Economy

The circular economy: How Rwanda tries to chart its course in hostile global waters

Wanting to move away from being a dumpyard of used clothings has meant angering Donald Trump's USA. The small east African country is trying to find a way out

 
By Christophe Hitayezu, Maina Waruru, Kundan Pandey
Last Updated: Tuesday 25 June 2019
Photo: Getty Images

An uneasy silence has enveloped over the once-vibrant Kimironko market in Rwanda’s capital town, Kigali. Sitting in a dim corner, Emmanuel Harindintwari listens intently as the other stallholders discuss an incident on the border that now threatens political and social stability in East Africa.

On May 24, the Rwandan security force gunned down two people, including a Ugandan national, for trying to smuggle used clothes into the country. Those were hand-me-downs from people living some tens of thousands of kilometres away across the North Atlantic Ocean, or beyond the Mediterranean Sea, which get sold across Africa as cheap garments and are the primary source of clothing across the continent. 

But the Rwandan government does not want its citizens to sift through piles of cast-offs from wealthier nations. In its attempt to shed the “third world” label and “restore” people’s dignity, the government has been aggressively regulating the entry of used clothes and footwear into the country.

Since 2016-17, it has progressively increased taxes on these merchandise, first from $0.20 to $2.50 per kg and then to $4 in the next financial year. Tariff on used footwear has also jumped from $0.20 to $5. Simultaneously, the government has heightened surveillance along the country’s porous borders with Uganda and the Democratic Republic of Congo, which are among the top importers of used clothing in Africa.

This has unnerved many of the 22,000 Rwandans engaged in the trade—right from wholesalers, retailers and vendors to those involved in washing, repairing and restyling products to fit the body shapes and sizes of Africans. 

When asked about his business, Harindintwari points at a less-than-a-metre-wide stall, crowded with neatly folded used trousers, shirts and colourful bedcovers, and says: “These are all legally imported goods. But the raised tariff has made them so pricey that a bale of used clothes now costs $422 compared to $56 two years ago. If we pass this cost on to customers, we risk losing sales. If not, we incur heavy losses.”

Earlier, he recalls, these narrow corridors of Kimironko market used to overflow with discarded garments. Customers used to jostle to pull out a fine T-shirt with a famous logo or a high-fashion western dress. “I made a fortune selling those in the past 20 years. Today, I struggle to arrange money for my child’s school fees.”

Away from the market, on the outskirts of Kigali, Claudette Nyiraneza, a roadside vendor, explains how the tariff has made decent clothes unaffordable for an average Rwandan. “Earlier, one could buy a second-hand garment for 100 Rwandan franc ($0.11). Now, one has to shell out at least Rwf4,000 ($5) for a piece. This is almost a week’s salary for a farm worker or 10 days’ salary for a domestic help,” says Nyiraneza.

According to the World Bank, over 55.5 per cent people in this tiny landlocked country live below the international poverty line of $1.90 a day.


Gikomba market in Nairobi is a major second-hand clothing centre in Kenya. The industry offers employment to  about 65,000 people in the country
 (Photograph: Billy Mutai )

OUTSIDE THE COUNTRY, the raised tariff on used clothes has rattled the world’s largest economy — the United States. In early 2017, just weeks after Donald Trump was sworn in as the president and the “America first” foreign policy was brought in, a little-known trade association, the Secondary Materials and Recycled Textiles Association (Smart) appealed to the government against the efforts in East Africa to phase out imports of second-hand clothing. It claims the region accounts for one-fifth of the total US exports of used clothes. A ban would cost the US 40,000 jobs and an annual export earning of $147 million.

In response, Trump first issued threats to Rwanda and then suspended its duty-free privileges on domestically made apparel under the African Growth and Opportunity Act (AGOA). The preferential trade agreement between the US and 44 African countries allows the latter to sell 6,400 goods in the US market without paying import tariffs that most countries must pay and without being subject to import quota restrictions.

Following Trump’s order, the Rwandan government is now losing an estimated $1.5 million a year in export earnings. This is a huge sum for a country that has few natural resources and heavily depends on trade.

FACTSHEET: The cloth cycle

But President Kagame has labelled the trade war losses only as “short-term” and his government is adamant on its decision. Leaving behind the shadow of the 1994 genocide, which claimed the lives of 50,000 to 1 million people in just 100 days, the country’s GDP has been steadily growing at an impressive 7 per cent in the past two decades. Today, it is one of Africa’s fastest-growing economies.

The government now aims to transform Rwanda into an upper-middle income country by 2035. The government believes removing cheap used clothing and footwear from the domestic market is the only way to protect its local textile and leather manufacturers from unfair competition, and thereby bolster the country’s economy.

A shared plan 

This vision was also at the heart of Rwanda’s neighbouring countries, Kenya, Uganda, Tanzania, Burundi and South Sudan, which have in recent years formed the East African Community (EAC) and are emerging as a single market. According to a 2017 report by international non-profit USAID, EAC accounted for 12.5 per cent of the global imports of used clothing, worth $274 million in 2015.

In 2016, led by Kagame who is also the chairperson of EAC, these countries prepared a long-term development strategy, Vision 2050, that required them to strengthen their domestic manufacturing sector. Along with Rwanda, rest of the EAC countries pledged to phase out second-hand clothing by 2019, which they believe has dealt a severe blow to their once-thriving textile and leather industries.

Consider Kenya. Between 1960s and early 1980s, import of used clothes was banned in the country and the government promoted domestic production of textile and apparel to meet local consumption as well as to protect its cotton industry from foreign competition. In the 1980s, the country allowed second-hand clothes as donations for refugees from neighbouring countries. This gradually led to trade in the merchandise, shows a research done in 2017 by non-profit CUTS International.

From the early 1990s, the government lifted the ban on used clothes as it focused on liberalisation and export promotion. By 2000, most of its domestic textile companies in Kenya had collapsed due to, among other factors, increased competition from used clothes.

According to Nairobi-based Kenya Association of Manufacturers, before 1990 the country had 52 textile mills and hundreds of garment companies, making its textile sector the second largest employer after public service. The country, at present, has only 17 players in spinning, weaving, knitting and fabric finishing. Only four of them are fully integrated textile mills.

Similarly in the late 1960s, Uganda was the largest producer of cotton lint in Sub-Saharan Africa. Most of its produce was consumed locally for producing perfect clothing for the warm, sunny climate. But the market collapsed first due to domestic turmoil in the 1970s and the 1980s and then following economic liberalisation in the 1990s. Today, Uganda produces just a fourth of what it used to produce in the 1970s, shows a 2017 document by the UN Conference on Trade and Development.

The dwindling capacity and defunct mills of these countries further increased their dependency on cheap second-hand clothing, creating a vicious cycle. Today, over half the population in Kenya depends on imported cast-offs for affordable clothing. In 2013, the government collected $54 million in tariff revenue on 0.1 million tonnes of imported clothing and the industry employed 65,000 people.

Abel Kamau, head of the Kenya Association of Manufacturers, says his country is a major beneficiary of AGOA. Among EAC nations, it is the largest apparel exporter to the US. In 2017, it exported $410 million worth of goods to the US as compared to $43 million by Rwanda. Small wonder, Kenya was the first EAC country to roll back tariffs on used clothes when Trump threatened it with suspension from AGOA benefits. Tanzania and Uganda, which are among the world’s top 15 importers of used clothes, and Burundi followed suit.

What’s worse, these countries have been leaders in raw materials required for the textile industry. Rwanda, for instance, is known for its fine silk. Tanzania is still one of Africa’s top cotton producers. But industry experts say most of the cotton produced in EAC goes to Asia where it is spun, converted into apparel and shipped to the US and EU to be worn for two to three years and then shipped back to EAC as used clothing.

The EAC region is also endowed with raw materials for footwear. Tanzania has a total of 22.8 million cattle, Kenya 17.5 million, Uganda 12.8 million, Rwanda 0.99 million and Burundi 0.74 million. But these countries can process leather only up to the preliminary wet blue stage, notes the research paper by CUTS International. Some 80 to 90 per cent of the wet blue leather is exported and only 10 per cent is left for processing to finished leather which is then used by artisanal shoemakers. Though there is a significant demand for footwear in the region, 80 per cent of the demand is met through imports out of which 60 per cent are second-hand shoes.

Charting its course 

Today, Rwanda Stands alone in implementing import restrictions and in its fight against the US. As part of its drive towards establishing self-reliance in clothing, Rwanda launched the Made in Rwanda campaign in 2016 to mobilise support for local entrepreneurs and artisans as well as to encourage companies to improve garment production quality.

It is also urging traders to shift from used clothing to Made-in-Rwanda clothing. At present, the Rwandan textile industry relies on imported raw materials such as polyester and cotton, making locally produced clothes expensive. Polyester and cotton make up 40 per cent of the raw materials used in textile manufacturing, according to Ritesh Patel, the managing director of Utexrwa, a Kigali-based textile industry functioning since 1985. “This reliance makes local garments uncomp etitive in the market. A shirt made by Utexrwa sells for $5 in the market, which is still expensive compared to second-hand shirts,” Patel admits.

In a bid to reduce the cost of production, the Private Sector Federation (PSF) of Rwanda, dedicated to promote the interests of the business community, is encouraging collective investments in the textile industry. “We have put the manufacturers together when it comes to importing raw materials. When they order collectively, the rate is cheaper than individual imports,” says Eric Kabera, head of communications and marketing at PSF.

To benefit from advanced technologies available elsewhere in the world, the Rwandan government in May this year signed an agreement with Chinese firm Pink Mango C&D to establish a modern garment factory in the Kigali Special Economic Zone. Emmanuel Hategeka, deputy chief executive officer of the Rwanda Development Board, responsible for implementing Vision 2035, has said the move would help the country revive its mills by creating 7,500 jobs and reduce the import of used garments. The government is also encouraging civil servants to wear Rwandan designer clothes on the last Friday of every month.

But the government must not drop its guard. Rwanda’s market is already stacked with another variety of low-cost clothing — the ones made by China. All the efforts to become an upper-middle income country would go waste if Rwandans find those as suitable alternatives for imported second-hand clothes.

These are desperate times. Countries are trying to protect their own companies. AGOA, which initially offered development assistance to the low-income countries, has changed direction under the Trump administration. Writes Garth Frazer, a professor of economic analysis and public policy at the University of Toronto, Canada, who is also a member of the International Growth Centre Trade Research Group, “What is deeply concerning is when the members of EAC decided to increase the restrictions on used-clothes imports, the current US administration responded by threatening to remove AGOA benefits for them.”

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