East African Community finance ministers face a tough task this week (Thursday) as they present their budget statements for the 2019/2020 fiscal year with a focus on bringing more people and businesses into the tax bracket to service the rising public debt and reverse the fall in revenue collections. The ministers will also be looking to allocate the additional resources to the debt-servicing kitty through the Consolidated Fund Services. EAC partner states are considering ways of widening tax brackets to boost revenue collections and channel more domestic resources towards repayments of interest on billions of dollars’ worth of loans procured to fund development projects. The EAC has been trapped in the web of infrastructure development which has seen millions of dollars find their way into various projects such as pipeline, road, rail, airports, and ports development. It is, however, argued that while infrastructure development is important to the economic development of a nation, funding for these projects is nudging the national economies into a debt overhang, with most of the expensive loans coming from China in exchange for project contracts. DAR ES SALAAM   Source The EastAfrican

In March 2018, African countries signed a landmark trade agreement, the African Continental Free Trade Area Agreement (AfCFTA), which commits countries to remove tariffs on 90 per cent of goods, progressively liberalise trade in services, and address a host of other non-tariff barriers.  Here are some benefits expected from the trade deal, according to research by Brookings Institution 1.Enlarged scope If successfully implemented, the agreement will create a single African market of over a billion consumers with a total gross domestic product (GDP) of over $3 trillion (Sh300 trillion). This will make Africa the largest free trade area in the world. What is less known about the AfCFTA is that its scope exceeds that of a traditional free trade area, which generally focuses on trade in goods, to include trade in services, investment, intellectual property rights and competition policy, and possibly e-commerce. 2. Fair distribution The signing of the Africa free trade area deal in Kigali comes at a time when the benefits of trade are actively contested, and global powers that traditionally promoted trade as a crucial driver of growth are now calling into question its very tenets. This apprehension is not without cause. It is broadly recognised that, while globalisation and trade produced the impressive economic expansion of the past three decades, the gains have not been fairly distributed. The World Bank population-weighted Gini index shows that inequality rose steeply between 1988 and 1998 and declined only moderately by 2013. Although global poverty has fallen, prosperity has not been...

The UN Economic Commission for Africa (ECA) on Monday called for concerted efforts to exploit the transformative economic potential of the African Continental Free Trade Area (AfCFTA) Agreement. The urgent call was made by ECA's Deputy Executive Secretary Giovanie Biha during a two-day high-level ministerial meeting concluded on Monday at the headquarters of the African Union (AU) in Ethiopia's capital Addis Ababa. "AfCFTA legally entered into force but for it to deliver its transformative economic potential, the signatory countries - and the few countries that have not yet signed - must rapidly join and ratify the Agreement to ensure that the continent moves forward together as one entity," ECA's deputy chief said. According to Biha, issues related to the scheduling of tariff offers and finalization of the rules of origin are among the vital imperatives towards the successful implementation of the continental free trade pact. "Difficult decisions must yet to be made and compromises sought, as we transform the AFCFTA legal text into an operable instrument," Biha told African trade ministers. Biha also stressed that as the continental free trade pact is set to start operationalisation during the upcoming AU summit, which is slted for next month in Niamey, Niger, "progress must be made with the AfCFTA implementation roadmap." AU Commissioner for Trade and Industry Albert Muchanga also said that "the coming into existence of the AfCFTA is a continuation of a long journey that started with the establishment of regional economic communities as building blocks of the African Economic...

This week began with good news for regional business persons, especially cross-border traders. The first news was an announcement by the Tanzanian High Commissioner to Rwanda that his country had at last heard complaints raised by businessmen operating in his country. The most pressing one was the removal of unnecessary non-tariff barriers such as the red tape involved for foreigners when opening a bank account. The High Commissioner promised that by the end of the year, all those barriers, including others that may be encountered along the way, will be no more. Some of the barriers were put in place as trade protective measures which have no place in these days of globalization and easing of trade barriers. One other positive outcome this week was the reopening of Gatuna border post for heavy commercial vehicles. The vehicles had been barred from using the border so as not to disrupt construction of the One-Stop Border Post. Work on the Rwandan part is complete unlike on the Ugandan side which is not expected to be completed anytime soon. The temporary disruption at the border had caused a lot of chatter, with many Ugandan officials going on the record to claim that Rwanda had closed the border. They were creating a storm in a teacup because, the other two entry points, Kagitumba and Cyanika were operational. So those who have been seeking to milk political points out of the Gatuna saga had better look elsewhere. What countries need to do is to honour...

The Southern African Customs Union (SACU) last week concluded bilateral tariff negotiations with the East African Community (EAC) which will enhance intra-regional trade between the respective countries. According to SACU Secretariat, the successful conclusion of these talks means that the SACU-EAC private sector will have access to new and dynamic markets for exports as well as new sources of inputs for domestic production processes. These negotiations are part of the Tripartite Free Trade Area, which was launched in June 2015 with the aim to establish a single market for 27 African countries with a combined population of about 700 million people (57% of Africa’s population), and Gross Domestic Product above US$1.4 trillion. “The conclusion of the SACU-EAC negotiations marks a significant step towards realising the benefits of the TFTA. The main aim of the SACU-EAC market access negotiations has always been to provide commercially meaningful market access for the private sector in the two regions,” the SACU Secretariat added.   Source Nambia Economist

“As EAC partner states unveils their budgets for the 2019/2020 fiscal year next week, governments should consider improving transport infrastructures, energy and access to credit to ease doing business in the EAC,” said a statement by EABC that was signed by Peter Mathuki, the executive director. The council said that to enhance revenue collection, EAC partner states budgets should focus more on efficient and effective service delivery for growth and expansion of businesses in the EAC and beyond. The EABC also urged adequate budgetary allocation of resources for the implementation and monitoring of the EAC Common Market Protocol and support to national implementation committees and related activities. “The EAC partner states’ budgets for the financial year 2019/2020 should prioritize achieving the vision of the EAC industrialization strategy which includes being globally competitive, environment-friendly and ensure a sustainable industrial sector,” the statement intoned. The budgets should visualize capacity to significantly improving the living standards of the people of East Africa by 2032 and the objective of 5th EAC development strategy to building a firm foundation for transforming the EAC into a stable, competitive and sustainable lower middle income region by 2021. EABC suggested that partner states budgets for the coming fiscal year should address the challenges of EAC regional integration such as high costs of doing business and the cost of borrowing, allocate budget funds for implementation and monitoring of the Common Market and Customs Union protocols and increasing intra-EAC trade through elimination of non-tariff barriers. The budgets should also focus...

In trade, time is money. And African businesses and consumers could save billions if delays at borders are reduced. To help make this possible, one of the continent’s free trade areas – the Common Market for Eastern and Southern Africa (COMESA) – has recently enlisted UNCTAD to help make it easier and faster to move goods in the region. The heads of the two organizations met on 24 May at COMESA’s headquarters in Lusaka, Zambia, to seal the €3 million (US$3.34 million) deal, which builds on UNCTAD’s experience in helping countries on the continent to facilitate trade. In landlocked Rwanda, for example, UNCTAD’s automated customs data system, known as ASYCUDA, slashed the time needed to clear goods at the border from 11 days in 2010 to less than 2 days in 2014. This cut the cost of clearance from about US$35 to US$5. “[We] recognize the role UNCTAD plays in promoting trade facilitation, its experience and capacity in modernizing customs administrations, and the intellectual property of ASYCUDA,” COMESA Secretary-General Chileshe Kapwepwe said. “I am confident that UNCTAD will deliver the expected outcomes as enshrined in the co-delegation agreement,” she said. UNCTAD Secretary-General Mukhisa Kituyi added that the benefits of the agreement will extend beyond COMESA to all corners of the continent. This is because the success of the African Continental Free Trade Area (AfCFTA), which entered into force on 30 May, depends on the health of the continent’s regional economic communities – and COMESA is the largest in terms of members....

As the strategic significance of East Africa is once again growing with new players in the region due to its significant location at the entrance of the Indian Ocean and the Red Sea, France is also back. On March 12, President Emmanuel Macron paid his first visit to the region, by visiting Djibouti, Ethiopia, and Kenya in an effort to catch up on the new developments in the region by nurturing new partnerships across the region and to break from its colonial past. In Djibouti, France’s former colony in the Horn of Africa and a country in which Thomas A. Marks has described as “France’s strategic toehold in Africa,” Macron’s visit was seen as an effort to “reassert French influence in the former colony, where China has a military base and has invested billions of dollars in infrastructure,” as Reuters reported. Djibouti, which hosted a French military base since 1932 and signed a mutual defense treaty with France in 1977, has become a military hub for other foreign powers – including the U.S., China and Japan due to its strategic location as the southern entrance of the Red Sea – a significant waterway for global commerce and for naval powers to project influence across the Indian Ocean, as well as the Near East. Countering China’s growing influence across the Horn of Africa was one of the most important objectives of Macron’s visit, as Beijing’s influence is growing in the Horn of Africa through massive investments in infrastructure projects including ports, railways, and...

Now that the African Continental Free Trade Area (AfCFTA) has come into force (see also our Brookings policy brief on the keys to success for the AfCFTA negotiations), policymakers and the business community should prioritize, develop, and implement smarter local strategies to seize the rising opportunities in manufacturing and industrialization across a variety of sectors and increase the global competitiveness of the continent. Right now, only 10 African countries (Mauritius, South Africa, Seychelles, Morocco, Tunisia, Botswana, Algeria, Kenya, Egypt, and Namibia) are ranked among the top 100 most competitive countries in world, per the 2018 Global Competitiveness Index. Given that an integrated continent will have a larger supply market, decreased trade restrictions, and free movement of people, manufacturing specialization will accelerate and make Africa’s industrialization globally competitive. As we have noted before, if the AfCFTA is successfully implemented, Africa’s manufacturing sector is projected to double in size with annual output increasing to $1 trillion by 2025 and create over 14 million jobs. Notably, one of the key objectives of the AfCFTA is to “enhance competitiveness at the industry and enterprise level through exploiting opportunities for scale production, continental market access and better reallocation of resources.” One pathway to success will be effective AfCFTA implementation and better national ownership and alignment with Agenda 2063, the African Union’s strategic framework for the socio-economic transformation of the continent. Agenda 2063 aims at creating a “strong, united, and influential global player and partner,” turning African countries into the best performers in global quality of life measures and accelerating inclusive growth, including through industrialization, import substitution, and...

At a time when the global trade regime is under attack, the African Union (AU) is celebrating the establishment of the African Continental Free Trade Area (AfCFTA), which came into effect on 30 May. After being ratified by the required minimum 22 nations, all the member states of the AU are now legally bound to allow African goods to be traded without restraint throughout the continent. This is an impressive achievement. AfCFTA not only covers the entire continent, but has proceeded at a record pace. It was signed on 21 March 2018. Its entry into force underlines African leaders’ commitment to pan-African economic integration – a goal as old as African independence in the 1960s. Intra-regional trade has long been minimal in Africa, standing at 13% for intra-imports and 17% for intra-exports over the last seven years. Earlier continental trade initiatives, such as the 1980 Lagos Plan of Action and the 1991 African Economic Community, have lagged far behind their ambitions. However, the practical implications of the continental free trade area are not immediate. Significant work is required to deliver tangible results. Negotiations on tariffs, time lines and the seat of the AfCFTA Secretariat are still ongoing. And without effective public policies, liberalising trade risks having negative implications for many people on the continent. African trade to date Establishing regional economic communities across the continent has produced a complex pattern of overlapping but inconsequential trade regimes. The only functioning customs union on the continent remains the 109 year-old Southern African Customs Union, an imperial relic that is dominated by South Africa. The last large-scale...