Page last updated at 22:29 GMT, Wednesday, 30 June 2010 23:29 UK

East Africa's common market begins

By Tim Bowler
Business reporter, BBC World Service

Jacqueline Mkind, Tanzania Horticulture Association
Jacquline Mkindi says the common market will help cut trade barriers

East Africa's common market comes into force this month, which aims to allow goods to move freely across the region.

The region's poor roads and lengthy customs procedures have long been seen by businesses as hindering cross-border trade.

From July 1, Burundi, Kenya, Rwanda, Tanzania and Uganda will move to do away with all barriers to trade.

However, this will take time and it is likely to take until 2015 before a free trade zone is fully operational.

Last November, the member states of the East African Community (EAC) signed a common market protocol, aimed at expanding the existing customs union.

Freer trade

All five countries have already adopted a common external tariff, an identical tax applied to imports from outside the bloc, and allowed duty-free regional trade with the exception of Kenya, the largest economy.

As of July, the common market aims to build on this - to enable the free movement of people, capital and services and abolish import duties.

We have had drivers standing at the border for four days
Eric Omondi, retail operations director, Dormans

But the EAC's ambitions go beyond pure economics. The hope is that member states will adopt a common currency by 2012, allowing them to move towards a political federation.

Yet some in the region worry that Kenya, which is the economic powerhouse of the five, could end up dominating its neighbours.

Jobs fears

There are concerns that other member states might have to cope with an influx of better-trained Kenyan workers.

Jacqueline Mkindi is the executive director of the Tanzania Horticultural Association, whose members produce fruit, flowers and vegetables for export.

"Free movement of labour should be encouraged, but to a certain level - not to deprive local people from accessing local jobs," she told BBC World Service's World Business News.

"If you have a large number of Tanzanians losing jobs - then people will not feel okay with the common market."

Most Ugandans think their jobs will be taken over by their neighbour, Kenya
Frederick Masiga, business editor, Daily Monitor

The concern over an inflow of migrant labour, especially from Kenya, is shared in other countries in the region.

Frederick Masiga is business editor for the Daily Monitor newspaper in the Ugandan capital, Kampala.

"Most Ugandans think their jobs will be taken over by their neighbour, Kenya."

"It's a quite understandable view, because so many Kenyans are already established in Uganda."

"Some Ugandans feel that once the borders are opened and you get people flowing across the border and looking for jobs, they are going to be out-competed in the labour market."

Customs barriers

Despite the worries about migrant labour, most businesses support the move to a common market and are keen to see an end to the delays and costs of getting their goods across borders.

EAST AFRICAN COMMUNITY
126 million people - combined market
$73bn - total yearly economic output
1999 - Kenya, Uganda and Tanzania founded EAC
2007 - Rwanda and Burundi joined
1977 - earlier trade bloc failed after ten years

"We are facing a lot of challenges as we cross the border - unnecessary delays," says Jacqueline Mkindi.

"On the Kenyan side they operate 24 hours a day, but on the Tanzanian side it's 12 hours a day. This has some impact."

It's a point echoed by Eric Omondi, retail operations director at the Kenyan coffee roasters and exporters, Dormans.

"In Tanzania in particular it takes a long time. We have had drivers standing at the border for four days"

"These things make the final price of our coffee up to three times that of the local product."

Vimal Shah, is the director of Bidco Oil Refineries, in Kenya, which makes and sells vegetable oils, fats, margarine, soaps across the region.

He says his company will gain from the common market.

"We support farms in Uganda and Tanzania. we buy all of their produce, we process it here in Kenya and then we sell the finished product. So now we will be able do that without any hassles."

Jacqueline Mkindi says one added advantage of East Africa's common market, is that it will give the area more leverage in international trade negotiations.

"If we are together, we can negotiate as a region, and that will give us stronger muscles in talks with other economic blocs like the European Union, for instance."



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