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The East African : December 9th 2013
The EastAfrican BUSINESS DECEMBER 7-13,2013 47 ing to the report has resulted in making products from EAC partner States less competitive than similar products produced in Kenya. “The Sectoral Council consid- Ease of starting a business (rank out of 189) ered the imposition of the levy and noted that the levy contravenes the EAC Customs Union Protocol and therefore proposed that the levy be abolished for EAC products,” said the report. Last week, Kenya launched Source: Transparency International, World Bank Presidents Museveni, Kagame and Kenyatta during the flagging off of the newly constructed berth 19 in the port of Mombasa. Picture: File the standard gauge railway line, a signal it was determined to go ahead with the project. Andrew Luzze, the executive director at East African Business Council said that inadequate government structures, erratic application of rules and the lengthy customs procedures were some of the barriers to trade in the region. “There is a need to have a law African Breweries’ beers were being charged a CET of 25 per cent when exported to Tanzania through Serengeti Breweries, EABL’s subsidiary in that country. “Tanzania informed the meet- ing that beer produced in Kenya was accorded preferential treat- GOOD BUSINESS ENVIRONMENT ria, which prescribes a zero per cent customs duty rate. It was established that plastics manufactured in the region qualified for zero rating, and that Tanzania should allow exports of the products freely into the country. Walter Kamau, a trade expert at Kenya Manufacturers Association, said the decision by the EAC Council of Ministers on June 10, directed partner states to grant members tariff preferences on plastic products upon fulfilment of the rules of origin. “The problem now lies with the lack of implementation of the council’s decision,” said Mr Kamau. Burundi, the report says charges full Common External Tariff (CET) on some items from the other partner states even though they meet the required standards. “Burundi indicated that it started charging full CET after finding out that several EAC Certificates of Origin were not authentic,” noted the report. Several regional companies are currently locked in trade disputes with either their competitors or regulators, among them cigarette makers British American Tobacco (BAT) and Mastermind Tobacco. Regional integration was meant to ease trade and stop the revenue losses suffered by companies while doing business in the region. However, many exporters and importers have found themselves involved in expensive trade battles that may inform the future of crossborder business deals in East Africa. Kenya complained that East In the EAC, all five economies implemented a combined nine regulatory reforms in 2011/12 making it easier to do business — four were carried out in Burundi, two in Rwanda and one in each of Kenya, Tanzania and Uganda. Burundi jumped 10 places in the ranking in the ease of doing business in 2011/12 thanks to improvements in four areas as measured by Doing Business 2013: starting a business, dealing with construction permits, registering property and trading across borders. Rwanda, the top performer in the region, made the most progress over the past seven years. Worldwide, it made the second-most progress. Over that period, Rwanda implemented 23 regulatory reforms, making it easier to do business. Regulatory reforms — such as the consolidation of different registration processes into one single point in Rwanda and Kenya — simplified the registration process in the EAC region. To start a business in the EAC now requires an average of eight procedures and costs an average of 33.6 per cent of income per capita — compared with 12 procedures and a cost of 140 per cent of income per capita 7 years ago, in 2005. www.doingbusiness.org ment except imported spirits re-exported to Tanzania,” said the report. Kenya undertook to investigate the issue and report back during the next meeting of the Sectoral Council on Trade, Industry, Finance and Investment early next year. Tanzania produced documen- tary evidence claiming that the County Councils of Kwale and Kajiado in Kenya had re-introduced charges for transit cargo. Kenya and Tanzania are to hold discussions on the allegations, the report shows. Kenya’s EAC Integration secre- tary Barak Ndegwa said barriers by county governments would negatively affect EAC’s mission to achieve free movement of goods and services. “The county governments should not use this as an opportunity to generate revenue,” said Mr Ndegwa adding that the government was aware of the complaint and it is working on resolving it. Kenya’s decision to introduce a levy of 1.5 per cent on all imports to the country has also been raised as a new impediment to trade in the region. he levy introduced in June is to fund the construction of a standard gauge railway line from Mombasa to Kisumu and also applies to goods transferred from other EAC Partner States to Kenya. This levy accord- system comes live in Tanzania, Uganda and Kenya the region,” said Dr Kasekende adding that the system “will be vital in promoting regional trade and enhancing economic integration.” He said that a single payment system was one of the building blocks towards a single currency. On November 30 the five EAC heads of state signed East African Monetary Union protocol that will steer the region towards a single currency in ten years’ time. Stephen Kaboyo, the managing director of Alpha Capital projected that the EAPS will help to integrate payment platforms to achieve the EAC’s vision of economic integration. “It will facilitate regional trade and result in business without borders,” he said. However the big challenge, said business executives is how quickly the system can be accepted by the people who are engaged in the export and import trade in the region. Avoiding confusion “To avoid delays in adapting to the system, and any confusion that may occur through our respective private sector bodies in Kenya, Tanzania and Uganda we need an engagement with the central banks to educate the business community on how to use the system,” said Gideon Badagawa, the executive director of Private Sector Foundation Uganda. Small and medium-sized busi- nesses, investors who make high value payments and consumers who have been using informal methods to make smaller payments including school and medical fees for relatives across national borders, are expected to be the biggest beneficiaries when the system takes off. Currently, some banks with a regional presence allow their customers to access their funds in parts of East Africa in either their Nov 25 home currency or in a currency of choice. Customers are however required to pay a fee for the conversion of the currencies. A key challenge to intra-African trade is the facilitation of payments. By comparison with international practices, African payment systems are often inefficient in terms of cost, time, convenience, adaptability and finality. A research by Economic Policy Date when the East African CrossBorder payment system became operational in the three central banks Research Centre (EPRC) reveals that intra-EAC trade was estimated at only $4.9 billion in 2011. In their joint research paper, the two research fellows at Economic Policy Research Policy Centre Isaac Shinyekwa and Othieno Lawrence argue that the economies of the member states and volume of trade in the region has been growing over the past seven years since the implementation of the EAC Customs Union. The researchers said Uganda is the biggest importer in the EAC with its total import within the region standing at $721 million while exports stood at $649 million in 2011. During the same period Kenya’s imports stood at $320 million while its exports totalled $1.544 billion, Tanzania’s imports were at $378 million, exports at $416 million; Rwanda’s imports were at $589 million and its exports stood at $70 million; Burundi’s total imports were at $267 million and exports at $24 million. to hold partner states responsible for not eliminating NTBs. NTBs are as a result of trade competition among the partner states. This will be there in any trading bloc but we need to have strategies in place on how to deal with them fast,” said Mr Luzze. Enforcement needed The EAC Council of Minis- ters, during its meeting held in April 2011, among others, reviewed the elimination of NTBs in the region and directed EAC to source for funds to develop a legally binding enforcement mechanism on the elimination of NTBs as identified in the EAC time Bound programme. The EAC with the support of Trade Mark East Africa contracted a consultant who prepared a draft Bill on a legally binding enforcement mechanism for the elimination of NTBs. The draft Bill was subjected to national stakeholders’ workshops in May and June to solicit for comments. After the national stakehold- ers’ workshops were held, an independent consultant was contracted to consolidate and incorporate comments in the draft Bill. The Sectoral Council considered the revised draft Bill and recommended its adoption by the Council of ministers.
December 2nd 2013
December 16th 2013