DOING BUSINESS IN The East African Community FINANCIAL TIMES SPECIAL REPORT | Wednesday November 30 2011 www.ft.com/east­africa­community­2011 | twitter.com/ftreports Inside this issue Barriers States may A regional have signed up to the principle but the reality is something market starts else Page 2 Stock markets Rwanda is way ahead in terms of regulation but it trades only four stocks Page 2 Infrastructure Delays to take shape caused by unreliable rail, worn roads and clogged ports make up 25 per cent of logistics costs Page 2 Katrina Manson and more enticing to outside inves- nity is even considering expan- tors and in a stronger position sion: both South Sudan and Interview Richard Sezibera, William Wallis report to negotiate a better deal. Sudan want to join. EAC secretary­general, is on the relaunched Driven by this logic, and with “The EAC is the fastest grow- determined not to do things few of the ideological differ- ing of all the Africa regional by halves Page 3 trading bloc, 34 years ences that divided members in economic communities,” says after the first the past, regional leaders and Donald Deya, head of the Pan- Counterfeit goods bureaucrats have spent the past African Lawyers Union, who Fake attempt fell apart decade refashioning the EAC for has worked on the complex products, the 21st century. legal issues that have emerged. smuggled hen the East Afri- On paper it is beginning to Next year, the EAC even through the can Community work. The EAC has a customs plans to create a monetary region’s (EAC) was first union, a common market, a leg- union and, in 2015 political fed- porous launched in 1967, islative assembly, a bank and a eration. Consultants like to say borders, affect Wit was among the most sophisti- court. It even has an anthem. the bloc is trying to do in 10 virtually cated regional alliances in the More than 133m people with a years what the European Union Flying the flags: national emblems of the five East African Community members meeting in Burundi today all areas world. External trade, fiscal and combined gross domestic prod- achieved in 48. of trade Page 3 monetary policy, even univer- uct of $80bn in the five coun- Yet as momentum gathers, GDP per capita GDP growth in 2011 Country’s largest export sity education operated under some of the same tensions are 2011, PPP* ($) 2011 (annual % change) % of exports Monetary union Could the same umbrellla. Europe cert arising that dogged the EU as it Kenya be the trading bloc’s was far behind at the time. Integration cannot grew. Integration cannot suc- Burundi Uganda Germany? Page 3 Thirty-four years after it fell succeed with less than ceed with less than whole- 430 4.2 Coffee Coffee apart amid intense political and hearted political backing, some Burundi Security What do you do ideological rivalry between its whole­hearted political officials in the region argue. 70% 20% when you have a failed three member states – Kenya, backing, some officials “Half-integration is dangerous Rwanda 1,319 7.0 state next door? Page 4 Uganda and Tanzania – the EAC in my opinion, because it gets Kenya Tanzania Airlines Regional carriers in its latest and larger iteration in the region argue half of the benefits and all of the Uganda 1,305 6.4 – adding Rwanda and Burundi – costs,” says Richard Sezibera, Tea Tobacco are bucking the global trend, enjoying robust is at the vanguard once again of the new secretary-general of the 6.1 African regional integration. tries now trade among each EAC, who is a strong advocate Tanzania 1,506 20% 9% growth, healthy profits and The logic behind its relaunch other with fewer barriers. Intra- of closer political union and a undertaking ambitious fleet and route expansions is not so different from that regional trade up is up as a regional currency zone. Kenya 1,751 5.3 Rwanda which informed its creation: if result, from $1.8bn in 2005 to Yet in a year when the future Page 4 Coffee African countries traded more $2.7bn in 2008 – although this of the eurozone has been called Sub-Saharan 2,381 5.2 Retail with each other, strengthened still only repreaents 11 percent into question and countries Africa average 37% Retail co-operation in keeping the of EAC total trade with teh rest such as Britain outside it are Sources: IMF; national sources Purchasing power parity spending is peace, and spoke with one voice of the world Growth across the pushing for the return of powers * growing at on the world stage, they would five was 6.4 per cent a year for ceded in the past, there are 15 per cent go a long way toward overcom- the years 2005 to 2009, making obvious lessons about the dan- Juma Mwapachu, the former sovereignty, it should focus ini- manufacturers say that in the in Tanzania ing the frailties associated with the region among the fastest gers of allowing political enthu- secretary-general who stood tially more on the “bread-and- current global environment they and 18 per their colonial era borders. growing in the world. siasm to get ahead of economic down this year, says that if the butter” matter of trade flows. could not keep going without cent in By merging into larger trad- As Burundi, its newest mem- reality in countries that still dif- community is to avoid getting On this subject, opinions on the benefit brought by Uganda Page 4 ing blocs, the continent’s frag- ber hosts the 13th EAC heads of fer greatly in fiscal and eco- bogged down like the EU has in progress among business people mented markets become at once state summit today the commu- nomic terms. detailed debates about national in the region are mixed. Some Continued on Page 2 2 ★ FINANCIAL TIMES WEDNESDAY NOVEMBER 30 2011 Doing Business in the East African Community Lack of harmony on road to smooth cross­border trade destined for the entire east agencies checking and nised domestic taxes; non- regional decision-making – rate amounts to 31.3 per Rwanda and hopes to trade up its first store in Tanza- Barriers to trade African region. Together inspecting, too many power tariff barriers are still a big the likes of a three-day axle cent in business-friendly Kenyan stocks directly from nia. with Kenya’s port of Mom- outages and computers issue; and they still don’t weight harmonisation Rwanda, it reaches 49.6 per there. Despite the official phas- Katrina Manson basa, Dar es Salaam sup- going down, money being have a mechanism for workshop, and debate over cent in Kenya, where tax- Experts cite examples ing out of internal tariffs, says transport costs plies a hinterland reaching paid but not reflected in revenue-sharing,” she says. 26 separate agreements over payers must allot 393 hours where member states dis- experts say there is plenty landlocked Burundi, authorised banks for a “We still have internal bor- computerised scales and to the process, more than criminate against each of deliberate protectionism. 80% more than in Rwanda, Uganda and whole week at a time – in ders within what is meant weighbridges – that costs double that in Rwanda. other to the benefit of out- While countries have signed US and Europe beyond. retail, time is everything,” to be a single customs terri- can be cut. It takes three days to siders. up to the principle of freer The World Bank’s latest says Ali Mufuruki, a joint tory.” But it took 10 years for open a business in Rwanda, “It is still easier for a trade, the instinct to protect Doing Business survey owner in Woolworths’ Tan- TradeMark East Africa, a ranked 45 of 183 countries Briton or an Indian to come domestic industries and Tourists gazing at the azure finds that while it costs zania and Uganda opera- donor-funded body intended There are too worldwide for its ease of and work in east Africa jobs continues to hold up horizon of Tanzania’s $1,430 to import a container tions. to help make EAC integra- many power doing business, but 34 in than it is for a Kenyan or a everything from milk to Indian Ocean coast are dis- to Tanzania, it costs $4,990 Businesses are frustrated tion a reality, says trans- outages and Uganda (ranked 123). Ugandan to find semi- margarine, and beef exports turbed by a long line of in Rwanda, 1,400km inland. at the lack of progress port and logistics costs are computers Burundi, at the bottom of skilled or service sector jobs to one-day old chicks. ships lit up like baubles. Woolworths, the South delivered by a customs 70 to 80 per cent higher going down – the five at 169, is neverthe- in each other’s country,” “Everybody thinks they The port at Dar es Salaam African retailer, says clear- union signed in 2004 and than those in the US and Ali Mufuruki less ranked among the says Robin George, director have their own bureau of is so packed, vessels must ance at Dar es Salaam is so the common market that Europe. world’s top 10 improvers. at Adam Smith Interna- standards,” says Atul Shah, anchor outside for days time-consuming that goods officially kicked into play It wants to cut the cost of Such disparities are tional, following a study by Nakumatt’s managing before a space is free for arrive in stores in Tanzania last year. “There isn’t a lot doing business across bor- member states to agree on a already losing countries the consultancy in Uganda.