- Companies that are export-ready and are motivated and willing to export helps them penetrate markets and make good sales, leading to business growth. However such initiatives have to collaborate with the government agencies responsible for promoting exports as that makes interventions sustainable.
Over the past few years, the East African Community has made notable strides towards regional integration.
Milestones such as the coming into force of the East African Customs Union, the establishment of the Common Market in 2010 and the implementation of the East African Monetary Union Protocol have all served to facilitate trade among member states.
The volume of trade, however, has not grown at the envisioned rate, with some countries still having to play catch-up.
Intra-EAC trading fell from $5.8 billion in 2013 to $5.6 billion in 2014.
Even with this scenario, Kenya, Uganda and Tanzania continued to dominate regional trade as Burundi and Rwanda lagged behind.
Overall, the share of intra-EAC trade, the region’s total trade fell to 10.1 per cent from 11.1 per cent in the same period, attesting to the existing imbalance in trade volumes among member states.
Data from the Kenya National Bureau of Statistics shows that Kenya’s combined exports to Uganda, Tanzania and Rwanda declined from $69.9 million in January to $1.56 million in February, before rising to $88.8 million in March this year.
Another study by Kenya’s Ministry of EAC in 2015 revealed that the Kenya’s exports to the EAC countries declined sharply. It attributed this to stiff competition from cheap Chinese imports and an unfavourable taxation regime such as; value added tax, industrial development fee and the railway development fund.
These taxation measures and industrial development fees make Kenyan manufactured goods 5 per cent more expensive than imports from Comesa and SADC countries.
Non-tariff barriers, double taxation for companies operating in two or more member countries, unharmonised standards have further compounded the matter.
This matrix paints a gloomy picture for small and medium enterprises (SMEs) especially those in landlocked countries such as Rwanda and Burundi. It also presents an opportunity for the region’s governments to be more proactive in creating opportunities for SMEs.
A case for Rwanda
Potential Rwandan exporters face various constraints in accessing EAC markets. These include weak export networks and inadequate exporting skills, low productivity of labour, weak understanding of market opportunities and market expectations as well as stiff competition.
It is, therefore, important to develop an enabling environment for enhancing export capacities and skills so that exporters can benefit from the opportunities provided by the EAC market, which currently are 146 million people. Various initiatives can help achieve this.
Trade Mark East Africa (TMA) has been at the forefront of supporting initiatives that increase Rwanda’s and its neighbour Burundi’s export capability, through support of the Export Development Capability Programme in partnership with the Rwanda government.
The initiative, started in 2012, ran a pilot project to help 10 selected Rwandan companies enter the Uganda market. The programme, through the Rwanda Development Board and its implementing partner, Traidlink an Irish NGO, supported the organisations to develop export strategies, exposed them to export opportunities in Uganda, undertook market research, facilitated sales missions and offered core support once deals were made.
Through the programme, six local consultants trained 16 companies in planning and executing export plans. These companies have successfully exported goods to Uganda, contributing to Rwanda’s export value to the EAC. The programmes’ original goal is to increase export values of the 16 target companies by $500,000.
Among the key takeaways from this initiative is that working with companies that are export-ready and are motivated and willing to export helps them penetrate markets and make good sales, leading to business growth. We have also learnt that such initiatives have to collaborate with the government agencies responsible for promoting exports as that makes interventions sustainable.
Additionally, governments should continually invest in infrastructure development and policy reviews to enhance SMEs capacity to compete with more established entities.
A few challenges remain, however. The slow pace of harmonisation of tax regimes and failure to eliminate non-tariff barriers remain sticking points that need immediate attention to level the playing field for all exporters in the region.
There is also a need for the region to expedite the development of a Single Customs Territory, which remains elusive despite having the protocol in place.
Other notable challenges that need immediate attention to open up the regional market include eliminating challenges emanating from Special Economic Zones (SEZs) and Export Processing Zones (EPZs) regimes as well as those of Investments Promotion Authorities.
The delayed adoption of the EAC Industrialisation Policy and Strategy, and the long overdue EAC Sanitary Phytosanitary (SPS) Protocol must also be addressed if the trade bloc is to compete on an equal footing with other regional blocs such as SADC and Ecowas.
Lisa Karanja is a senior director of business competitiveness at TMA.
