Volatility of the local currency stems from the global financial crisis, worsened by the shilling’s turmoil domestically in 2011, insecurity and closing down of several forex bureaus. Recovery lies in avoiding excessive turbulence and minimising the negative impacts on investor opportunities and risks, write Dr Mbui Wagacha (top) and Dr Eric Aligula (bottom) Three key factors determine a country’s exchange rate:the relative purchasing power of its currency; its investment opportunities and risks; and its demand for goods and services. Against this background there is reason to ponder the recent depreciation of the Kenyan shilling. This year, it has shed approximately 5.1 per cent of its value against the US dollar, compared with annual declines of 4.8 per cent, 0.27 per cent, 1.1 per cent, 5.29 per cent, and 6.48 per cent for 2014, 2013, 2012, 2011 and 2010, respectively. The current global exchange rate scene is rooted in the financial turbulence of 2007/2008, the management of the ensuing economic contractions (deflation), and the impacts of policy choices made in major economies to fight the great recession. The US chose its policies wisely. It implemented expansionary but “unconventional” central banking policies combined with an expansionary fiscal stimulus to address financial stability and stimulate the economy by restoring private spending. The policy mix cut interest rates to historic lows but caused capital “spillovers” abroad, especially in the so-called “carry trade”. The policy mix worked to reverse a plunging economy. It yielded a strong recovery and created or saved millions of jobs. The...

A contracting manufacturing does not bode well for the economy and according to the latest economic survey 2015, this is what happened to the industrial sector last year. Growth in the sector was down by 2.2 per cent from 2014. This growth was supported by animal feeds, tobacco products, pharmaceutical products, furniture, fabricated metals and other non metallic mineral products while the shut down of the refinery took its toll on us. For a long time now the country has been running on one engine only, that of domestic consumption. Our biggest export market is the EAC and total trade increased in 2014 which is an improvement. Our exports to the EAC in 2014 recovered somewhat from the drop that was witnessed in 2013 to a total 162,456,423 though not in equal measure to 2012 when we had exports totalling to 165,803,523. A two-year moving average analysis of exports to EAC partner states shows that our exports to Burundi have consistently increased over a period of5 years, while our exports to Tanzania, Rwanda and Uganda have been decreasing. We are increasingly importing from Uganda which is now our biggest import market in the region. A positive blip in all this data is that the sector as a whole delivered on its promise to create more jobs. Formal employment increased by 2.9 per cent creating 8,000 new jobs, informal employment created 112,200 new jobs, compensation to employees was up by 11.2 per cent and our imports of industrial machinery increased pointing...

Despite spirited efforts by regional authorities to make the East African Community (EAC) free market protocol succeed, non-tariff barriers remain a stumbling block to integration. An investigation by Sunday Nation at the Isebania border of Kenya and Tanzania showed that the free movement of people, labour, goods and services is being hampered by formalities, multiplicity of institutions, duplication of clearance procedures and limited institutional capacity. Other obstacles are technical requirements and travel restrictions that increase the cost and transit time of goods. Traders interviewed expressed their frustrations, saying they were yet to see meaningful benefits from the EAC. “Harassment and intimidation by authorities of the two countries still remain. We are not seeing any positive change,” said Mr Chacha Mwita, who has been doing business at the border for the past 15 years. “Clearance of goods takes hours despite assurances by the two governments that it should not take more than 30 minutes. We are still far from realising the intended benefits of EAC.” The Sunday Nation observed a long queue of trucks awaiting clearance whose crews had spent days waiting for the green light to proceed. Truck driver Mohammed Abdala, who was heading to Kigali, Rwanda, urged EAC leaders to “come up with practical solutions that will save our valuable time when crossing the borders”. The number of officials working at the border posts should also be increased to cope with the increased workload, he said. Customs officials from both Kenya and Tanzania said they were trying their best...

The East African Community (EAC) has achieved much since being revived in 1999. However, it is now entering a crucial phase that requires greater levels of single-mindedness. Two senior IMF officials PAULO DRUMMOND and ORAL WILLIAMS give their personal views of what is in store in the coming years ahead. The East African Community (EAC)—comprising Burundi, Kenya, Rwanda, Tanzania, and Uganda—has the ambitious goal of introducing a single currency by 2024. This journey towards integration commenced in 2000 and is underpinned by three main protocols: the customs union (2005), the common market (2010), and, more recently, the monetary union (2013). This increasing integration, which the East African heads of state see as steps towards their ultimate goal of a political federation, facilitates the free movement of goods, services, and capital around the region, which in turn improves the welfare of the general population through sustained, durable, and inclusive growth. Economic success As the EAC has improved macroeconomic management as part of the integration process, these efforts have delivered steady growth in real per capita incomes, which have remained above that for the rest of sub-Saharan Africa in recent years. The EAC is also the second-fastest growing economic bloc after the Association of South East Asian Nations. Other reasons for the region’s success relate to progress made in financial inclusion in part through e-banking and ease of doing business. The region has attracted some $24 billion in foreign direct investment since 2000. More recently, several countries have become first-time issuers of...

KIGALI, Rwanda - The cost of doing business in the East African Community which has been still affecting healthcare delivery in the region is gradually falling. The EAC partner states are working together to address the infrastructural challenges to reduce the cost of doing business hence support the health sector of the region. “Transferring medical equipments from one part of the region to another is gradually improving,” Rogers Ayiko,a Global Health Specialist working at the EAC Secretariat as the Principal Health Systems and Policy Officer said during the 4th East African Healthcare Federation Conference held last week in Kigali Rwanda Ayiko said, “Previously some goods used to take months to leave one port and reach another country but with the concerted efforts of the EAC partner states, the number of days taken for good to leave say port Mombasa to Uganda has reduced now which is a very good progress as determined by the people of the region”. The other big cost that affects doing business in the region is the cost of communication. “The cost of communication is reducing gradually in the entire region,” Ayiko said. “EAC countries are coming together to agree to reduce on taxes so that people can be able to communicate across the region which is supporting doing business in the region,” he said. The current landscape of healthcare in EAC shows that the EAC Common Market has around 165 million people with a market worth USD 120billion which if collectively harnessed can help the...

It is always a pleasure to travel across East Africa and discuss the state of the East African Community with citizens. That has been my privilege this past week when I travelled to three partner states. During my conversations, one issue that formed part of the discourse was the benefits of the community to the citizens. Secondly, an explanation of the mistrust between citizens of neighbouring countries and what can be done about it. A few examples of some of the concerns raised will serve to illustrate my experience. In one conversation the issue raised was the possibility of men from one country marrying most of the women from another state. In another, the focus was on land being grabbed by citizens from other states. Others recalled their suffering when the original community collapsed. There was also focus on the state of constitutional development across EAC states and its implications on realisation of a political federation. I could go on and on. The pattern being painted was of real, practical issues. And while these could be dismissed as pedantic or peripheral, they are at the heart of the perceptions East Africans have of their neighbours. It is important that we address them candidly if we are to have a sustainable and people-centred integration process. Recently, Tanzania restricted access of Kenyan tour operators into Tanzania. The dispute escalated when Kenya stopped Tanzanian tour vans from picking and dropping tourists from Jomo Kenyatta International Airport. In retaliation, Tanzania reduced the number of...

ARUSHA, Tanzania - East African Community (EAC) Secretariat staff have been advised to cut out unnecessary travel. In the run-up to the 2015/16 budget being passed last week, a report of the General Purpose Committee (GPC), presented by the Chair Dr. Odette Nyiramilimo suggested the need to further curtail excess travel and enhance implementation of the decisions and directives of the Council of Ministers. Consequently the Committee called for more Video Conferencing and that all departments within the EAC should adjust their budgets to reflect the same. In its report the Committee also expressed concerns that the social sectors at the EAC have been chronically underfunded over time. Committee members called for the re-allocation to the extent possible in order to restore some activities of the sector to allow for their effective implementation. The GPC also wants an overall strengthening of EAC Sensitisation policy and the requisite prioritization in funding. “While the Committee has previously recommended strengthening of the Corporate Communications Department to be able to spearhead the process, the Committee is of the view that efforts have to be enhanced and funding increased to facilitate Organs and Institutions to optimally participate both jointly and as entities, in the sensitization of East Africans,” a section of the report reads. Dr Nyiramilimo also calls for improvement of the conditions of service and emoluments of the EAC Staff to make the Institution more competitive and to retain the best caliber of staff. The Committee raises concern over the impending high number of...

At the best of times, the East African Community (EAC) Secretariat staff in Arusha would wish for more than the $110 million regional legislators are debating at present. Notably, the budget for 2015/16 is about $15 million less than the previous one of $126 million passed in financial year 2014/15. Paying for important EAC Secretariat programmes is perhaps the most nagging problem before the Partner States and as yet no definite solution has been presented. There is so much to do, but limited financial resources require that many vital programmes are left on the shelf until the cash is in hand. As closer regional integration becomes stronger, the importance of the Arusha Secretariat becomes just as crucial. For the present, Development Partners like the European Union (EU), have been quick to give a helping hand. On bilateral terms, Germany even paid for construction of the EAC headquarters. In other areas, other countries have been offering grants to push the regional integration agenda forward. But as most would agree, this kind of arrangement is not sustainable. The EAC must increasingly fend for itself if it is to be taken seriously as a viable economic bloc. According to the official stance, the Vision of EAC is a prosperous, competitive, secure, stable and politically united East Africa; and the Mission is to widen and deepen Economic, Political, Social and Culture integration in order to improve the quality of life of the people of East Africa through increased competitiveness, value added production, trade and...

THE tripartite free trade area is expected to be launched next month and is anticipated to offer Zambian farmers and agribusiness players’ wider access to export markets in the region. The agreement will comprise of the Southern African Development Community (SADC), East African Community (EAC) and the Common Market for Eastern and Africa (COMESA) member states. According to the Zambia National Farmers Union (ZNFU) Friday brief availed to the Daily Mail on Monday, the objective of the tripartite agreement is to strengthen and deepen economic integration of the southern and eastern African region. “The big free trade area encompassing SADC, EAC and COMESA is expected to be launched on June 10, 2015 in Egypt. This big free trade area will have 26 countries including Zambia and other trading partners such as South Africa, Democratic Republic of Congo, Zimbabwe, Malawi, Kenya, among others,” the statement reads. It however,, says in view of the amount of outstanding work to implement the SADC-EAC-COMESA Free Trade Agreement, the launch of this big free trade area next month will only be symbolic as countries will not be able to trade without completing work on applicable duties and rules of origin. The SADC-EAC-COMESA Free Trade Area will not come into force until a minimum of 14 countries sign and ratify the agreement. Once implemented, the big free trade area is expected to offer Zambian farmers and agribusiness players’ wider access to export markets in the region. It is also expected that Democratic Republic of Congo and...

A MAJOR cargo transportation deal between Tanzania Zambia Railways Authority (TAZARA) and DSM Corridor Group Limited will soon be sealed, breathing some life into the struggling rail company. DSM Corridor Group Chief Executive Officer, Erik Kok said the two sides are ironing out details of the deal, which will come into effect immediately. “We have come to agreement with Tazara on a rail access rate last Thursday so Tazara is sorted and we are now doing a feasibility and will make a full proposal to Tazara,” Mr Kok said in an emailed message. Kok said details of the concession will be known within two weeks when the two sides sign memorandum of understanding. The deal will allow Tazara to ship over 1.6 million tons of cargo between Dar es Salaam and New Kapiri Mposhi from DSM Corridor Group’s clients. DSM Corridor Group is constructing a dry port at Kisarawe to escape from the traffic congestion at Dar es Salaam port and will use Tazara wagons to ship the cargo. “By taking cargo to Kisarawe dry port and then through Kibaha by trucks will reduce time and costs compared to the current route,” said Mr Kok. The cargo will enable cargo from Kisarawe to be shipped to DR Congo, Malawi and Zambia to reduce freight charges. Tazara which has capacity of transporting some five million metric tons of cargo per annum but currently only handles less than 400,000MT due to poor infrastructure and competition from trucks. The DSM Corridor deal will...