EA integration doubles internal trade

Prospects for economic growth, new jobs and prosperity in East Africa depend, to a large extent, on the continued growth of trade in the region. The five East African partner States — Burundi, Kenya, Rwanda, Tanzania and Uganda— have seen internal trade almost double over the last 5 years.
Trucks in transit at Gatuna boarder. (File Photo)
Trucks in transit at Gatuna boarder. (File Photo)

Prospects for economic growth, new jobs and prosperity in East Africa depend, to a large extent, on the continued growth of trade in the region. The five East African partner States — Burundi, Kenya, Rwanda, Tanzania and Uganda— have seen internal trade almost double over the last 5 years.

The Customs Management Act and the Common Market Protocol are creating a unique opportunity for the free movement of people, capital and services in the region. This is essential to attract domestic and foreign investors, and to help East Africa step forward on the world economic stage.

According to Juma Mwapachu, Secretary General of the EAC, “Investors are attracted to large and growing markets for their goods and services.”

The region now has a combined market of 130 million consumers which is of great interest to investors. Yet to compete successfully, investors must be able to move their goods cheaply and efficiently across borders, unencumbered by delays and ageing physical infrastructure. Modernised ports, roads and railways, faster border crossings, and less cumbersome paperwork will create a better business environment.

This will in turn reduce costs and reduce prices to hard-pressed consumers.  In Rwanda 46 percent of the total price of imported goods is represented by the cost of transporting them from Mombasa or Dar es Salaam.

East Africa is now responding to a stark choice: stay divided and lose ground or compete globally without internal borders. The environment for regional integration is favourable, with closer political cooperation between the five EAC member states, and potentially vast capital available from the underperforming post-recession economies of the developed world.

The region’s two main transport corridors – the Northern and Central Corridors – run from the ports of Mombasa and Dar es Salaam inland to Uganda, Rwanda, Burundi and Eastern DR Congo. Together the corridors handle 90 percent of the region’s trade.

The challenge is the high cost of doing business along the corridors. For example, transport costs are 60 percent-70 percent higher in East Africa than in the EU or the USA. The array of non-tariff barriers (NTBs) to business is painfully familiar.

 The visible barriers include inadequate capacity and infrastructure at ports and border posts, poor quality roads, and an obstacle course for truck drivers in the form of designated or unregulated police stops, weighbridges, and cumbersome checking of goods by standards authorities and others. 

These procedures delay transit of goods on the corridors. Some experts believe they add an estimated 15 percent to the cost of transport along the corridors.

The cost of a 40-foot container amounts to between $800 and $1,000 each day, so the stakes are high. The net result is inevitable increases in the prices of all imported goods in the region.

The EAC has a crucial role in removing infrastructure barriers and red tape, and making the region more competitive with other parts of Africa, and Asia. Progress is being made. Average times for trucks crossing the border posts in the region has been in the past as high as 4-6 days, but nowadays can be less than 6 hours.

TMEA’s work on the One-Stop Border Post at Kagitumba/Mirama Hills between Rwanda and Uganda will reduce long delays for the 50-60 trucks that cross the border each day.  The delays will be reduced to only 2 hours per truck once the work is finished. TMEA is also supporting East African countries to implement internet-based systems that process the transit of goods. This will enable business to pay taxes more easily, and to eliminate mistakes in completing forms and achieving compliance.

East Africa is working towards improved prosperity through its commitment to integration, and TradeMark East Africa is proud to be part of that process.

The writer is Deputy CEO, Country Programs at TradeMark East Africa,
anataria.karimba@trademarkea.com

 

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