East Africa

Overview of Opportunities under EAC Common Market

By ALP Advocate
on
June 19, 2019

Since 2010, the five partner states, Kenya, Burundi, Rwanda, Uganda and Tanzania have aimed at having the EAC as a single customs union. The scope of co-operation is as provided in Article 5 of the Protocol to apply to any activity undertaken in co-operation by the Partner States, to achieve the free movement of goods, persons, labour, services and capital and to ensure the enjoyment of the rights of establishment and residence of their nationals within the Community.

Overview of Opportunities Under EAC Common Market

*By Hanningtone Amol & Beatrice Maina

The EAC treaty brought to birth the East African Community Common Market with the aim of boosting the growth of the EAC regional bloc, through the Four Freedoms:  Free movement of goods, services, labour and capital. The Protocol on the establishment of the EAC common Market came into force on 1 July 2010 and facilitated the realization of the second stage of the regional integration process. This has seen the regional bloc experience a boost in inter regional trade. In fact, the EAC Common Market is three times as much as the Economic Community of West African States or the Arab Maghreb Union in North Africa.

Since 2010, the five partner states, Kenya, Burundi, Rwanda, Uganda and Tanzania have aimed at having the EAC as a single customs union. The scope of co-operation is as provided in Article 5 of the Protocol to apply to any activity undertaken in co-operation by the Partner States, to achieve the free movement of goods, persons, labour, services and capital and to ensure the enjoyment of the rights of establishment and residence of their nationals within the Community. The Partner States agreed to eliminate tariff, non-tariff and technical barriers to trade;harmonize and mutually recognize standards and implement a common trade policy for the Community; and ease cross-border movement of persons and adopt an integrated border management system. The region’s population of over 130 million people and the series of mutually beneficial partnerships with other regional blocs like COMESA and SADC has contributed to a combined population of over 400 million and evidently, increased trade.

The EAC offers several incentives to investors; firstly, EAC common market has a Customs Union, which was the first regional integration milestone.The Customs union has laid out initiatives for its members, such that they qualify for duty-free access to the US market under the African Growth and Opportunity Act (AGOA), as well as EU’s Everything But Arms (EBA) initiative, under which all products from Least Developed Countries (LDCs) except arms and ammunition, have preferential access to the European Union market. The region also possesses a readily available youthful workforce.Partners have consistently employed comprehensive economic reforms aimed at guarding the region’s economy to ensure macroeconomic stability by simultaneously reducing direct government interventions and stimulating the growth of the private sector.

The adoption of the EAC Industrialization Policy and Strategy in 2011 presented six strategic regional industries for the EAC Community. These were among a few investment opportunity areas in the region which were cited as having potential comparative advantage. The six strategic industries, namely Iron-ore and other mineral processing; Petrochemicals and gas processing; Agro-processing; Fertilizers and agro-chemicals; Pharmaceuticals; and Energy and Bio-fuels,represent only a fraction of the potential that lies in the EAC Common Market.Investors are advised to contact Investment Promotion Agencies in Partner States for detailed information and updates on the specific areas of development that they may be interested in.

Partnerships in the Private Sector

One of the fundamental goals of the EAC is to promote investment and the development of the private sector. Each member state has developed a Private Sector Development Strategy through which business people interact at the Secretary-General’s Forum, a platform that came about through the Consultative Dialogue Framework. On this platform, investors and business persons in the region dialogue on the issues affecting business in the region. Further, the East African Business Council which is the formal business body through which the community’s private sector is represented, plays a key role in the promotion of business in sectors including ICT, manufacturing, tourism, media and banking. 

The East African Chamber of Commerce, Industry and Agriculture lobbies for the creation of a conducive environment for cross-border trade and investment within the EAC. It is owned by the three independent National Chamber of Commerce and Industry, in Kenya Uganda and Tanzania.

The Eastern Africa Association, which has its headquarters in London, is charged with bridging communication between foreign investors and Eastern African Governments.

National associations in member states have also been formed to collect and disseminate information to members, address issues concerning cross-cutting sector-based concerns, provide training and marketing services and facilitating dialogue with their individual governments.

The existence of a regional network of lawyers has brought confidence and platform for the private sector to meaningfully participate in development of legislation at the regional level. The Arusha-based law association brings together seven national bar associations – Law Society of Kenya, Uganda Law Society, Tanganyika Law Society, Zanzibar Law Society, Rwanda Bar Association, Burundi Bar Association and South Sudan Bar Association. Through concerted strategic litigation and collaboration with regional trade associations like EABC, the East Africa Law Society is optimally placed to provide leadership for the private sector in judicial and legislative front in the region.

Regional Investment Opportunities

EAC’s four securities exchanges, forming East African Securities Exchanges Association, are of significant businesses prosperity in the bloc. Burundi is the only partner that does not yet have one.  East African Securities Exchanges Association aims at cross-listing and technology to move securities between central depositories and order routing between automated trading systems.

All the EAC member states are headed to a total privatization of the water and sanitation services sector. This is a prime area for investors to venture into. There is a gap in the provision of quality services for waste management and recycling, provision of portable water facilities, garbage disposal and refuse management. The five member states all have water utility services, but this is far from sufficient.The population in the region is rapidly growing and so is the need for proper sanitation services.

The tourism sector is another very lucrative area for business in the EAC. The region boasts of a rich heritage in wildlife and serene environment. The European Union is already one of the biggest income generators in terms of tourism, but tourists majorly come from Italy, Germany, UK and France. The United States is also a key contributor to this sector.Having tourists from the rest of the EU would improve the income raised from this sector. The partners have done a commendable job so far with the individual growth of tourism, but a lot of potential still lies undiscovered.

Uganda has the Murchison Falls, which is the source of the great River Nile. Cruise facilities on the Murchison Falls would be a worthy investment.  

Tanzania has the scenic and azure islands of Mafia and Zanzibar. World-class tourist facilities such as guest houses, hotels and campsites are still not close to being sufficient for these areas.

Rwanda is a habitat for rare flora and fauna. She has been for a very long time, been regarded the cleanest country in Africa. Investors can use her immaculateness to set up urban botanical and zoological gardens in cities like Kigali.

Burundi people are known for their drumming skills and their undiluted culture in dance. Investors could target the construction of cultural and recreational centers in major towns across Burundi, to tap this well preserved culture.

Kenyan facilities have in a big way suggested that they are meant for foreign visitors. Facilities such as game drives, lodges and conference tourism, that target domestic tourists are bound to be productive for investors.

Education is one of those investments that one can never go wrong with. Human beings are constantly seeking to improve themselves. Most of the EAC member states are adopting universal education policies. There is also a growing urge and trend to travel and learn in different parts of the world. The EAC region itself already has a very rapidly growing population, with a matching need for tertiary education.This is a chief area that investors should target since private universities and training centres are on high demand.

Each of the five member countries has had the discovery of potential petroleum products in the recent past. Since the EAC organizes the East African Petroleum Conference biennially, member states should focus on harmonizing policies, legal and fiscal regimes pertaining to petroleum exploration so as to achieve full exploitation of these resources.

The legal and judicial sector in the EAC has not been left behind as the other sectors were making strides. The East African Court of Justice is an international court that handles disputes among member states. Though it lacks the mandate to preside over individual matters, involving the violation of human rights, the court serves as an integral part of the EAC through its role to interpret and enforce the Treaty for the Establishment of the East African Community. As part of actualizing the freedom of movement of services, the EAC common market protocol identifies certain professionals who can move freely to offer services across the region.Notably, there has been an increase in the number of universities offering law degrees among the five member states. In as much as the movement of advocates requires accreditation and clearance by the respective councils of legal education for the partner states, it will be a milestone for the region to establish a common regulatory procedure for advocates from member countries to offer their services without so many restrictions. The mutual recognition agreement, when it comes into force, will break down walls in the practice of law across the bloc. Since the East African Court of justice is an international court,advocates who are licensed to practice in their respective states can appear before the EACJ.

The potential that lies in the EAC is unmatched. As with any other trade bloc, progress can sometimes be stunted by challenges such as disharmonized laws and conflicts among members. Nonetheless,targets and objectives are achievable whenever there is the will by the majority.

Techno-powered regional economy is the next frontier for EAC integration. With increased reliance on technology, and with a relatively young population inspired by computer innovations, EAC presents a big opportunity for tech-based investments.

*Hanningtone Amol is the Chief Executive Officer of the East Africa Law Society, and serves as Team Leader for ALP Kenya.

Beatrice Maina is a corporate lawyer and member of ALP Kenya.

The authors can be reached at hamol@alp-ea.com