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How Africa can make its big trade deal work for it

Trade Mark East Africa chief executive Frank Matsaert. PHOTO | FILE
Trade Mark East Africa chief executive Frank Matsaert. PHOTO | FILE 

In 2017, 37 per cent of Kenya’s exports went to an African country, down from  40 per cent the previous year. This caused a near flat growth in export earnings, particularly from East Africa which accounts for more than half of Africa’s total trade with Kenya.

These declining trade levels have spurred interest in the establishment of policies and structures that can boost intra-Africa trade.

Trade Mark East Africa (TMEA) has been working with East African Community member states on trade facilitation, with the goal of establishing borderless commerce. Business Daily’s Laban Cliff Onserio talked to TMEA’s chief executive, Frank Matsaert, on the future of regional trade and what can be done to expand it.
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Your organisation has been supporting trade and investment in East Africa for more than 10 years and is about to go into Strategy II. What do you have to show for your efforts in phase 1 and what should we expect from this latest initiative?

Our big aim is to encourage job creation through increased trade. I would like to go for a target of about one million jobs. We want to increase trade in the region by reducing the cost of trade. What is different about this latest phase is that we are going to do some pilots to bring in anchor investment aimed at diversifying exports.

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The potential for Kenya to attract investment in labour-intensive manufacturing is strong so we want to help that process as part of the President’s Big Four Agenda initiatives. We really want to slot in our work in Kenya and the region. This is what we call a trade logistics cluster approach and it entails developing the necessary infrastructure then work on the trade aspects to bring in plug-and-play factory investments that create jobs. In Kenya, our pilot will be in the factory and garments sector.

You seem to take more of an outside East Africa approach in your next plan of action?

Strategy 2 is about scale-up. What we will be focusing on to reduce trade costs is thinking about efficiency of the transport and trade network. Here we will be looking at East Africa’s external borders. We will be looking at the borders of DR Congo and the Great Lakes as well as borders to the south.

We are also about to begin operations in Zambia and Mozambique and are working on how to bring in Ethiopia to the East African Network. Our target is to lift more than 1.8 million people out of poverty.

Uganda is one of Kenya’s key trade partners. earlier this year you launched the one-stop border post to ease movement of people and goods, how is this going?

Independent surveys of the impact have generally produced positive results. Statistics show that there has been about 70 per cent decline in the time it takes to clear goods at the border and in free movement of people. When we launched the border with the presidents of Kenya and Uganda, I went a day before to have a look at the impact of the border on informal trade.

There is a burgeoning 20 acres of wholesale markets, particularly on the Uganda side. That is what we did not expect. The metrics have been 70 per cent time reduction but what is interesting is a lot more trade is going on at these borders.

What do you see as its potential going forward?

We are taking this experience and focusing on the external borders to East Africa, so the region can trade with its neighbours. So the border strategy is to work with partners to reduce the cost of trade across the region. We are not saying goodbye to borders. We continue to monitor them, and there are still some problematic ones such as Malaba where we will be putting extra money to shape things up.

What is your view of East Africa’s integration given last year’s fall in Kenya’s trade with Africa?

No one can deny there are challenges at the regional level at the moment. It does require continued political leadership to overcome some of those challenges. The region is still the best preforming in Africa but the number of challenges have increased and I think there is no doubt about that.

However, I do think the East African Community (EAC) has got the strength to overcome some of the short-term challenges. There has to be political will.

You attended the signing of the Africa Continental Free Trade Area (AfCFTA) agreement in Kigali, do you sense that the initiative has political will?

Yes, what I saw there and excited me most is political will. I think the political will for Africa to trade itself out of poverty is there but the reality is, Africa is still insignificant in trade terms with less than five per cent of global trade.

For Africa to have a seat at the table, we really need to increase trade within the continent itself and for me this is a really important agenda. We have more of a comparative advantage in trading with ourselves than externally.

Looking at the CFTA milestone, does it excite as having having potential to increase trade in Africa?

AfCFTA is like an enabling policy, unless action is taken on the ground in terms of addressing challenges to trade, it is unlikely to be fully realised. You can have a very good trade agreement but unless you are able to trade physically you cannot take advantage of it (AfCFTA). I think the AU is realistic about that and it is why we are focusing on working with EAC’s neighbours to start that process.

You were in the UK for the CommonWealth business summit, attended by heads of state, including Kenya’s. You also met several investors willing to do business in East Africa. What were some of their sentiments on Foreign Direct Investment (FDI) in Africa? 

The long-term potential for Africa investment is very good. There are a number of global and continental factors driving that. If CFTA becomes a reality, it will make Africa more attractive to investment. We’ve got rising incomes and a large population and investment into a single market is more strategic.

There were very positive sentiments on Africa and that is good. I also think the potential for the Commonwealth to play in this in the post-Brexit world is strong. The fact is that the barriers to investment in Africa are self-evident.
Generally, energy are high in East Africa. We are making progress on the stability of the investment climate but more needs to be done to reduce the cost of trade. The skills gap is also something we need to think more strategically about.

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