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KRA-Customs-Transit-Control

Kenya Revenue Authority Commissioner-General John Njiraini announces the implementation of a common customs and transit cargo control framework to rid Mombasa port of corruption

Four East African countries on Tuesday agreed to fast-track implementation of a common customs and transit cargo control framework to enhance regional trade.

Commissioners-general from the Kenyan, Ugandan, Rwandan and Tanzanian revenue authorities said adoption of an excise goods management system would curb illicit trade in goods that attract excise duty across borders.

They said creation of a single regional bond for goods in transit would ease movement of cargo, with taxation being done at the first customs port of entry.

The meeting held in Nairobi supported formation of the Single Customs Territory, terming it a useful measure that will ease clearance of goods and reduce protectionist tendencies, thereby boosting business.

Implementation of the territory is being handled in three phases; the first will address bulk cargo such as fuel, wheat grain and clinker used in cement manufacturing.

Phase two will handle containerised cargo and motor vehicles, while the third will deal with intra-regional trade among countries implementing the arrangement.

The treaty for establishment of the East African Community provides that a customs union shall be the first stage in the process of economic integration.

Kenya Revenue Authority (KRA) commissioner-general John Njiraini said the recently introduced customs and border control regulations were designed to enhance revenue collection and beef up security at the entry points.

“At KRA, we have commenced the implementation of a number of revenue enhancement programmes particularly on the customs and border control front that will address security and revenue collection at all border points while enhancing swift movement of goods,” he said.

To address cargo diversion cases, the regional revenue authorities resolved that a joint programme be rolled out to reform transit goods clearance and monitoring processes. Source: DailyNation (Kenya)

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WCO Capacity Building Magazine 3rd Edition.ashxThe WCO – Sub – Saharan African Customs Modernization Programme funded by the government of Sweden comprises four projects, namely the WCO- EAC CREATe , the WCO– SACU Connect, the WCO– WACAM and the WCO– INAMA Projects. In their totality, the projects support regional Customs Unions in Africa in their mission to facilitate trade without compromising the security of their country and the safety of their citizens. The newsletter will appear quarterly and will inform on ongoing tasks as well as give an overview of future activities. Source: WCO

AfricaMap_SADCThe following article titled ‘Cross-border projects dependent on cost’ was recently published by Transport World Africa. It deals essentially with cross border logistics and provides an insight into regional infrastructure and logistics projects – successes, failures and their impact on transport logistics. It emphasizes the need for greater and closer public and private partnerships, but alas sovereign states appear to be more focused inwardly on their domestic affairs. 

Implementers of projects have the knack of focusing on what they know very well, often leaving out what they do not know. Usually, this comes back to bite them. An example is in the integration of leadership. Countries in the Southern African Development Community (SADC) region compete with each other for demand and capacity provision, which results in the inflated cost of logistics.

Rather, countries should work together. Integrating ports and funding is relatively easy. What is not available is integrated leadership in the region (excluding heads of various states), agreeing that SADC is ‘one country’. Logistics planning is still done at the country level, which is not practical, because then supply chains are being developed that are competing with each other. The sector should be cautious about acceleration, and about what is funded. One example is Transnet, whose plans should fit into regional plans, but right now they do not.

The softer issues in project development often go ignored, but they are at times the most important. There should be a halt to focusing mainly on mega-projects, since they take time and money, as well as resulting in complications (excluding Grand Inga). Despite this, mega projects do create a common vision for a region. Do sponsors have the capacity to support these projects? Institutional capacity is certainly needed. At the political level, southern Africa has done well, top–down approaches are there, but things go off course when there is the attempt to get others to plug-in to this.

One-stop border posts are very important. It was cautioned that the region must be careful not to follow the architecture of colonial extraction, which means focusing on intra-Africa trade rather than too great a focus on ports and exports. Government and private sector must both drive natural winners and losers in markets. There is sufficient funding and policies, but project preparation is limited. What is needed is to decide how to make hubs of excellence, and decide who is going to do what.

The high-level work has been done, but now the sector is facing an implementation challenge. Governments do not do regional integration very well. The private sector does the regional integration, and they suffer most when it does not work. Regional infrastructure will not happen unless there is public support for it. The most successful cross-border project was a PPP: the M4 toll road. This had a large economic impact.

Also, the Port of Maputo has been successful in generating income. Ports without land side integration are useless. Projects need a soft-issue mediator; otherwise there are great ideas, but no implementation. The private sector should not see itself as a messiah, but should rather have a sense of responsibility for developing supply chains. There needs to be a clear understanding of soft issues, clear legal and policy understanding, and communication. SADC has been driving the implementation of harmonisation of vehicle load management for twenty years. A mediator between the public and private sector (such as Maputo Corridor Logistics Initiative (MCLI) is absolutely necessary.

It is a stark reality how little intra-African trade there is. To address this there should be a clear target for development in future. In Namibia, there are efforts to focus on the positives in regards to transport development, even with limited resources. Namibia has been independent for 25 years; 15 years ago the Walvis Bay Corridor was created as a focus on regional integration and regional development. There are 2.2 million people in Namibia, which means a small economy.

There is no real choice but to take into consideration the region and recognise the value Namibia can add. In regards to planning, in 1995 it developed its first transport master plan, and in 2014 it developed its second transport master plan (this was twenty years apart). In February 2015, it developed a logistics master plan to develop Namibia into a logistics hub in the region. It has focused on transport modes because it has a port emphasis. It started roads development.

Currently, Namibia is building its first dual-carriage road (65 km), which is a big step for such a small economy. It would like to do more with sufficient funding. Namibia is also looking into what to do with aviation. As a whole, the country is trying to develop as an alternative trade route for southern Africa. Five to seven years ago, Walvis Bay was just a fishing port, but now R500 million is coming into Namibia’s economy through this post (from zero rand 10 years ago). Namibia is trying to create a better alternative in the SADC region. Now it is looking to focus on developing the manufacturing sector. Namibia is working with South Africa to develop partnerships (excluding transport corridors to production corridors). Continue Reading…

TripartiteLogoAfrica’s longstanding vision is an integrated, prosperous and united continent. This vision will come closer to reality in December when the largest integrated market covering 26 countries in eastern and southern Africa is established.

Commonly known as the Tripartite Free Trade Area (TFTA), the integrated market will comprise the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC).

The establishment of a single and enlarged market is expected to boost intra-regional trade and deepen regional integration through improved investment flows and enhanced competition.

In fact, this integrated arrangement will create a combined population of some 625 million people covering half of the member states of the African Union (AU) and a Gross Domestic Product of about US$1.2 trillion.

According to a statement released by COMESA, which is spearheading the implementation process as chair of the Tripartite Taskforce, the proposed Grand FTA will be launched in December during a Tripartite Summit to be held in Egypt.

This follows a series of intense consultations and negotiations that have been going on since 2008 when the three regional economic communities made a commitment to jointly work together in regional integration during their historic summit held in Kampala, Uganda.

The commitment shown by the three economic communities has now proved fruitful as the Grand FTA is within sight and becoming a reality. Source: sardc.net

EAC-logoSince July 2014, EAC revenue officers work together to facilitate trade within the community. Some improvements remain made; the Single Customs Territory (SCT) does present some advantages. Since the single customs territory is operational, clearing processes are established in the country of destination while the goods are still at the port of Dar es Salaam”, explains Leah Skauki, a SCT liaison officer at the Tanzania Revenue Authority (TRA).

Once the declaration is over, when custom duties and taxes are paid, TRA verifies the physical goods. “The office grants a notification testifying that the goods fulfil all requirements in order to get the exit note.” Within the new system, the number of weighbridges and non-tariff barriers are reduced because “truck drivers only have to show the documents which certify that the goods have undergone verification.”

Massoundi Mohamed Ben Ali, Administrative Director in Charge of Human Resources and Import – Export at the Bakhresa Grain Milling Burundi, is pleased with the new development. “Before the system was implemented, Bakhresa used to import 3800 Tonnes of wheat (40 trucks) and we were obliged to declare each truck with a different clearing agent. We now fill in one statement with one clearing agent. The procedures are done quickly with a small of amount of money”, he points out.

Clearing agents testify that the number of statement on the borders is reduced. “Before, transporters had to fill in a transit declaration (T1) on each border”, one of the clearing agents in the Dares Salaam port relates.

Aimable Nsabimana, a focal point of SCT in Dar es Salaam for the Burundi Revenue Authority, indicates that the computerised system they use is different in each country.”It is not easy to exchange data. We are forced to print documents for verification. And when the goods arrive in Tanzania, they are in the hands of the TRA which has its own software”, he notes.

Inter-connectivity of software would facilitate verification and avoid fraud. This opinion is shared by many clearing agents: “If we were interconnected, the Tanzanians would be able to easily access Burundian data and vice versa”, one of them says.

Léonce Niyonzima, programme and monitoring officer at OBR and the national coordinator of SCT, agrees that the lack of interconnectivity causes delays in the transmission of documents.

He says that all EAC countries should have been interconnected by June 2014, but due to technical problems Tanzania and Burundi still lag behind. “There is a technical committee responsible for monitoring and evaluation which will draw up the balance sheet of the challenges before ending the pilot stage at the end of this year.”

The Single Customs Territory is funded by Trademark East Africa with an amount of USD 450 thousand for the redeployment of staff, travel expenses, inspection and supervision, information technology, office equipment and assistance. Source: http://www.iwacu-burundi.org

eabc-flagsThe East African Business Council, the umbrella body of the region’s private sector, has asked governments in the five-member East African Community (EAC) to expedite implementations of the new WTO trade facilitation agreement.

Council chairperson, Felix Mosha, made the appeal on Tuesday during a breakfast meeting with trade facilitation institutions and the business community in Arusha, Tanzania.

WTO members in December 2013 adopted the Agreement on Trade Facilitation during the Ninth Ministerial Conference in Bali, Indonesia after 10 years of negotiations. The Bali deal aims at boosting poor countries’ ability to trade and allow them more flexibility in food security. The agreed text is currently under review by legal experts and will come into force once two thirds of the 159-member World Trade Organisation accept it.

Trade and Industry minister, Francois Kanimba, told The New Times that implementation of the agreement cannot be done immediately because WTO is yet to give member countries the requisite legal implementation modalities.

“By July, we’ll have got it, so that the process can start,” Kanimba said. He added that Rwanda, after a recent self-assessment on how it stands on the implementation road map, realised most requirements had been attained.

Steps made in facilitating cross-border trade such as the ongoing EAC one-stop border posts, and the 2012 launch of the electronic single window system, were some of the steps taken by Rwanda.

Benefits

“Everything, by nature of trade facilitation is always good. The trade balance for Rwanda is negative and if the Bali agreement helps us improve, it will help us address our development challenges,” the minister said.

“Rwandan traders will also benefit as trade facilitation is about easing things for them. For example, improvements in communication will ease access to vital information they need in different member countries and this will enable many to conduct trade more efficiently.”

With the agreement, WTO members established a new legal framework that fills gaps in the existing General Agreement on Tariffs and Trade (GATT), in effect since in 1947. The new agreement stipulates obligations and provisions on special and differential treatment for developing and least developed country members as well as the provision of technical assistance and capacity building. Obligations include publication and access to trade related information, appeal procedures, simplification of trade procedures and goods clearance processes, agency cooperation, as well as cross-border customs cooperation.

Calling for the “swift” implementation the WTO Bali Agreement on Trade Facilitation, Mosaha said: “This will go a long way in lowering transaction costs, enhancing competitiveness of the businesses as well increasing intra EAC trade”.

Mosha said that while some progress had been made in ensuring free movement of goods, persons, labour, services and capital, challenges continued to constrain full realisation benefits from integration. Among them he cited 33 non-tariff barriers, non-recognition of the certificate of rules of origin, additional taxes and charges and lack of harmony in domestic tax regime such as excise duty, VAT and income taxes. Source: The New Times.

PAUL-KAGAME-WINDOW-SYSTEMPresident Paul Kagame yesterday launched Kenya National Electronic Single Window System seen as a major boost for regional trade since it will simplify clearance processes of goods.

The launch was part of the activities of the 5th Northern Corridor Integration Projects Summit held in Nairobi, and was attended by Presidents Kagame, Uhuru Kenyatta of Kenya and Yoweri Kaguta of Uganda, as well as the second vice president of Burundi and Tanzania’s prime minister.

Rwanda, Uganda and Kenya – which heavily rely on the Kenyan port of Mombasa – are spearheading a series of joint projects aimed at fast tracking regional development through joint infrastructure, trade and political and economic integration.

The use of Electronic Single Window System is expected to centralise trade services such as tracking of goods, custom clearance, and electronic payment including through mobile money.

The system will also integrate with Kenya Revenue Authority, making the clearance at Kenyan ports a lot faster and easier.

“I just want to reiterate how this is one of many important projects that the East African Community partner states have undertaken to deepen integration that we have been seeking, make business more efficient, and lower the cost of doing business as we move forward,” Kagame said at the launch.

Making tech tick

He reiterated Rwanda’s “continued active participation towards making integration a reality.” President Kenyatta and his deputy William Ruto described the Single Window System as yet another building bloc in the EAC integration process.

“Our ultimate vision should be to implement an EAC Regional Single Window platform. The benefits from this initiative may not be fully realised unless all of us in the region adopt National Single Window Systems.

“Our brothers in Rwanda are already implementing a Single Window System and similar efforts are underway in Tanzania and Uganda,” Kenyatta said.

The Kenyan leader said the technology will make it possible for traders to submit information about their goods to multiple government agencies in multiple locations, making business faster and more efficient.

After the launch of the Kenya National Electronic Single Window System, also known as Kenya TradeNet, the Heads of State and Government discussed the progress of several other projects under the Northern Corridor initiative. Source: AllAfrica.com

Dr Richard Sezibera meets His Highness the Agha Khan at the EAC Headquarters in Arusha. (Sunday Times Rwanda)

Dr Richard Sezibera meets His Highness the Agha Khan at the EAC Headquarters in Arusha. (Sunday Times Rwanda)

Overlapping membership in several trade areas is impeding “free circulation of goods” within the East African Community-members states, a regional integration and trade expert has said.

Alfred Ombudo K’Ombudo, the Coordinator of the EAC Common Market Scorecard team, has told The News Times that belonging to other trade blocs outside the EAC makes members reluctant to remove internal borders to allow goods to move more freely.

According to K’Ombudo, a Common External Tariff (CET) is critical to ensure free circulation of goods through the application of equal customs duties. The EAC Customs Union protocol has a three-band structure of 0 per cent duty on raw materials, 10 per cent on intermediate goods and 25 per cent on for finished goods.

However, of the five partner states, Tanzania is a member of the SADC and subscribes to a different structure while Burundi, Kenya, Rwanda, and Uganda, are members of the Common Market for Eastern and Southern Africa (Comesa). On the other hand, Burundi belongs to the Economic Community of Central African States (ECCAS).

This, according to the expert is “perforation of the bloc’s CET,” drilling a hole in the regions tariff structure as member- states trade with other countries below the agreed tariffs.

“This makes EAC countries less willing to remove internal borders because they are not sure whether goods may have come from other blocs. This is a serious structural problem that is difficult to solve because the customs union legally recognises other blocs that members belong to,” K’Ombudo noted.

Burundi, Kenya, Rwanda and Uganda’s participation in Comesa and Tanzania’s membership to SADC is recognised by the EAC, but no exception is granted to Burundi for participating in the ECCAS.

Article 37 of the bloc’s Customs Union Protocol recognises other free trade obligations of partner states but it requires them to formulate a mechanism to guide relationships between the protocol and other free trade arrangements.

EAC Secretary General, Richard Sezibera, told The New Times during the launch of the Scorecard in Arusha, that there have been efforts to address the issue of overlapping membership.

“They [EAC leaders] have done two things to [try] addressing it: One is to harmonize the CET of the EAC and that of COMESA. This makes it easier for COMESA states to reduce the level of perforation,” he explained.

He added that in 2008, the heads of state decided to negotiate a free trade area between the EAC, COMESA and SADC as another way of fixing the problem.

Dr Catherine Masinde, the Head of Investment Climate, East and southern Africa at the International Finance Corporation (IFC), said: “If we were not to perforate the EAC would end up with a bigger volume of trade figures”.

She noted that since the launch of the EAC Customs Union, in 2005, the region has witnessed strong growth in intra-regional trade, rising from $1.6 billion to $3.8 billion between 2006 and 2010. Intra-EAC trade to total EAC trade grew from 7.5 per cent in 2005 to 11.5 per cent in 2011.

“This is significant growth but, I am told that this is, in fact, a drop in the ocean. That it is far from the potential of the market. I was given a figure, that $22.7 billion [in inter-regional trade] was actually lost to other regional blocs, from this region, [between 2005 and 2012] because of non-compliance with the common market protocol.” The Scorecard, Masinde hopes, will solve various EAC compliance issues as well as energize reforms to spur the bloc’s development. Source: The Sunday Times (Rwanda)

Presidents Uhuru Kenyatta (Kenya), Paul Kagame (Rwanda) and Yoweri Museveni after the trilateral talks in Entebbe, Uganda. President Jakaya Kikwete of Tanzania and Pierre Nkurunziza of Burundi stayed out of the loop of the third infrastructure summit in Kigali, Rwanda on Monday. [Photo/PPS]

Presidents Uhuru Kenyatta (Kenya), Paul Kagame (Rwanda) and Yoweri Museveni after the trilateral talks in Entebbe, Uganda. President Jakaya Kikwete of Tanzania and Pierre Nkurunziza of Burundi stayed out of the loop of the third infrastructure summit in Kigali, Rwanda on Monday. [Photo/PPS]

Kenya, Uganda and Rwanda have postponed the single customs territory (SCT) roll-out, giving Burundi and Tanzania more time to prepare for the shift.

East Africa Community (EAC) secretariat custom officer Ally Alexander told the committee on Communication, Trade and Investment in Mombasa that the implementation of the model would begin in June.

“We are looking at reducing the costs and number of days to clear the cargo from Mombasa to Kampala to take three days instead of the previous 18 days,” Mr Alexander said.

The SCT was initially planned to begin in January with the three countries moving their revenue staff to common entry and exit points to begin goods clearance. But Tanzania and Burundi protested their exclusion in the arrangement after Kenya announced in January that it was ready to start accommodating revenue officials from the two landlocked states in Mombasa, prompting the three States to go slow on their plans.

On Monday, Mr Alexander told East African Legislative Assembly that SCT would reduce the cost of doing business and bring efficiency in trade. He said for exports within the region, a single regional bond for cargo would be issued to cater for goods from the port of Mombasa to different destinations.

An electronic cargo tracking system would also be used to avoid diversion of goods into the transit market. Under the model, goods will be checked by a single agency on compliance to regional standards and instruments.

“We want to avoid agencies replicating checking on standards, when it is done once this will not be repeated,” he said.

Mr Alexander said goods would be released upon confirmation that taxes have been paid and customs procedures fulfilled.

However goods heading to the Democratic Republic of Congo which is not a member of EAC will be cleared on a transit basis.

The establishment of SCT has raised concerns among stakeholders, key among them the registration of clearing agents and job losses. Kenya Revenue Authority deputy commissioner customs Nicholas Kinoti said the concerns would be addressed through legislations. Source: http://www.businessdailyafrica.com

WCO ESA_Snapseed

Participants from all 24 members of the WCO’s Eastern and South African region attended the forum. [SARS]

Customs officials from 24 eastern and southern African countries met in Pretoria this week to share knowledge and experience with regard to the successful modernisation of Customs administrations.

Opening the three-day forum, Erich Kieck, the World Customs Organisation’s Director for Capacity Building hailed it as a record breaking event.

“This is the first forum where all 24 members of the Eastern and Southern African region (ESA) of the WCO were all in attendance,” he noted. Also attending were officials from the WCO, SACU, the African Development Bank, Finland, the East African Community and the UK’s Department for International Development (DFID).

Michael Keen in the 2003 publication “Changing Customs: Challenges and Strategies for the Reform of Customs Administrations” said – “the point of modernisation is to reduce impediments to trade – manifested in the costs of both administration incurred by government and compliance incurred by business – to the minimum consistent with the policy objectives that the customs administration is called on to implement, ensuring that the rules of the trade game are enforced with minimum further disruption”

The three-day event witnessed several case studies on Customs modernisation in the region, interspersed with robust discussion amongst members. The conference also received a keynote addressed by Mr. Xavier Carim, SA Representative to World Trade Organisation (WTO), which provided first hand insight to delegates on recent events at Bali and more specifically the WTO’s Agreement on Trade Facilitation.

The WCO’s Capacity Building Directorate will be publishing a compendium of case studies on Customs Modernisation in the ESA region during the course of 2014.

WCO ESA members – Angola, Botswana, Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Rwanda, Seychelles, Somalia, South Sudan, Swaziland, South Africa, Tanzania, Uganda, Zambia and Zimbabwe.

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Source: SARS

SEZ and Regional Integration in AfricaOne of the most prominent features of the global trading landscape in recent years has been the worldwide proliferation of bilateral and regional trade agreements. Africa is no exception to this pattern. Another prominent development in Africa over the last couple of decades has been the increasing use by many countries in the region of various types of special economic zones (SEZ). These zones are more and more being viewed in the region as important mechanisms for attracting foreign investment, creating jobs, boosting manufacturing production and manufactured exports and contributing to much-needed industrial and economic development.

This paper – Click here for access – does not seek to provide an evaluation of the performance of the various special economic zone programmes established in Africa in recent years, but instead seeks to explore the various issues, challenges and opportunities that arise when countries – and especially developing countries – use special economic zones while simultaneously pursuing regional integration initiatives. This is a particularly important subject in the context of the COMESA-EAC-SADC T-FTA as a large number of the countries involved are actively using special economic zones or are currently in the process of establishing zone programmes. Source: Tralac

Doing Business EAC 2013Improving customs efficiency can boost trade volumes and reduce the cost of doing business in the region, the Doing Business in the East Africa Community 2013 survey (Click hyperlink to view the report) has indicated.

The study conducted by World Bank (WB) and the International Finance Corporation showed that a one day reduction in inland travel times could lead to a 7 per cent increase in exports. The report also noted that easing access to finance, improving infrastructure and empowering the private sector are key in the region’s integration process.

“Transport efficiency and a favourable business environment have a greater marginal effect on exports as they boss access to foreign markets, especially in low income economies,” it indicated. “Improving logistical performance and facilitating trade may have a larger effect on regional trade, especially on exports, than tariff reduction.”

Also, economies with efficient business registration, fair tax policies and efficient transport have a higher entry rate of new firms and greater business density, meaning that they are essential to ensure strong firm productivity and macro-economic performance.

According to the report, lowering costs for business registration improves formal job opportunities as more new firms hire skilled workers. “This strengthens other sectors, including the education sector and legal systems,” said Chantal Umuraza, the director of Chamber of Industries. “Economies that rank high on the ease of doing business tend to combine efficient regulatory processes with strong legal institutions that protect property and investor rights,” she added.

According to the report, financial market infrastructure, including courts, creditor and insolvency laws, as well as credit and collateral registries, improves access to credit and boosts trade. It also noted that entrepreneurs in EAC face weak legal institutions and complex regulatory processes compared with global averages and those of the developed economies.

Despite instituting some reforms, the survey found that East African Community businesses still faced huge obstacles, while economies in other regions had improved business regulations. “As a result, EAC member states’ rating in this area has stagnated at around 117 over the past four years,” the report showed. According to the report, it requires only eight procedures and 20 days on average to start a business in the East African region.

EAC economies accounted for two of the 11 regulatory reforms implemented in sub-Saharan Africa to make it easier for entrepreneurs to start businesses, the survey said. Rwanda still has the most efficient process in the EAC to start a business and 8th globally out of 185 countries surveyed. It is followed by Burundi at 28th position, Tanzania at 113, Kenya at 126 and Uganda trails at 144.

In general, 3 of 5 EAC economies rank well below the regional average in all areas measured by the survey. Burundi eliminated four requirements to have company documents notarised, to register the new company with the commercial court and the department of taxation. As a result, it moved up 80 places in the global ranking on the ease of starting a business, from 108 to 28.

On the whole, the report indicated, the region’ fares better than other regional trading blocs on the continent on the ease of starting a business. It was ranked 84th, way above 104th position for the Southern African Development Community (SADC). The Common Market for Eastern and Southern Africa (Comesa) is at 110th position while the Economic Community of West African States (Ecowas) ranks 127th. Source: AllAfrica.com

East%20Africa%20mapIn the spirit of stronger East African integration, the revenue authorities of Kenya, Uganda and Rwanda have started preparations for the implementation of a Single Customs Territory. The Commissioners’ General of the three East African countries deliberated on the mechanisms to operationalize the decisions of the heads of state who have continuously called for its fast tracking.

On June 25, 2013 at the Entebbe State House in Uganda, a Tripartite Summit involving the three heads of state issued a joint communiqué directing among other things the collection of customs duties by Uganda and Rwanda before goods are released from Mombasa. The leaders also agreed that traders with goods destined for warehousing should continue executing the general bond security.

During the meeting, the Commissioners’ General of the three countries put in place joint technical committees on ICT, Business Process, enforcement, change management, legal and human resource to discuss the implementation road map.

In a statement signed by the three Commissioners’ General, they said that the development of a Single Customs Territory will positively impact on the trading activities of the three countries as it will ensure that assessment and collection of taxes is done at the country of destination before cargo moves out of the port.

“As a result, the East African Community Customs Union will join the ranks of other Customs Union such as South African Customs Union and the European Union among others. Under this arrangement, restrictive regulations are eliminated as the corridor is now considered for customs purposes. For clarity, circulation of goods will happen with no or minimal border controls,” reads the statement in part.

Kenya said it would cut red tape holding up millions of dollars of imports into its landlocked neighbours Rwanda and Uganda, by letting the countries collect customs on goods as they arrive in its port at Mombasa. Goods can currently face long delays as agents process the paperwork to release cargoes from warehouses at east Africa’s biggest port, and later make separate arrangements to pay import duties at Kenya’s borders with Uganda and Rwanda.

Officials said the new system, due to be introduced in August, would clear inefficiencies and blockages seen as a major barrier to trade in the region. But clearing agents in Kenya said it could also cost thousands of jobs in warehouses, freight firms and almost 700 clearing and forwarding companies operating in the country.

Kenya, Uganda and Rwanda, together with Burundi and Tanzania, are members of the regional East African Community trade bloc, with a joint gross domestic product of $85 billion.

Kenyan tax officials said the new system would allow a “seamless flow of goods” and make it easier to stop goods getting through the system without customs payments. “Once cleared at the port, there will be no stoppages at borders and checkpoints along the corridor,” the Kenya Revenue Authority’s commissioner of customs, Beatrice Memo, told a news conference.

Under the system, Rwandan and Ugandan clearing agents and customs officials would be able to set up their own offices to clear cargo and collect taxes directly at the port. The Kenya International Freight and Warehousing Association said that meant up to half a million jobs could be lost to Uganda and Rwanda. “The Government has not consulted us … and we totally reject it,” said  Association chairman Boaz Makomere. Sources: East African Business Week (Kenya) & The New Vision (Uganda).

The following article is a lesson for all aspiring enterpeneurs on the African continent.

I got curious about the small, mostly unnoticed item in Kigali, what we like to call ‘cure-dent’, the tooth pick. This is how I stumbled onto the fact that we import toothpicks. Yes we import toothpicks from China. Toothpicks here are a symbol for all the things we could make ourselves but import.

toothpicksIt got me wondering – just how complicated is it to make a toothpick? Firstly, toothpicks are made from bamboo and we have plenty of that in Musanze. In any case bamboo can be cultivated. It grows fast and there are new genetically modified reach heights of over 15 metres. A little time on Google showed me that it does not take very much to make them. Indeed the whole process can be done in a woodwork workshop. The process from splitting the bamboo to sharpening the toothpicks takes less than half an hour. That is about 100 packets of toothpicks.

The reason we give for imported stuff is supposedly because we do not have the technology required to make it. This is clearly not true in this case, and, I bet, in the case of a lot of other imports.

Toothpicks are very cheap. They go for between Rwf100 and Rwf500 for each small packet. This is after all the manufacture, freight, taxes and, of course, the shopkeeper’s profits have been considered. Maybe this is why we consider it not to be a profitable venture. Would making toothpicks be profitable? The answer is yes. Let us consider two reasons.

One – the Chinese are not known for time wasting. If they would engage in this enterprise to this extent, they must be something in it. Two – consider being able to make 100 packs of toothpicks in half an hour.

That makes 200 per hour and 1600 per eight hour day (you are by no means tied to this. If you sell them at Rwf50 per pack, you will be grossing Rwf80,000 per day. Now that is profit!

Where is the market? Are we not in the East African Community? We have to start exporting beyond the agricultural produce. Why is urwagwa and akabanga not on the shelves of Kenyan, Ugandan, Tanzanian and Burundian shops?

Why are we always importing? If we are importing toothpicks what do we not import? Unfair Balance of Trade and its accompanying Balance of Payments in addition to aid dependency are the main propagators of poverty in our country. They give us aid… .we use it to buy their products, down to toothpicks!

If we are to make it to self-sufficiency we have to manufacture and export. The journey to self-sufficiency must precede self-reliance. As Bob Marley would say, “We gotta be conscious”.

Article by Sam Kebongo writing for the Rwanda New Times.

The following article featured in The New Times (Rwanda) provides a snap shot of developments towards a future “Customs Union” in East Africa. While valid concerns are being expressed by traders, how close are the respective Customs administrations in terms of common standards (tariff, regimes, etc), and the application of common external border procedures? The rest of Africa should follow this process closely. Unlike the EU, where it is incumbent of prospective Customs Union members to first attain and implement minimum customs standards prior to accession, here you have a pot-pourri of member states who apply national measures aspiring to an ultimate regional standard. Who determines this standard? Who is going to maintain ‘watch’ over the common implementation of such standards? Forgive the long article – this is a very significant development for the African continent.

0c8d8_logo_of_east_african_community_eac_-63ae9With the East Africa Community integration process gaining pace rapidly, clearing and forwarding agents have been advised to set up shop at entry ports under the proposed single customs territory.

Angelo Musinguzi, the KPMG tax manager, who is representing traders on the team of experts negotiating the establishment of the single customs territory, challenged the agents to look at the opportunities that the policy brings instead of focusing on how it will harm their businesses. “You need to look at this as an opportunity for business expansion because this policy will remove trade tariff barriers, duplication of time-consuming and costly processes and corruption. This will improve efficiency and reduce the cost of doing business,” he said.

The advice follows a deal reached by Uganda, Kenya and Rwanda where top customs officials from landlocked Rwanda and Uganda will be stationed at Mombasa port to ensure quick clearing of goods and curb dumping of cheap products in the region. Under the deal, Kenya will create space for its partners to set up customs clearing units.

Rwanda was given the task of establishing the single customs territory at the recently-concluded meeting between Presidents Paul Kagame of Rwanda, Uhuru Kenyatta of Kenya and Uganda’s Yoweri Museveni held in Entebbe, Uganda. However, local clearing and forwarding agents as well as traders are skeptical about the deal and want the process delayed until Rwandan businesses are supported to become more competitive.

“There are issues we still have to examine critically before the policy is implemented. For example, who will collect revenue and how will it be collected? How will Rwanda share the revenue? Will we have a common legal framework? Will we share Kenya’s or Tanzania’s infrastructure?

Fred Seka, the Association of Freight Forwarders and Clearing Agents of Rwanda president, noted that the move could affect them negatively if it is not studied carefully. “We have already raised the matter with the Minister of Trade. Besides hurting small firms, the country will lose jobs when companies relocate to Mombasa or Dar es Salaam. That is a big concern for us,” Seka said.

He noted that some of the partner states have many trade laws that might affect their operations. “It would be better if a locally-licensed company is not subjected to any other conditions once it relocates to Mombasa,” Seka noted.

Mark Priestley, the TradeMark East Africa country director, said the research firm and other players were currently conducting studies on how the single customs territory can operate without harming any player. “The intention is not only to ensure that we get rid of barriers which have been hampering trade, but also reduce the cost of doing business within the region,” he said. He added, however, that it was too early for traders to be scared of the consequences of operating under the single customs territory.

Last year the Permanent Secretary in the EAC Ministry, stated that the model which will involve shifting customs operations from Rwanda to the ports of Mombasa, and Dar es Salaam, will lead to unemployment, revenue loss and adverse multiplier effects. According to the model, certificates of origin of goods would be scrapped, which, according to Kayonga, would lead to the suffocation of local industries as well as making the region a dumping ground for unnecessary products.

Scovia Mutabingwa, the Aim Logistics East Africa managing director, said there was need for more consultations on the operation of the single customs territory “to understand how it will work”. “We need to know where our bargaining power is in the region?” Mutabingwa said. She noted that there was a need to first harmonise other trade policies if the single customs territory is to benefit all businesses in the region. She pointed out that she had applied for a clearing and forwarding licence in Tanzania over one and half years ago, but she was yet to get it. “How shall we work in such countries?” she wondered.

Another clearing firm, urged those negotiating the deal to ensure uniformity in tax policies across the region. “In Rwanda, there is 100 per cent tax compliancy, but we know this is not the same in other countries. How will we compete favourably if such issues are not addressed?” she wondered.

While one needs at least $300,000 to open a business in Kenya or they have to give a stake in their company to a resident, non-Kenyan companies also pay higher taxes at 35 per cent corporate tax compared to 30 per cent for locals.

Tanzania still has over 63 trade laws, and to operate a clearing firm there you need to be a Tanzanian, according to Musinguzi.

The East African Community (EAC) Customs Union Protocol came into effect in July 2009 after it was ratified by Kenya, Tanzania and Uganda in 2004 and later by Rwanda and Burundi in 2008. The creation of the EAC customs union was the first stage of the four step EAC regional integration process.

When fully implemented, the customs union will consolidate the East Africa Community into a single trading bloc with uniform policies, resulting in a larger economy. By working together to actualise the customs union, partner states will deepen EAC co-operation, allowing their citizens to reap the benefits of accelerated economic growth and social development.

However, the customs union is not yet fully implemented because there is a significant level of exclusions to the common external tariff and tariff-free movement of goods and services.