Published On: Fri, Jun 14th, 2013

East Africa Regional Trade –

tradersThe thirteen countries of East Africa – Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania, and Uganda – have overlapping memberships of varying degrees in six of the eight RECs recognized by the AU. Thus, this makes harmonization quite complex.

The countries of Burundi, Kenya, Rwanda, Tanzania, and Uganda of the EAC have not experienced major conflict in many years, except for the election violence in Kenya in 2007 and the ongoing, but diminished attacks of the Lord’s Resistance Army (LRA) in Uganda. However, the EAC, which has made tremendous strides in regional integration, is surrounded by other countries – Somalia, Sudan, Southern Sudan, Eritrea – in East Africa that have not done so well in managing conflict.  In addition, the current drought conditions in the Horn of Africa and piracy off Somalia’s coast are heightening concerns in the region. Moves are being made to mitigate the rise of these conflicts and the spill over into other countries, e.g., Uganda allowing U.S. troops to hunt down the remaining LRA members, Ethiopia and Kenya sending troops into Somalia to fight Al-Shabaab.

While there are several reasons for taking stronger offensive moves to avoid conflict spillovers, one key driver is economic development. In the case of Kenya and Ethiopia entering Somalia, both countries are involved with a newly planned development corridor called the Lamu Port – South Sudan – Ethiopia (LAPSSET) transport and economic development corridor. Some areas through which this corridor will pass have recently seen more evidence of Al-Shabaab crossing over the border, including the kidnapping of Western tourists.

This is a key corridor as it will give Ethiopia and South Sudan, two landlocked countries, access to the sea. This will help boost trade and investment potential for both countries. In addition, it will eliminate oil-rich South Sudan’s reliance on the pipeline through Sudan.

Even with remaining security concerns in the region, the economic growth of the region is in full bloom. The average annual growth rate for East Africa was 6.6% from 2000 to 2009.[1] Ethiopia is expected to be one of the fastest growing economies in the world and the fastest in Africa between 2011 and 2015, according to the Economist. [2]

The main regional strategy frameworks impacting East Africa are the tripartite agreement between COMESA, EAC, and SADC and the EAC protocol framework. The major development partners in the region include the AfDB, World Bank, U.S. Agency for International Development (USAID), Norway, Holland, Germany, Denmark, European Commission (EC), Japan International Cooperation Agency (JICA), UK Department for International Development (DFID), and the multi-donor funded agency, TradeMark East Africa (TMEA).

The major transport corridors that pass through East Africa are Central, Northern, North-South, and Dar es Salaam (Tazara) corridors. Both COMESA and EAC have agreed to jointly work together on infrastructure development with a strong focus on corridor development as insufficient infrastructure is also a problem in East Africa. There is also strong programming to develop One Stop Border Posts (OSBPs) to make cross border transport more efficient and seamless.

The EAC was close to finalizing the EAC Transport Strategy and Regional Road Development Programme document in 2011.  There is also an East African Railway Master Plan[3], which covers the revitalization of rail lines in all EAC countries with proposed rail lines reaching into Ethiopia, South Sudan, and the DR Congo.

In terms of energy, East Africa has various energy resources, including oil, hydro, gas, coal, and renewable energies like wind and solar. Most countries have energy policies and frameworks, but gaps in the frameworks keep more investment from occurring in the region. In 2011, the Regional Power Master Plan process was initiated to develop a regional power strategy for Burundi, DR Congo, Djibouti, Egypt, Ethiopia, Kenya, Rwanda, Tanzania, and Uganda.[4] Like in Central Africa, there is also a power pool called the Eastern Africa Power Pool (EAPP)[5].

In terms of ICT, East Africa is creating a second wave of mobile growth, including handsets and applications. However, broadband still significantly lags behind as it does for most of Africa. The landing of the SEACOM cable was a tremendous boost for this region in terms of Internet access and has helped drive down costs and catalyzed the local ICT industry. SEACOM[6] is currently connected to Kenya, Tanzania, Uganda, Djibouti, and Ethiopia. Rwanda’s connection will provide access to Burundi and eastern DR Congo. SEACOM is also expected to make connections available to South Sudan and Somalia in the near future, which will bring coverage to almost all of East Africa.

Other undersea cable systems that have arrived in East Africa include EASSy, TEAMs, SEAS, and Lion 2 (late 2012). The region will have access to slightly over 10,000 gigabits of international bandwidth.

There is still the issue of national ICT backbone infrastructure development. The EAC has successfully developed a regional ICT backbone, which connects all five countries. However, each country in the EAC is at a different state of development in their national ICT backbone deployment.

In terms of financial integration, there is no regional central bank. However, there is strong cooperation between the central banks in the EAC. For example, in the last quarter of 2011 all five central banks agreed to tighten monetary policies to address the rising inflation in the region.[7]

The commercial banks, particularly in Kenya, fortunately have regional business models which means they are ahead of the opportunity presented in the region. Several Kenyan banks have established themselves in other East African countries and Pan-African banks, like Ecobank and Standard Bank, can be found in several East African countries. There are also plans to establish a regional stock market.  Currently, there are stock exchanges in Kenya, Tanzania, Uganda, and Rwanda.

The EAC is working on a financial integration scheme to harmonize all countries into one financial services market.[8] Thus far, the EAC countries have been able to integrate regional payments systems and improve interconnectivity between payment card switches, which will help regional trade moving forward.

Featured image is map of countries in East Africa. Sudan and South Sudan are normally considered part of East Africa while Madagascar is considered part of Southern Africa (SADC). Source: Wikimedia Commons
Excerpt from book, “Grow Rich in the New Africa
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