EAC need to focus on economic issues
EAC trade ministers want economic issues to be at the top of the agenda at the East African Head of States leaders’ summit which will be held here in November.An International Trade and Industry expert told your blogger that economic ministers decided that more emphasis should be given to the economy during the upcoming meeting in the light of current currency and market volatility.In light of the current economic situation and how it is affecting all countries, we feel it is important for our heads of state and governments to pay more attention to economic issues when they gather in November.East African leaders, including new Tanzanian President who will be elected next month, are scheduled to attend the Summit and related meetings.Currently, outgoing United Republic of Tanzania President Jakaya Kikwete is currently chair of the leaders summit.This past week,technocrats from economic ministries are said to held a number of meetings, including several with their representatives from the East Asia Community Business council forum.The EAC comprises five member countries namely Burundi, Rwanda, Tanzania, Uganda and Kenya.South Sudan and Somalia have representations but are yet to be admitted to the regional bloc due to instability in the two countries.
The expert who I cannot mention as he is directly involved with the summit, said the main focus during the EAC meeting was to share information and updates on the economic situation amid the current uncertainties due to rising cost of living as well as market and currencies volatility with Uganda and Tanzania being the hardest hit.On another matter, expert said that despite current external economic worries, confidence on EAC’s prospects remained high in the business communities of the region.East Africa Business Council representatives in their meeting with Finance ministers earlier this year expressed continued confidence in the region’s prospects.EABC also expressed support for region’s effort to create a single currency and production base through the East African Community in the next ten years.EAC broader economy remains weak, employment continues to track well below population growth and the three main economies Tanzania, Uganda and Kenya incomes are expected to continue to suffer the effects of the sharp fall in the terms-of-trade. Higher interest rates have not supported property prices and will continue to do so thanks to greed of commercial banks in the region that largely believe in short terms gains.However, income growth will offset much of those benefits during 2016.
EAC countries also need to find a more equitable solution to its long-term budget problems.The public now realise that the problem extends much deeper than simply spending too much. The states are also struggling to generate enough cash to meet the needs of their people.This will eventually create an opportunity to discuss widespread tax reform but I don’t expect that view to gain much traction until mid 2016. The narrative that caught most analysts by surprise this year was the sharp fall in coffee and tea prices.Expect prices to continue to ease this year albeit at a slower pace and expect further consolidation within the sector.Tanzania and Uganda growth will continue to moderate though better than Kenya and remain elevated by the standards of developing lower middle countries. Kenya, I guess will continue to rebalance its growth model towards consumption and away from commodity intensive infrastructure investment.The implications for Uganda have been clear: both commodity prices and export volumes are weaker while in Tanzania Firms have seen a mining sector as a very different beast this next year.Offsetting these effects partially will be a weaker exchange rate. The Tanzanian and Uganda shillings have fallen sharply against the US dollar and more importantly the trade-weighted index over the first half of this year. Overall, capital flows to Tanzania will ease due to huge investment opportunities in mining sector.