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Falling EAC trade worries regional business leaders

Nicholas Nesbitt.
East African Business Council chairman, Mr Nicholas Nesbitt. FILE PHOTO | NMG 

Arusha

Business leaders in East Africa have voiced their concern about declining intra-regional trade, with some saying it does not augur well for the integration agenda.

The newly appointed East African Business Council (EABC) chairman, Mr Nicholas Nesbitt, said trade among East African Community (EAC) member states declined by 10.1 per cent between 2013 and 2014, and fell further by 14.6 per cent between 2015 and 2016.

“This is not a good sign for regional business,” he said.

Falling intra-regional trade has been largely attributed to persistent non-tariff barriers (NTBs), which the region has been fighting with limited success over the years.

Mr Nesbitt also blamed restrictions on the export and import of certain goods among partner states.

He said the task of the regional business body, which has an observer status in the EAC, was to ensure that there was seamless flow of goods and services to bolster regional integration.

Improve business environment

Mr Nesbitt added, however, that this cannot be realised unless the governments of partner states collaborated closely and improved the business environment.

He also said that intra-regional trade can be improved through improvement of technological infrastructure to fast-track movement of goods and services.

Reached Tuesday for comment, an official of the EAC secretariat admitted that there was growing concern about falling intra-regional trade, saying the matter had featured prominently in recent high-level meetings.

He said the EAC Council of Ministers, which is the policy organ of the regional bloc, earlier this year directed the secretariat to establish the reasons for the decline.

However, a regional analyst based in Arusha said causes of the decline were well documented, chief among them being NTBs.

He added that border procedures were still cumbersome despite the recent launch of one-stop border posts, which are meant to facilitate trade among member states.

According to the EAC Trade and Investment Report 2016, intra-regional trade declined markedly in 2015.

In 2016, total trade declined by 19.5 per cent to $44.6 billion from $55.4 billion in 2015.

The fall was attributed to fluctuations in demand and prices of exports as a result of an unfavourable global economic environment.

Total exports declined by 6.8 per cent to $14.9 billion from $16.0 billion in 2015, while imports fell by 24.6 per cent to $29.7 billion in 2016 from $39.4 billion in 2015.

Crude oil imports

The fall in imports was attributed to a drop in crude oil prices that reduced import bills for petroleum products.

The EAC trade deficit declined by 36.8 per cent to $14.8 billion in 2016 partly due to a fall in imports into the region.

Overall, EAC trade was meagre and accounted for only 0.3 per cent of global trade in 2016.

Intra-regional exports continue to constitute a small proportion, amounting to only 5.9 per cent of total EAC trade despite the implementation of the Single Customs Territory that provides for removal of tariffs and other barriers to trade among partner states.

Total intra-EAC exports declined by 17.4 per cent to $2.6 billion in 2016 from $3.2 billion in 2015.

However, exports to the Comesa region, excluding the EAC partner states, increased by 2.9 per cent to $2.4 billion, reflecting growing trade relations between EAC and Comesa.

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