Trade between nations in East Africa is expanding. One example is the trade bloc formed by the East African Community member countries (EAC). Kenya, Uganda, Tanzania, the Democratic Republic of the Congo, Rwanda, South Sudan, and Burundi are all part of it. Intra-regional commerce between these nations was worth USD 10.1 billion in 2017 to the end of September. This sum is significantly higher than the seven billion dollars in trade between members in 2022.
Despite the encouraging development, it is still quite low in comparison to what member countries traded with the rest of the world, particularly those outside Africa. The intra-trade volume accounts for 20 percent of total trade volume. In all, EAC trade with the rest of the globe totaled USD62 billion, which is equivalent to the export proceeds of a single country in Asia, Europe, or elsewhere.
“We expect that intra-regional commerce in East Africa will reach at least 40% in the next five years,” said Peter Mathuki, secretary general of the EAC, at a press conference two weeks ago in Nairobi. It is easier said than done, as the saying goes.
To get to the level that the secretary general envisions, current challenges affecting trade between member countries should be averted.
Doing business inside the East African community is tough, as it is in many other African countries. Trading within the bloc, in particular, necessitates the patience to navigate various regulatory hoops and even cope with corrupted officials. This, combined with non-tariff barriers and member nations’ unharmonised rules and regulations, made progress on the EAC’s common market protocol impossible. Members of the EAC trade with countries outside the bloc more than with their neighbors who are members of the bloc.
As the free movement of products and services becomes more difficult, what is achieved now falls far short of what the protocol’s founding members envisioned when they founded it. Two weeks ago, the leader of the main actor within EAC, Kenyan President William Ruto, pushed member countries to eliminate non-tariff barriers to trade among members.
“As East Africa, we share a destiny. We must therefore work together to remove hurdles to trade and investment within the region for the sake of the people’s prosperity,” said Ruto as the EAC premier address council of ministers gathered in his palace two weeks ago.
Mathuki, the secretary general, anticipates that trade restrictions inside the EAC will be removed soon, as member countries have already demonstrated a willingness to finding a solution. “257 non-tariff barriers have been collectively resolved since 2007. This is consistent with the bloc’s goal of increasing intra-regional trade volumes,” he said.
The proposal to establish an EAC central bank has devolved into a pipe dream as members struggle to reach an agreement on where it will be headquartered.
“It will be in place this year, allowing us to unify member states’ fiscal and monetary policies, and then we will have a common currency in place in roughly three years,” Mathuki said last week at another press conference in Nairobi.
Mistrust among members
The EAC was founded in 1917, with Kenya and Uganda as founding members under their colonial master, Britain. Tanganyika, now Tanzania, became a member of the group in 1927. Four decades later, the three countries formally created the regional bloc. However, it failed ten years later, despite the fact that member countries were able to establish major institutions such as the East African Development Bank, the University of East Africa, East African Railways, and East African Airways.
EAC was revived in 2000, this time with more members. Rwanda Burundi and South Sudan joined the original three members. The dominance of Kenya, the bloc’s strongest economic powerhouse, appears to have contributed to the breakdown of the EAC in 1977 and the reluctance of member nations to reconstitute it. Kenya is accused by member states of flooding their markets not just with its own products, but also with products produced in their country but repackaged and sold in the local market.
Ugandan legislators once summoned authorities in charge of international commerce and directed that an audit be done to see whether Kenya is benefiting or not. Uganda buys USD 800 million in commodities from Kenya while exporting less than USD 500 million.
The lack of trust that exists among the members is another cause for concern.
The Democratic Republic of the Congo (DRC), which just joined the EAC, accused Rwanda of providing a safe haven for illicit trade. DRC officials accused Rwandan authorities of knowingly enabling the smuggling of minerals mined in Congo into their country. One example is the disparity between Rwanda’s official and unofficial mineral exports. Rwandan officials announced that they shipped 2,163 kg of gold to the UAE in 2018. The UAE declared in the same year that it imported 12,539kg of gold from the same country.
New players to the bloc
The Democratic Republic of the Congo is the youngest member of the EAC, while Somalia is still in the process of being joined. Mathuki, the secretariat general, revealed last week that Somalia’s request is being assessed by a verification team.
“Somalia has the longest national coastline in Africa, stretching over 3,000 kilometers and connecting Africa to the Arabian Peninsula, which the region can use to boost intra-regional trade and enhance the lives of East Africans,” he said.
However, not everyone is pleased with the addition of new members.
On June 20, 2021, a Ugandan lawyer filed a petition with the East African Court of Justice to prevent DRC from being admitted, stating that DRC unjustly and without due process arrested three hundreds of Ugandans.
There is also concern that the DRC would send armed militants to the EAC. Given the current security situation in the DRC, which forced the EAC to deploy combined forces to bring peace to the region, this is not an unfounded issue. “One of the concerns about DRC’s admission is its significant security difficulties,” an analyst stated. “I believe admitting Somalia will exacerbate the security situation.”