We must break trade barriers to promote development

This week, businessmen, policy makers and other economic stakeholders from within East Africa and across the globe convened at the Speke Resort in Munyonyo in Uganda for the first ever high-level Manufacturing Business Summit and Exhibition in the East African Community (EAC).
The fact that the forum was held at ‘Speke Resort’ with its colonial undertones and heritage, echoes that Africa is still grappling with the legacy of colonialism and how to deal with the effects of national boundaries drawn up so many years ago in Europe, without recourse to local culture or inhabitants. It also illustrates how these boundaries continue to affect the economics, trade, immigration and geopolitical situation of these former colonies.
How so? For many nations in Africa today, it is easier to trade with Europe, America or China than it is to trade across what for many is an imaginary line in the sand denoting two different countries. Yet there are individuals and companies grappling with how to extend their business beyond the borders. Many indeed are already beating a path that will set precedence for many others to follow when we can finally enjoy the Pan African dream.
The forum came at a time when one of those regional pioneers, General Motors East Africa, has embarked on a regional expansion programme that will see it grow across the East African region.
Headquartered in Nairobi, Kenya, the company has recently broken ground for, or opened new showrooms across different parts of Kenya with a view to creating an enhanced presence and improve their customer experience.
It is this ability to operate across borders that is important.
Research shows that cross border trade within the region will deepen the customer experience by bringing in economies of scale and improving the availability of funds for research and development for the bigger market.
According to experts, including the World Bank, a major factor restricting intra-African trade is the problem of “thick borders”, meaning the complex of tariff and, even more important, non-tariff restrictions that slow down real and virtual commerce traffic across African frontiers.
What this means is that businesses that operate across borders in Africa often spend as much time tackling cross border bureaucracy as they do working on their core business.
The first ever East African Manufacturing Business Summit seeks to address this and many other challenges bedeviling business by bringing together key manufacturers, supply industries, wholesalers and retailers as well as government officials, policy makers and regulators from the East African region and beyond, and getting them to engage so as to create common ground and eliminate some of the bureaucracy that is often a major headache for those engaged in trade.
This is expected to enhance trade.
General Motors has been at the forefront of enhancing trading on the African continental bloc. From the continental perspective, it is clear that the larger market created through bloc building initiatives that intend to merge the EAC, SADC and Comesa will result in huge efficiency gains and is anticipated to provide impetus for growth of high tech capabilities and capital intensive industries where economies of scale are most critical and therefore, require larger markets to be competitive.
The Tripartite Trade Arrangement is expected to command a market size of nearly $1 trillion, in terms of GDP, with a consumer base Of 700 million people in 26 countries. The creation of this market is integral for real economic takeoff and transformation in Africa. The role of the manufacturing and agri-business sectors as drivers of this socio-economic
Despite global exuberance, takeoff in Africa cannot be gainsaid, though so far it remains minimal on account of generally low investment that targets these sectors and limited awareness on investment opportunities that are available.
A majority of these investments were directed at extractive industries, particularly the oil sector and infrastructure projects. The manufacturing sector currently contributes a paltry 10 per cent to the EAC’s GDP as compared to the agricultural sector at 34.7 per cent, the extractive sector at 10.8 per cent and services at 44.8 per cent.
Currently, the installed capacity for the entire motor vehicle assembly industry is about 30,000 units of vehicles, which are more than the requirements of the East African Community for new vehicles. Unfortunately, the entire industry is only utilising less than 20 per cent of that capacity. This provides growth opportunities as the regulatory framework continues to be implemented for the sector. Of great beneficial impact, for instance, would be the full implementation of 25 per cent duty on imported vehicles as per the current East African Community Common External Tariff.
The potential and scope for manufacturing and agri-business driven economic development path in the East African region is enormous, gauging by the apparent manufacturing deficit in the region, where up to 70 per cent of total demand for imports is attributable to manufactured products.
Growth in these sectors will be sweet music to the automotive sector, which helps these producers by creative automotive logistics solutions to get their products to market.
Similarly, opportunities for agri-business across the region are substantial considering the good agro-ecological conditions in most parts of the EAC and growing demand trajectories in both regional and international markets.

Ms Kavashe is the managing director, General Motors East Africa Ltd


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