East African finance ministers converged on tough taxation measures aimed at protecting local manufacturers from “unfair imports competition,” in their spending plans for the coming year, made public on Thursday. Most of the tax measures, contained in the budget statements for the 2019/2020 fiscal year, were approved during the ministers’ pre-budget consultations in Arusha in May. Higher taxation of imports is aimed at driving consumption of cheaper locally produced goods, spurring the growth of manufacturing and creating jobs that ultimately improve living standards. Proponents of the proposed measures are in line with the EAC Industrialisation Plan that seeks to transform the region into a globally competitive, environment-friendly and sustainable industrial sector that is capable of significantly improving the living standards of the people by 2032. “The recommendations aim at pushing the regional industrialisation policy, creating jobs and improving East Africans’ living standards,” said Philip Mpango, Tanzania’s Finance and Planning minister. Uganda, Tanzania, Rwanda and Kenya are focusing on improving the competitiveness of local industries by protecting them from cheaper imports through taxation and other policy measures. Despite the good intentions, experts have warned that these tax measures — which are also applicable to goods coming from EAC member states — could stand in the way of integration, as each country becomes inward-looking in a bid to build its industrial capacity. Already, trade spats, especially between Kenya and Tanzania, have seen Dar es Salaam block Kenyan products from its market. The partners have also failed to agree on a reviewed common...

Kenya’s budget is the highest in East Africa region exceeding that of Tanzania, Uganda, and Rwanda.The three nations presented their 2019/20 national budgets before respective parliaments at the same time on Thursday.Kenya’s 2019/20 budget stands at Sh3.02 trillion followed by Tanzania (Sh1.4 trillion), Uganda (Sh1.08 trillion) and Rwanda at Sh316 billion. Rwanda, Tanzania, and Uganda 2019/20 national budgets total to Sh2.8 trillion that is around Sh200 billion less Kenya’s budget. Rwanda Rwanda said its overall spending will rise 11 per cent in 2019/20 (July-June) fiscal year to Sh316 billion, while 2019 economic growth will be slower than a year earlier, its finance minister said on Thursday.The finance minister Uzziel Ndagijimana proposed that 85.8 per cent of the budget would come from internal sources, and the rest from external grants. The economy is projected to grow 7.8 per cent in 2019 from 8.6 per cent in 2018, he said. Tanzania According to Tanzania's finance minister, the country's overall spending during the 2019/20 period will rise 2 per cent to Ksh1.4 trillion. Philip Mpango, its finance minister told parliament on Thursday that the John Pombe Magufuli led government also plans to borrow Tsh2.32 trillion from external non-concessional sources.Tanzania is East Africa’s third-largest economy and is investing heavily in public infrastructure projects as it seeks to profit from its long coastline and upgrade its rickety railways and roads to serve the growing economies in east and central Africa. Uganda Uganda finance minister Matia Kasaija said the government spending is set to rise 23...

The Democratic Republic of Congo has applied to join the East African Community in a move that could potentially expand the boundaries of the trading bloc to the Atlantic coast of Africa. The application comes following months of talks between DR Congo President Felix Tshisekedi and Rwanda President Paul Kagame, who chairs the East African Community. Sources familiar with the diplomatic talks that preceded the formal application say most EAC member states are enthusiastic about DR Congo’s membership. The DRC officially communicated its intention to join the EAC in a letter to President Kagame dated June 8. Kinshasa said its desire to join the bloc was informed by its increasing trade ties with the region. In response, President Kagame directed the EAC Secretariat to table DR Congo’s application for discussion at the next Heads of State Summit in November. If it meets the admission requirements, members will vote on its admission. GAME CHANGER The potential membership of the Central African country is being viewed as a game-changer, given its natural resources wealth and a huge consumer market of 81 million people. It is the world’s biggest producer of cobalt, a major component in the manufacture of rechargeable batteries for electric vehicles, and Africa’s main copper producer. It also a major producer of gold, diamonds, uranium, coltan, oil and other precious metals, making it one of the most resource-rich countries in the world. DR Congo is also host to the world’s second-longest river, the Congo, vast swathes of fertile soil, potentially...

The recent ratification of the African Continental Free Trade Area (AfCFTA) has created a promising environment for economic integration of major African markets with the smaller markets and enhance competitiveness at the industry and enterprise level by exploiting opportunities for scale production, continental market access and better reallocation of resources. The eventual implementation of AfCFTA is predicated on the assumption that the reduction of tariff between African countries would increase intra-African trade by 15 to 25 percent (amounting to about 50-70 billion USD) by 2040. The intra-continental trade in Africa would create a very large single market which would allow member states to build better resilience to resource allocations and price fluctuations even as they diversify their export portfolio. However, creating a single large market will require a massive amount of physical infrastructure facilitation. The continent will see itself placed in a catch 22 situation as it will need to invest trillions of dollars in infrastructure to spur contact and build growth momentum in the region. This figure would increase if the costs associated with climate change mitigation and adaption were to be included. For the development to be inclusive, the concept will have to build beyond better harmonization and coordination of trade liberalization across Regional Economic Communities (RECs). Improved customs procedures alone will fail to stimulate the markets unless finance is made available to small and medium sized enterprises, and women entrepreneurs are given adequate resources to participate meaningfully in exports. While the continent-wide free trade agreement has been...

MALABO, Equatorial Guinea – Central Africa stands to benefit the most from the African Continental Free Trade Area (AfCFTA), data from the African Development Bank shows. Hanan Morsy, Director of Research at the Bank, revealed the findings at the launch of one of the Bank’s flagship reports in Malabo, where the African Development Bank is hosting its Annual Meetings. Mr. Morsy said Central Africa’s real income could increase by as much as 7% in one of the scenarios that researchers describe in the 2019 African Economic Outlook. By the same calculations, East Africa, currently, the star performer on the continent, would experience an increase of around 4.2%, followed closely by North Africa. The scenarios measure the potential outcomes of the AfCFTA, ranging from one (least impact) to four (greatest impact). “While there are differences in gains, all African countries are better off with regional integration than without,” Morsy said. He said current levels of growth were not adequate to generate jobs for millions of unemployed Africans, but regional integration could stimulate the growth needed to make a dent in unemployment, adding that Africa needed to grow between 4% and 6% in order to turn the tide. The Outlook predicts that Africa can add 4.5% to its GDP, provided that governments do away with bilateral tariffs and non-tariff barriers and keep rules of origin simple. The launch included a panel discussion by Finance and Economic Planning Ministers, who are also Governors of the Bank. Aïchatou Kané, from Niger, said the Economic Community...

African leaders on Wednesday underscored the urgent need to fast-track the continent’s regional integration process in order to accelerate Africa’s economic transformation. The call was made at the opening ceremony of the African Development Bank’s (AfDB) 2019 Annual Meetings, in Malabo, Equatorial Guinea, with the theme: “Regional Integration for Africa’s Economic Prosperity.” “Apart and divided, Africa is weakened. Together and united, Africa will be unstoppable,” the Bank’s President Akinwumi Adesina told delegates at the packed Sipopo Conference Center. Adesina urged African governments to work toward the elimination of non-tariff barriers. “Pulling down non-tariff barriers alone, will spur trade by at least 53%, and potentially double trade,” he said. The opening ceremony was presided over by the host nation’s President Teodoro Obiang Nguema Mbasogo. Also in attendance were King Letsie III of Lesotho; President Félix Antoine Tshisekedi of the Democratic Republic of Congo; and Ambrose Mandvulo Dlamini, Prime Minister of eSwatini. High-level government officials from Rwanda, Cameroon, the Central African Republic, and Côte d’Ivoire were also present. In his opening speech, President Obiang Nguema Mbasogo recalled that Equatorial Guinea, once one of the poorest countries in the world, has since been radically transformed with one of the highest per capita incomes on the continent. “For me, development is not about per capita income, it is about expanding the opportunities for the people to live a more dignified life,” Obiang Nguema Mbasogo said. “Equatorial Guinea is open for business. We are committed to regional integration for shared prosperity. We count on the...

East African countries plan to increase spending dramatically on infrastructure projects in budgets to be released today. It’s not clear whether they can afford it. Kenya, Tanzania, Uganda, Rwanda and Burundi will unveil plans to fund the building of more roads, railways and power plants, as well as expand services such as healthcare and education, for the year starting July 1. In most cases, this will raise budget gaps as a percentage of gross domestic product, and increase borrowing requirements.“There is a risk of rising fiscal deficits coming from the fact that many have ambitious revenue targets they may fail to meet,” said Tony Watima, a Nairobi-based independent economist. Spending will probably climb about 10 per cent in Kenya in the next fiscal year, 17 per cent in Uganda and 11 per cent in Rwanda, while it will be broadly flat in Tanzania, the nations’ respective governments have said in forecasts. While the governments forecast that revenue will increase by double digits next year, Kenya, Uganda and Tanzania all have plans to approach the debt markets to help raise the funds to finance their deficits.In Kenya’s case, the nation will borrow about Sh607 billion ($6 billion) locally and internationally in 2019-20, according to Treasury Secretary Henry Rotich.GDP in East Africa will probably expand 5.9 per cent in 2019 and 6.1 per cent in 2020, according to the African Development Bank, making it the fastest-growing region on the continent. Economic expansion in Kenya, Tanzania, Uganda, Rwanda and Burundi will average a...

East African countries plan to increase spending dramatically on infrastructure projects in budgets to be released Thursday. But the question many ask is whether those countries can afford it. Kenya, Tanzania, Uganda, Rwanda and Burundi will unveil plans to fund the building of more roads, railways and power plants, as well as expand services such as health care and education, for the year starting July 1. In most cases, this will raise budget gaps as a percentage of gross domestic product, and increase borrowing requirements. “There is a risk of rising fiscal deficits coming from the fact that many have ambitious revenue targets they may fail to meet,” said Tony Watima, a Nairobi-based independent economist. Spending will probably climb about 10% in Kenya in the next fiscal year, 17% in Uganda and 11% in Rwanda, while it will be broadly flat in Tanzania, the nations’ respective governments have said in forecasts. While the governments forecast that revenue will increase by double digits next year, Kenya, Uganda and Tanzania all have plans to approach the debt markets to help raise the funds to finance their deficits. In Kenya’s case, the nation will borrow about 607 billion shillings ($6 billion) locally and internationally in 2019-20, according to Treasury Secretary Henry Rotich. GDP in East Africa will probably expand 5.9% in 2019 and 6.1% in 2020, according to the African Development Bank, making it the fastest-growing region on the continent. Kenya is implementing its so-called Big Four agenda, which will see the region’s...

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...