2.2.1.5. Wholesale trade
Wholesaling, jobbing, or distributing is defined as the sale
of goods or merchandise to retailers, to industrial, commercial, institutional,
or other professional business users, or to other wholesalers and related
subordinated services. In general, it is the sale of goods to anyone other than
a standard consumer.
According to the United Nations Statistics Division,
"wholesale" is the resale (sale without transformation) of new and used goods
to retailers, to industrial, commercial, institutional or professional users,
or to other wholesalers, or involves acting as an agent or broker in buying
merchandise for, or selling merchandise to, such persons or companies.
Wholesalers frequently physically assemble sort and grade goods in large lots,
break bulk, repack and redistribute in smaller lots. While wholesalers of most
products usually operate from independent premises, wholesale marketing for
foodstuffs can take place at specific wholesale markets where all traders are
congregated.
Traditionally wholesalers were closer to the markets they
supplied than the source they got the products.
However, with the advent of the internet and E-procurement
there are an increasing number of wholesalers located nearer manufacturing
bases in Mainland China, Taiwan and South East Asia like Chinavasion, Ownta,
Salehoo and Modbom, many of which offer drop shipping services to companies and
individuals.
2.2.1.6. External trade
It is commonly called international trade and it refers to the
buying and selling of commodities between or among the nations. It can be
carried out by individuals, private companies or governments. The purchase of
commodities from another country is called import trade and the selling of
goods to another country is called export trade. The trade in goods is called
visible trade while trade in services is called invisible trade. When two
countries trade together, it is called bilateral trade and when trade takes
place among more than two countries, it is called multilateral trade (TAYEBWA
B., 2007:231).
2.2.2. Trade and Rwandan
development
Rwanda needs to improve trade dramatically if it is to meet
its development objectives. Domestic investment and trade provide a crucial
basis for economic development, helping producers move from subsistence farming
to access local and international markets and providing a core of employment by
generating income within domestic industrial production and services delivery.
The vision of the trade sector is to support the Government's vision for rapid
economic growth and poverty alleviation by creating an environment that is
conducive to the rapid growth of industrial and service sectors for the
sustainable improvement of Rwanda's welfare. Its mission is to facilitate and
promote the growth and development of trade so as to achieve a sustainable
socio-economic transformation of Rwanda.
2.2.2.1. Constraints of the
Trade Sector
The major constraints to the rapid growth and to expanding
trade are often also constraints that stem from the geographical and historical
situation of the country. For example, being landlocked and without cheap air
or rail links greatly hinders Rwanda's current export capabilities. The trade
sector suffers from two major problems, the production constraints on one hand
and the international markets access on the other hand.
Our country is characterized by a weak export structure due to
low quality products originating from weak industrial sector that use
undeveloped technology. Rwanda being a land locked country and without cheap
air or railway links to regional or international markets, transport costs are
high and this makes difficult for trade development in the country. There is a
poor infrastructure such as road network, especially in the rural areas which
pose a serious transport problem to rural produced products, from areas of
production to market. Trade in Rwanda is hindered by high production costs
which have direct impact on prices, when imported product prices are lower than
locally produced products prices then automatically imports are preferred to
locally produced products hence being a problem to local producers who could
not sell their products. Most of the business laws that are currently being
used do not suite the current business situation.
Production is still low due to various constraints and this
leads to trade that always targets internal markets or subsistence hence trade
imbalance. Shortage of power supply cause most industries to
work under capacity, leading to limited production and increased production
cost. There are many factors that cause low quality production
in Rwanda, these include, poor infrastructure, power shortages, unskilled
labor, low production technology etc all these lead to lack of capacity to
compete on international markets. Lack of modern technology in
production that is always done at a higher cost as compared to the neighboring
countries and the small size of the local production units do not allow
exploiting the economies of scales.
Low standards and inability to reach international standards,
lack of quality parking materials, inadequate conditions of stock control and
high costs of transport passed on to the price of products reduce
competitiveness. There are heavy requirements for loans emanating from out
dated laws. This makes it hard for business men to access loans in the due
time. Furthermore, weak financial institutions for example banks, insurance
companies etc limit smooth functioning of business entities retarding trade
development.
Marketing constraints such as lack of clear information on
Rwanda's potentials, low purchasing power, lack of a professional business
community and aggressive mechanism to promote the positive image of Rwanda,
absence of the market information system and lack of skills in commercial
techniques and international market hinder both internal and external trade
(MINICOM, 2006:12).
Large traders have relatively easy access to finance for trade
activities but access of SMEs to credit to finance trade is constrained.
Large enterprises tend to have strong capacity to promptly
repay loans and can present tangible assets for collateral. Banks
in turn consider export/import activities to be
favorable short-term activities yielding large, low-risk and quick turnovers.
Local traders finance their activities using
ownership' equity and commercial loans, while foreign-owned
export/import firms can access not only commercial lending, but
also can often obtain advances from their overseas
suppliers. These large firms have access to short-term bank loans with
negotiable interest rates around 12.5 percent.
Well-established SMEs tend to finance trade activities using either
owners' personal equity or bank loans. Newer SMEs have
difficulties in financing their trade activities for
the following reasons: high nominal interest rates, lack of training of
entrepreneurs, difficulties in the search process of
getting a loan, poor registry system, absence of adequate credit
assessment tools and lack of information and awareness of
available schemes (REPUBLIC OF RWANDA, 2006:17).
The mainstreaming of trade in national development plans,
among other measures for stimulating economic growth and development, remains
weak. The limited scope, lack of specificity and detail, content and depth of
coverage of trade in national development plans like Vision 2020 and the EDPRS
clearly demonstrates the point. There has not been a strong justification to
put trade amongst other government sector policies, despite the fact that clear
objectives, policy measures, negotiating strategies and clear links between
trade and other important trade-related activities can help in boosting trade
to spur development and reduce poverty. Some trade objectives are loosely
referred to in some cases but this is limited and not done systematically.
Clear trade policy objectives rich in both quantity and quality need to be
present in the national plan. The ongoing exercise of mainstreaming trade in
national plans through the Enhanced Integrated Framework continues to reveal
substantial gaps between intentions and actual implementation (UNITED NATIONS;
2010:3).
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