East African Community commit to efforts to grow intra-regional trade
The East African Community has committed to efforts including operationalization of single customs territories and reducing non tariff barriers in its endeavor to grow trade among member states. The ongoing integration efforts across the East African Community (EAC) region largely aim at increasing trade.
However, despite these efforts, intra-regional trade across the bloc is at about 17 per cent, according to trade experts who say that there is great potential across the bloc.
EAC comprises six countries with a population of more than 160 million.
According to Frank Matsaert, the TradeMark East Africa Chief Executive, though some indexes put the levels of trade in the region at 20 per cent, 17 per cent is more realistic.
Matsaert said that persistent setbacks to regional trade in EAC largely comprise of non-tariff barriers which include, technical issues such as standards, logistics and police road blocks.
TradeMark East Africa is a non-profit company that supports the growth and trade to ensure gains for EAC residents.
“The other barrier to trade is lots of paper work requirements, red tape and lack of automation in the process of intra-regional trade,” he said.
Matsaert noted that despite the progress with developing physical infrastructure across the region, there was still a long way to go in connecting various parts of the region to create avenues of trade.
“The ports have a long way to go. The efficiency of our two ports is way below, say Durban. That is a big issue. Trade is growing quite quickly but we also have to increase our capacity,” he said.
Matsaert noted that also partly to blame for the status quo is the high transport and freight costs often brought about by inefficiencies along the transport routes especially at entry points like ports and borders.
“For East African landlocked countries transport can be as high as 75 per cent of the value of exports,” he pointed out.
To address such challenges, Trademark East Africa is set to launch the second phase of its intervention which is expected to take an investment of about $700 million for the next six years.
The new strategy, that kicks-off next year, seeks to have an impact of $11.9 billion of additional trade in the region which will turn around $116 billion to the region’s Gross Domestic Product.
With that, the organisation is projecting creating and sustaining about 5 million jobs across the region and lifting about 3 million people out of poverty, according to Matsaert.
“In the new strategy, TradeMark East Africa aims to reduce trade costs in East Africa by about 10 per cent and reduce transport time by 15 per cent for the average trip through corridors.
“These interventions are expected to generate an average increase in exports of key commodities in target sub-sectors of 50 per cent equivalent to additional exports of $1.9 billion,” the chief executive said.
The phase will also see more Rwandan firms and producers connected to external markets building on from efforts in the previous phase, he said.
Ali Mufuruki, the institution’s board chairperson, said that the second phase will also seek to increase the region’s trade with the rest of the world, which is currently at 2 per cent.
“That 2 per cent tells you that we have a lot of work to do as a region, and that there should be cooperation among the various players across the region to enhance trade and improve lives,” Mufuruki said.
In the previous phase that began in 2010 on the inception of the programme, TradeMark invested about $65m in Rwanda and cites a total net return of 28 per cent in the four key programmes implemented.
Patience Mutesi, the Rwanda’s country director for TradeMark East Africa, said that among the key impacts was the significant reduction in cost of transporting containers from Mombasa to Kigali.
The cost has dropped by more than $1,500 from $6500 in 2011 to about $4800 in 2016 which has saved the country about $7 million.
“There has also been a reduction of road tolls for Rwandan trucks entering Tanzania from $500 in 2014 to the current $152 and estimates show that businesses have saved about $800,000 per annum through the development,” Mutesi said.
