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East African Community battles trade disruption

skynewsbyskynews
August 14, 2020
in Business, Lifestyle, News, Travel
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East African Community battles trade disruption

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At the Kenya-Uganda border towns of Malaba and Busia during the initial stages of Covid-19, queues of lorries stretched up to 65km as the Ugandan authorities imposed compulsory coronavirus tests on Kenyan lorry drivers before they entered the country.

Delays-on-the-Tanzania-Uganda-border

Kampala implemented the measure in late April when it became clear that truck drivers were key vectors of transmission. Similar issues unfolded at busy border crossings across the six countries that make up the East African Community (EAC) as governments failed to harmonise preventative measures at the regional level.
At the Rwanda-Tanzania border crossing of Rusumo, for example, Tanzanian drivers were forced to hand cargo over to Rwandan counterparts who took it onwards to Kigali.
The sudden disruption spelt disaster for the industries and businesses that rely on fluid borders in a region routinely heralded as the most integrated in Africa. The cost of moving goods around the region rose by an initial 30%, according to TradeMark East Africa (TMEA), though the trade body believes this figure has since decreased as the region adopts a more coordinated response.
“Covid-19 has been really disruptive in terms of cost structures,” says Frank Matsaert, TMEA’s CEO. “I expect things to normalise now that we have much more agreement between EAC member states. The tailbacks at the Ugandan border are down to 15km – that’s more than it’s been in many years – so there are still things to be done but I believe that it will happen by the end of July.”

Initial disruption
Most of East Africa’s imports pass through Kenya’s port of Mombasa or Tanzania’s port of Dar es Salaam, both of which saw trade volumes fall during the initial stages of the virus.
Mombasa, which accounts for roughly 60% of regional imports, saw a 4.7% reduction in volumes between January and May as Chinese exports in raw materials and capital goods fell, says Gilbert Langat, CEO of the Shippers Council of Eastern Africa.
While this affected Kenya’s manufacturing sector and other industries, it spelt greater trouble for landlocked countries like Uganda, Rwanda, Burundi and South Sudan which rely on the port of Mombasa for imported goods.
Around 85% of the cargo landed at Mombasa is loaded onto Kenya’s standard gauge railway (SGR) and transported to Nairobi before it is moved by truck to Uganda and beyond via the “northern corridor”. Kenya is the main transit hub for the EAC region, accounting for around 46% of total exports and 41% of total imports.
While most countries allowed nationwide logistics to continue despite implementing widespread lockdowns, much of the intra-regional activity was greatly reduced due to border issues.
Before Covid-19, it had taken cargo around 3.5 days to be transported from Mombasa to Kampala, 7 days to Kigali, 10 days to the DRC and 14 days to South Sudan. The virus more than doubled the length of time taken to transport goods: the journey to Kampala extended to 7-10 days, while it took 21 days to Kigali and far longer to the DRC and South Sudan.
“Before Covid-19 we were able to get cargo to Kampala for between $2,000 to $2,200 – now it has increased to $3,200,” says Langat.

Technology offers solution
The delays were largely driven by regulatory changes implemented by each country to minimise the risk of foreign lorry drivers spreading the virus. A Kenyan truck driver driving to Rwanda via Uganda would likely need to be tested for Covid-19 three times – once in each country – rather than being able to use paperwork accepted across the entire region. At the beginning of the pandemic, these tests were analysed in urban centres far from national borders leaving truck drivers stranded for days in inhospitable border towns.

This level of mistrust and lack of coordination led to calls for a regionally mandated response from the Arusha-based EAC Secretariat. The regional body published a set of “administrative guidelines” for the movement of goods and services during Covid-19 – which included advising countries to use gazetted routes and encouraging truck drivers to travel with a maximum of three people – but many believed it did not go far enough.
To facilitate border crossings, TradeMark East Africa (TMEA) has worked with EAC member states to develop an app that stores health certificates issued by test centres working to agreed standards.
“The test results are put on the app, which is recorded on blockchain so it can’t be faked, and then the truck driver is tracked all the way,” says Matsaert. “They can only stop at certain places along the corridor so that the driver doesn’t pick up an infection. It should create a lot more trust between partner states.”
The app was rolled out in late July, and the CEO hopes it will have an immediate impact on some 10,000 trucks operating in the region.
While it is initially being offered as a bilateral agreement between states, it is hoped that it will eventually be adopted at the regional level. This could offer a model for how East Africa looks to overcome logistical challenges in the future, using what TMEA calls safe trade zones (STZs). These zones would implement agreed health and safety measures between countries, allowing traders who meet requirements to cross borders.
Along with the impact on established businesses, the border closures have been disastrous for informal traders who have mostly been barred from making crossings. Around 90% of informal cross-border trade has ceased since Covid-19.
Now that countries are beginning to lift lockdowns and resume international and domestic air travel – despite rising cases – informal trade is expected to resume.

Landlocked economies will be hardest hit
A recent report from the Brookings Institution on the effects of Covid-19 on trade in East Africa identifies “a concerning scale of disruption to intra-regional commerce” and some particularly worrisome trends for the landlocked countries of the region.
Authors Andrew Mold and Anthony Mveyange cite figures from the Economist Intelligence Unit predicting that Uganda and Rwanda’s imports will fall by 18.8% and 14.1% respectively in 2020 as a result of the restrictions on trade. In contrast, Kenya and Tanzania’s access to international trade via the ports of Mombasa and Dar es Salaam will help to minimise the costs of such restrictions on their economies – their imports fall by just 2% and 6.2% respectively.

The authors conclude that “a coordinated EAC-wide approach is critical for intra-regional trade to remain buoyant… and for ensuring vulnerable countries are cushioned from the Covid-19 crisis fallout.”
They also highlight the urgency of implementing the African Continental Free Trade Area (AfCFTA) to mitigate the negative effects of Covid-19 on trade.

Political tensions
The EAC obtained the highest overall score for regional integration of all Africa’s trade blocs in UNECA’S Africa Regional Integration Index 2019, which was based on measurements of the free movement of people, infrastructural integration, macroeconomic integration, productive integration and trade integration. It has a higher percentage of intra-regional trade than the other regional blocs, but traders and businesses are quick to criticise the shifting landscape of tariff and non-tariff barriers, while political tensions between member states continue to slow down efforts towards further integration.

Tanzania’s response to coronavirus has largely been at odds with the rest of the bloc. After declaring his country virus-free despite carrying out very few tests, Tanzania’s President John Magufuli blasted his neighbours for implementing lockdowns. Neighbouring Kenya and Zambia have closed the borders amid disquiet over his coronavirus response.
“The president of Tanzania encouraged his country­men to sell goods to Kenya at a very high cost,” says an African Development Bank infrastructure expert, speaking on condition of anonymity. “This might just be politics, but the underlying current is hostility. All these things add up and when you take them together it will lead to lasting problems unless the leadership says let’s look at this together.”
As a member of the Southern African Development Community (SADC), Tanzania has been criticised in the past for prioritising its southern neighbours over the eastern bloc.
Elsewhere, the standoff between Uganda and Rwanda since 2017 has seen trade volumes plummet between two countries that were once thriving partners. Rwanda and Burundi’s trade ties have similarly been held hostage to fraught political relations, although new leadership in Bujumbura following the death of President Pierre Nkurunziza in June offers the chance for a reset. Despite such difficulties and the coronavirus fallout, experts see regional integration continuing on a progressive path.
“There will always be ups and downs as part of the integration process,” says TMEA’s Matsaert. “But I do see these disputes around a longer-term trend of cooperation. We need to make sure that there are regional institutions strong enough to arbitrate on disagreements. Whenever I talk to businesses, they always stress just how important the EAC is to investing in the region. It is a great asset.”

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