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newtimes - 25 days ago

Why wood sector needs access to financing

There is a need for improved access to finance for the wood sector to boost its contribution to economic and exports growth as well as job creation, experts have said. According to Dr. Christian Sekomo Birame, Director-General of the National Industrial Research and Development Agency (NIRDA), the wood sector employs over 75,000 in the country which indicates its key contribution to sustainable development of Rwanda. According to studies, there has been a huge employment increment in wood processing and trade alone from 12,000 in 2017 to 23,000 jobs in 2019. “We need to discuss how we can pull our efforts together to support the wood sector and ensure that we have enough locally produced materials in quality and in quantity. This is because the current situation is the reverse. Rwanda is not only an important regional importer of timber but it is also a major importer of wood products.” he said. For instance, he said, imports of wood products are estimated at Rwf8 billion per year annually while exports are only Rwf80 million, a 100 times lower than the value of  import. “On the other hand, though 78 per cent of timber consumed by the local market originates from Rwanda, the average price of local timber is six times lower than the price of imported timber made products,” he said. He explained that there is a list of factors behind, but market preference for wood products made from imported wood is by far the main reason. He said that this situation can certainly be a window of opportunity for partners and stakeholders across the wood sector value chain. Total national trade of sawn wood is estimated to be between 275,000 and 300,000 cubic metres per year according to the recent study. The study shows that traded timber originating from Rwandan forests is between 215,000 and 235,000m cubic metres per year. The total value of traded timber could be around $76 million per year, the study shows. There are 2,284 wood enterprises mostly SMEs as 21 are only large. Profit margins vary between producers and traders, and species and products. For example, eucalyptus, which accounts for about 50 per cent of traded volumes, generates about 21 per cent profits for producers, 16 per cent for traders and 14 per cent for retailers.  Profits are higher for traders and retailers when they sell Pinus, Cypresss or Grevillea. “There is a lot of untapped potential in the wood sector which can yield more results,” Birame noted. Over the next ten to fifteen years, studies show, the timber industry could double or triple direct and indirect jobs in Rwanda, and exceed $ 200 million in worth. He said that there is a need for companies or actors in the sector to invest more in acquisition of up to date technology and relative technical expertise adding this requires access to finance. According to Birame, this is the route towards better and competitive quality of wood products, in a sustainable way. The issues that are still affecting the wood sector, according to an assessment, include limited awareness on technological solutions to sustainable development, lack of innovative solutions due to limited level of technology, limited technical and managerial capacity of actors to sustainably supply an exponentially growing wood products market with quality and safe products. Access to finance An assessment of the access to finance status in the wood sector, Birame said, seemingly confirms financial institutions’ and investors’ limited contribution to the wood sector. “We are envisioning a situation whereby the construction sector only enjoys higher investment rates and hence trust compared to other sectors, the wood sector included. We are talking about only 18 per cent of projects only in export and manufacturing projects in 2020, yet the sector being the top employer,” he said. He noted that there is a need to support the wood sector with promising community development guarantees. “We believe that working together to address those issues is in fact key for the success of the sector and by doing so, we can contribute to the creation of more decent and productive jobs. Together with GIZ, we are running a program of Incubation and Accelerator facility where firms in the wood sector are getting additional technical and financial support,” Birame noted. The financial support is expected to improve the competitiveness of start-ups and companies in the wood value chain. The support includes business advice, entrepreneurship and business management training, coaching and mentoring, access to technical infrastructure, technical assistance, market information services, facilitation of financial and investment linkages as well as facilitation of linkages for technological upgrading.


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