East Africa is a region well-endowed with resources both natural and human which if well-harnessed could help turn around the East African Community (EAC)’s economic fortunes.
While most sectors of the economy are informal, they nonetheless remain the backbone of the economy. These SMEs need support, however, to reach their potential and one of these is the Market Access Upgrade Programme (MARKUP) which enables small businesses to access the European Union (EU) market.
Launched in 2018, MARKUP which is a partnership between the EU and the EAC aims to increase exports of agribusiness and horticultural products and promote regional integration and access to the European market. The EU presents a huge opportunity for regional SMEs making it a great platform for those in the sector to market their products in Europe.
For instance, coffee farmers and exporters in the region are breaking into specialty coffees. Through the International Trade Centre (ITC), MARKUP is putting EAC specialty coffee on the world map by supporting selected companies which will participate in the SCA World of Coffee event in Warsaw, Poland in October 2020.
As preparation, companies participating in the event will go through targeting training to ensure that they make the most of their participation. The 25 SMEs in the EAC’s Specialty Coffee export sector have participated in a marketing and communications training strategy ahead of the Warsaw event. To enable these companies reap the most from the event, the training focused on branding and effective buyer negotiations as well as appealing to international markets.
Participants from Kenya, Tanzania, Burundi, Rwanda and Uganda will exhibit their produce at the Warsaw World of Coffee event where they will be learning about European buyer expectations and market demand.
With such an opportunity, the EAC SMEs have a chance to explore trade prospects beyond the regular since MARKUP will help them improve their market access while understanding new markets and finding and meeting new buyers. The SMEs will also be able to market and promote themselves and their products better against global competition.
MARKUP is supporting harmonisation of standards and SPS measures while strengthening SMEs and sector associations. The programme is also equipping trade support institutions to deliver better quality services.
While Ethiopia is missing out in the MARKUP programme, the country remains on an impressive growth trajectory with the International Monetary Fund (IMF) placing it second after Kenya as the region’s biggest economy. Ethiopia had overtaken Kenya briefly in 2016 but East Africa’s economic hub reclaimed the pole position in 2017 with a projected GDP of US$ 95 billion (KSh9.9 trillion) in 2019.
IMF projects that Kenya will remain in that position for the next four years where the country’s GDP will hit US$150 billion by 2024.
Ethiopia’s estimated GDP as of 2019 was US$90 billion while that of Tanzania was US$60 billion. Uganda comes in fourth at US$32 billion of GDP while Rwanda which is hailed as one of the fastest-growing economies in the world has a GDP of US$9 billion. Burundi’s GDP was estimated at US$3.4 billion while South Sudan’s was US$3.2 billion as at 2019.
The EAC Trade and Investment Report 2018 shows that key developments with the potential to influence current and future trade and investment outcomes include continued positive economic growth of the region.
East Africa should position itself as a trade hub and investment destination where the Global Value Chains initiative impacting agricultural production, industrial processes and logistics will be structured.
With the Africa Continental Free trade Area (AfCFTA) presenting both opportunities and challenges, it has the potential to integrate Africa’s fragmented markets, enhance competitiveness, increasing access to regional and global markets and better reallocation of resources.
This is where SMEs come in since they are a critical contributor to the GDP growth of the region which mainly exports agricultural commodities in their raw form leading to their fetching little returns on the global market.
Beyond the European market, the EAC should focus on intra-regional trade in manufactured commodities which is limited by the lack of heterogeneity in industrial development. As such, SMEs will have a better chance than if they just focus on markets where their produce is marketed without value addition.