Business Guide Africa > East African Community

The East African Community

East African countries of Kenya, Uganda and Tanzania establish the East African
Community (EAC) to boost regional trade and commerce

n a major development in East Africa, Kenya, Uganda and Tanzania decided to join hands and form a

trade bloc called East African Community (EAC) in 2001. The new trade bloc aims to worktowards
economic policies that are pro-market, pro-private sector and pro-liberalisation. By pooling in their
resources and promoting free trade within the region, the East African Community aims to emerge as a
leading trade entity in East Africa. In a simple ceremony held in Arusha, Tanzania, Kenya's former
President Daniel arap Moi, Uganda's Yoweri Museveni and Tanzania's Benjamin Mkapa, formalised the
EAC treaty to pave way for an economic and, ultimately, political union of the three countries.
"Everything that we have done up to now has just been the preparation, the work for integration has just
begun," Mkapa said at the official ceremony. "The important goals of the EAC are to improve our
economies, quality of life and relations between the three countries," he said. Technocrats who have been
working towards the cooperation have termed it "a new chapter" in which "none of the old mistakes will be
repeated". The "old mistakes" refer to the problems which led to the collapse of the EAC in 1977. East
Africa had become ideologically split then, with Kenya advocating capitalism and social interventions, while
Tanzania pursued socialism. Besides, mistrust among the leaders mounted especially after Ugandas
former dictator Idi Amin took power by force.
Moi, Museveni and Mkapa had signed the treaty in November 1999 which set out the principles for
economic, monetary and political union. It also provided for common action on the movement of people
and goods between member countries and on transport, tourism and telecommunications. The treaty calls
for common external tariffs and the elimination of international tariffs, the establishment of an East African
legislative assembly and of a common customs union.
Rwandan President Paul Kagame and his Burundian counterpart, Pierre Buyoya, also expressed their
desire to join the community. However, President Mkapa noted that their admission could only take place
once the state of insecurity in their countries had been permanently addressed.
The East African region (Tanzania, Kenya and Uganda) covers an area of 1.8 million square kilometres
with a combined population of about 80 million and has a vast potential in mineral, water, energy, forestry
and wildlife resources. It also has agricultural, livestock, industry and tourism development. Its people have
a common history, language (Kiswahili), culture and infrastructure. The EAC integration was aborted in
1977 after 10 years. Efforts to revive the community began in 1993 with the heads of state signing an
agreement to establish a commission for East African cooperation.
United Nations Secretary-General Kofi Annan welcomed the creation of the new association, calling the
newly established regional body a "building block" for a future African Economic Community. "The United
Nations supports the strong commitment of African countries to multilateralism and initiatives such as the
EAC (East African Community) that strengthen Africa's capacity to meet the challenges of globalisation,"
he said.
However, the East African region has had its fair share of disputes and disagreements. The main bone of
contention has been the long-held perception by Uganda and Tanzania that Kenya's economy - mainly the
manufacturing sector - was more competitive than theirs despite the fact that it has been declining over the
past few years under pressure from imports from the Middle East and inadequate infrastructure. Kenya
exports approximately three-fifths of its goods to Uganda and Tanzania and had been facing tariffs of
between 10 and 20 per cent before the establishment of the East African Community. However, the EAC is
expected to present a good investment platform for both domestic and foreign investors due to their
economies of scale. Benefits should also accrue to Uganda and Tanzania, who have, of late, reaped
immensely from food commodity supply fluctuations in Kenya.

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Business Benefits Of East African Union

The East African Union has taken giant steps towards integration by creating an attractive
alliance...

he East African Community (EAC) is the regional intergovernmental organisation of Burundi,

Kenya, Rwanda, Tanzania and Uganda, with its headquarters in Arusha, Tanzania. The EAC aims to
create a prosperous, competitive, secure, stable and politically united East Africa; and the Mission is to
widen through increased competitiveness, value added production, trade and investments.The EAC
countries established a Customs Union in 2005 and a Common Market in 2010. The next phase of the
integration will see the bloc enter into a Monetary Union and ultimately become a Political Federation of
the East African States.
The realisation of a large regional economic bloc encompassing Burundi, Kenya, Rwanda, Tanzania and
Uganda with a combined population of more than 130 million people and a combined Gross Domestic
Product of $74.5 billion, bears great strategic and
geopolitical significance and prospects of a renewed and
reinvigorated East African Community.
The regional integration process is at a high pitch at the
moment as reflected by the encouraging progress of the
East African Customs Union and the establishment in
2010
of
the
Common
Market.
The negotiations for the East African Monetary Union,
which commenced in 2011, and fast tracking the process towards East African Federation all underscore
the serious determination of the East African leadership and citizens to construct a powerful and
sustainable East African economic and political bloc.
A single market has many benefits. With full freedom of movement for all the factors of production between
the member countries, the factors of production become more efficiently allocated, further increasing
productivity.
For both business within the market and consumers, a single market is a very competitive environment,
making the existence of monopolies more difficult. This means that inefficient companies will suffer a loss
of market share and may have to close down. However, efficient firms can benefit from economies of
scale, increased competitiveness and lower costs, as well as expect profitability to be a result.
Consumers are benefited by the single market in the sense that the competitive environment brings them
cheaper products, more efficient providers of products and also increased choice of products. What is
more, businesses in competition will innovate to create new products; another benefit for consumers.
Other benefits include common and coordinated policies that increase efficiency especially in those
countries that are behind in their instituting good policies. In addition the common regulatory regime and
frameworks ensure that best practice within the regional framework is not only in place but adhered to. The
closeness of market single ensure that good procedures are instituted and practiced and thus creates a
kind of seamless market.

In addition, by being in common market and practising common policies and regulations countries in the
trading bloc become their brothers keepers and therefore they create a system of surveillance upon one
another based on best endeavours and at time backed by legal systems. This in a way creates an
efficient bloc that will operate in a higher indifference curve in consumption and efficient production curve.
Under the Common Market Protocol, Partner States agreed to remove all barriers and restrictions on the
movement, sale, investment and payments of capital. Partner States have also agreed to remove any
discrimination based on the nationality or on the place of residence of the persons or on the place where
the capital is invested.

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Business Opportunities In East Africa

The East African Community (EAC) offers excellent opportunities for new business
ventures...

ast Africa is a region overflowing with potential from agriculture to mining to tourism to energy

investment opportunities abound. With the aim of harnessing this potential to promote economic growth
and development in the region, the five partner States of the East African Community have agreed to cooperate in the areas of Investment and Industrial Development, as outlined in the EAC Treaty.
This co-operation seeks to, among others, rationalise investments and the full use of established industries
so as to promote efficiency in production with a view to promoting the Community as a single investment
area.
With a population of more than 130 million, East Africa boasts one of the largest single-bloc regional
markets in Africa. This market is made even bigger by a series of mutually beneficial partnerships with
regional blocs such as COMESA and SADC, boasting a combined population well over 400 million. The
EAC also has in place a fully-fledged Customs Union.
The membe countries of EAC are working towards the
transformation of the manufacturing sector through high value
addition and product diversification based on comparative and
competitive advantages of the region.
An added incentive for investors and business people is the fact
that EAC members also qualify for duty-free access to the US
market under the African Growth and Opportunity Act (AGOA), as well as EUs Everything But Arms (EBA)
initiative, under which all products from LDCs except arms and ammunitions have preferential access to
the EU market.

That should be pure music to the ears of any prospective investor, as should the news of the ready
availability of a young, skilled and enterprising labour force. And something more yet; a host of generous
incentives are on offer.
But what would opportunity be without strategic government support that provides for the kind of
macroeconomic stability that ensures businesses flourish?
Since the 1980s, the EAC countries have undertaken comprehensive economic reforms aimed at reducing
direct government intervention in the economy and stimulating the growth of the private sector, recognised
as the engine of economic growth.
These reforms, implemented in the form of structural adjustment programmes, have enabled the private
sector to thrive.
Such reforms have naturally included the liberalisation of the respective financial sectors, meaning all EAC
countries
boast
floating
exchange-rate
regimes
today.
Furthermore, all EAC member states are engaged in the privatisation of major government corporations.

Advantages
A single market has many benefits. With full freedom of movement for all the factors of production between
the member countries, the factors of production become more efficiently allocated, further increasing
productivity.
For both business within the market and consumers, a single market is a very competitive environment,
making the existence of monopolies more difficult. This means that inefficient companies will suffer a loss
of market share and may have to close down. However, efficient firms can benefit from economies of
scale, increased competitiveness and lower costs, as well as expect profitability to be a result.
Consumers are benefited by the single market in the sense that the competitive environment brings them
cheaper products, more efficient providers of products and also
increased choice of products.
What is more, businesses in competition will innovate to create
new products; another benefit for consumers.
Other benefits include common and coordinated policies that
increase efficiency especially in those countries that are behind
in their instituting good policies. In addition the common
regulatory regime and frameworks ensure that best practice
within the regional framework is not only in place but adhered to. The closeness of market single ensure
that good procedures are instituted and practiced and thus creates a kind of seamless market.
In addition, by being in common market and practising common policies countries in the trading bloc
become their brothers keepers and therefore create a system of surveillance upon one. This in a way
creates an efficient bloc that will operate in a higher indifference curve in consumption and efficient
production curve.

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