The production of fresh and processed chilli in Rwanda has the potential to capture significant demand for these products in markets such as the European Union (EU) and China. This according to a study by Manufacturing Africa in collaboration with various Rwandan government agencies.

European demand for chillies is roughly 1.5 million tonnes per annum, which translates to about USD 2.7 billion, while China requires about 78,500 tonnes at a value of USD 56 million.

The main African countries currently supplying these markets are Morocco and Uganda. According to the study, Rwanda is well positioned to capture this demand. European buyers, in particular, are constantly looking for new reliable and cheaper sources, given volume and quality inconsistencies from leading suppliers in producing countries.

Several varieties of chilli can grow well in Rwanda, including bird’s eye, scotch bonnet and green chillies. Rwanda’s significant seasonality advantage also allows it to produce chillies while its competitors are in light supply.

Financial analysis: Exported fresh chillies

The export of fresh chillies to the EU can fetch a gross profit margin of 49%, assuming a wholesale price of USD 4,360/ tonne. The farmgate price is in the region of USD 425/tonne but driven by a variety of factors including yield, supply volume, and produce quality. Transport costs to the EU are approximately USD 1,800/tonne if the exporter takes advantage of RwandAir’s subsidised tariffs.

Financial analysis: Exported chilli oil and chilli sauce

Processed chilli products can also be sold to European markets at attractive margins.

Chilli oil can fetch a gross margin of 52%, assuming a wholesale price of USD 15,000/tonne. Total production outlay is about USD 7,000/tonne, while transport costs are USD 150/tonne, assuming transport from Kigali to Dar es Salaam by road and then to Europe by sea freight. The projected gross margin for chilli sauce is 39% at a wholesale price of USD 10,000/tonne and production costs of about USD 6,000/tonne.

The study highlights Souk Farms as a Rwandan agribusiness success story. It exports about 2,000 tonnes of fresh horticulture produce – including chilli, avocado, passion fruit and French beans – to markets such as the UK, UAE, France and the Netherlands. Souk has its own farms and manages a network of about 70 outgrowers and contract farmers.

Rwanda competitive advantages

According to the study, Rwanda’s competitive advantages to produce high-value crops for premium export markets include:

• Ideal climatic conditions and seasonaily advantage. Rwanda has fertile soil, a wet climate and a mild temperature.
• Horticulture is a strategic sector for the Government of Rwanda, with several fiscal and non-fiscal incentives available.
• Competitive labour market. Wages are USD 1.30 to USD 2.60 per day for unskilled labour and USD 300 to USD 450 per month for specialist staff.
• RwandAir has daily flights to Europe and the Middle East that are available to export high value crops. The cost of air freight from Kigali to any destination is USD 1.8 per kg.
• Improving infrastructure. Rwanda is the third country in Africa in terms of road quality with a commitment to continue improving road infrastructure. The rural feeder roads programme has enabled Rwanda to go from 1,000 km of unpaved roads in poor condition in 2012, to 1,824 km additional paved roads, and more than 2,000 km of newly rehabilitated and all weather unpaved roads in 2018. Additionally, the government has committed to building a road within 2 km of each farm by 2028 (30,000 km of road in 2028 vs 13,350 km in 2015).

Manufacturing Africa is an FCDO funded programme looking to support investment into the manufacturing sector across Kenya, Ethiopia, Rwanda, Uganda, Nigeria and Senegal. For more information about Manufacturing Africa, investment opportunities, or additional sector deep dive studies please reach out to the Portfolio Lead Faheem Chowdhury: [email protected]