Uganda seems to have jumped late into the pool in the race to create zones that can enable her manufacturers gain a competitive advantage in the bid to promote her exports.

However, this should not be seen as a disadvantage but rather as an advantage because she will be able to copy and aquire best practices and also skirt the errors made by her sisters in the East African Community (EAC) Kenya and Tanzania .

In this case, I refer to the creation of Zones demarcated by governmnent authorities as free from import and export duties on raw materials and exports.

For a long time, the biggest hurdle to industrial production is the cost of doing business. This comes in the form of taxes on raw materials and machinery and also taxes on export of the finished product. This has now been adressed in the free zone arrangement.

This free zone thing, incidentally, is not a new phoenomenon, having started decades ago with the earliest known free zone being The Shannon Free Zone in Ireland, established in 1958. One cannot help wonder why this had not been implemented sooner.

Many East African businessmen have been facing tough competition from producers who have had better incentives and infrastructure in more developed economies.

With the free zones, an industry is guaranteed both less cost of doing business and a better, well laid out infrastructure like access roads, good water and power lines.

Since ultimately the entrepreneur aims at producing for export, the free zones will guarantee high quality products that can enable them compete favourably in the market.

The other perks this free zone affords to the industrialist is a 10 year tax holiday. There is also a 100% tax exemption on income from agro-processing. There are also other tax benefits like waiver of taxes on income on technical personnell.

Whilst our governments may not afford to give direct subsidies to producers like farmers, this is one thing our governments in the EAC have agreed to do and I believe is an opportunity not worth missing.

There are currently over 3,500 Export Processing Zones (EPZ) in the world in over 130 countries with Africa also having started 40 years ago in Liberia and Senegal. Countries like Mauritius, which have proved very successful have used the EPZ model.

One of the big success stories to-date is the UAE which has successfuly used this model to spur development, attract foreign direct investment, and increase on industrial output.

The ball is in the court of East Africans. All that our industrialistw will require to benefit is to fulfil the requirements; register a new company for the sole purpose of operating in a free zone; Demonstrate technical capacity and have an adequte equity base to opertate in the zone, either to produce services or export commodities; Use modern technologies and provide employment; be sensitive to the environment.

The possible hurdle here is the demonstration of the ability to produce for export which can be troublesome given that many of our industries in the EAC are ‘Jua Kali’ or artisanal of nature.

However, there are three types of operators in the free zone. There are the contractors who would offer the services like construction, these would request for the developers license. There is also the Manager’s license for one to manage the free zone, and there is the Operators license which is the actual production of the goods or services within the free zone.

Fortunately, there is always the possibility of joint ventures with more robust partners if the local EAC company cannot handle the requirements.

Most of all, there is adequate market for the goods and services produced in such a free zone.

Source: East Africa Business Week

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.