Sectoral Desks

AGRICULTURE

The agricultural sector is central to the EAC economy. It is the main source of livelihood for about 80% of the rural population. In 2015, its contribution to GDP ranged from around 25% in Uganda to around 42% in Burundi. Agriculture is also a major source of foreign exchange earnings, as well as of raw materials (more than 50% of total raw materials) for the manufacturing sector. 1 Major cash crops include tea, cotton, coffee, pyrethrum, sugar cane, sisal, horticultural crops, oil crops, cloves, tobacco, coconut and cashew nuts. EAC exports are dominated by agricultural products such as coffee, cut flowers, tea, tobacco, fish and vegetables. Agriculture is essentially rain-fed and is dominated by smallholders. Persistent challenges to the sector include declining yields, drought, and the degradation of the ecosystem. In addition, low expenditure on agricultural research, poor infrastructure, low adoption of improved agricultural technologies, and a poor policy environment continue to keep agriculture production far below its potential.

At the EAC level, the Sectoral Council on Agriculture and Food Security, a body made up of agriculture ministers, is responsible for all issues related to the sector. The main objective of the EAC in the agricultural sector is to achieve food security and a greater rationalization of production. Under the EAC Treaty, member countries are called upon to increase their agricultural productivity and output to reduce hunger and poverty, and to achieve food and nutrition security in the region. To this end, the EAC Agriculture and Rural Development Policy (EAC-ARDP) constitutes the main framework for interventions in the sector. It provides for detailed actions to be implemented over the period 2005-30.

In general, agricultural products enjoy a higher protection under the CET, with an average tariff of 20.7%, compared to an overall average of 12.9. Under the EAC duty exemption regime, a number of agricultural inputs can be imported dutyfree. These include: seeds approved as fit for sowing; fertilizers approved by the relevant national authorities; horticulture, agriculture and floriculture inputs; and inputs for use in the manufacture of agricultural equipment. Source: WTO Trade Policy Review Body, 2019

INFRASTRUCTURE

The contribution of manufacturing to GDP in the EAC is estimated at 8.9%. The sector is composed essentially of micro, small and medium enterprises (MSMEs) characterized by limited value addition, and is highly concentrated in agro-processing activities. The aim of the EAC is to promote self-sustaining and balanced industrial growth, improve the competitiveness of the industrial sector, and encourage the development of local entrepreneurs. In line with these goals, a 20-year industrialization policy and strategy was adopted in November 2011. The overall objective of the East African Industrialization Strategy (2012-2032) is to enhance production and productivity, and accelerate the structural transformation of its economies. These are to be achieved through, inter alia, diversifying the manufacturing base and raising local value-added content of exports to at least 40% by 2032; strengthening institutional frameworks; expanding trade in manufacturing; and transforming MSMEs into viable and sustainable business entities. Several actions have been undertaken in the framework of the Strategy. During the review period, EAC countries implemented an Industrial Upgrading and Modernization Programme (IUMP) for small and medium-sized enterprises (SMEs). The Programme has four components: reform of the institutional framework, the business environment and financial instruments; strengthening of the capacities and capabilities of technical support institutions; support of SME development, investment promotion, and improvement of competitiveness; and facilitation of the transfer of industrial technologies and best innovation practices. The EAC has also developed frameworks to promote food processing, pharmaceutical production, and value addition in the mineral resources industry. A number of policy tools are in place to promote the manufacturing sector. Under the CET, intermediate goods attract, in principle, the 10% rate. Duty remission and export promotion schemes allow manufacturers to import their inputs tax free under certain conditions. The 2015 revision of the EAC rules of origin lowered the threshold of local content required from 35% to 30%, thus allowing more manufactured goods to benefit from the preferential treatment. Operational since July 2015, the East African Science and Technology Commission was established, inter alia, to facilitate technological innovation and the commercialization of research and development (R&D) findings. Source: WTO Trade Policy Review Body, 2019

SMEs

In the global economy, SMEs represent about 95% of the enterprises and account for more than two-thirds of the employment by the private sector. In developed economies, they contribute to nearly two-thirds of both employment and GDP, while in developing economies, formal SMEs account for almost half (45 per cent) of employment and 33 per cent of GDP (IFC, 2013). In EAC, as most Regional Economic Blocs in developing countries, SMEs are typically hidden in the informal sector and are largely characterized with women cross-border traders. However, SMEs in EAC are the engines of the economy with a significant contribution towards innovation, social integration, economic and social development. They constitutee about 90 percent of traders, more than 60 percent of employment with a share of about 29% on the region’s GDP. SMEs also play a significant role in reducing the development gap through addressing poverty reduction, women empowerment, and income distribution (ITC, 2014).

EABC’s strategic intervention towards SME development in EAC is on:

  1. Advocacy on policy and non-policy constraints impeding market access for SMEs.
  2. Addressing capacity constraints towards SME growth and participation in regional and global value chains.

SERVICES

The EAC Partner States committed to progressively liberalize trade in services in accordance with the negotiated commitments made under Annex V of the Common Market Protocol. In 2010 all Partner States committed to open their market in seven (7) service sectors, namely: Business; Distribution, Education; Finance; Communication; Tourism & Travel related; and Transport. The EAC Partner States agreed to progressively remove restrictions and undertake not to introduce any new restrictions on the provisions of services (Art. 16(5) of EAC Common Market Protocol. The EAC Partner States took a variegated approach to liberalization, by commitments in different services activities and modes of supply also the Partner Staets agreed that additional commitments will be undertaken in successive rounds i.e. specific commitments and sectors where no commitments were undertaken will form the basis for further negotiations on the remaining 5 services sectors namely: Construction and related; Environmental; Health-related & Social; Recreational; Culture & Sporting services and Other services not included elsewhere.

The linking of Mode 4 i.e. the temporary movement of services suppliers to the schedule on the movement of workers has restricted the free movement of services and service suppliers/providers in the region. The EAC Partner States have developed Regulations on Free Movement of Services and Service Suppliers and the Mechanism for the Removal of Restrictions on Trade in Services. The Regulations is expected to govern the movement of services and service suppliers after services suppliers have been delinked from the movement of workers in the revised schedules of commitments on progressive liberalization of services.

MANUFACTURING

The contribution of manufacturing to GDP in the EAC is estimated at 8.9%. The sector is composed essentially of micro, small and medium enterprises (MSMEs) characterized by limited value addition, and is highly concentrated in agro-processing activities. The aim of the EAC is to promote self-sustaining and balanced industrial growth, improve the competitiveness of the industrial sector, and encourage the development of local entrepreneurs. In line with these goals, a 20-year industrialization policy and strategy was adopted in November 2011. The overall objective of the East African Industrialization Strategy (2012-2032) is to enhance production and productivity, and accelerate the structural transformation of its economies. These are to be achieved through, inter alia, diversifying the manufacturing base and raising local value-added content of exports to at least 40% by 2032; strengthening institutional frameworks; expanding trade in manufacturing; and transforming MSMEs into viable and sustainable business entities. Several actions have been undertaken in the framework of the Strategy. During the review period, EAC countries implemented an Industrial Upgrading and Modernization Programme (IUMP) for small and medium-sized enterprises (SMEs). The Programme has four components: reform of the institutional framework, the business environment and financial instruments; strengthening of the capacities and capabilities of technical support institutions; support of SME development, investment promotion, and improvement of competitiveness; and facilitation of the transfer of industrial technologies and best innovation practices. The EAC has also developed frameworks to promote food processing, pharmaceutical production, and value addition in the mineral resources industry. A number of policy tools are in place to promote the manufacturing sector. Under the CET, intermediate goods attract, in principle, the 10% rate. Duty remission and export promotion schemes allow manufacturers to import their inputs tax free under certain conditions. The 2015 revision of the EAC rules of origin lowered the threshold of local content required from 35% to 30%, thus allowing more manufactured goods to benefit from the preferential treatment. Operational since July 2015, the East African Science and Technology Commission was established, inter alia, to facilitate technological innovation and the commercialization of research and development (R&D) findings. Source:  WTO Trade Policy Review Body, 2019