Mr Adrian Njau, the acting chief executive officer of the East African Business Council. Partner states often prioritise domestic objectives, such as protecting local industries or boosting national revenue, leading to recurring barriers. PHOTO BY DOROTHY NAKAWEESI
EAC@25 what are the successes and failures of the integration to the regional private sector players?
The EAC has made notable strides, significant milestones include the establishment of the Customs Union in 2005, the Common Market in 2010, and steps toward a Monetary Union. However, challenges persist, such as non-tariff barriers (NTBs) which hinder full integration.
What role has EABC played in promoting entrepreneurship and Innovation?
The EABC actively advocates for the creation of a conducive environment for trade and investment by promoting harmonized trade policies and regulations, while working to eliminate Non-Tariff Barriers.
By this time, the region should have had a single currency and regional bank. Was this farfetched?
The Monetary Union - the third pillar of the EAC Integration, was expected to be established in 2024 with the introduction of a common currency and a regional central bank. Preparations for the Monetary Union include the attainment of macroeconomic convergence criteria, the establishment of institutions to support the Monetary Union, and the harmonisation of policies and regulatory frameworks.
The goal of having a single currency by 2031 is ambitious but achievable if partner states remain committed to EAC integration aspirations.
The key prerequisite of achieving an EAC single currency includes achieving a high degree of Macroeconomic convergence criteria which primarily include a ceiling on headline inflation of 8 percent, a reserve cover of 4.5 months of import, a ceiling on the overall deficit of 3 percent of Gross Domestic Product (GDP), including grants and a ceiling on gross public debt of 50 percent of GDP in net present value terms.
How is each member state fairing in achieving a Monetary Union?
Most of the EAC partner states are on track towards attaining these convergence criteria despite some challenges in the criterion on Net Present Value of Debt to GDP as well as fiscal deficit, due to increased demand for infrastructure development and spending to mitigate the economic impact of the Covid-19 pandemic as well as serving external debt and disruption of global trade and economy.
On having a robust institutional framework (EAMU Institutions) to ensure compliance and safeguard the convergence process: These institutions include (i) the East African Monetary Institute; (ii) the East African Statistics Bureau; (iii) the East African Surveillance, Compliance and Enforcement Commission, and; (iv) East African Financial Services Commission.
The EAC Secretariat is still working with partner states to develop legal instruments and initiate administrative procedures for the establishment of these institutions.
Regarding the harmonisation of monetary and exchange rate policies, the EAC central banks have made good progress. In principle, all the EAC central banks have agreed to move from a reserve money-based framework to a forward-looking price-based monetary policy framework.
Timeline extension provides an opportunity to address these hurdles, sustained efforts are needed to build the institutional and legal frameworks required for a successful single currency implementation.
The regional integration was majorly revived to trade seamlessly among the partner states. However, Non- Tariff Barriers keep cropping up. Member countries are blocking each other’s goods and services. How would EABC want this issue to be solved?
Non-tariff barriers (NTBs) persist in the EAC due to prioritising national interests over regional interests. In most cases, NTBs are caused by the unscrupulous private sector which lobbied for the protection of their uncompetitive products against similar competitive products from other EAC partners.
The private sector should advocate for their respective countries and the region in general to address the high cost of doing business instead of opting for NTBs which create an unlevelled playing field, encourage inefficiencies, reduce welfare for consumers, and frustrate intra-EAC trade.
Partner states often prioritise domestic objectives, such as protecting local industries or boosting national revenue, leading to recurring barriers. Inefficient border procedures further exacerbate the problem.
Although mechanisms such as the NTB Reporting System exist, slow resolution processes and limited accountability hinder progress. Addressing these issues requires stronger enforcement of the EAC Customs Territory.
What opportunities have risen from the EAC's integration into the African Continental Free Trade Area (AfCFTA)?
The integration of the East African Community into the African Continental Free Trade Area (AfCFTA) offers numerous opportunities for economic growth and regional development. It opens access to a broader continental market with a combined GDP estimated at $3.4 trillion, the agreement is expected to connect around 1.3 billion people living in different parts of the African continent.
The AfCFTA being the biggest agreement ever signed globally, aims at boosting trade volumes through reduced tariffs and non-tariff barriers. This integration fosters economic diversification by encouraging the development of value-added products and strengthening value chains across industries such as manufacturing, agriculture, and services.
The EAC also stands to benefit from increased foreign direct investment (FDI) driven by the appeal of a larger, unified market, spurring infrastructure development and job creation.
Harmonisation of trade policies and standards within the AfCFTA framework enhances regional integration and competitiveness while promoting innovation and productivity.
Additionally, improved connectivity through investments in transport and logistics infrastructure reduces costs, making EAC businesses more competitive.
How can the region forge a way forward?
Harmonising trade policies and simplifying regulations will create a seamless business environment while improving access to affordable financing will empower small and medium-sized enterprises and startups. Investment in infrastructure, particularly transport, energy, and ICT, is crucial.
