SMEs challenged to focus on domestic market

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Small and Medium enterprises-SMEs seen as a driving force for the vibrant private sector that the country is banking on should focus at satisfying the domestic market before they eye regional markets, experts have suggested.

Experts believe that SMEs need to   be well positioned in the domestic market before they think of tapping into other markets to avoid   business shocks that   would affect their   further growth.

“SMEs should, therefore be nurtured and supported so that they can successfully operate domestically, before they begin to export outside of Rwanda,” said Emmanuel Hategeka, Permanent Secretary, Ministry of Trade and Industry.

This comes at the time; experts are drumming up for increased   export base to help the country cushion the huge trade deficit.

Arguably, according  to experts, supporting SMEs  to  create a strong base in  the  home market will help  strategically position  themselves to  compete  favourably  in other markets  mainly the regional  market.

Moreover, there is still need for   locally produced goods mainly foods and beverages to reduce on the imported products from regional markets.

“The country is still   getting more juice drinks from Uganda, Kenya and Tanzania and they compete favorably mainly on quality and price,” said Davis Mukiza, a business consultant.

He further asserts that, “I believe this is because we still   have no many products that draw confidence within the consumers.”

Moreover, it is easier, processors say to produce and monitor the local market with   limited resources at the SME level than   a bigger market, and nevertheless it provides fewer returns on the expected profit margins.

“When the products is known locally it is easier to market it in the region because people themselves will start referring it to friends in other markets,” said Christine Murebwayire, a Banana wine producer earlier noted

Accordingly, the country’s SME sector accounts for 98% of all businesses contributing around 82% in the employment arena while most of these are micro enterprises mainly in processing and value addition at small level.

Again, SMEs  have been  vital in   increasing   off farm jobs  jumping to  1.4 million in 2011up from  408,000  in 2001  with   Non- agricultural  employment increasing  to 27.3%  of all jobs in  2012 from 12.1% in 2002.

Nonetheless, a focus on the export base should not be avoided mainly in the cross border trade where the country recently registered increased trade receipts.

“Encouraging SMEs to export regionally is a pathway to encouraging their growth and success,” said Hategeka

He adds, “SMEs also have a large role to play in informal cross border trade within the region, which is a sizeable proportion of Rwanda’s overall trade,”

Statistics from Ministry of Trade indicates that Informal exports comprised 16% ($110 million) of the total exports in 2013 indicating an increase of 8% from the previous year.

Moreover, an SME on the other hand can produce particular products for a specific market segment either   regional or international and may not produce for the domestic market.

There is optimism that with the recent efforts to bolster the country’s fast growing sector that registered an average growth of 11% year on year between 2010 and 2012, exports are likely to increase in the next years.

If Rwanda is to hit export targets set under EDPRS II(Economic Development and Poverty Reduction Strategy),Hategeka says “a rapid increase in the number of million dollar exporters, combined with sustained export growth from existing million dollar exporters is required.”

Moreover, the government efforts to ease doing business, creation of more markets and support credit extension to private sector through guarantee funds  is  likely to  back up the  performance of the  private  sector mainly the  budding  SME sector.



About the author

Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

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