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Uganda border of Malaba. It is one of the businesses in the East Africa
region
For years, the East African Community (EAC) struggled with divisions among member states mainly on key trade agreements slowing down the region from achieving a full working common market.
Countries have been playing protectionism targeted mainly at protecting local industries, with fallouts witnessed among states.
Kenya, Uganda and Tanzania have had their fair share of the trade wars with both tariff and non-tariff barriers affecting regional integration.
Poor infrastructure in some parts of the region has also been affecting easy movement of trade volumes while businesses have suffered lack of enough capital to do trade.
However, recent developments have set the region for growth both on intra-EAC trade, continental trade and of course international trade.
Over the course of 2022, there has been progress on the East African Community’s Common External Tariffs (CETs) which had dragged since 2016.This exposed the region to cheaper imports mainly from China and India, making local industries uncompetitive in international markets.
Trade experts say, as intra-EAC trade remains at a low of13 per cent, in comparison to common markets such as the EU which is at 67 per cent.
The CET is imposed on products imported from non-member countries, aimed at safeguarding local products and boosting industrial growth.
In May 2022, EAC Ministers / Cabinet Secretary in charge of Trade and Finance adopted a 35 percent tariff as the 4th Band of the EACCET.
Respective Finance Ministers met during a retreat on the comprehensive review of the CET, in Mombasa, Kenya, agreed the implementation of the reviewed tariff rates to commenceJuly1, 2022.
According to EAC Secretary General Peter Mathuki, the move was a positive step towards the promotion of industrial sectors and realization of the benefits of the African Continental Free Trade Area (AfCFTA).
“The move is set to spur intra-regional trade by encouraging local manufacturing, valueadditionand industrialization,” said Dr. Mathuki.
East African Ports: Who really is controlling the region’s trade
Another driver for trade is the huge investments in port facilities by Kenya and Tanzania which puts the region at a pole position for international trade.
The Africa Port report, dubbed “Fast-tracking Transformation” lists Dar es Salaam and Mombasa among Africa’s rising ports alongside Lagos, and Cape Town.
Tanzania has in place a port expansion plan to the tune of $421 million.
Dar es Salaam currently has an annual throughput capacity of 11 million tonnes.
Other ports are Tanga and Mtwara.
Neighbouring landlocked countries have since increased the use of Dar which has also improved efficiency.
In Kenya, there has also been ongoing port expansion among them being the completion of a second phase on the ports second container terminal.
The project has increased the port’s annual capacity by 450,000 containers, bringing the total annual capacity to 2.1 million containers.
This is in addition to the 550,000 TEUs that came with the first phase of the three-phased project.
The largest port in East Africa has undergone a massive infrastructure upgrade and dredging works with an expectation that more vessels and large post-Panamax ships will be able to dock.
Kenya also has invested in a second port facility-Lamu Port which is mainly targeted at transshipment business.
Lamu Port has a larger vessel handling capacity than Mombasa.
Its berths are 400 metres long compared to Mombasa’s 300 meters average while the depth at Lamu is up to minus 17.5 meters against 15 meters at the Port of Mombasa.
Its natural depth and proximity to the open sea makes it potential for transshipment as it will attract bigger vessels.
“Kenya can become a major player for transhipment and maritime trade, “ the Shippers Council of Eastern Africa (SCEA) notes, as the facility continues to connect movement with Zanzibar.
Leveraging East African trade
Individual states have trade deals with key global markets among them the European Union UK, US and Asia.
While the EAC-EU Economic Partnership Agreements (EPA) works differently for Kenya compared to other developing countries, the region may capitalize on the instruments in place to push for greater trade.
The EU-EAC EPA covers trade in goods, fisheries, agriculture, institutional provisions, dispute settlements as well as economic and development cooperation.
The agreement contains a clause for future negotiations to be undertaken on Trade in Services and Trade Related Issues (competition policy, investment and private sector development, intellectual property rights, trade and sustainable development, and transparency in public procurement).
Burundi, Rwanda, Tanzania and Uganda are covered by the EU’s everything But initiative, under which all products from Least Developed Countries except arms and ammunitions have preferential access to the EU market.
Together with other sub-Saharan African countries, the EAC Partner States also qualify for duty-free access to the US market under the African Growth and Opportunity Act (AGOA), with the exception of Burundi whose eligibility was revoked in 2016.
Meanwhile, Kenya is pushing for a trade deal with the US as it seeks to secure preferential terms for her exports before the lapse of AGOA in 2025.
The region has an opportunity to negotiate for trade pacts as a bloc, experts say, which will help increase their volume of transactions under regional and international trade agreements.
Member states have potential to push for export markets mainly on fresh produces, with Asia, Europe and the Middle East as key potential destinations.
According toEast Africa Business Council, it is imperative for the region to also take advantage of opportunities such as the African Continental Free Trade Area (AfCFTA), AGOA, Economic partnership agreement, to advance trade.
It is yet to fully exploit trade agreements to its advantage, due to challenges such as low productive capacity, fragmentation and poor infrastructure, EABC notes.
The EAC secretariat that seats in Arusha remains keen on rationalizing investments and using established industries to promote efficiency in production, as well as harmonizing trade policies, investment incentives and product standards, with a view to promote the Community as a single investment area.
If the region seeks to cooperate and reduce their respective barriers, promote harmony through a unified approach, the bloc can surely capitalize on its unity.
However, the challenge today is that each nation has its own agenda, and the internal miscalculated trade conflicts will continue to hurt respective nations until they wake up and realize that they’ve been left behind.
