Volume 1 September 2007

Impact of Economic Partnership Agreements: Survive or Thrive? Strategic Challenges for Business in Africa

The deadline for African Caribbean and Pacific (ACP) countries to sign the Economic Partnership Agreement (EPA) with (EU) is 31st December of 2007. This agreement will significantly change the business environment in many African countries. Should there be no agreement by the deadline, the EU threatens to immediately increase tariffs for ACP exports into , by in some cases, 25%.

Perspectives the effect of challenges of and specialization in primary opening our markets up to commodities. From the perspective of the EU. business and entrepreneurs, The second challenge is there are two key On the other hand, the two expected fiscal revenue loss opportunities offered by key challenges posed by which raises the likelihood EPAs. First is trade creation EPAs to business are first, of compensatory increases in as new opportunities for competition in domestic taxation. The ESA countries trade become available. and export markets. This expected to be worst affected The effects of trade creation arises from the principle, by revenue loss are Djibouti, are expected to exceed the upon which EPAs are based, Seychelles, Burundi and effects of diversion of current of EU and ACP countries DRC. Implementation of customers to suppliers reciprocating market access EPAs calls for major fiscal from the EU. The second provisions. In the East and reforms, and possibly some opportunity is the deepening Southern Africa group (ESA), structural changes, in many of regional integration. the countries that are likely African countries. EPAs call for strong regional to be most affected by an integration and therefore increase in imports from EU As ESA countries grapple should speed up the are Kenya, Mauritius, Sudan with these challenges, the formation and deepening and Ethiopia. It is feared that European countries projected of economic blocks and the playing field is so skewed to benefit the most from EPAs customs unions. This is that, for ESA countries, are Great Britain, , expected to allow business to there is a risk of de- , and . diversify and should mitigate industrialization, significant shrink in intra-regional trade

Advisory • Consultancy • Coaching • Training • Executive Support Options alternatives fall into two analysis and reliable broad categories. The first intelligence. How do we One of the key strategic category is based on WTO improve competitiveness options that business and ‘enabling clause’ that allows of our businesses in order entrepreneurs should developed countries to grant to thrive under an EPA consider is to build and unilateral trade preferences regime? Is it time to consider consolidate efficient supply to developing countries. The consortia or mergers and capacity before opening up second category hinges on a acquisitions, even across to EU. The second option new ‘waiver’ to succeed the national boundaries, which is to focus on reducing and one on which the Cotonou will generate economies of removing intra-Africa trade Agreement is based, after its scale necessary to compete barriers including speeding expiry at the end of 2007. with the best from Europe? up regional economic What is the best business integration processes. The Cotonou Agreement to be in and how do we that underpins the EPA hedge against risks in an negotiations was signed in EPA environment? Where Questions June 2000 and entered into are the examples we could force of law on 1st April learn from? Where can we For business, the key bottom- 2003. It has a lifespan of get clear, objective and line strategic consideration is twenty years with revisions innovative thinking and whether EPAs will positively scheduled for every five recommendations on this and significantly impact on years. It is conceivable that matter? the ESA countries’ obstacles the agreement can be revised of significant marginalization to extend the EPA deadline Whichever way one looks at in the global economy; low to a date more favourable to EPAs, whatever eventually intra-regional trade; and ACP countries. happens on the matter is weak domestic economic set to significantly alter structures. the business landscape Action across Africa. How each There is a view that the EU is business reacts will spell We think that by this unfairly pushing developing the difference between time businesses should countries to hastily enter into extinction and existence; have already considered an unfavourable trade regime between surviving and their strategic and tactical under EPAs. In addition, thriving. there is a significant lobby responses to a variety of www.upwardboundkenya.org for the establishment of scenarios arising from alternatives to EPAs. These EPAs based on thorough

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