Industrial development: importance, problems and solutions

1Why this matters

Before its 2018 upgrade, the Cimerwa factory produced about 27,000 tonnes of cement a month, while Rwanda needed about 50,000 tonnes. The gap had to be imported, at a high cost in foreign currency. Every product made at home instead of imported keeps money and jobs in Rwanda. This lesson weighs why industry matters, what holds it back, and what is being done.

2Importance of industrial development

• Jobs for a growing population, especially young people leaving small farms.
• Adding value: processed tea, coffee and tin sell for far more than raw leaf, cherries or ore.
• Import substitution: making cement, soap or milk at home saves foreign exchange.
• Exports and foreign exchange, for example tea, coffee, metals and garments.
• A market for farmers, whose crops and milk become factory inputs.
• Government revenue from taxes; better roads, power and water around industrial areas; growth of towns; new skills and technology.
• Diversification: less dependence on farming alone.

3Problems

• Landlocked position: importing raw materials and machines, and exporting goods, is costly because of the long road trip to the sea.
• Costly and unreliable power.
• Shortage of skilled workers and managers.
• Limited capital and costly loans.
• A small home market with low incomes.
• Competition from cheaper imported goods.
• Few local raw materials for some industries.
• Pollution of air, water and wetlands by factory waste.
• Scarce flat land in a hilly country.

4Solutions

• Special economic zones and industrial parks in Kigali and the secondary cities, with ready land, power and roads.
• Regional markets through the East African Community and wider African trade agreements.
• "Made in Rwanda" promotion, so that buyers choose local goods.
• Technical and vocational training for skilled workers.
• More power from hydro, methane and solar.
• Credit for manufacturers, and attracting investors.
• Environmental rules: factories were moved from the Gikondo industrial area, which lies in a wetland, to the special economic zone.

Worked example: cement self-sufficiency

Before 2018, Cimerwa made 27,000 t a month and Rwanda needed 50,000 t a month. After the upgrade, output was expected to reach about 441,223 t a year.

1. Share of need met before = 27,000 ÷ 50,000 × 100 = 54%. Imports = 50,000 − 27,000 = 23,000 t a month.
2. Expected monthly output after = 441,223 ÷ 12 ≈ 36,770 t.
3. If need stayed at 50,000 t, share met after ≈ 36,770 ÷ 50,000 × 100 ≈ 74%. The upgrade cuts imports, but demand grows as the country builds, so imports do not disappear.

Practice