East African Community

I was recently requested to present a paper on “Challenges of the East African Community (EAC)” in a seminar which was subsequently postponed indefinitely. I remembered some papers I wrote in the 1990’s about the EAC and European community. On the EAC, I was lamenting about its collapse in the 1970s. On Europe, I wrote a paper in which I said “Europe would never unite politically”. The title was too proud to unite... Looking at the EAC, I think pride is a major issue. In 1977, it led to the collapse. Pride may be the reason the EAC may never work. We may integrate, whatever you may want to call it, but the process will be driven by business rather than politics. The alert businessmen will see the advantage of a politically encircled market but economically disintegrated would go ahead and take advantage of it.

The original EAC that was preceded by the East African Common Services Organization, developed organizations that served the region as a whole. This was a strong organization built by a common political unit, the colonial government. It did it very well till the countries became independent in the early 1960s. The community split in 1977. The split was due to two major factors.

1) Idi Amin and his filtration with politics claiming parts of Kenya, Tanzania which caused political conflicts and hence the need for a political divorce among the EAC.

2) Economic. Kenya the economic power house in the region found advantage in splitting the community as you know he took most of the assets, trains, planes and literally everything that moved. At that time Tanzania which was still experimenting with socialism did not have the economic muscle to stop Kenya.

The community is a good institution, it provides a wider market, it increases trade, and it can promote development. The East African countries saw this and revived it in the early 1990s. The new community has admitted Rwanda and Burundi besides the original Uganda, Kenya and Tanzania. These countries naturally fit into the community since culturally there are lots of similarities and their economies are closely inter-related with those of EAC members. The new community is very ambitious. It has a four stage process including with a customs union, common market, monetary union and the political union. The first two are under implementation albeit with problems. The weaker countries and of course this is Uganda, Tanzania, Burundi and Rwanda are complaining about their inability to meet the requirement. There are lots of battles raging from the community about these aspects. The third stage is the monetary union. Having sat on the board of Bank of Uganda for some years, it was clear that this was an objective that will not be achieved in the short run. No country is ready yet to surrender its monetary policy to some unknown authority. Here we are talking about a common currency, a common central bank. Definitely none of the countries is ready and if you are to implement it now you would be handing over monetary policy to Kenya. By the way, it is not that the monetary policy management but Kenya is the biggest economy in the region. Like Germany in the European Union it will have a bigger step and say in shaping and controlling the monetary policy. If you look back, at one stage there was one common currency in the EAC however this was abandoned in 1966. This was a few years after the independence of these countries (Tanzania 1961, Uganda 1962 and Kenya 1963). Prior to that these countries were controlled by one common government, the British Colonial Government. A common currency was therefore possible and a common political dominion. It is not surprising, when the countries became sovereign; the common political interest went away. Whether monetary union can be achieved is questionable. It may only be possible if there is a political union first. This is because politics would unify policy, however political union is the most difficult to achieve because of the selfish economic interest of different business groups in different countries. Mark, not political but business groups.

Political union is most crucial if the community is to succeed and serve the interest it is intended to. But of course this assumes these are the right intentions. If we pursue the current objectives of the EAC, the results will primarily benefit selected businesses. It is crucial that the community political leaders will think the mission of the community and the strategies to achieve this mission. The role of government is to ensure highest level of living standards of the people. A political union among countries should also have similar objective. My contention is today, while the EAC may have the intent to achieve the objective of improving living standard of people in the community that is not what the current strategies are trying to do. A Political union that is evolved with the right mission would serve the purpose of transforming the lives of the people in the community. The revenues of the community would go towards government programmes intended to raise the standards of living of people in the region. There will be one government which would sit down and plan the development in the region and use resources for that purpose. Without political union a few companies in the EAC would take advantage of the big market for the benefit of the shareholders. Look at the benefits Uganda is getting out of the political reform in its neighboring countries. Uganda helped Rwanda, Congo, Southern Sudan, it is now in Somalia. It helped political stabilization of these places, unfortunately no economic benefits. Uganda has no company with the economic muscle and interest to be able to do business formally in these countries. Today Kenya Airways and its shareholders reap from the benefits in the stability of Rwanda, Burundi, Congo and I guess Somalia where Uganda has spent resources to create the political stability. Kenya Commercial Bank (KCB) and many other Kenyan institutions are in these markets making a killing. Uganda has failed to capitalize on its military prowess to do business in the region. Who then is a primary beneficiary of a common market that has no common military objectives. It is primarily the business owners mainly Kenyan companies, the host government where the businesses are registered in this case, the Kenyan government it has nothing to do with the ordinary East Africans. For a common market to develop, Kenya would synchronize its infrastructure development plans with her neighbors.

The evidence is clear, the countries have signed the various agreements however there are no good results unfortunately. We are not enjoying full free movement of goods. See what is happening to Ugandan sugar, there is no free movement of capital or labour. Countries are protecting their local companies and local markets. The integration is yet to show up. The deadline is set and being frustrated by internal resistance of member states and lack of political will. There are road blocks in implementation. Rwanda appears to say that it will not be part of the single currency. The individual countries are doing more business with other countries outside the community. I do not think that our political leaders are on the same page. They are not about to deliver the political union.