Last year, financial institutions rejected 58 per cent of the total loan requests from agriculture, fisheries and livestock sectors. Could commercial banks be overlooking the backbone of the economy expected to deliver the country’s growth targets?
That is the question experts are discussing today as the World Bank country office presents its annual economic update of Rwanda.
Yoichiro Ishihara, a senior economist with World Bank, said this year’s economic update will provide an opportunity for stakeholders to discuss how Rwanda can manage economic uncertainties to ensure sustainable growth and poverty reduction.
The discussions will have special focus on agriculture and Åsa Giertz, a specialist at the World Bank’s agriculture global practice, will present a paper assessing the risks that could be scaring away investments from the sector and provide an insight on how to circumvent them.
A panel of experts, including the permanent secretaries of the finance ministry Kampeta Sayinzoga, that of Agriculture Innocent Musabyimana, World Bank’s Apurva Sanghi and agro-processing guru Felicien Mutalikanwa of Minimex, will brainstorm on Giertz’ presentation.
The world bank notes that Rwanda’s growth projections depend heavily on the performance of the agriculture sector, reason why its contribution must be secured and sustained if the country is to hit its set national targets.
For instance, the Bank says as a result of sufficient rainfall, strong agricultural performance contributed to national economic performance that surpassed growth projections in 2014.
A 6 per cent growth projection had been anticipated by the government but central bank governor John Rwangombwa revealed last week that based on the better than expected performance posted in the first nine months of 2014, the earlier growth projection will be surely surpassed.
Economic activity was high in the first three months of 2014, posting a 7.5 per cent growth, slowed slightly to 6.1 per cent between April and June but rebounded to post a 7.8 per cent growth between July and September.
Agriculture, in particular, performed well, thanks to favourable weather conditions that saw the sector surpass its 4.5 per cent projected annual growth, at least based on performance figures from the first nine months.
The sector grew by 5 per cent in the first and second quarters, and 6 per cent for the third.
Next month, the National Institute of Statistics of Rwanda is expected to release performance figures for the last quarter of 2014. Expectations are high that the economy will have rebounded from the 4.6 per cent growth posted in 2013 and agriculture will be one of the sectors to thank.
Agricultural targets
Today’s assessment of the agricultural risks is opportune as it happens at a time when government officials are preparing for the Twelfth National Leadership Retreat; most of what experts will say today is critical to achieving the national agriculture sector targets.
For instance, under the second Economic Development and Poverty Reduction Strategy (EDPRSII), the government is targeting to increase the productivity of agriculture with a projected annual sector growth of 8.5 per cent, from 5.8 per cent by 2018.
High agricultural productivity is particularly important to yet another key government target, poverty reduction from 44.9 per cent to below 30 per cent by 2018.
The government strategists say that reducing poverty to those levels is possible through focusing on increased productivity of agriculture, which engages the vast majority of the population.
But World Bank notes that the sector currently receives a small share of inputs but still manages to post higher outputs which, moreover, have more direct impacts on the national account.
One of the arguments expected to be floated in today’s discussions is that, by reducing risks in the agriculture sector to attract more investment input, it would directly contribute to macroeconomic performance.
Transforming agriculture
Since 2004, the Ministry of Agriculture has been implementing a Strategic Plan for the Transformation of Agriculture in Rwanda (PSTA), which is currently in its third phase, running from 2013 to 2018.
The strategy aims at transforming agriculture into a modern, professionally operated, and market-oriented economic undertaking through the promotion of professionalism, specialisation, technological innovation, and public-private partnerships.
During the programme’s second phase, the ministry signed up for the Comprehensive Africa Agriculture Development Programme agenda whose objective was, among others, to progressively achieve a 10 per cent commitment of National Budget to agriculture to raise the sector’s annual growth to 6 per cent by 2015.
Agriculture is listed under the rural development thematic area of the Budget and was allocated Rwf252.8 billion, which is equivalent to at least 14 per cent of the 2014/2015 National Budget.
The ongoing third phase reportedly aims at building on the second phase achievements to ensure sustainability of public investment for the agriculture sector and directed in ways that are most cost-effective in achieving the goals of EDPRSII and Vision 2020.
Bottlenecks to address
Experts say meeting national targets faces a test posed by key structural challenges that bedevil the sector. Top on the list of those challenges is the fact that agricultural land plots are very small with 80 per cent of land holdings being less than one hectare and often fragmented into three or four plots, notes the World Bank.
It’s also noted that 70 per cent of the agricultural land is on hills or the side of hills, making mainstream commercial agriculture difficult.
Participants in today’s discussion are also expected to brainstorm on how to address challenges such as agriculture being dominated by small-scale, subsistence farmers who use traditional agricultural practices heavily dependent on natural rain patterns.
Another key concern is the fact that irrigation is still underdeveloped and not yet widespread with only 0.6 percent of agricultural land under irrigation. Experts will also seek to answer why the use of improved seeds is still constrained and with only one third of farmers using fertilisers.
In economic terms, Rwanda’s agricultural sector accounts for a third of Rwanda’s GDP and constitutes the main economic activity for the rural households and remains the main source of income for at least 80 per cent of the country’s total population.
The sector also reportedly meets 90 per cent of the national food needs and generates more than 50 per cent of the country’s export revenues.
The New Times
UM– USEKE.RW
