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Rwanda: Textile Firm Seeks Tax Exemptions On Raw Materials

Heavy custom duties are hampering the Made-in-Rwanda campaign as the Government moves to phase out used clothes, textiles manufacturers have said.

According to industrialists, the campaign, launched in 2014, might be slowed down if more incentives are not introduced to promote locally manufactured clothes.

They single out the 25 per cent levy charged on imported raw materials on top of the 18 per cent Value Added Tax (VAT).

This, according to the textiles players, is one of the biggest challenge coupled with lengthy checks and bureaucracies, and high transport and transaction costs of both imported and exported materials.

Saidi Hitimana, assistant general manager of C&H Made in Rwanda, a garment and textile factory in Kigali Special Economic Zone, said if the government could scrap taxes on raw materials, their company would be able to produce more than the current 7,000 vests and underwears it rolls out daily.

"We are trying to increase our production capacity in a bid to best serve the vast market out there. But the cost at which we import raw materials, mostly from China, to make final fabrics continues to put a heavy toll on the business," he said.

"There are only two textile industries in the country and demand is high, especially now that the Government is phasing out used clothes. We believe we can bridge the gap if we were exempted from those taxes."

Operationalised in 2015, the C&H Made-in-Rwanda employs about 1,000 workers having increased from 200 in 2015. It targets to have about 5,000 workers by the end of 2017.

The company exports 80 per cent of its products.

Alex Ruzibukira, director-general of Industry at the Ministry of Trade and Industry, said the Government was in talks with East African Community (EAC) member states to enforce policies that will see exemptions on some imported items and raw material.

"A few months ago, we adopted a plan of action that exempts taxes on some of clothing materials such as buttons and zippers because they cannot be sourced locally. However, this will require adoption at the regional level," he said, adding that technocrats in the EAC have been working on proposals which will be tabled before the upcoming Heads of State Summit.

C&H Made-in-Rwanda and Utexrwa are the two major textile factories in the country, but there are many upcoming small and medium enterprises in the garment industry that are yet to contribute significantly to the reduction of imported clothes.

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