12. Determinants of Productivity of Rwandese Food and Beverage Processing Sector: Do Tax Incentives Matter?

This study discusses the main determining factors of capacity utilization in the food and beverage manufacturing industries which are likely to be positively affected by tax incentives. It uses data from the manufacturing industry comprehensive survey carried out by the Rwandese Ministry of Trade and Industry (MINICOM) in 2013–14. The model it uses is derived from an augmented Cobb–Douglas production function. The key findings of the study are: (i) in the food processing industry the main factors which undermine firms’ capacity utilization are shortage of raw materials, lack of specialized technologies, poor tax administration and standards; (ii) in the beverage manufacturing industry, drivers of capacity utilization are firm experience (age) and its material-intensive characteristics. Four factors harm the capacity utilization of beverage manufacturing firms—oversize in terms of fixed assets, lack of working capital, standards and insufficient demand. Thus, policymakers in Rwanda need to focus on non-tax measures to boost the food and beverage processing sectors.