Lincoln Davis, Anke Reichhuber
Executive Summary
This assessment scans the fertilizer and pesticide value chains in Rwanda to evaluate the country’s advantages to attract private investment. It analyses the current enabling eco-system for agri-input firms to understand the key impediments for scaling up private invest-ment and improving access to quality inputs.
The current global environment is challenging, with market prices rising rapidly in 2022 and there is generally a global shortage of fertilizer due to the Ukraine Russia conflict meaning that there is potentially a serious food security issue looming for Rwanda. Against this back-drop Rwanda is undergoing a period of significant transition within the regulatory environ-ment for agricultural inputs. There are two major thematic areas of reform: firstly, Rwanda is aiming to harmonize agrochemical regulations with the East African Community; sec-ondly, Rwanda has committed to a reform of the Input Subsidy Program. These two reform areas offer a significant opportunity for the private sector to expand its role within these two markets.
This study employed several methods of information gathering, including literature reviews, data collection from public sources, quantitative and qualitative field surveys, and in-depth interviews with private and public stakeholders. For the fertilizer and pesticide value chain analysis, customs information was provided covering imports and exports of pesti-cide and fertilizer products by importer, and data was collected from various other sources including Seasonal Agricultural Surveys, Rwanda Agriculture and Animal Resources Devel-opment Board, National Agricultural Export Development Board, among others. Field sur-veys were conducted in six districts, which were selected to provide a comprehensive rep-resentation of key crops of interest and to include all regions of Rwanda. Key informant interviews were conducted with a wide range of stakeholders including importers, distrib-utors, private sector business and government representatives.
Regarding the fertilizer value chain, the assessment found that high prices and difficulties in the fertilizer distribution system are seen as the most significant barriers to increased fer-tilizer use. The cost of imported products makes up a large proportion of the fertilizer retail price and reducing costs within Rwanda will not have a substantive impact on retail price. There is significant market concentration in the fertilizer import market, especially in terms of importing companies. In terms of distribution, One Acre Fund has effectively acquired a monopoly in several districts.
In terms of opportunities, the market for fertilizer is growing and there is unmet demand for soil specific fertilizers, micronutrients, and affordable alternatives to chemical fertilizer. There are several options to meet this demand including blending of new products, and diversification into organic fertilizers. Overall, there is a broad consensus that Rwanda’s current fertilizer subsidy program requires reforms to enhance efficiency, effectiveness, and sustainability. In terms of digital solutions, the Smart Nkunganire System and Mobile Ordering and Processing Application demand management systems are revolutionary sys-tems, but there is room for improvement. It will be up to private sector actors to investigate whether to continue with this system or to replace it, or to enhance it by using system data to provide improved access to finance.
Regarding the pesticide value chain, the assessment found that pests and diseases pose a strong threat to Rwandan agriculture – at present the most serious threat is the Fall Army Worm which attacks maize crops. For farmers, sometimes it is difficult to access pesticides in a timely fashion in parts of Rwanda and pesticides are expensive for farmers. Further, there is evidence that pesticides are not applied in a proper manner – meaning that they are both less effective and potentially harmful. In terms of counterfeit products, the analysis found little direct evidence of counterfeit products, but inspection reports indicate that there may be a substantial market in unregistered pesticide products that is not captured in official statistics.
Despite these difficulties, imports of pesticides have been steadily increasing over the last half decade, which may be linked to the strong growth in the horticulture sector. Import costs represent a lower fraction of the retail price for pesticides than for fertilizer. Hence, there is potentially a stronger case for cost reduction at retail stage. There may also be market opportunities to increase the efficiency of pesticide application.
The second major component of this assignment was to conduct a regulatory assessment, which had two main areas of focus: registration of new agrochemical products, and prod-uct and facilities inspections. The analysis found that importers looking to register new ag-ricultural input products face a significant administrative burden. There is a lack of coordi-nation between RICA, RSB and RAB in terms of the protocols for product testing, which creates long delays and costs for the private sector. Inspection of imports can cause long delays due to limited laboratory testing capacity.
There is a harmonization process underway for both fertilizer and pesticide regulations at the EAC level, which will drive reform of the Rwanda regulations on agrochemicals. The pesticide EAC regulations have been developed and must now be adopted in Rwanda, while the fertilizer EAC regulations are in the process of being finalized at the time of writ-ing. Both reform processes offer huge opportunities to improve market efficiency: recogni-tion of international standards would accelerate the registration process and allow more products to enter the market; reduced testing requirements on new products would allow better market access.
The final chapter of the report is a detailed list of recommendations which are sorted into priority, near term recommendations; recommendations for further analytical work and technical assistance; and long-term capacity building recommendations.
In terms of priority, near term recommendations, it is important that private sector actors have a clear understanding of the implementation of the reform roadmap for the agricul-ture Input Subsidy Program. Clear communication about the transition out of the ISP and a strong commitment to the reform transition process is a key requirement going forward. The other key recommendation is that IFC should facilitate the harmonization process of fertilizer and pesticide regulations within EAC by providing technical assistance to the Gov-ernment of Rwanda to help implement the guidelines, review existing laws and regulations,
and promote the adoption of the new EAC regulations. Another key area is to improve coordination between key agencies regarding the process for testing and registering new agri-input products.
In terms of recommendations for further analytical work and technical assistance, the re-port identified several areas of interest for further investigation. Areas of interest include private sector extension services, professional spraying services, organic fertilizer produc-tion in Africa, and insect farming to produce biofertilizer in Rwanda. The report also high-lighted the potential for the use and production of bio-pesticides. Bio-pesticides and or-ganic fertilizer also have the advantage that they are not subject to the same level of regulatory control as synthetic inputs. The report also recommends that the level of com-petition in the market should be monitored to ensure an effective level of competition among suppliers, and that where possible innovations in demand management and ac-cess to finance should be encouraged.
Finally, in terms of long-term capacity building recommendations, the report finds that hu-man and physical capacity should be developed along the registration process, and along the inspection and testing process. These are long term recommendations that will require investments in physical infrastructure as well as human capital.
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