EAC Scoreboard: DRC’s admission is a big win, business slows down business
The East African Community (EAC) is expected to expand its membership to seven this year in a historic development that will see the admission of the Democratic Republic of the Congo to the bloc by April.
But while this marks a huge step forward in regional integration, several critical issues remain unresolved, including the full implementation of the first four pillars of the EAC; Customs Union (2005) and Common Market (2010), Monetary Union and Political Federation.
The bloc’s profile as a trade and investment destination has shrunk due to non-tariff barriers, the excessively high cost of doing business, and inconsistent tax regimes.
Experts pointed out that trade disputes and infrastructure bottlenecks could derail trade with the DRC, just as happened before it with South Sudan.
The failure to amend the treaty on rules and procedures that could speed up the decision-making process for welcoming new members has also slowed down the integration process.
An attempt by the Chairman of the Heads of State Summit, Kenyan President Uhuru Kenyatta, to amend the Rules of Procedure Treaty has been rather slow.
âSomething very subtle but very important is the quorum for meetings. We wanted the Summit to make a decision on this, âsaid Adan Mohamed, Secretary of the Kenya EAC Business Cabinet and Chairman of the Council of Ministers.
âPresident Kenyatta is determined to improve the governance structure of the Community during his tenure. “
The treaty establishing the EAC was drafted to accommodate the three founding countries, Kenya, Uganda and Tanzania. But three other partners have joined the bloc and the DRC is waiting behind the scenes. Burundi and Rwanda joined the EAC in 2007, while South Sudan joined in 2016.
âThis rule has never been changed. Now we are six members, maybe seven, and even more if you consider Somalia.
“Having all of these members present at a summit is a Herculean task,” Mohamed said.
âWe have suffered a lot of setbacks at the EAC meetings where five countries come and one doesn’t like something on the agenda, and they have to cancel it. So we’re trying to change the rules to provide for a two-thirds majority. “
Dr Peter Mathuki, a Kenyan who succeeded Liberat Mfumukeko of Burundi as secretary general in March 2021, is expected to lead the secretariat to cut red tape, end border disputes between partner states and find funds to finance EAC programs.
Nine months into his tenure, he is still grappling with tariff issues like the common external tariff after partner states failed to agree on a fourth band.
Phyllis Wakiaga, CEO of the Kenya Manufacturers Association, said the current tariff regime undermines industrialization efforts by either favoring imports or subsidizing import costs, resulting in reduced competitiveness of local manufacturers.
“This leads to few job opportunities and less development and ultimately an increase in the cost of living,” she said.
Imports from other countries outside the EAC enjoy lower rates (25%) than products from the EAC.
“This is not only retrograde for the goals of the EAC, which include enhancing the prosperity, competitiveness and stability of the region, but also jeopardize industrial growth and its benefits,” Ms. Wakiaga said. .
The EAC faces several ONTs.
The EAC Non-Tariff Barriers Elimination Act 2017, which was approved by partner states and published in July 2017, provides the legal basis for the removal of barriers, but the Secretariat has yet to develop a framework for monitoring to implement it.
Rwanda and Burundi, Rwanda and Uganda, and Kenya and Uganda are involved in battles for cross-border trade, which the secretariat has been unable to resolve.
There are still roadblocks for goods from Uganda and Kenya to South Sudan manned by security personnel, and Juba has yet to fully operationalize the principles of a single customs territory five years after joining. at the EAC.
“Under the common market protocol, not all partners have implemented a single tourist visa, the use of a national identity card to travel and the single network zone,” says a report of the Council of November 2021.
Again, not all EAC partners are reaping the benefits of these efforts.
While one can use an ID to cross the Kenya-Uganda border into Rwanda, one cannot be used in Tanzania, Burundi and South Sudan.
At the 40th meeting of the Council of Ministers held in February 2021, the Council warned that EAC bodies and institutions were facing liquidity problems caused by low disbursements.
In fiscal year 2020/21, each partner state contributed $ 7.8 million compared to $ 8.2 million in the previous fiscal year.
âThere are important balances. Not everyone pays on time. As the circumstances are different, the Secretariat is working hard and the Council of Ministers is reaching out to Member States which have not contributed as requested, âsaid Mr. Mohamed.
A meeting of the Finance and Economic Affairs Sector Council held in Mombasa in October 2021, chaired by Kenya’s Cabinet Secretary to the Treasury, Ukur Yatani, recommended changes to the EAC contribution model.
“The current funding model is not sustainable, which is one of the reasons the Summit asked the Council to look for other more sustainable options,” Yatani said.
The committee proposed a hybrid model of financing the EAC budget, in which 65% of the budget is funded equally by all partner states, and 35% is based on the nominal GDP per capita of the partner states for the five years. previous ones, as assessed by the World Bank.
But there is no consensus on the proposal, with some partners arguing that remittances should be on equal contributions.