East African Community member states have been urged to facilitate an environment that is conducive to business for quick recovery of the regional economies and their investments from the impact of the COVID-19 pandemic.
This comes at a time when non-tariff barriers (NTBs) are still posing a major concern for the EAC business community as they add to transaction costs and contribute to low intra-regional trade volumes.
Various studies have cited NTBs as one of the key factors contributing to the decline of intra EAC trade currently standing at about 12 per cent. Most of the NTBs are undermining the provisions on the free movement of goods and services as enshrined in the EAC Customs Union and Common Market Protocols.
According to East African Business Council (EABC) chairman, Nicholas Nesbitt, business people must work hard to protect people and curb the spread of COVID-19 whilst getting the economy on a recovery path by ensuring both formal and informal sectors resume normalcy.
“As the COVID-19 pandemic continues to evolve, EAC businesses need to effectively navigate the four phases of dealing with the crisis. The first phase of action entails businesses to positively but cautiously respond to the crisis. The second phase of resilience entails entrepreneurs and businesses to manage the uncertainties brought about by the pandemic. The third phase of recovery requires businesses to identify new opportunities that have been presented by COVID-19. The last phase is the new reality whereby EAC businesses are required to adapt to a new brave world and a new normal,” Mr. Nesbitt said.
The EAC common market boasts of over 177 million people with a combined Gross Domestic Product (GDP) of over USD193 billion. However, trade within the bloc has declined sharply. According to current data, total EAC exports have decreased by 4.7 per cent to USD14.0 billion in 2018 from USD14.7 billion in 2017 of which, intra-EAC exports accounted for 22.4 per cent.
Trade deficit for the EAC region increased by 39.4 percent to USD24.3 billion in 2018 from USD17.4 billion registered in 2017 according to the EAC Trade & Investment Report, 2018.
This is why the EABC in partnership with the Federation of German Industries (BDI) has convened trade and policy experts from the EAC Partner States virtually, to chart out a joint regional policy advocacy agenda geared to spur intra-EAC trade to 30%. This is after the COVID-19 pandemic has disrupted regional and global supply chains leading to contraction of intra-EAC trade and costing USD37 billion to USD79 billion output losses for the region.
“The COVID-19 pandemic has compelled EABC to refocus and repurpose policy advocacy initiatives towards economic resilience and rebound including stimulus packages to support business continuity,” said Dr. Peter Mutuku Mathuki, EABC CEO.
“Concerted advocacy efforts are needed to fast-track the finalization of the comprehensive review of the EAC Common External Tariff to boost industrialization and regional value chains, ” said Dr. Mathuki.
The EAC region has few harmonized regional standards, lengthy harmonization process as well as low adoption rate of harmonized regional standards coupled with varying frameworks of technical regulations across partner states.
This has led to standards related to NTBs such as costly and time-consuming re-testing processes or denial of market access for certain products.
The lack of a regional technical regulation framework has contributed greatly to the application of national technical regulations that do not have a common administrative approach in the process nor the list of standards declared as mandatory. This situation is exacerbated by a frequent misunderstanding amongst stakeholders on the different roles of regulatory authorities and National Bureaus of Standards of each of the member states, and the lack of coordination among those institutions.
Recommendations of the EABC Policy Agenda 2021/22
The EABC has come up with a list of ideas that if implemented may result in boosting trade within the region. Among them is the elimination of persistent NTBs and the implementation of trade dispute settlement mechanisms.
The business council also recommends harmonized product standards and work permit regimes as well as liberalization of trade in services, free movement of capital, and harmonization of domestic taxes in the region. These are top of the EABC Policy Agenda 2021/22 geared to boost intra-EAC trade and investment in the region.
The aforementioned challenges and poor performance in trade and investment are a wake-up call to both policymakers and the private sector to work together to make our region more competitive and attractive to businesses. This therefore calls for the Partner States to implement the agreed regional commitments and undertake legal and regulatory reforms to comply with commitments made in the EAC Customs Union, Common Market and Monetary Protocols.
The agenda by the business council also calls for the harmonization of East African Standards to be prioritized according to the 20 most traded goods across the EAC region.
The regional policy advocacy agenda as a result aims to harness the economic potential of the EAC by analyzing trade and investment barriers, which have been cited as some of the challenges blocking businesses, to take full advantage of the EAC Customs Union and Common Market.
Some of the challenges still slowing down intra-EAC trade include the packaging which is less developed and remains a big challenge for most small and medium enterprises in identifying the right packaging and the costs involved. Another challenge is food additives which play a vital role in value addition to achieve customer quality requirements. As component of food, food additives are subject to pre-market approval by experts qualified by scientific training and experience to evaluate their safety under the conditions of intended use.
“Food additives, despite being a necessity in value addition, may trigger allergic reactions and possibly lead to other serious health issues” and therefore MSMEs need to know the recommended food additives and quantities for each product.
EABC has been quite vocal on matters of regional trade. They have on several occasions managed to improve the bloc’s ease of doing business by convincing the partner state governments to make amendments that make trade easier within the region.
Last year, EABC resolved the following COVID-19 related NTBs as a result of EABC engagements with policymakers, trade facilitation agencies at the border posts to ensure seamless flow of cargo during the pandemic. This happened when there were over 300 trucks reported to be stranded at Namanga from Tanzania into Kenya due to a curfew imposed in Kenya.
This caused long truck queues and lengthy clearance time of cargo trucks entering Kenya through the Namanga OSBP. Following EABC’s intervention, a bilateral meeting between Kenya and Tanzania agreed to allow movement of cargo trucks during curfew times.
There was also a blockade of transit goods at the Nemba, Akanyaru, Borders between Burundi and Rwanda. This was due to lack of mutual trust of COVID-19 test results between Kenya and Tanzania (Namanga, Holili/Taveta, Lungalunga/Horohoro, Isebania/Sirare).
Aside from Covid-19 recovery, NTBs have been a thorny matter for a long while and EABC has been seeking redress with the issues prevailing. The business council, with support from GIZ-Creating Perspective Project and Federation of German Industries (BDI) have undertaken substantial efforts in the past seven months, to introduce a new Customer Relationship Management (CRM) software to the National Focal Points and other Business Membership Organizations with aim of helping BMOs to better serve their members and stakeholders across East Africa.
All this is aimed at improving trade within the bloc.