The East African community (EAC) a body founded by the three east African countries seems to be more of a scare crow than a lion in the jungle. This organization was founded under the pretext of stabilizing the economic atmosphere in the three countries and among its objectives includes the following; Partnership development with the rest of the continent and world, Implementation of tariff reduction whereby Kenya applies 90%, and Tanzania and Uganda 80% tariff reductions, EAC Industrial Development Strategy, Initiation of Power Interconnectivity Project to facilitate cross-border flow of electricity supply in the border towns among others.
Though such sweet objectives have been put on paper, very little energy has been injected in the implementation of the above policies. From time in memorial, the three countries have kept a record of high excise tax; this has risen; bearing in mind the fact that Uganda is a landlocked country; which means she does not have access to the sea. This automatically puts her at a vulnerable position where by she has to rely on her counter-parts in order to import and export her goods. This deficiency together with the agro-based economy leads to Uganda participating less/or in the development of a partnership with the continent.
Starting at the core of the matter, it’s observed that corruption levels in the region tend towards the rise; and government bodies meant to crack this practice down, are very reluctant. Corruption is held responsible in large part for the failure of development, and the truth is that the very word development looks like a “myth” when the extent and nature of corruption is considered. This is why, World Bank and IMF after ignoring the problem for decades, have recently declared war on corruption and concentrated on their efforts particularly on the African continent as noted by Michael Johnston a British economist.
In July 1997, the Government of Kenya refused to meet commitments made earlier to the IMF on governance reforms. As a result, the IMF suspended lending for 3 years, and the World Bank also put a $90 million structural adjustment credit on hold. Although many economic reforms put in place in 1993-94 remained, Kenya needed further reforms, particularly in governance, in order to increase GDP(natonal income) growth and combat poverty among the majority of its population. Lack of progress in the Goldenberg scandal marked an unwillingness to deal with corruption.
Looking at power, which is emphasized in the agenda, the issue of cross border inter-connectivity is merely a dream. The question is, where is this plant going to be built? The factor of load shedding in Uganda is alarming and Umeme threatened to quit because the plant is not producing the anticipated mega-watts. Efforts to import power from Kenya failed due to financial disagreements and yet Uganda initially exported power to Kenya hence the hunter became the hunted.
Ideologically, the three countries vary, that is, Uganda and Kenya are mixed economies while Tanzania is into African socialism (Ujama policy); and due to this, a majority of Tanzanians are soaked in poverty of course not forgetting the poverty levels eating up the rest of East Africa. Each country has donors; and therefore coming into partnership means togetherness, the question then is, which party(s) is ready to be converted because the fact that differing ideologies exist does not facilitate an equilibrium position for the integration due to the “economic muscle” of the donors.
Depreciation of currency value in all the three countries seems to be inevitable. Taking the examples of both Uganda and Kenya, when the Kibaki government came into power in 2002, the Kenyan shilling was fluctuating from Sh19-20 against the dollar while the Ugandan currency in the 1990’s was rated at 1000 shillings against the dollar. But apparently the rates in both countries have wildly increased, that is, Sh72.80-73.00 and Sh1,837-1,842 in Kenya and Uganda respectively. So with the economic community, there needs to be stability of currencies and also a single currency needs to be put into effect so as to deal away with the intrications of exchange rates.
Comparing the fuel tariffs leaves a gap to explore and yet the economy needs fuel to run its day today policies. According to an article, which ran in “People’s Daily” a Chinese news paper, a survey done in Kampala indicated that the highest price of petrol is 2,350 shillings (1.3 dollars) for petrol, up from 2,150 (1.2 dollars), while the lowest is 2,220 shillings (1.23 dollars), up from 2,150 (1.19 dollars) and so on. It was also noted that most filling stations had no kerosene. This was blamed on the crisis at the depots; however, the fact is, the Kenya Revenue Authority (KRA) changed the clearance of fuel from Mombasa to Uganda in order to avoid tax evasion prior to the previous policy where fuel was cleared while in Uganda, this in a way sounds like protectionism; a barrier to integration.
“The Rwanda Development Gateway” reported that, oil products have reduced due to a small pipeline from Nairobi to Kisumu, Eldoret and Nakuru with only 6- 8 inches, compared to the pipeline from Mombasa to Nairobi with 14 inches. The size of pipelines from Nairobi to the product terminals at Nakuru, Eldoret and Kisumu are small and this limits the quantity of fuel products from those terminals. This is a critical issue and so the members of the community have to first sort out such limitations than merely declaring a commonality. The only point of concern however, should be the bigger marginal difference of prices in other countries for instance, in Rwanda, fuel prices changed three times, from 370 Rwanda francs (82 US cents) to Rwf 390 (86 US cents) and finally soared to Rwf406 (90 US cents) per litre of petrol (about 1652.80 Sh) still very less compared to tariffs in Uganda for example.
The East African newspaper noted that in Kenya, premium petrol prices fluctuated, that is at Ksh54 (68 US cents) a litre and Ksh58 (73 US cents) in Nairobi. In Dar es Salaam, a litre of petrol increased from Tsh595 (60 US cents) to Tsh655 (70 US cents) while diesel increased from Tsh565 (60 US cents) a litre toTsh610 (60 US cents). Kerosene increased from Tsh420 (40 US cents) a litre to Tsh480 (50 US cents). The increase in kerosene prices has also been attributed to an increase in demand following a sharp rise of electricity tariffs. We note here that prices vary in all countries that is, some are high while others are low.
Therefore, the question is, if such internal disequilibria’s still exist in each individual member state, then what is it going to be like in the community? Won’t each country try to pursue individualistic interests? Taking the example of world trade organization as reported by npr.org; “Members of the World Trade Organization called an end to five years of international trade talks on commerce liberalization after they failed to resolved disputes over farm aid. WTO chief Pascal Lamy put the Doha round of negotiations on hold indefinitely”. The concerned members should therefore put in place strategies, which are achievable and not ambitious objectives bearing in mind that even the most experienced organizations have failed.
After this intrinsic phenomenon, one gets to wonder what the possible solution(s) could be. Bearing in mind the problems discussed, economists have come up with varying remedies to such shortcomings. A critical exposition of the Euro zone as analyzed in the wikipedia is a perfect mirror to the stability of the EAC. The euro is the sole currency in Austria, Belgium, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.These 12 countries are referred to as the Eurozone.
The introduction of a single currency for many separate countries presents a number of advantages and disadvantages for the participating nations. Opinions differ on the actual effects of the common currency. One of the most important benefits of a single currency is lowered exchange rate risks, which makes it easier to invest across borders. The risks of changes in the value of respective currencies has always made it risky for companies or individuals to invest or even import/export outside their own currency zone. Profits could be quickly eliminated as a result of exchange rate fluctuations. At the same time, this is likely to increase foreign investment in countries with more liberal markets and reduce that in those with rigid markets. However,profits may flow away from particular member states to the detriment of their traditional social values. It might also result in the reduction of local decision makers in businesses. A benefit is the removal of bank transaction charges that previously were a cost to both individuals and businesses when exchanging from one national currency to another.
