Personal Finance

EAC partner states must treat businesses equally


Busia border crossing. FILE PHOTO | NMG

The newly passed East Africa Community Competition Act ( EAC Competition Act) is a law meant to regulate matters that touch on competition and consumer welfare in the region.

The East Africa Community (EAC) is made up of six partner states including Kenya, Uganda, Tanzania, Rwanda, Burundi and South Sudan. The Democratic Republic Of Congo has shown willingness to be a part of the EAC. The EAC is a large regional bloc that includes many businesses and consumers.

Some of the larger corporations are multinationals that are trading in more than one EAC partner states. The EAC competition law is particularly applicable to such entities that have established presence in more than one jurisdiction.

The new law places certain obligations on partner states to take actions to enhance competition in the region by abolishing discrimination and favourism. This means that partner states ought to treat businesses originating from the EAC equally despite the country of origin. The practice is far from the provision in the law. There is still a lot of bias and favourism where local businesses are given preference to businesses originating from other partner states despite them being members of the EAC. This is especially in the ease of incorporating a new entity. Citizens from other partner states can easily incorporate a company online, however the company will not be able to trade until it procures an investor’s permit.

The partner states have not entirely abolished technical obstacles. This is against the spirit of competition envisaged in the law. In the European Union (EU), it is possible to designate the EU trademark to goods originating within the EU. The EAC is yet to have a distinct mark of origin that would facilitate liberalisation.

Liberalisation is greatly encouraged in the new law. Partner States are encouraged to open up their domestic markets to competition from other like entrants originating from other EAC states.

This is already happening in many sectors, for example the aviation, where open sky policy is encouraged. The open sky policy calls for opening up of the local market to competition from airlines originating from other countries. It is felt that the consumer is the biggest winner.

In EAC there is healthy competition among the airlines such as Rwanda Air, Precision Air, Kenya Airways and the latest entrant, Uganda Airlines. Other sectors should follow suit and encourage intra-EAC competition for consumer good.

The new law doesn’t only place obligations on the partner states but businesses as well. Businesses are supposed to avoid practices that would be deemed to be against competition.

Such practices include collusion in intra-EAC tenders, restraint on investment, limitation of technology transfer and abusing a dominant position.

Multi-nationals in the region should carefully understand the provisions of the law to avoid business practices that would be deemed uncompetitive. The law should also be taken into account when undertaking a strategic decision on business practices and investment.

Tender opportunities are supposed to be liberalised such that intra-EAC procurement is encouraged. There should be no discrimination based on country of origin. A complaint on procurement can be made to the EAC Competition Authority, an ad hoc body created under the law.

The little known or applied law has a bearing on regional business and strategy. However in as much as the law looks good on paper, there is a very weak institutional mandate given to the authority noting that it is an ad hoc committee. Enforcement of decisions is unclear though national courts can enforce the law. The East Africa Court of Justice would hear disputes between partner states mostly.