Tuesday, November 24, 2009




The signing of the much awaited East African Community Common Market protocol last Friday after eight years of haggling has flung open the door for what is expected to be a rigorous fight for market space in the region.

And once it takes off mid next year, it will expose areas of ill preparedness on the part of those who will struggle to take up the challenging open market as goods, services and labour will now move freely across the trading bloc of approximately 120 million potential consumers.

The pact removes all cross-border tariffs among partner states and use of Common External Tariffs (CET), to protect the local producers against competition of cheap goods from third parties.

That means goods and services produced and moving within the region will be treated with equal measure and labour force will be free to sell its services to the buyer with the best offer across the region.

Regional citizens will also seek residence in partner states without stringent restrictions and companies will be allowed to move their production plants to countries they believe have the best business environment.

President Yoweri Museveni (2nd in line) leaves Tanzania through Kilimanjaro International Airport after the meeting. He is flanked by Tanzania Minister of Energy and Minerals William Ngeleja (3rd in line). In circle is President Paul Kagame during the conference. PPU

Kampala City Traders Association sounded the first alarm bell to the signing citing increased competition.
“Traders need to be more aggressive and we must tighten our belts because we shall be out competed in the game,” Kacita spokesperson Issa Sekitto said.

He said Kenya, the leading trade partner to Uganda has closer relationship within the Comesa bloc and will use that advantage to buy goods cheaply from Comesa and sell them in Uganda threatening Uganda’s manufacturing sector.

However, even as the ink on the document begins to dry, Ugandan business leaders fear they are still more disadvantaged with internal challenges in the open region compared to their counterparts especially Kenya and Tanzania.

There is also fear that the question of how to deal with counterfeits will become even more difficult as these goods will easily slip across borders under the cover of being manufactured from a partner state.

“The much cherished wish to have a bigger market is gradually going to be achieved; while that is so, we as the Ugandan private sector are still challenged on what goods are going to put on the table,” Chairman Private Sector Foundation Uganda (Psfu) Gerald Ssendaula said on Saturday.

Mr Ssendaula said although Uganda might claim to have an advantage in the production of agricultural products, non-tariff barriers instituted through back door means will continue to stifle free movement of such goods by people who want to protect their own markets.

In 2006, Uganda’s poultry exports, especially day-old chicks into Kenya, were banned after the outbreak of bird flu but the ban has been a thorny subject between the two countries.
“What is perturbing is that Kenyan businesses uses back door means through their agents in Uganda to purchase the same chicks and take them to Kenya,” Mr Ssendaula said.

He said unless Ugandan government officials tidy up the technical loopholes, Uganda will take longer to get into rhythm with the rest of its regional trading partners.

Ugandan manufacturers will also be weary of the growing counterfeit industry. Unlike Kenya, Uganda has weak commercial laws and is yet to pass the Counterfeit Bill into law. Counterfeit products have emerged as the single biggest internal market threat to genuine local manufactures according to the Uganda Manufacturers Association.

Gideon Badagawa, the UMA executive director said on Saturday that Uganda could be flooded with counterfeit and substandard goods from the region if full proof measures are not put into place to ensure that manufacturers are protected.
“It might be easier for Kenya to track down their goods, yet for Uganda it may not and this leaves us out of the competition,” he said.

Goods moving across the region will be required to meet certain standards without which entrance will be prohibited.
“The free movement of goods between the Partner States shall be governed by the Customs Law of the Community in addition to the East African Community Standardisation, Quality Assurance, Metrology and Testing Act,” the Protocol reads in part.

EAC Leaders at the EAC Headquaters.

The Uganda National Bureau of Standards – charged with regulating standards – has been on the spotlight lately for not doing a good job. Indeed, last week Trade and Industry Minister Kahinda Otafiire disbanded UNBS board for failing to contain counterfeits in the country. The body has severally complained that it has budgetary constraints and cannot spread itself enough to deal with every counterfeit detail in the market.

At the 10th anniversary of the East African Community last week, the East African Business Council Chairman Faustin Mbundu told heads of states that the regions’ inability to cut down costs of doing business and improve competitiveness against third parties is hinged on its dilapidated transport network system.

“We would like to state that the current poor infrastructure continues to have a negative impact on the business environment in the region. As a priority, East African governments need to address infrastructure bottlenecks such as poor road network, inefficient railway system, and expensive and unreliable electricity supply if the region is to attain the desired competitiveness,” he said.
Compared to Kenya and Tanzania, Uganda is at a disadvantage on the infrastructure front being a hinterland more than 1,000 miles from the sea.

“Transport to the sea should be made cheap by government by responding to the development of the railway line. Government has been talking of the renovation of the Pamba and Kaawa ships but this has not been done,” Mr Ssendaula said.

Uganda uses the northern corridor route to transport its goods to and from the sea via Mombasa Port in Kenya. Goods transported into the country via Mombasa end up being more expensive because of transport.
The protocol also stipulates that restrictions on movement of labour be removed, harmonising labour policies, programmes, legislation and social services (education, health, safety).

Mr Badagawa said that Uganda is still behind Kenya and Uganda on this because Uganda lacks a national identity card system that is crucial in getting job placements in those markets.

“Kenyans and Tanzanians can easily be recognised and can easily access jobs and education. This is not the case for Ugandans who go to these countries,” he said adding that most Ugandans will also find it hard to compete on a one-on-one for jobs with Kenyans and Tanzanians whose skills ratings are above that of Uganda.

“Kenyans are well equipped in terms of skills and, so is Tanzania. What this means is that they can easily get jobs in Uganda, something which Ugandans will not easily achieve when they go to other regional countries,” he said.

He said Uganda has dwelled so much on students getting degrees and forgotten about the technical training institutions an area that both Kenya and Tanzania have cultivated since their independence from the colonial era.

The Business Technical and Vocational Training Bill was only passed into a law in Uganda but it will take time before its fruits begin to result into tangible outcomes to put Uganda on the same competitive platform as the other countries.

The contentious issue of land was left to each partner state to manage. Uganda and Tanzania have serious land issues. A Land Bill is currently being debated in Uganda with varying views being raised.
The Common Market protocol stayed away from land by preferring that “access to and use of land and premises shall not be governed by this protocol but by the respective national policies and laws”.

Some have cautioned against trying to speed up the process. The director of Corporate Affairs at Vodacom Tanzania, Ms Mwamvita Makamba, told Daily Monitor’s sister Paper ‘The Citizen’ that growing together as an economic bloc was okay, but the region should not “run very fast” on some issues.

She said at the corporate level the signing of the protocol was a positive development, but doubted whether the common people, especially those living in the remotest parts of East Africa, would equally benefit from the arrangement.

Mr Shaban Sserunkuma, director for programmes at the Consumer Education Trust (Consent), said the protocol marks the dawn of a new era of the East African consumer to have a choice.
“Consumers will be able to enjoy some synergies from a wider market. But members states have to work towards guarding the standards for better quality products and regulation,” he said.

Overall however, Uganda can have some solace to chew on.
“We can be the food basket for the region because we have two seasons in a year unlike our counterparts. But for this happen people have to change their attitude towards work otherwise even these small jobs will be taken away from them,” businessman James Mulwana warned.

Uganda could also see its tourism industry boosted by a re-energised marketing strategy and opening up of border points. Kenya and Tanzania are well ahead but according to Mr Ismail Ssekandi, the executive director of Uganda Hotel Owners Association, Uganda has unique features in its tourism sector that it can ride on.

“This may be a disadvantage to the local workers but if services are boosted so will the tourism industry and this means economic growth,” he said and called on the government to equip the Crested Crane tourism training institute in Jinja.