Preferential Trade agreement, free trade areas, customs union, once well planned under the African Continental Free Trade Area (AFCFTA pact), benefits outweigh protectionism by far. AFCFTA member countries will have few or no price controls in form of tariffs or quotas between each other. This agreement like many around the globe, allow member countries to focus on their competitive advantages and to produce the goods and services they are comparatively more efficient at making, thus increasing the efficiency and profitability of each country. Competitive advantage Competitive advantages are conditions that allow a company or country to produce a good or service of equal value at a lower price or in a more desirable fashion. Business players will need to vigorously monitor their position to compete.  A local company must look for conditions that allow production of goods and services that will generate more sales or superior margins compared to its market rivals. Competitive advantages are attributed to a variety of factors including cost structure, branding, and the quality of product offering, the distribution network, intellectual property and customer service. The two major competitive advantages are comparative advantages and differential advantages. Under comparative advantages, firms produce a good or service more efficiently than its competitors, which leads to greater profit margins, thus creates a comparative advantage. Therefore, the more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantages. Remember rational consumers will chose the cheaper of any two perfect substitutes offered. Investors’ expectations More dynamic...

Kenya risks missing out on business opportunities in other East African Community (EAC) countries. EAC Cabinet Secretary Peter Munya cited police roadblocks on international highways, double taxation and inefficacy at the port of Mombasa as some of the challenges Kenya must address to maximize on trade opportunities. Munya said he has written to the national Government and asked that roadblocks that have been erected on international highways be removed to ease movement of transit goods. “These roadblocks are causing unnecessary delays of goods from Mombasa to neighbouring countries. I have raised the issue with relevant agency and I hope the barriers will be removed soon,” he said in Kitale. He also asked counties to stop imposing illegal taxes on transit goods. Source: Standard Digital

Taxation by county governments on transit goods is holding back plans to eliminate trade barriers between East Africa Africa Community countries, Cabinet minster Peter Munya said at the weekend. The Cabinet Secretary for East African and Northern Corridor Development said double taxation will stiffle the growth of the East African economic market. “I want to ask the county governments to stop double taxation on the trucks that are on transit, that is not in the constitution,” he said. Munya was speaking in Kitale during a sensitisation workshop for Members of County Assembly drawn from Trans Nzoia, West Pokot, Busia and Turkana whch are border counties on EAC trade rules. He urged counties to minimise roadblocks that hinder movement of goods from the port of Mombasa to other East African countries saying that summit decisions stipulates that unnecessary roadblocks should be avoided on international highways. “It is very clear that there should be no roadblocks on international highways that’s a decision by the summit that must be adhered to, this is causing a lot of delays,” he said. The minister said only gazetted roadblocks placed to enhance security should be in place. He said that as a result of the roadblocks which lead to time wastage, other countries with similar goods are edging out Kenya from its traditional regional markets an advantage that Kenya has been enjoying with the signing of the East African free trade. He said that faster movement of goods from the Mombasa port will enable Kenya to...

Border counties should establish formal trade relations with their neighbours, a Cabinet secretary has said. East Africa Community and Northern Corridor Development CS Peter Munya urged such counties to avoid imposing unnecessary taxes that could hinder cross-border trade. To promote such trade, Mr Munya (pictured) urged the leaders of the affected counties to embrace regular integration and exchange programmes. “In order to create more business opportunities for our people living near international borders, we need to build sustainable business ties with our neighbours. The counties should not put barriers that will hinder trade,” he said. Munya was speaking during a two-day workshop in Kitale over the weekend. The event was organised to educate county executives and MCAs from border counties on EAC regional integration. Participants were drawn from Turkana, West Pokot, Trans Nzoia, Busia and Bungoma counties. Munya said the Government was committed to opening up cross-border business opportunities for Kenyans. Source: Standard Digital

East African countries are struggling to comply with key macroeconomic targets on fiscal deficit, inflation, public debt and foreign exchange reserves ahead of the operationalisation of a single currency regime by 2024. The mixed performance of regional economies on these targets is likely to delay the delivery of the benefits of a monetary union to regional traders and citizens such as reduced costs of cross-border transactions. A study by the United Nations Economic Commission for Africa (Uneca) conducted in October 2017 shows that while the partner states are on track to achieving the criteria on inflation, challenges remain in attaining the targets on fiscal deficit and adequate level of foreign exchange reserves. This, according to the study, is due to the countries' heavy spending on infrastructure projects and increased imports of capital goods. Countries are expected to attain headline inflation of a maximum eight per cent, a fiscal deficit (including grants) of not more than three per cent of GDP, a public debt-to-GDP ratio of 50 per cent and forex reserves of at least 4.5 months of import cover, to qualify to join the East African Monetary Union. Countries are also required to comply with the criteria for at least three years before the official launch of the single currency regime. This implies the countries have up to 2021 to comply with these conditions. However, efforts towards fulfilling these conditions have been lacklustre with signs that some countries could be forced to scale down on huge infrastructure projects to reduce...

To ensure Rwandan exporters are not significantly affected by the anticipated suspension of duty-free access to the US market under the AGOA framework, government has decided to take over the resultant tax obligations. This follows the move by the American government on March 31st announcing their intention to suspend the application of duty-free treatment to all African Growth and Opportunity Act (AGOA)-eligible goods in the apparel sector for Rwanda. According to a statement from the US government, the suspension would take effect in 60 days (from March 31) in case Rwanda maintains its policy on used clothes, commonly known as Cagua. However, the Government has said that to ensure minimal disruption to the businesses, they are putting up an adjustment facility to pay taxes imposed on the exporters for the next one year. During an exclusive interview, Rwanda Development Board CEO, Clare Akamanzi, told The New Times that this would allow firms work on accessing new markets as well as meet existing contractual obligations to the American market. “In the meantime, for those who are going to be affected by AGOA suspension government is going to work with them to allow them to finish the orders that they were working on in the US for the next one year and we will pay the taxes for them. We would not like their orders to be affected as they seek alternative markets.  We are putting in place  an adjustment facility that will allow us to have a fund to pay their...

44 African economies signed in March an ambitious treaty in order to form the African Continental Free Trade Area (AfCFTA). The goal is to eliminate tariffs on 90% of goods. The rationale behind more regional integration is to trade between equals and limit the share of vertical trade (exports of commodities and imports of capital). It should help ascend the value chain and increase the share of manufactured goods in African exports, since manufactured goods represent 43% of intra-African exports and less than 20% of African exports to other regions (75% is driven by commodities). The current predominance of commodity exports makes growth procyclical to commodity prices. Sizeable output volatility deters economic development. More trade openness should imply some economies of scale, through the relocation of production activities in regional hubs, although with some limitations explained by remaining capital controls. One may easily infer some welfare gains for the consumer. However, such economies of scale will also imply some losers. The recent period of low commodity prices was abruptly felt by countries with fixed exchange rates, as they lost competitiveness after other currencies depreciated (like the Nigerian Naira or the Ghanaian Cedi). In economies with low labor productivity, the likely impact of lower import tariffs is worrying trade unions. It explains why Nigeria and South Africa did not sign the free trade agreement yet, since these organizations are directly involved in political parties in these countries. A free trade area will increase intra-African exports We expect African exports to increase...

“The best is the enemy of the good” is an expression associated with Voltaire. It just might have critical relevance for the relation between the African Continental Free Trade Area (ACFTA), the COMESA-EAC-SADC Tripartite Free Trade Area (TFTA) and the regional economic communities (RECs) in Africa. But on 8 June 2018, Kenya deposited with COMESA Secretariat in Lusaka, the instrument of ratification of the TFTA, having ratified ACFTA as well and deposited the instrument with the African Union Commission. Both South Africa and Uganda were also taking the same approach of ratifying both. Just a year ago, it all looked impossible to many around the world that Africa could have a Continental Free Trade Area. But for some, this was de ja vu, for it was the same trepidation in 2015 just before the TFTA was launched on 10 June in Egypt. The TFTA was an African revelation, for it demonstrated the palpable possibility of and spurred strategists towards a continental equivalent. Having missed the deadline of December 2017, ACFTA was duly launched a mere three months later on 21 March 2018 in Kigali, with 44 out of the 55 African countries signing the Agreement on the spot. World history was made, despite entrenched scepticism rooted in pessimistic narratives about Africa but delighting and vindicating optimists around the world. There was some pending work though. Precise time frames were duly set. Annexes (with detailed regulations) to the Protocol on Trade in Goods were to be cleaned up by lawyers (scrubbed)...

Last week, the United Nations Conference on Trade and Development (UNCTAD) released its annual Economic Development in Africa report. This year’s report, “Migration for Structural Transformation,” documents African migration trends and highlights the economic impact of migrants and their potential for augmenting growth. Recently, the African Development Bank also released its Annual Development Effectiveness Reviews, which included a section on African migration. A key takeaway from both reports is that the majority of African migration is within Africa—and usually to neighboring countries. As Figure 1 from the Annual Development Effectiveness Reviews 2018 shows, in 2017, the largest migrant flows in Central, East, and West Africa were to other countries in their respective regions. Interestingly, there was very little migration between East Africa and West Africa in 2017. Two other notable findings from the report are that the middle class in Africa migrates to the region’s richer countries, and the need for jobs is a major driver of migration in poorer countries. Looking further into intra-African migration, Figure 2, from UNCTAD’s Economic Development in Africa report, highlights the 15 top corridors for intra-African migration in 2017 by migrant stock. International migrant stock is an estimate of the total number of foreign-born people in a country at any given point in time. In 2017, the Burkina Faso to Côte d’Ivoire migration corridor had the largest stock of migrants at 1.3 million. Migration in the other direction, from Côte d’Ivoire to Burkina Faso, was also in the top five. According to the report,...

With the giants of Africa, Nigeria and South Africa, faced with a crisis at home, East African countries are increasingly becoming a suitable alternative for foreign investors and large consumer companies. Both of Africa’s largest economies have experienced growth at below 2%, hit hard by fall in global commodity prices in 2016. While East African countries’ led by Ethiopia, Kenya, Tanzania and Rwanda have been enjoying growth rates not less than 5% since then. Coca-Cola Beverages Africa (CCBA), the continent’s largest soft drinks bottler, recently announced it would invest $100 million in Kenya over the next five years to improve infrastructure and launch new products. Earlier in May, the company had also launched a $69 million new juice line at its Nairobi plant, one of its four bottling plants in Kenya. The South-African based company made its strategic move into Kenya, and the East African market when it bought Equator Bottlers, the third largest Coca-Cola bottler in Kenya in 2017. “With a population of over 45 million and a rapidly urbanising population, 72% of whom are under 30, Kenya offers opportunities for growth and investment,” Daryl Wilson, country Managing Director for Equator Bottlers, said after it was acquired by CCBA last year. Within sub-Saharan Africa, East African countries—especially Ethiopia and Kenya, and to a lesser extent Uganda and Tanzania — have seen an increase in investments from consumer goods’ companies. The region’s positive economic growth, political stability, an improved regulatory environment and a big market of over 120 million people...