In April, the Democratic Republic of Congo (DRC) formally joined the East African Community (EAC), eliciting hope that trade within the EAC would swiftly increase for each member country.
Indeed, the 2019 Africa Regional Integration Index (ARII) report shows that the EAC was the most integrated bloc among the eight regional economic communities recognized by the African Union. Therefore, the entry of a new enthusiastic member would add vigour to an already flourishing bloc through market expansion among other things.
Notably, DRC has been trading with other EAC countries, especially in food and live animals, raw tobacco, scrap iron, among others, and with positive trade balances with Kenya and Tanzania. With the entry of DRC into the EAC, the flow of goods and services across the member states is expected to increase due to the low or reduced tariff charges.
Consequently, the previously imported goods and services may easily be produced within the bloc hence further enhancing productivity. This is largely because productivity improvements will boost output growth, which will enable the bloc to harness external trade dividends.
The expanded EAC has a potential for growth since the integration primarily means the removal/reduction of tariffs to facilitate the free movement of goods and services and people within the community. Secondly, each of the EAC countries is unique in natural-resource endowment, with different cultural, human resource and socio-economic peculiarities that would make them to thrive economically.
The diverse structure of economies of EAC member states suggest that trade will be vibrant. For illustration DRC’s endowment is in natural mineral resources; Uganda, Rwanda and Tanzania are endowed with Tourism sites, and Kenya is the industrial center. However, the peculiar concern is how EAC countries can create synergies that would elicit individual potential toward a common developmental goal by harnessing and tapping into the global market dividend.
Therefore, harnessing the external market dividend to their advantage, EAC countries need to address several issues and streamline efforts to stimulate transparency through the following.
Empower Domestic investors: This can be achieved through measures such as tax incentives, especially to small and medium enterprises. This could incentivise them to aspire for growth into large firms and guarantee sustainability. In addition, the regional governments need to ensure macroeconomic stability to boost economic activity. Implementing these measures is also critical to reducing capital flight.
Fast track the harmonization of standards across the community: This has been a challenge due to a failure to hold East African Standards council meetings. There is an urgent need for collaborative dialogue among all the standard bureaus of the EAC countries to maintain quality and ensure competitive exports. This would as well enhance regional bargaining power and ultimately the price of the exports hence increasing foreign exchange earnings.
Invest in infrastructure to ease access to markets: The regional governments need to invest massively in their respective country’s infrastructure such as roads, railways, warehouses, and air transport to ease the storage of goods and services and their movement. Importantly, operationalizing an efficient railway system among the EAC countries would certainly cut the travel time for people, goods, and services by a great magnitude.
Need to consider a block marketing strategy: For example, the EAC countries should establish a central marketing system where export prices are centrally determined in order to ensure uniformity in the prices of exports. In addition, all the community members should be involved in the search for market opportunities in order to eliminate unnecessary competition that threatens efficiency.
DRC and South Sudan should expedite their ratification of the customs union. Ratification of the customs Union by DRC and South-Sudan would mean zero duty imposed on goods and services across the member states and a common tariff on goods coming from non-member countries. This would ensure free movement of raw materials from less developed resource-rich members to a more developed member-country for value addition and quality assurance. Consequently, regional foreign exchange earnings would be enhanced.
In conclusion, DRC’s entry into the EAC is beneficial to the community members in terms of market and input-supply sources. But the bloc can leverage on this to position itself as a significant player at the global level.