Determining Rwanda's comparative advantage in rice : Eastern Province case study

Nkurunziza, Benjamin (2015-12)

Thesis (MScAgric)--Stellenbosch University, 2015.

Thesis

ENGLISH ABSTRACT: As agriculture remains the economic engine of rural Africa, reducing poverty in Africa will depend largely on stimulating agricultural growth. To realize this growth, the efficient allocation of a country’s scarce natural resources becomes a prerequisite. Rwanda is endowed with extensive wetlands with a high potential for rice production due to its hilly topography, abundant rainfall, and warm temperatures. However, many of these wetlands remain uncultivated despite the prevailing rice deficit in the domestic and regional markets. Over the past decade, Rwanda has increasingly become dependent on regional and global markets for rice, as domestic supply is unable to keep pace with the growing domestic demand. This production deficit has limited the potential gains that farmers and the nation could realize in the form of income and foreign exchange earnings. The main objective of this study is to determine Rwanda’s comparative advantage in rice and to identify constraints limiting efficiency. To achieve this objective, this study utilizes the Policy Analysis Matrix (PAM) to measure the comparative advantage in rice production and the level of inefficiencies within the rice subsector in the Eastern Province of Rwanda. The key findings of the analysis demonstrate that this province has a comparative advantage in rice. However, within the sample, 68 % of rice farmers’ cooperatives, cultivating rice on 25% of the total area under study, have no comparative advantage. In terms of net welfare gains, due to market distortions, domestic rice prices are artificially high, which creates a deadweight loss in the rice market. In particular, the protectionist policies (i.e. rice import tariffs and farm inputs subsidization) induce the private farm profit to outweigh the social farm profit. This abnormal profit allows rice production to become financially profitable even where there is a comparative disadvantage. On the demand side, although the domestic price of imported rice in Rwanda is slightly higher than the local rice price, the majority of consumers prefer imported rice to local rice, due to its long grain shape, aroma, and good quality. The low domestic demand for bold and short grain rice, which is cultivated by 70 % of Rwandan rice farmers, limits domestic rice producers’ market share. Given the study’s findings, the policy recommendations are threefold. The first involves technology dissemination and adoption. In order to improve the domestic rice production capacity and competitiveness, without compromising efficiency, it is imperative for rice farmers to adopt labour saving technologies. This technology adoption would allow for an increase in the area on which rice can be grown efficiently, due to a reduced social production cost. The second recommendation is that government should encourage research on the identification of aromatic and long grain rice varieties that can adapt to Rwanda’s agroecology, thereby meeting consumers’ demand preferences. Finally, though rice import tariffs protect domestic farmers against foreign competition, these policies decrease consumers’ welfare due to a reduction in the range of rice consumed in the domestic market. This study recommends the government to facilitate exportation of local rice in regional markets, and reduce rice import barriers. This intervention would benefit both farmers and consumers, while stabilizing the trade balance.

AFRIKAANSE OPSOMMING: Aangesien landbou steeds die ekonomiese enjin van landelik Afrika is, sal die vermindering van armoede grootliks afhang van die stimulering van groei binne landbou. Die doeltreffende toedeling van ‘n land se skaars hulpbronne is ‘n voorvereiste om hierdie groei te verwesenlik. Rwanda het ekstensiewe vleilande met ‘n hoë potensiaal vir rysproduksie as gevolg van die heuwelagtige topografie, oorvloedige reënval en warm temperature. Baie van die grond is egter steeds onbewerk desnieteenstaande die heersende rystekort in die plaaslike en streeksmarkte. Oor die afgelope dekade het Rwanda toemend afhanklik geraak van streeks- en globale markte vir rys aangesien plaaslike aanbod nie kan byhou met die toemane in plaaslike vraag nie. Die produksietekort het die potensiële voordele wat boere en die volk kan realiseer in die vorm van inkomste en buitelandse valuta, beperk. Die hoofdoelwit van die studie is om Rwanda se vergelykende voordeel in rys te bepaal en om die beperkings ten opsigte van doeltreffendheid te identifiseer. Om hierdie doelwit te bereik, het die studie die Beleidsanalise Matriks gebruik om die vergelykende voordeel in rysproduksie en die vlak van ondoeltreffendheid in die ryssubsektor van die Oostelike Provinsie van Rwanda, te meet. Die kern bevindinge van die analise dui daarop dat die Oostelike Provinsie van Rwanda ‘n mededingende voordeel in rys het. In die steekproef is daar egter 68% van die rysprodusente koöperasies wat geen mededingende voordeel het nie. In terme van netto welvaartsvoordele, as gevolg van verwringing in die mark, is die plaaslike prys van rys onnatuurlik hoog, wat ‘n dooieverlies skep in die rysmark. Spesifiek, die beskermende beleide (d.i. rys invoertariewe en plaas insetsubsidies) het tot gevolg dat private boerdery wins groter gewig dra as die sosiale boerdery wins. Die abnormale wins laat toe dat rysproduksie finansiëel winsgewend word selfs al is daar ‘n vergelykende nadeel. Aan die vraagkant, al is die plaaslike prys van ingevoerde rys in Rwanda ‘n klein bietjie hoër as die plaaslike rysprys, verkies die meeste verbruikers die ingevoerde rys eerder as die plaaslike rys, as gevolg van die lang korrel vorm, aroma en goeie kwaliteit. Die lae plaaslike verbruik vir vet kort korrel rys, wat verbou word deur 70% van die Rwandese rysboere, beperk die plaaslike rys produsente se markaandeel. Gegewe die studie se bevindings, is die beleidsaanbevelings drieledig. Die eerste behels tegnologie oordrag en aanvaarding. Om plaaslike rysproduksie kapasiteit en mededingendheid te verbeter sonder om doeltreffendheid af te skeep, is dit noodsaaklik vir rysboere om arbeidsbesparende tegnologie te aanvaar. Die tegnologie aanvaarding sal die area wat doeltreffend onder rys verbou word, vergroot as gevolg van verminderde sosiale produksiekoste. Die tweede aanbeveling is dat regering navorsing oor die identifisering van aromaties en lang korrel rys varieteite moet aanmoedig om aan te pas by Rwanda se agro-ekologie; om sodoende verbruikers tegemoet te kom met hulle vraagvoorkeure. Laastens, al beskerm invoertariewe van rys die plaaslike boere teen internasionale mededinging, verlaag hierdie beleide die verbruikerswelvaart as gevolg van ‘n verlaging in die verskeidenheid rys wat in die plaaslike mark verbruik word. Die studie beveel aan dat die regering die uitvoer van plaaslike rys in streeksmarkte fasiliteer en die invoerbeperkings op rys verminder. Die ingryping sal beide boere en verbruikers bevoordeel, terwyl die handelsbalans gestabiliseer word.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/98136
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