Chapter 2: the food-processing industry.
Food-processing offers Rwanda a wealth of opportunity for industrialization, economic development, and poverty alleviation. The government's political commitment has already been demonstrated by the establishment of the agencies necessary to support and regulate such an industry. However, the industry remains very limited in extent, scale, and quality. The absence at every level of a pool of appropriate technical labor with practical skills constrains the pace at which the industry can grow.
The Rwandan market for agricultural produce is generally disorganized, marked by small-scale production and marketing. Losses due to spoilage associated with storage often exceed 30 percent of production. The price difference between farm and factory gates can be as much as a factor 10, with the added value accruing to intermediaries with access to transport. High transport costs and losses are exacerbated by the deficient road system. These problems create a haphazard supply of raw materials of variable and unreliable quality.
A critical requirement for formal-sector food-processing industries is reliable access to raw materials of constant quality in a volume that enables economies of scale. Purchasing partly processed rather than raw materials yields major savings, reducing volume and weight by 70 percent or more, with associated reductions in transport costs. In Rwanda, however, very little processing takes place at the farm or community level, raising transport costs and postharvest losses. The huge number of micro-producers, the lack of organization of the industry, and poor transport significantly limit the industry's potential.
Production in the formal sector is constrained by unpredictable input volumes and quality, as well as deficiencies in technical and managerial skills. With the exception of coffee- and tea-related enterprises, which are well organized and supported (and therefore excluded from this survey and report), the number of formal-sector food-processing enterprises listed by the Ministry of Industry and Commerce and the Rwanda Investment and Export Promotion Agency is about 40. This list includes 5 large, 12 medium-size, and 23 small-scale enterprises, most of them located in Kigali City. These firms employ 10-558 employees each. They process or produce coffee, tea, meat, biscuits, beer, fruit, mineral water, sugar, cooking oil, milk, animal feed, wheat, and maize flour.
Hundreds of informal food-processing businesses provide local markets with traditional products, such as banana wine, sorghum beer, meat, fruit juices, cereal and cassava flour, and bread. The Government encourages these informal food-processors to convert to the formal sector, notably through the formation of cooperatives. Toward that end, a new cooperatives law has been drafted and submitted to Parliament for approval.
The interview-based needs survey revealed several main constraints to expanding this sector:
* the shortage of trained human resources with appropriate practical or technical expertise, at all levels;
* the lack of a reliable supply of raw material;
* inadequate access to, the high costs of, and restrictions regarding the use of packaging materials;
* inadequate capacity of regulatory and other government agencies;
* the lack of cohesion and access to information necessary for commercial development, particularly technological;
* insufficiently supportive financial and business environment;
* the high cost of power;
* the high cost of transport; and
* problems with the water supply.
Because of the lack of a sustainable supply of local raw materials, the food industry relies heavily on imported raw materials and generally operates at less than capacity. As a result, time management is difficult, and only a few companies are able to operate three shifts a day. Most entrepreneurs lack sufficient business management skills to find the solutions necessary to address the constraints.
The cost of packaging is often prohibitive, sometimes exceeding the value of the potential export. The national ban on plastic packaging, frequently interpreted without reference to the regulations or their scientific basis, represents a serious obstacle. Overall, lack of resources severely limits the ability of the regulatory authorities to be proactive and constructively effective.
Food-processors have to make the difficult choice between investing in cheap and simple equipment from Asia or expensive and highly sophisticated versions that come from the West. They often chose the first option, purchasing separate pieces of equipment without taking account of the relative capacities of each machine. Turnkey plants tend to be more expensive but are normally designed more logically and with greater expertise. Some equipment, mainly in flour-processing plants, is assembled and welded in Rwanda by technicians hired from Tanzania or Uganda. Equipment often lacks the name and address of the manufacturer, leading to repair and maintenance problems.
The fact that some operations (peeling, washing, drying) are still frequently done manually reduces product quality. Processing facilities are often installed in sites and buildings such as garages and shops that happen to be available but are not appropriate for food-processing. This often and increasingly results in conflict with the regulatory agencies, the Rwanda Bureau of Standards (RBS) and the Rwanda Environment Management Authority.
STANDARDIZATION AND QUALITY MANAGEMENT
The RBS is working toward acquiring international accreditation. A specialist in the accreditation of laboratories has been hired to advise the staff on what is required to achieve accreditation and to train them in different laboratory tests. The RBS already is a member of the International Standards Organization (ISO) and CODEX.
The bureau faces challenges, including insufficient laboratory equipment, lack of reference materials, and insufficient trained technical staff. Lack of control at border points has led to an inflow of substandard goods into the Rwandan market. RBS now certifies processors by means of a quality mark.
HUMAN RESOURCE CONSTRAINTS
No capable technicians are available to Rwanda's food industry. For their part, managers rarely have hands-on knowledge of their industry and its operation and are thus poorly equipped to recognize the deficiencies of their operations.
Students with bachelor of science degrees in food science and technology from the Kigali Institute of Science, Technology and Management (KIST), of which there are now some 200, have no meaningful practical experience, the subject being taught almost entirely in theory. They are thus of little use or interest to industry. KIST currently has no facilities for practical work, and the two months' training done at the Jomo Kenyatta University of Agriculture and Technology during the final fourth year of undergraduate studies is clearly insufficient to give students the practical skills they need. The performance of KIST graduates thus does not live up to the expectations of the private sector, which barely appears to be aware of these graduates. Despite the campaign conducted by KIST graduates themselves, there is considerable confusion between food-processing and cooking/hotel management skills.
As a consequence of this mismatch between industries' needs and the abilities of KIST graduates, companies understandably prefer to employ technicians trained abroad (in India, Kenya, and Uganda). The majority of the first two classes of KIST food science and technology graduates remain jobless; among those who are employed, a significant number appear to be doing jobs not directly related to their training. Discussions with local industry experts suggest that even more than university graduates, the food industry needs intermediate-level (A1) graduates with hands-on skills in butchery, baking, dairy, fruit and vegetable processing, and food services.
MARKETS FOR PROCESSED FOODS
The domestic market is constrained by the fact that only a small percentage of the population is in a position to consume processed products. Nonetheless, significant opportunities exist for import substitution, in fruit pulps and juices, dairy products, and meat products for the urban market, for example. There are also opportunities in the regional market, although uncertainty exists regarding the consequences of Rwanda's upcoming membership in the East African Community.
As for export markets, demand is not a major constraint to establishing and developing food-processing industries in Rwanda. A number of promising opportunities exist for exporting products, including honey, meat, and dried fruit and vegetables, particularly to the Gulf states. Data are scarce, because such agencies as the Rwanda Investment and Export Promotion Agency (RIEPA) have little reason to conduct market research if the potential export does not exist or is considered too small to be profitable. A senior RIEPA official indicated that the agency currently focuses on developing the supply side rather than promoting exports, after learning at overseas trade shows that the volumes of relevant products produced in Rwanda are nowhere near those required to meet the orders of potential clients.
Access to export markets is constrained by poor quality, caused by lack of appropriate skills and expertise at all levels, inadequate technology, and the high cost of appropriate packaging materials. Poor organization prevents the necessary economies of scale permitted by high production volumes.
Given the high cost of shipment, the ideal export product for Rwanda is of low volume and weight per unit of cost or value added. Dried fruit and vegetables and products such as potato chips fulfill this requirement, because only minimal water content is shipped. These products possess the additional virtue of being highly suitable for processing in rural areas, requiring only the addition of packaging and market access. However, current production is marketed only locally, in nonfood-grade plastic bags, unprinted and with no indication of the provenance. In this form, even the potential for import substitution is limited: these products are generally found in only small shops.
DEVELOPMENT POTENTIAL FOR THE FOOD-PROCESSING INDUSTRY
Internationally, there is a strong market for dried fruit and vegetables. Accessing this market would require the creation of a high-quality rural drying industry, using simple solar-based technologies, and a formal-sector dry-packaging capacity, which would add value in terms of quality control and attractive modern packaging.
Specific subsectors that could potentially be developed include fruit juices, banana fiber, dried fruit, and beehives.
* Fruit juices. Pulping and pasteurizing passion fruit themselves could allow cooperatives to reduce weight and volume by about 70 percent, reducing transport costs and attracting client partnerships with formal-sector companies such as Shema Fruits and Laiterie Inyange.
* Banana fiber. Banana fiber--a waste product in Rwanda used only for mulching--can be made into paper. One innovative small-scale process can be carried out next to the plantation; it requires little electrical power and no water and produces no effluent. The finished paper product requires transportation to the cardboard-packaging factory to be made into corrugated cardboard. Adopting this process could allow Rwanda to stop importing paper for bags and cartons and to export cardboard products within the region. Producing this product domestically would significantly reduce industrial costs.
* Dried fruit. International demand for dried fruit and vegetables is strong, particularly if they are certified organic. Because it is light and compact, high-value but low-weight dried food is the ideal export for a landlocked country. Low-cost solar dryers and good training could enable cooperatives to manufacture high-quality dried fruit and vegetables, but access to the market requires volume and attractive and hygienic packaging. The establishment of a dry-packaging factory that purchases finished products such as dried tomatoes, dried onions, and dried fruit from a large number of rural cooperatives would add value by means of packaging while simultaneously giving rural producers access to high-value and high-volume markets.
* Honey. Modern beehives increase honey production by a factor of at least five and increase yields of neighboring crops significantly (35 percent in the case of beans, 100 percent in the case of sunflowers). Shema Fruit would buy as much honey as available for export to existing customers in the Gulf states.
Food-processing must be linked to the production of primary material and respond to market demand. For this to happen, farmers need to develop business skills, and they need better access to market information so that they can respond more effectively to market signals.
A key strategy at the national level would be to promote simple food storage and conservation systems as well as processing technologies that have performed satisfactorily in tests. At the regional and subregional levels, seminars could be organized and a program set up to promote the prevention and reduction of preharvest and postharvest food losses, in combination with a subregional training project on the processing of tubers and root crops.
Food-processing can be profitable when raw material is available in the required quantities and quality at a viable price. To achieve this, it is important to enhance the capacity of both rural producers/primary processors and their formal-sector partner-clients. In addition, inexpensive packaging material needs to be easily available, and industrial equipment needs to be upgraded. Successful exporting companies usually have a solid market foundation at home that helps them master the norms and standards essential for export markets concerning quality control.
The proposed strategic vision for developing the Rwandan food-processing industry involves four main components:
* organizing and training rural producer cooperatives to be commercial entities producing primary-processed crops in volume, using suitable technologies;
* establishing direct contractual links between primary-processing cooperatives and formal-sector industrial partner-clients;
* building the capacity of formal-sector food-processing industries through improved final processing, quality management, packaging, and access to markets; and
* addressing specific constraints, particularly in terms of education and in-service training of staff at all levels.
Realizing the proposed vision requires action on several fronts:
* Increase the availability of graduates with adequate theoretical and practical skills.
* Increase the number of industrial managers with specialist knowledge of and experience in specialized food-processing industry subsectors.
* Upgrade technical personnel at every level within the industry and the government agencies related to the food-processing industry.
* Organize, mobilize, and train rural producer cooperatives on a significant scale.
* Improve the financial and business environment.
* Improve consultation and cohesion between government agencies and the food-processing industry.
* Increase access to information on strategies and technologies for industrial development and the development of appropriate management mechanisms.
* Adopt a consultative approach to packaging policies and regulations and the establishment of environmentally and commercially acceptable implementation protocols.
* Increase the availability of economically viable and environmentally acceptable packaging materials appropriate for a modern export-oriented food-processing industry.
* Establish an efficient, transparent, and consultative regulatory environment and apply it identically to domestic and imported products.
* Encourage regulatory agencies overseeing commercial busineses to recognize the potential significance of the commercial food-processing industry for the economy of Rwanda.
The objectives of the proposed capacity-building options are to improve and consolidate existing enterprises and to prepare the ground for the future expansion of the industry. The key areas for which capacity- building interventions for the development of a sustainable food-processing industry are proposed include human resource development (professional training, vocational training, and in-service and other training); financial and economic support; industrial development and packaging; and regulatory environment (including laboratories and quality assurance).
Many measures can be initiated and constraints addressed immediately; other measures will take time to deliver measurable benefits. Thus, it is likely to be two or three years before the establishment of vocational training courses will begin to deliver competent technicians to the industry. Knowledgeable Rwandan managers for the food-processing industries will probably not begin to become available until the first cadre of the new practice-based training students have graduated, in six or seven years.
EDUCATING AND TRAINING PEOPLE
Human resource development is needed at various levels. Vocational training colleges and ecoles techniques officielles could set up a food- processing technician course, to include hygiene, food-handling, and small-scale production of appropriate foods. Graduates would be suitable for employment and further training in the industry. They would also be equipped to set up and run micro-scale food-processing enterprises in rural areas.
To build capacity at the mid-level technical and management level, KIST could create a four-year, practice-based food-processing course leading to a bachelor's degree that includes a major in a particular subsector. To provide the required practical training and work experience, KIST could establish properly equipped specialist food-processing teaching laboratories. Students would acquire technical, management, and business experience through participation in self-financing production units that process dairy, meat, fruit, vegetables, and cereals. This group of units would be financially autonomous and act as a technology demonstration center for the Rwanda food-processing industry. The accounts of each unit should be accessible to commercial food-processing enterprises to assess the cost-effectiveness of technologies and practices used. KIST could also provide in-service training by establishing evening courses and part-time programs in food-processing whose curriculum and delivery is defined by the needs of industry, and by the proposed Rwanda Food-Processing Association (described below) and commerce and regulatory bodies.
For higher-level management, a one-year, government-subsidized graduate apprenticeship (with continuing tutorial involvement) could be set up, nationally or regionally. This apprenticeship could become the basis for a one-year master's degree in the management of food-processing industries. The master's program could include enterprise and finance modules, given jointly with a school of business management. In addition, specialist postgraduate studies related to the food-processing industry could be encouraged, making use of scholarships from donor countries.
KIST could also establish an environment stream, with the objective of supplying the professionals needed to monitor and manage Rwanda's environment and to administer and manage the regulatory system. The program could train 50 environmental impact assessment experts and 50 environmental auditors specialized in various industrial subsectors, including food-processing.
The government could provide scholarships for one-year formal in-service training courses for key food-processing industry staff, principally outside Rwanda (in Botswana or Europe for meat packing and processing). It could publish a handbook on designing and implementing in-house staff training within food-processing enterprises in Rwanda. Technology-oriented study tours could be provided for enterprise decision makers, focusing on the comparison of particular technologies, their performance, and effects. Investors and managers could be educated about environmental impact assessment and significance and the benefits of environmental stewardship.
DEVELOPING BUSINESS DEVELOPMENT SERVICES
For primary producers and processors, capacity building could focus on developing business development services aiming at the identification, organization, mobilization, and training of producer cooperatives. This could include establishing mobile business development services that deliver on-site support to rural cooperatives in the establishment of primary processing enterprises and contractual partnerships with formal-sector food-processing industries. Regional study tours could be organized to allow local experts to visit and examine business development services for food-processing, to enable business development services consultants to make use of the experience of others.
To increase the capacity of staff of regulatory agencies, KIST could establish training capacity for in-service training for Rwanda Environmental Management Authority (REMA) staff (generic and specialist), provided through evening classes. All hygiene inspectors should be trained to implement Rwandan standards, and only trained and qualified specialist hygiene and health and safety inspectors should be permitted to carry out inspections.
IMPROVING TRANSPORT AND PACKAGING
A joint research project involving KIST, the RBS, and REMA in collaboration with the proposed Rwanda Food Processors' Trade Association could identify environmentally and commercially appropriate packaging and promote its introduction and use as well as the appropriate regulatory framework. Research could be conducted on improving the transport of perishable foods, particularly meat, fish, and raw milk, including development of commercially viable low-cost technology solutions and handling systems.
CONDUCTING MARKET RESEARCH AND FEASIBILITY STUDIES
Market research could be conducted to identify suitable food-processing products and manufacturing capability in relation to local market and export opportunities. A database, managed and regularly updated by RIEPA, could be constructed on specific subsectors as a resource for investors, enterprises, and business support services.
Feasibility studies could be undertaken on the following topics:
* establishment of a food-processing park adjacent to a significant renewable-energy generation installation, capable of supplying sufficient power for modern food-processing industries and associated cold storage at modest cost;
* establishment of a frozen food factory in the food-processing park for potato chips, French fries, vegetables, meat products, and other products;
* importation of livestock from Burundi and the Democratic Republic of Congo for processing in and subsequent export from Rwanda;
* establishment of a dry-packaging enterprise capable of buying appropriate finished food-processing products in bulk from rural producer cooperatives and attractively packaging and exporting them;
* application of renewable energy systems available in Rwanda;
* the potential for introducing papermaking from crop residues, particularly banana stems, including the identification and investigation of any decentralized low-input and environment-friendly processes suitable for decentralization;
* the local manufacture of corrugated cardboard and cartons from sheets of paper made locally from crop residues, with particular reference to technology and quality (specific packaging requirements studied should include meat-grade, water-resistant cardboard boxes suitable for freezing);
* the potential for establishing commercial manufacture and distribution of intermediate nonmotorized means of goods transport (such as trailers for cycles and motorcycles and extended cycles); and
* the manufacture from banana palm fiber of impermeable sacks for meat packing, as a substitute for imported jute sacks.
ADOPTING COMPLEMENTARY MEASURES
A variety of complementary measures could also be taken:
* Support the formation and consolidation of an inclusive national Food-Processing Trade Association (FPTA) able to negotiate directly with regulatory authorities and other government agencies. The FPTA should include all food-processing stakeholders, including the formal-sector industry, producer/primary processor cooperatives, and KIST. The FPTA could fund industry twinning and exchanges with other countries in the region in order to increase capacity in Rwanda.
* Reduce or remove duties on food-processing production equipment not available within Rwanda, in order to encourage investment in appropriate modern equipment.
* Establish a national food-processing information center at KIST and a national rural technology information service, primarily Web based, created to provide information for relevant technologies in Rwanda and the region, furnish design information on appropriate equipment to manufacturers within Rwanda, and establish links with other disseminators of technology information.
* Define and implement strategies and mechanisms through which the regulatory authorities can improve their empathy with, accommodation of, and assistance to the food-processing industry, in order to develop a culture of constructive engagement and increase the transparency of regulatory policies and decisions and the science upon which they are based. This process should involve developing and legally establishing an independent appeals procedure by which regulatory decisions can be challenged.
* Have the RBS publish a list of manufacturers whose laboratory equipment is acceptable for certification for specific processes within Rwanda; facilitate the training of a cadre of laboratory equipment maintenance technicians; publish clear protocols for all procedures, conforming to internationally accepted practices; maximize, together with REMA, regulatory alignment with other regional economies; increase and reinforce the capacity to test and analyze a significantly larger proportion of processed food imports in order to ensure conformity with Rwandan standards, including the indication of contents and conformity with environmental regulations; and create the capacity to encourage and deliver organic certification as a means of adding value and increasing market appeal.
* Identify and develop appropriate mechanisms for awareness-raising and the dissemination of information on regulatory issues and the protection of health and the environment.
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|Title Annotation:||Building Science, Technology, and Innovation Capacity in Rwanda: DEVELOPING PRACTICAL SOLUTIONS TO PRACTICAL PROBLEMS|
|Publication:||Building Science, Technology and Innovation Capacity in Rwanda|
|Date:||Jan 1, 2008|
|Previous Article:||Chapter 1: overview and summary of results.|
|Next Article:||Chapter 3: value-added exports.|