The EAC is currently home to 174 million people with a surface area of 2,467,202 sq. km. The combined GDP of the region is about US$163.4 billion (at purchasing power parity, about US$473 billion) and the average GDP per capita is about US$941 (at purchasing power parity, $2,722).
In addition to the EAC market, investors in the Partner States have access to other African markets (e.g. COMESA, SADC and AfCFTA) as well as to international markets through preferential trade arrangements.
The Common Market for Eastern and Southern Africa (COMESA) comprises 21 Member States with a surface area of 11.8 million sq. km, a population of 560 million, and a total GDP of US$768 billion. This is one of the largest trading arrangements in Africa. Kenya, Rwanda, Uganda, Burundi and South Sudan are members of COMESA, whereas Tanzania withdrew from the organization in 2000.
The Southern African Development Community (SADC) was established in 1992 and comprises 16 Member States with a surface area of 9,885,197 sq. km, a population of 344 million and a total GDP of US$720 billion. Tanzania is the only member of SADC amongst the EAC Partner States. The other EAC Partner States may access SADC market through Tanzania. Whereas Tanzania may access the COMESA Market through any of the other EAC Partner States, DRC, Zambia, Malawi or Mozambique.
Below is a brief summary about EAC, COMESA and SADC:
EAC
COMESA
SADC
Surface Area/ million sq. km:
2.467
11.8
9.883
Population/ million:
174
560
344
GDP/ US$billion:
163.4
768
720
Member States
6
21
16
The African Continental Free Trade Area (AfCFTA) currently comprises of 54 out of the 55 member states of the African Union (AU) that have already signed the agreement. Following the ratification and entry into force of the AfCFTA, five (5) supporting Operational Instruments were launched during the AU Summit held in Niamey, Niger in July 2019.
These instruments are: (1) The rules of origin (2) The tariff concessions (3) The Continental Online Tool/ Mechanism for monitoring, reporting and elimination of Non-Tariff Barriers (NTBs) (4) The Pan-African Payments and Settlement System (PAPSS) and (5) The African Trade Observatory.
These instruments are the key tools that will support the launch of the operational phase of the AfCFTA with start of the trading scheduled for July 2020.
AfCFTA will be the largest trading block since the formation of the World Trade Organisation (WTO). Establishing a continental market compliments regional integration efforts. For example, exports from the East African Community (EAC) face much higher tariffs in other parts of Africa than outside the continent. So, the AfCFTA’s elimination of tariffs and non-tariff barriers will improve development prospects for EAC, allowing the region’s firms to tap into rapidly growing markets elsewhere in Africa.
The AfCFTA is not only about trade, but also about creating access and free movement of people, goods, and services. Liberalizing intra-Africa services trade could bring great benefits for the East African Community. Tourism is one area of growing Intra-Africa trade in services. With intra-Africa migration on the rise, the Agreement on Free Movement of Persons, which was signed by more than half of African Union member states, is particularly important. A more open continental labor market would go far in addressing the skill shortages that constrain growth in strategic sectors.
In the developed world, the European Union (EU) is the largest trading partner of the EAC countries. Exports from EAC countries have had preferential access to the EU market under the Cotonou Agreement between the EU and the African, Caribbean and Pacific States (ACP). The Cotonou agreement (The ACP-EU Partnership Agreement), signed in Cotonou on 23 June, 2000 was concluded for a 20-year period from 2000 to 2020. It is the most comprehensive partnership agreement between developing countries and the EU. Since 2000, it has been the framework for EU's relations with 79 countries from Africa, the Caribbean and the Pacific (ACP). In 2010, ACP-EU cooperation was adapted to new challenges such as climate change, food security, regional integration, State fragility and aid effectiveness. Under the Cotonou Agreement, valid until 2020, the EU offers duty-free access to a wide range of agricultural products as well as some industrial products. Other products can access the EU market under the “commodity protocols”, which offer duty-free access on a quota basis to a number of products, including bananas, sugar, beef and veal, and rum.
As least developed countries (LDCs), Burundi, Rwanda, Tanzania and Uganda are also covered by the EU’s Everything But Arms (EBA) initiative, under which all products from LDCs except arms and ammunitions have preferential access to the EU market.
Together with other sub-Saharan African countries, the EAC States also qualify for duty-free access to the US market under the African Growth and Opportunity Act (AGOA), which has been extended until 2025. The legislation significantly enhances market access to the US for qualifying Sub-Saharan African (SSA) countries. Qualification for AGOA preferences is based on a set of conditions contained in the AGOA legislation. In order to qualify and remain eligible for AGOA, each country must be working to improve its rule of law, human rights, and respect for core labor standards.
Th EAC Partner States may also access the US market under the Generalized System of Preferences (GSP) scheme. Together, AGOA and the GSP offer US market access to nearly 60% of EAC product lines. Most African countries are currently taking advantage mainly of the textile and apparels provisions, but various agricultural products and manufactured goods are also eligible under these schemes. Products from EAC countries can access various markets in the developed world through the Generalized System of Preferences (GSP), which offers preferential treatment to a wide range of products originating in developing countries. No quantitative restrictions accompany these GSP schemes, although other non-tariff barriers to trade have in the past acted as a constraint on intended beneficiaries’ taking full advantage of these schemes. Markets accessible through GSP schemes include those of Australia, Canada, Japan, New Zealand, Switzerland and the United States.
The region has an extra ordinary natural resource in its wildlife. Governments in the region have designated large areas as national parks or game reserves, which are great tourist attractions.
For instance, about 25% of Tanzania’s land is designated as game reserve or national park and includes the largest game reserve in the world: the Selous in southern Tanzania.
The region is also endowed with a variety of minerals, including fluorspar, titanium and zirconium, gold, oil, gas, cobalt and nickel, diamonds, copper, coal and iron ore.
Source: EAC Vision 2050 and South Sudan Development Strategy
Such mineral resources present an opportunity for development of the mining industry, which is currently underdeveloped.
The region has several water masses in the form of freshwater lakes, rivers and marine waters. The freshwater masses (lakes and rivers) harbour much biodiversity that can be exploited as food and also create employment. Other lakes are special because they either have hot springs or harbour rare species of birds such as the flamingo, which makes them tourist attractions. The marine waters at the coast provide food, employment and a source of foreign exchange. The coastal beaches are a major tourist attraction in both Kenya and Tanzania.
Ports at Mombasa and Dar es Salaam, among others, serve both the region and the landlocked countries bordering the region.
The EAC region has sufficient human capital to support new and existing businesses in the EAC with high quality, innovative and skilled human resources at all levels. Within EAC international Universities of high repute have set up campuses.
The EAC region has sufficient human capital to support new and existing businesses in the EAC with high quality, innovative and skilled human resources at all levels. Within EAC international Universities of high repute have set up campuses. Also, a good number of Universities in EAC are ranked among the top 20 and top 1000 in Africa and the world respectively.
The EAC has TVET institutions that are producing graduates with vocational skills and competencies at certificate and diploma levels.
Furthermore, on 28th April, 2017 the Heads of State of East African Community Partner States declared the transformation of the EAC into a Common Higher Education Area. The purpose is to improve the international competitiveness and attractiveness of higher education in the EAC and ensure mobility and employability of graduates.
The objectives of the Common Higher Education Area include among others:
Adoption of a system of easily readable and comparable qualifications;
Facilitation of a system of credits as a proper means of promoting students’ mobility;
Promotion of mobility by overcoming obstacles to the effective exercise of free movement; and
Promotion of cooperation in higher education, particularly with regards to curricular development and harmonization of academic programmes, inter-institutional co-operation, mobility schemes, training systems and research.
The Inter-University Council for East Africa, an institution of the EAC, coordinates the harmonisation of higher education and training systems in East Africa, facilitates their strategic development and promotes internationally comparable standards and systems to ensure high-quality human capital development necessary for developing and implementing investments.
Also, the East African Science and Technology Commission, another institution of the EAC assists with the coordination of the development and implementation of Science, Technology, and innovation investment initiatives. All these efforts are aimed at consolidating the EAC as a regional human capital hub.
Human Capital: The EAC region has sufficient human capital to support new and existing businesses in the EAC with high quality, innovative and skilled human resource at all levels. The EAC has also established institutions to leverage the community as a regional human capital hub. These institutions include the Inter-University Council for East Africa and the East African Science and Technology Commission. The Inter-University Council for East Africa coordinates the harmonisation of higher education and training systems in East Africa, facilitates their strategic development and promotes internationally comparable standards and systems to ensure high quality human capital development necessary for developing and implementing investments. The East African Science and Technology Commission assists in coordination of the development and implementation of Science, Technology and innovation investment initiatives. All these efforts are aimed at consolidating the EAC as a regional human capital hub.
Natural Resources: The region has an abundance of resources such as its rich diversity of wild life, fresh water masses, marine waters, rolling grasslands and other magnificent physical features.
East Africa is home to two of Africa’s most popular safari destinations - Kenya and Tanzania – along with gorilla encounters in the rainforests of Uganda and Rwanda, and the tropical beaches of Zanzibar.
The two highest mountains in Africa, Mt. Kilimanjaro and Mt. Kenya are located in the EAC.
East Africa is also home to the River Nile and its source Lake Victoria, which is the largest lake in Africa and the second largest freshwater lake in the world.
The region is also endowed with a variety of minerals, including fluorspar, titanium and zirconium, gold, oil, gas, cobalt and nickel, diamonds, copper, coal and iron ore. This presents an opportunity for investment and development of the mining industry, which is currently underdeveloped
Mineral Resources in EAC
Country
Precious metal, Gemstones and Semi- Precious Metal
Source: EAC Vision 2050 and South Sudan Development Strategy
Market Size and Access: The internal EAC market has over 174 million consumers, while the Common Market for Eastern and Southern Africa (COMESA) comprises 20 member states with a population of over 460 million. Rwanda, Kenya, Uganda and Burundi are all members of COMESA. The Southern African Development Community (SADC) is composed of 15 member states among which is Tanzania - the only EAC state that also belongs to the SADC bloc. The other EAC Partner States may access SADC market through Tanzania, whereas Tanzania may access COMESA Market through any of the other EAC Partner States. EAC products also access various international markets:
The European Union (EU) is the largest trading partner of the EAC countries. Exports from EAC countries have had preferential access to the EU market under the Cotonou agreement between the EU and the African, Caribbean and Pacific States (ACP).
Together with other sub-Saharan African countries, the EAC States also qualify for duty-free access to the US market under the African Growth and Opportunity Act (AGOA), which has been extended until 2025.
Products from EAC countries can also access various markets in the developed world through the Generalized System of Preferences (GSP), which offers preferential treatment to a wide range of products originating in developing countries.
A brief summary of EAC, COMESA and SADC Markets
EAC
COMESA
SADC
Population/ million
174
560
344
GDP/ $billion
163.4
768
720
Member States
6
21
16
Infrastructure: All EAC Partner States have invested heavily in infrastructure development. Thus, the region has a relatively well-established infrastructure to support and sustain investments and businesses. The partner states are committed to continued improvements of all infrastructure for the benefit of investment in the region.
Strategic location: Bordering the Indian Ocean and Somalia on the east, and Ethiopia and Sudan on the north, Central African Republic on the west and Malawi, Mozambique and Zambia on the South, the EAC is strategically located as a regional financial, communication and transport hub. No wonder, it hosts continental offices for several international organisations and multinational companies.
Macro-economic stability: There has been sustained macro-economic stability in the EAC mainly due to effective macro-economic policies. For East Africa Region, inflation, an important indicator of macroeconomic stability, remained in the double digits in 2018, increasing by 0.5 percentage point from 14.0 percent in 2017. In Africa, East Africa continues to lead with GDP growth. In 2018, East Africa’s GDP growth was estimated at 5.7 percent in 2018, followed by North Africa at 4.9 percent, West Africa at 3.3 percent, Central Africa at 2.2 percent, and Southern Africa at 1.2 percent (East Africa Economic Outlook, African Development Bank Group, 2019).
Peace and Security: The EAC is a largely peaceful region. Article 124 of The Treaty for the Establishment of the East African Community recognizes the need for peace and security within the EAC Partner States. The same article spells out wide-ranging approaches for implementation in order to have a stable and secure environment within the region. This kind of environment is geared towards promoting development and harmonious living of the people of EAC. Peace and Security has been acknowledged at EAC level as critical to creation of the right environment upon which regional integration in all aspects can be fostered. Strategies on the control of cross border crime ensure security of persons and goods as they move within the region are continually being developed and implemented. The EAC partner states are all committed to maintaining peace and security in the region
Political Stability: Five of the six EAC Partner States have had regular free and fair elections for heads of state and other political leaders. These elections have always been endorsed by international observers. South Sudan has also agreed on a Unity government which is planned to take effect from 2020. The EAC integration underpins the commitment and the political will of the EAC Heads of State to the integration process. The treaty establishing the East African Community also acknowledges participation of the private sector and civil society and thus the operational principle for the Community is a people-centred and private sector led integration. The ultimate goal of the EAC regional integration is Political Federation, which is the fourth step after the Customs Union, Common Market and Monetary Union. Political federation will further enhance political stability across the region.
Export Processing and Special Economic Zones:Each Partner State has gazetted export processing zones (EPZ) and Special Economic Zones (SEZ). EPZ and SEZ across the Partner States focus on contributing to building a strong export-led economic development through industrialization. EPZ and SEZ provide a number of specific incentives for investors operating within them, which include fiscal and non-fiscal incentives, including corporate tax holidays, duty and VAT exemptions.
