EAC at 25: Why barriers to Eastern African cooperation remain

By Edward Qorro

The eight-member East African Community (EAC), which will clock 25 years of existence on November 30, traces its origins to 1967 when Kenya, Uganda and Tanzania joined hands to form the erstwhile East African Cooperation.

The objective was to foster economic integration, enhance regional trade, and promote unity among the East African nations.

While the initiative fell through in 1977 due to differences among the partners, the bloc's rebirth in 1999 remains a pivotal moment in the history of collaboration within the continent.

But as with all milestones, EAC's silver jubilee is as much about introspection as it is an occasion to celebrate.

Issues like non-tariff barriers (NTBs) and low intra-trade continue to be hurdles in cooperation among the eight partner states — the Democratic Republic of the Congo, Burundi, Kenya, Rwanda, Somalia, South Sudan, Uganda, and Tanzania — because of individual priorities getting precedence over regional interests.

"In some cases, NTBs are caused by nationalistic private sector actors that lobby for the protection of their uncompetitive products against similar, more competitive products from other EAC partner states," the acting chief executive of the East African Business Council (EABC), Adrian Njau, tells TRT Afrika.

He stresses the need for the private sector to address the high cost of doing business in the region rather than resorting to NTBs.

Hurdles to business, A 2023 EAC report, reveals that 274 NTBs have been removed since 2007, but at least ten remain unresolved.

These NTBs translate into cumbersome customs procedures and discriminatory regulatory practices.

Njau blames them for creating an uneven playing field, encouraging inefficiencies, reducing consumer welfare, and curtailing intra-EAC trade.

"Inefficient border procedures exacerbate the problem. Although mechanisms like the NTB Reporting System exist, slow resolution processes and limited accountability hinder progress," he points out.

At EABC, headquartered in Tanzania's Arusha, the primary concern is the recurrence of NTBs even after they are removed.

This is why the regional business council has been calling for a robust mechanism to address the challenge.

Shifting goalposts As the EAC prepares to celebrate its anniversary, the envisioned EAC single currency arrangement is still a distant dream, with the target pushed further to 2031.

The Monetary Union, the third pillar of EAC integration, was initially expected to be established in 2024, featuring the introduction of a common currency and the creation of a regional central bank.

Preparations for the Monetary Union include achieving macroeconomic convergence criteria, establishing institutions to support its implementation, and harmonising policies and regulatory frameworks.

The EABC chief is optimistic that such a plan would still materialise.

"The goal of having a single currency by 2031 is ambitious but achievable, provided partner states remain committed to EAC integration aspirations," Njau tells TRT Afrika.

The prerequisites to achieving an EAC single currency include a high degree of macroeconomic convergence, such as an 8% ceiling on headline inflation, reserve cover of 4.5 months of import, fiscal deficit capped at 3% of GDP, and a ceiling on gross public debt of 50% of GDP in net present value terms.

Njau sees most EAC partner states on track despite some challenges in meeting the criteria of net present value of debt to GDP and fiscal deficit, mainly due to increased demand for infrastructure development and spending to mitigate the economic impact of the pandemic.

The burden of servicing external debt and global trade disruptions are other factors.

Rife with potential In principle, all EAC central banks have agreed to move from a reserve money-based framework to a forward-looking, price-based monetary policy framework.

"We strongly believe that 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," says Njau.

As for intra-EAC trade, it has improved somewhat over the years, driven by initiatives like the Single Customs Territory and Common Market protocols, and infrastructure investments.

However, all of this is still below potential, with intra-EAC trade accounting for only about 15% of the total transactions.

The regional economic bloc's intra-trade grew by 13.1% in 2023, reaching US $12.1 billion.

"To boost intra-regional trade, partner states must fully implement agreed regional commitments," Njau points out.

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