Bottlenecks hold back EAC trade despite strides, new report says

The East African Community (EAC) partner States appear to always be fighting over products from their neighbours.

If it is not Kenya and Uganda feuding about milk, eggs or sugar, it is Kenya and Tanzania taking on each other over chicks, confectioneries and cooking gas. It is seen across the regional trading bloc.

The so-called sibling rivalry, at times spawned by the need to protect local industries, not only negates the ideals of the bloc but also has a major impact on businesses, jobs and slowing down economies.

Non-tariff barriers (NTBs) to trade in East Africa remain a major hurdle for businesses undertaking cross-border trade despite the region having over the years made major strides to get rid of these bottlenecks, according to a new report by Trademark Africa.

According to the organisation, EAC partner States have over time demonstrated commitment to resolving non-tariff barriers and significantly reducing the amount of time taken to address them.

The partner States, for instance, have a 90 per cent resolution rate for NTBs and reduced the time taken to resolve NTBs from 535 days in 2015 to 76.6 days in 2021.

“The East African Community has made tremendous progress in integration and trade over the last decade, attested to by the rising trade volumes,” said Trademark Africa in an annual report.

“However, non-tariff barriers (which are laws, regulations, administrative and technical requirements other than tariffs imposed by a partner State that impede trade) continue to challenge the realisation of the EAC Common Market.”

Trademark and the EAC Secretariat recently undertook a study on the impact of the NTBs in the region.

The study showed that NTBs slowed trade down by 30 to 80 per cent. Among the major barriers to trade identified by the study are rules of origin, costly road user charges, lengthy customs procedures, additional taxes and sanitary and phytosanitary (SPS) measures.

“The most reported NTBs were issues relating to rules of origin (22 per cent), costly road user charges (seven per cent), lengthy customs procedures (seven per cent) additional taxes and other charges (six per cent) and SPS at (four per cent),” said Trademark.

According to the study, different sectors are affected differently, with sectors such as confectionery able to rebound once the NTBs are lifted, while some value chains like poultry are more prone to NTBs.

Trademark gives the example of feuding between Kenya and Uganda in 2015 in which Uganda had discriminatively imposed a 10 per cent duty on Kenyan manufactured laundry bar soaps.

For about the nine months that the duty was in place, there was a 90 per cent dip in trade with Kenyan firms losing revenues to the tune of $800,000 (Sh102 million).

“Before the NTB, Kenya exported over 1.6 million kilogrammes (kgs) of soap to Uganda, worth about $941,000 (Sh120.45 million); but when the NTB was introduced, trade reduced to just about 86,000 kg worth just over $100,000 (Sh12.8 million). This shows a 90 per cent drop in trade that cost businesses

over $800,000 (Sh102 million ) in lost revenues,” said Trademark Africa in a report, adding that it took 262 days to resolve this matter, during which there were numerous lost opportunities.

The matter was resolved in June 2016.

“After the resolution of the NTB in 2016, the quantity increased gradually to 147,955 kgs in 2017 and 2.3 million kgs in 2021. This shows that the resolution of the NTB has increased the exports of bar soaps from Kenya to Uganda by 2.2 million Kgs in 2021, which translates to $1.5 million (Sh192 million).”