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The East African : December 23rd 2013
The EastAfrican 38 BUSINESS DECEMBER 21-27,2013 I≥ony of easte≥n Af≥ica: As count≥ies get wealthie≥, mo≥e people ≥ated poo≥ Africa region over the past few years has been quite remarkable. Countries in the region comprise Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Rwanda, The Seychelles, Somalia, South Sudan, Tanzania and Uganda. But this strong performance G by regional countries has increasingly been accompanied by growing concerns over the quality of the growth — particularly the extent to which this growth has been conducive to broadbased poverty reduction and employment creation. Countries are confronting a number of major economic and social challenges — rising urbanisation, population pressures, and, as pointed out by the recent State of East Africa Report, high degrees of income inequality. Despite a much improved economic performance in the 2000s after two decades of economic stagnation across the region, a lot of social and economic aspirations have still not been fulfilled. One revealing manifestation of all this, cited in the United Nations Economic Commission for Africa’s (UNECA) Tracking Progress Report 2013 - Towards High Quality Growth and Structural Transformation in the Eastern Africa Region is that, although $1.25-a-day poverty has been reduced in relative terms in the region (from 65 per cent of the population in 2000 to 54 per cent of the population in 2011), the absolute number of citizens living below the international poverty line has increased from 155 million to 166 million over the same period. This paradox — growing wealth but more poor people — is a sure testimony that more needs to be done to ensure that the proceeds of growth are invested well for the future development of the region. The majority of the countries in Eastern Africa have articulated elaborate plans to reach middle-income status over the next 10-20 years. Such ambition is laudable and should be supported. With the generally favourable macroeconomic context and on the strengths of our important natural resources endowments and improving risk profiles, we have a window of opportunity to change our fortunes permanently, and move out of the aid-dependent lowincome countries status into the middle income status. But that window may not re- main open indefinitely. The risks to regional growth are multiple, and too numerous to enter into detail here. Some are exogenous — for example, global commod- iven the difficult global context, the continued resilience of economic growth in the Eastern P≥oduce≥s to impo≥t mo≥e dutyf≥ee p≥oducts By CHRISTABEL LIGAMI Special Correspondent RWANDA AND Burundi manufacturers will now be allowed to import more raw materials and industrial inputs duty free. This comes after EAC min- isters approved an extra list of goods to be exempted from the Common External Tariff (CET) of 25 per cent as provided in the EAC Customs Union protocol. The decision was made at the ministers’ meeting in November in Kampala, but the list is not yet official. Currently, the goods exempt- ed from CET include sugar for industrial use, paper for manufacturing books and paper, vegetable fats and oils. According to Richard Sindi- The Blue Nile in Guba, Ethiopia, during a ceremony to divert the water on May 29, which is part of a giant dam project. Pic: AFP COMMENTARY ANTONIO PEDRO “At the heart of all this then, is the need to create more employment opportunities.” ity prices (upon which part of the improvement in regional performance has depended on) may decline, or demand from Asia — which cushioned the region from the negative impact of the slowdown in the US and Europe since 2008 — may slow. Arguably, however, the more serious risks come from within. For instance, if job creation does not manage to keep pace with the rapidly expanding workforce, social unrest could end up undermining the whole growth process. At the heart of all this then is the need to create more employment opportunities. In our Economic Report on Africa 2011, UNECA was one of the first organisations in the region to coin the term “jobless growth.” The list of things that governments need to do to address this problem is long. It entails getting the basics right (such as macro-economic fundamentals, rule of law, strong and capable institutions that can stay the course and operate over long-term horizons), reviving planning, raising investment rates, enabling creativity and entrepreneurship development, and using local content judiciously to promote the establishment of domestic lead firms and fostering the creation of small and medium-sized enterprises which are the seedbed of job creation. Education Of equal importance is the need to raise the ambition and quality of our educational programmes, expand Africa’s infrastructure to reduce transaction costs and boost competitiveness, prioritise manufacturing and domestic value addition (of com- modities), explore economies of scale arising from regional value chains, and make Africa’s rapid urbanisation a driver for the continent’s growth, innovation and economic and social transformation. Fortunately, leaders in East- ern Africa have internalised the challenges, recognised the opportunities and have captured the aspirations and goals of their nations in long-term visions and other blueprints. A fluid dialogue between government, keystakeholders and international organisations is fundamental to make sure that the visions and supporting policies respond to the needs of the people. We applaud the decisive steps President Yoweri Museveni flags off the operations of berth 19 at the port of Mombasa together with Rwanda’s President Paul Kagame and Kenya’s Uhuru Kenyatta on August 28. Pic: Laban Walloga More needs to be done to ensure that the proceeds of growth are invested well for the future development of the region.” that are already being taken to move from visions to actions, notably on the infrastructure front. International organisations and other stakehoders too need to play their role by supporting the member states with a basket of practical and context specific solutions and toolboxes to expand development options, identifying and harnessing better growth opportunities and supporting policy formulation and implementation. Crucially, for a region which is on the cusp of a veritable resource boom, as advocated in UNECA’s Economic Report on Africa 2013, there is a whole set of policies that can be introduced to harness natural resource industries better so as to develop the linkages with the local economy, and thereby maximise job creation. Antonio Pedro is the Director, United Nations Economic Commission for Africa — sub regional office for Eastern Africa ga, the director of economic affairs at Kenya’s Ministry of EAC Affairs, Commerce and Tourism, the additional raw materials and industrial inputs should only be used in the production of goods exported to other East African countries. “The goods are managed un- der the duty remission scheme to ensure control, and are subject to full duty when sold in other partner states,” said Mr Sindiga. Cushion Rwanda and Burundi’s cur- rent list of raw materials and industrial inputs exempt from CET expires in June 2014, after a five-year period. “The two partner states joined the Customs Union in 2009 and the exemption was allowed to cushion their industrial base in the face of competition from established firms of other partner states,” said Mr Sindiga. Uganda too has a list of ex- empted goods — known as “the Uganda List.” The Uganda List was to expire in June but its extended by a year after its tenure was extended by a year after manufacturers argued that local factories were still in their infancy, and that entrepreneurs had taken bank loans which they were still paying. Kenya, on the other hand, has an upfront duty remission scheme for exports, benefiting about 400 exporters. Under the EAC duty remis- sion scheme, manufacturers are allowed to import raw materials duty-free for exports outside the region, or only sell 20 per cent of the products within the EAC but pay full duty. However, firms can choose to use the EAC rules of origin scheme that allow them to add value up to 35 per cent, but tax is paid on imported raw materials.
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