The East African Business Council (EABC) has called upon regional companies to fully take advantage of the Africa Growth Opportunities Act (AGOA) initiative.
The EABC Executive Director, Charles Mbogori said that instead of fully taking advantage of the initiative, the East African companies largely focus on competing against each other rather then complementing each other especially in the area of specialisation and division of labour.
“In almost 10 years of existence, the East African companies have not fully taken advantage of trade ties the initiative trade with the United States under the AGOA,” he said.
The Act was signed into law in 2000 as the Trade and Development Act. Information on trade under AGOA in sub-Saharan Africa shows that Mauritius, Botswana, Swaziland, Namibia, Nigeria and Kenya are just a few of the countries that have utilised AGOA better while Tanzania, Uganda, Rwanda and Burundi have performed poorly in comparison.
According to records, the combined total export of all five East African Community (EAC) countries for 2006 was not even $0.5 billion.
The region managed only $419.5 million in total exports to the US. The figures indicate that Kenya reaped annual exports of $352.8 million with Tanzania coming second at exported goods worth only $34.6 million.
Rwanda on its part derived only $8.9 million (Rwf5 billion) – coming forth after Uganda ($21.7 million) while Burundi managed to trap just $1.9 million. However, Rwanda and Burundi joined the EAC in July, 2007.
According to figures from the Rwanda Private Sector Federation (PSF), the country’s exports to the US last year from of about Rwf5 billion in 2007 to Rwf2 billion, representing a 60 percent fall.
Emmanuel Hategeka, the PSF Chief Executive Officer (CEO) attributed the fall to the global financial crisis.
The EABC therefore suggests that each country should concentrate on the area that offers the most comparative advantage and regional competitive advantage.
“Industries that produce at smaller quantities can be merged into regional industries that can meet the demands of big external market,” Mbogori said while addressing the East African Community Preparatory Meeting for the 8th Sub-Saharan AGOA Forum.
He continued that establishing collaborative partnerships with competitors, supporting industries or producers of complementary goods increases capital, market share and spreads the risk and encourages sustainability of a larger market.
Mbogori explained that East African businesses have traditionally focused on Europe and Asian markets and are still not well informed of US market, its nature, and its business environment.
He continued that this is worsened by the distance between US and EAC and the high cost of doing business in the region.
“East Africa region has some of the highest energy, and transport costs in the world, which makes it difficult for regional firms to compete with those in Asia and Latin America.”
Mbogori further suggested that the Aid for Trade initiative should be implemented quickly for EAC countries to improve their productive capacity and expand exports to the US market while the AGOA preferences last.