EAC Industrial Upgrading and Modernisation Programme Overview

Posted in Industrialization & SME Development

Small and medium-sized enterprises (SMEs) represent the biggest part of all registered entities in nearly all activities in majority of the East African countries, averaging 60% in number or reaching 90% if the micro enterprises are also considered.

Over the last decade, hundreds of thousands of micro enterprises have flourished in East African countries in the areas of trade, services and industry as the region’s economies opened up.

Only a few of these firms will grow into medium- and large-sized firms or expand to reach markets beyond their area of operations.

This is because they face a number of constraints limiting their expansion including:

1. Absence of a holistic regional trade and industry development approach including private sector and SME promotion policies;
2. Low level of product transformation and industrial value-added, and industry dependence on imported products, resulting in a low value-added ratio per capita;
3. Poor internal technical, technology and managerial practices affecting their competitiveness on local and external markets;
4. High public service and other transaction costs;
5. Inadequate financing and access to investment and financial services;
6. Insufficient integration to the international capital markets;
7. Difficult access to technology and information, and lack of the local and regional Research & Development institutions related to manufacturing activities, among others.

The EAC Secretariat has recognised both the important role played by the SMEs in employment creation and development of the EAC region and also the challenges they face, and has prioritised their development in its programmes.

The EAC Industrialisation Policy (2012-2032) calls for the provision of a framework that supports growth and development of SMEs to facilitate their integration into regional and global value chains enhancing their prospects for effectively contributing to economic development goals.

Further, Article 80(1) of the EAC Treaty calls upon Partner States to: “facilitate the development of: (i) small-and-medium scale industries including sub-contracting and other relations between larger and smaller firms”. The EAC Development Strategy 2012-2016 calls for the Implementation of the EAC Industrial Upgrading and Modernisation Programme for SMEs.

The EAC Industrial Upgrading and Modernisation Programme focuses on sustaining SMEs’ growth and addressing some of the constraints to private sector growth, including SMEs’ access to financial services and information, business environment and regulatory framework favourable for expanding private sector’s productive activities. The programme was developed by EAC in collaboration with United Nations Industrial Development Organization.