Rwanda’s textile and garment sector has recorded unprecedented growth since 2018 when the US government suspended Rwanda from the list of countries whose apparel exports enter the American market duty-free.
Donald Trump’s administration suspended duty-free status for Rwandan apparel products under the African Growth and Opportunity Act (AGOA) following a decision by Kigali to raise tariffs on second-hand clothes to protect the local industry.
However, the local apparel export defied the odds between 2018 and 2020, growing at 83 per cent in value.
Statistics from the Ministry of Trade and Industry indicate that Rwanda exported $5.9 million (about Rwf5.8 billion) worth of textile and garment products to the international market in 2018.
By 2020, that value had increased to $34.6 million (about Rwf34.2 billion), pointing to increased volume of garment products to markets such as DR Congo, Belgium, Germany, and Hong Kong.
The value of garment products such as T-shirts, singlets, overcoats, raw silk, and woven fabrics to DR Congo reached $30.4 million in 2020, up from $636,578 in 2018.
At the time Rwanda’s access to AGOA’s apparels market was suspended, local producer C&H Garment Factory was the biggest exporter of apparels to the US.
When the suspension came into force two years ago, products from the Chinese-built factory at the Kigali Special Economic Zone destined for the US attracted as high as 30 per cent in tariffs.
But the company, whose operations were acquired by Pink Mango C&D – a Hong Kong-based textile manufacturer – has since ventured into new markets.
“What we did was to simply look elsewhere, mostly the European market,” Dennis Ndemezo, a director at Pink Mango told The New Times. “It [the decision by the US] brought us new clients.”
Pink Mango now serves several European markets such as Belgium, Germany, Spain, United Kingdom, Turkey, France and the Czech Republic.
Subsequently, the value of Rwanda’s textile products to the US dropped from $2.5 million (about Rwf2.4 billion) in 2018 to just $224,294 (approx. Rwf222 million) in 2020.
When Rwanda took the decision to impose tariffs on second-hand clothes, the idea was to reduce importation of large amounts of cheap used apparels that were seen as stifling the nascent local garment industry.
The move was part of the East African Community’s decision in 2015 to phase out hand-me-downs with view to promoting local manufacturing capacity in garment and other industries.
But when the US government threatened to suspend EAC access to its apparels market under the AGOA framework, all partner states but Rwanda budged.
Local demand surges
Rwanda went ahead and imposed a tariff of $4 per kilogramme on imported second-hand clothes. The US responded with a tariff of 30 per cent on Rwandan apparels, where there had previously been none.
Mehta Dharmendra, the head of Marketing at Utexrwa, the oldest garment manufacturer in Rwanda, says demand from local clientele has increased since 2018.
“We have seen an increase in demand of somewhere between 10 per cent and 20 per cent since 2018,” he noted. “I think that’s because most people have resorted to buying local.”
AGOA is a trade arrangement under which countries in sub-Saharan Africa export their products to the US duty-free. It first came into force in 2000 for a period of 15 years, before it was renewed for 10 more years – to 2025.