As the East African Community (EAC) integration process gathers pace, there are indications that some member states accrue more benefits than others due to stiff competition within their respective business communities.
Some businesses in newcomers Rwanda and Burundi, complain about what they call ‘unfair’ competition from the more established counterparts in the other EAC partner states, especially Kenya and Uganda.
“We would have competed but products from Uganda and Kenya are cheaper. For example, I export maize and beans, but a kilo of maize in Rwanda is at Rwf 190; while in Kampala it’s at Shs180. Therefore, we shall not benefit if we export our products to those countries”. Alfred Nkubiri, a local cereal exporter said.
He added that due to the cutthroat competition in the original EAC member states – Kenya, Tanzania and Uganda – he had chosen to export to Burundi and Congo saying the markets were ‘friendlier’.
Gerald Sina, the proprietor of Nyirangarama, a food processing company, blamed the relative high prices of local products to high production costs, partly due to the fact that many local producers import raw materials.
He also said that larger competitors from Kenya, Uganda and Tanzania were able to sell their products at lower prices – despite the addition of transport costs – because they enjoy the benefits of economies of scale, on top of incurring lower production costs.
“For instance, I import passion fruits from Uganda, meaning that I incur more costs in terms of transport, and this also limits my production capacity,” explained Sina.
Both Rwanda and Burundi started implementing the EAC Customs Union in July 2009, meaning that they scrapped tariffs on goods originating from within the bloc.
Janvier Mucyo, the Marketing Manager of Bank of Kigali, noted that though their bank was yet to expand to other regional countries, competition in the banking sector had increased with the entry of other players from the EAC.
Some local exporters said that some countries were likely to continue benefiting from the integration process more than others.
Freddy Nyangezi, the head of corporate affairs in a local brewery, Bralirwa, pointed out that, due to transportation difficulties in countries like Tanzania and Kenya, the company had decided to only export their products to Uganda and eastern DR Congo.
However, the acting Chief Executive Officer of the Private Sector Federation, Yvette Mukarwema, said that unless competition among partner states intensifies, regional products would struggle to compete on the international market.
She said PSF had established mechanisms that would provide guidance to local investors to enable them compete with their counterparts within the bloc.
“We have now embarked on establishing business trips for our business communities to undertake a study tour to other regional countries with the aim of getting experience on how to improve their products,” she said.
“We want them to see how things are done elsewhere and are optimistic it will help them to identify the weaknesses of their competitors and capitalise on them to create a niche.”
The EAC, which brings together Rwanda, Burundi, Kenya, Uganda and Tanzania, has a total population of more than 130 million and a combined GDP of about $78 billion.
The bloc also posts an average growth rate 5 percent, with officials currently pushing for anywhere between 8 and 10 percent.
Addressing the business community at the regional body’s Secretariat in Arusha, this week, the EAC Secretary General, Ambassador Dr Richard Sezibera, said that the vibrancy of the region’s businesses will largely depend on the willingness of the individual partner states to carryout wide-ranging policy reforms.