUs in Rwanda every month in a very diversified value chain to their customers.
“We are both into import and export by road, sea, rail and air freight. We also have the bonded and non-bonded capacity which contribute to our leading position on the market,” she added.
Talking about the commodities AGL Rwanda handles, she said, “Coffee and tea take the biggest portion. For coffee, we represent 40 percent of the market. We are also into the movements of perishable goods and are expanding in all these commodities. We are witnessing increased demand from Europe, Asia and even the American market. For instance, avocados from Rwanda have high demand in these markets.”
Cold chain infra
Meanwhile, Ayesiga points out that the elephant in the room for the Rwandan supply chains is the cold chain infrastructure. He said that 30 to 40 percent of perishables produced in the country are wasted due to the lack of cold storage and reefer trucks.
“Rwanda lacks cold chain infrastructure from the production site to even the airport. Truckers move fruits upcountry and by the time they reach Kigali, some will be expired,” he said.
“DRC imports through Rwanda as well. They land in Kigali Airport and are trucked via road to Bukavu border because most of the cities in the DRC are inaccessible due to the roads and security situations.”
Nicodemus Ndeti, G5 Logistics
Originally from Kenya and with 20 years of experience in the supply chain, Nicodemus Ndeti, Chairman & Chief Executive Officer of G5 Logistics, is somebody who understood this gap in the Rwandan logistics landscape and started his company in the country in 2022 and shifted his base to Kigali from Kenya.
“When I first came to Rwanda, there were no cold rooms. There was only one at the airport and now investors have started coming in, setting up cold rooms even in remote areas. They have now understood the importance of using refrigerated trucks to transport vegetables and fresh produce,” he said.
He considers himself a pioneer in executing end-to-end cold chain operations in the country with a particular example of moving perishables from Rwanda to the Netherlands via air. He points out that there are plenty of opportunities in agriculture because of the growing production of avocados, fresh-cut flowers and french beans.
“Post-harvest handling is lowering the quality of these fresh produce because they do not observe cold chain processes. That's why they are missing out in the market,” he said.
Rwanda as a regional hub
Amidst these challenges and the need for improvement, the question is whether Rwanda could transform itself as a regional logistics hub for the continent and the answer is yes from most of the stakeholders.
For instance, Izabayo believes that the region's airfreight hub and freighter capacity development will be realised through the new Bugesera Airport.
“The country’s clear vision on the logistics sector, such as the Kigali Logistics Platform and the Kigali Special Economic Zone are cornerstones to the development of hub solutions for the region and beyond,” she said.
“The new Bugesera Airport offers options for road-air cargo from neighbouring countries being consolidated in Kigali and airlifted to all over the world. AGL in partnership with other stakeholders will develop consolidation platforms in this regard, especially for perishables and temperature-controlled cargo,” she added.
For example, the cargo from Burundi to Rwanda via road could be exported through Bugesera or Kigali Airport. Logistics companies are also targeting cargo from the cities of Goma and Bukavu in the DRC.
Ndeti adds western Uganda as well to the list. “There is a lot of fresh produce, including avocados and french beans, and fresh cut flowers getting exported from western Uganda which is close to the border with Rwanda. These are very fertile lands like Rwanda itself. It is easier for them to bring it to Kigali rather than taking it to Entebbe International Airport in Kampala,” he said.
He also pointed out that there are a lot of fish from Lake Tanganyika in Burundi and minerals from the DRC need to be processed and exported. But it is not just about exports. There is a lot on the import side as well.
“DRC imports through Rwanda as well. They land in Kigali Airport and are trucked via road to Bukavu border because most of the cities in the DRC are inaccessible due to the roads and security situations,” he said.
“I would confirm that Rwanda is becoming the hub. That's why they need to expand the airport. There is a need to bring in more aircraft as well,” he added.
To transform Rwanda into a regional hub, air cargo infrastructure is not enough. The country also needs to focus on other transport capabilities including cold chain, rail and road, particularly by keeping the producers and end consumers in mind.
As Izabayo puts it, “AGL is investing in the logistics platform for freight consolidation, palletisation, cold chain storage, to provide upstream and downstream logistics solutions for the cargo passing through the Kigali hub. Our integrated offering includes pick and pack, ready-to-eat packaging, and distribution. Key inland cargo freight stations at Isaka (Tanzania) and Naivasha (Kenya) will be leveraged to provide rail-road solutions for Rwanda cargo. Being close to shipping lines will greatly help better manage the containers detention for the inbound and outbound freight”.
Rwanda is a natural logistics gateway for the central and eastern African continent, even though it is landlocked. Both the government and the foreign investors seem committed to leveraging this position with investments into the new airport, dry ports, cold rooms, reefer trucks and refrigerated containers. While the country and its investors are on the right track to address the shortcomings, there is a long way to go.
This feature was originally published in the September - October 2024 issue of Logistics Update Africa.