How can Uganda benefit from DRC’s admission to EAC?

AUTHORSHIP: Ms Aida K Nattabi (above) works with the Economic Policy Research Centre. The article was co-authored by Mr Swaibu Mbowa.

What you need to know:

The embrace of regional judicial protocols and political willingness are vital to facilitate a market-driven economy that allows trade to flow. 

The East African Community partner states have endorsed the admission of Democratic Republic of Congo into the bloc. This comes after DRC’s expression of interest to join the EAC in June 2019, appreciative of the need to tap into the bloc’s market and labour access among other benefits. 

The DRC has successfully demonstrated suitability in the first seven steps to obtain admission, including a verification mission conducted by the EAC to evaluate its fitness to join the community as per the EAC Treaty criteria, in June 2021. The DRC is now three steps away from the conclusion of the admission process.

The EAC stands to benefit from DRC’s admission in several ways: DRC shares borders with five of the six-member states, and satisfies the geographical proximity clause of the EAC Treaty. Secondly, DRC’s trade potential is facilitated by a common language, Kiswahili which is spoken by 50 per cent of Congolese and is East Africa’s official language; this will ease trade transactions. Third, DRC has a population of 81 million and therefore, widens the commodities market for the EAC states, including access to labour.While the above benefits generally accrue to the bloc, it is necessary to highlight how Uganda can leverage this admission to increase its trade flows, specifically bilateral trade with DRC. The Economic Policy Research Center studies show that DRC’s total formal imports from Uganda have stagnated at 3.1 percent of its total imports for the last decade. This is because DRC’s main imports are high value manufactured commodities, which Uganda cannot produce competitively, such as electronics, machinery, automobiles and pharmaceutical products.  These constituted an estimated 40 per cent of DRC’s total import bill in 2018. Products such as lime and cement, iron and steel where Uganda has developed a reasonable production capacity, also still command a small market of DRC’s imports of 5.1 and 0.84 percent respectively. This has negatively affected Uganda’s total trade revenue from its trade with DRC. 

However, an analysis of the potential trade effects due to free trade with DRC, estimates that Uganda is likely to increase its formal exports to DRC by $60.4 million, on account of geographical proximity and pre-existing bilateral trade.

The largest gains will be realised in the export of processed food and beverages, mainly sugar, palm oil, broken rice, sweet biscuits, and wheat flour; metal and mineral products. 

This highlights the dominance of food and beverages in the manufacturing sector, therefore, trade liberalisation with DRC presents an enormous opportunity for Uganda to invest and transform the agricultural sector to higher value-addition/agro-industrialisation in accordance with the third National Development Plan (NDP III). This should be in line with regional and international product standards.

Growth in the metals and minerals exports to DRC is expected, especially of iron and steel, cement and petroleum products. This will require extensive private sector investment to mitigate the supply side constraints, but also subsidisation of production costs such as electricity prices and taxes.

Uganda still grapples with limited advancements in technology to produce high value manufactured products such electronics, machinery, and automobiles.  However, through its industrial strategy  it can leverage the recent developments in the automotive industry by Kiira Motors cooperation (Kiira EV) and the mobile phone manufacturing plant in Namanve Industrial Park, but also establish itself as a re-export/assembling hub to supply these products in the long run.  Nonetheless, for Uganda and other EAC states to benefit, full commitment to the EAC Treaty and integration objective is required to overcome conflict/trade wars between states and arbitrary border closures.

Aida K. Nattabi and Regean Mugume are research analysts at EPRC, Makerere University.

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