Most of us know by now that doing business in Africa is not about engaging in one single emerging market- but rather about making the right decisions on a huge continent that consists of 54 countries with very distinct characteristics. Indeed, this is one of the major factors why doing business in Africa is so much more challenging than doing business in any of the BRICS countries, namely the emerging economies of Brazil, Russia, India, China, and South Africa (by the way, the addition of Argentina to the BRICS is going to be discussed this month, in July 2014).
You have multiple markets in Africa, and in order to make smart and informed decisions when starting and growing your business, it is important that you are aware of the various market dynamics within Africa – and the growing trends!
But much less known and discussed are the various Regional Economic Communities (REC) that Africa has. These are economic communities made of several African member states that seek to boost regional growth, cross-border trade, and cooperation; some of them are fast growing in relevance.
As you can see on the image below, there are 8 major African RECs, but it is the East African Community (EAC) the smallest of them all that lately makes the biggest progress and is fast gaining popularity among investors.
So, be informed, and don’t lack behind! Here are 8 Great Benefits You Should Know About Doing Business In The East African Community (EAC):
Mo Ibrahim Report 2014
BENEFIT 1
Get Access to a Vibrant African Market of around 140 Million People (Wow, how many potential buyers you could find in there!)
The East African Community (EAC) is the regional intergovernmental organization of Kenya, Rwanda, Tanzania, Uganda, and Burundi with its headquarters in Arusha, Tanzania. The EAC is strongly working towards a united, coherent market place, which will enable you to do business in a single market with around 140 Mio people!
There were even serious talks among the foreign ministers of several states in October 2013 to merge the EAC with the IGAD region (yep, another African REC), which would see other countries like Ethiopia, Sudan, and South Sudan being included. So watch this space!
BENEFIT 2
EAC Cross-Border Payments Made Easier (click, click – done)
At the end of last year, Kenya, Tanzania and Uganda linked their Real Time Gross Settlement systems, which means that a major barrier to the flow of capital has been dealt with. This is a development that will be very beneficial to business people in the region, here is what it means: If you trade in the region through your local accounts you now do not need third parties for currency exchange. So when you are in Uganda or Tanzania for example, you don’t have to use a third party such as a Forex bureau or a commercial bank to first buy Kenyan currency or US dollars in order to pay a invoice in Kenya. You can make a direct money transfer across borders and then the banks will simply effect the transaction through the East African Payments System (EAPS) for you.
BENEFIT 3
EAC Working towards Strengthening a Single Customs Territory (Don’t forget to wave back to the border customs staff when they wave you through !)
Cargo that has to be moved between the ports of Mombasa (Kenya) or Dar es Salaam (Tanzania) and other neighboring member states is a major headache to anyone trading in the region. Trucks driving between Kigali (Rwanda) and Mombasa have to pass 47 road blocks! But things are visibly improving: Tanzania has outshined her East African Community partners in launching and executing electronic cargo systems around the region to significantly reduce the number of weighbridges and roadblocks with the entry of the Single Customs Territory and by doing so speed up exports and imports through the Indian Ocean.
According to the Deputy EAC Minister, the weighbridges along main corridors in the country will be upgraded to be able to measure vehicles without the latter having to stop thus reducing time taken on transit. Burundi, Rwanda, Uganda and Kenya are working on expanding the system. It would also mean that imported goods headed to neighboring countries can now be cleared at border points instead of having to queue at the harbor for the process.
BENEFIT 4
Single Visa Issuing (Those planning a Kenyan beach holiday can now throw in gorilla watching in Rwanda…..Business? Hey, you only live once. Do it!)
Kenya, Rwanda and Uganda now have a single joint visa in a bid to boost tourism revenues and other business links. The tourist cross-border visa between Kenya, Rwanda and Uganda was launched on January 1, 2014 and costs currently USD $100. This will save you $30 if you visit the three countries, but above all it will save travelers and some businesses time and hassle. Tanzania did not (yet) join.
BENEFIT 5
EAC Top Destination for Private Equity Investors (Psssst…….They know why, now, you follow them)
Private equity investors seem to be closely following these developments and recent reports confirm that East Africa has become their favorite investment destination.
These are excellent news if you are doing business and hoping to catch the interest of investors. Being in East Africa will increase your chances that you are being spotted. But apart from that: You are following a popular trend starting your business in East Africa, too.
BENEFIT 6
EAC Provides Great Potential for Business Growth and Mitigated Risk (Well, you still need to get personal insurance cover for elephants enjoying your crop produce)
One reason why equity firms are flooding into the East African Community market place is the potential to diversify their operations within this common market and mitigate risk. Operating in the East African community allows you at the one hand to quickly grow your operations from one country into the next, but should one country be hit by unforeseen circumstances such as conflict, terrorism, or natural disaster it also means that you can mitigate the risk by operating in the other member states without changing an entire market.
BENEFIT 7
Get Access to the New East Africa Exchange (EAX) (Forget about getting your name into the local business directory…..go for a listing on the EAX)
There is more good news, East African states progressed even further a few days ago with the official launch of the East Africa Exchange (EAX) in Kigali, Rwanda.
This is a transparent electronic trading platform that will facilitate a regional commodity exchange for the first time. The regional commodity exchange will connect buyers and sellers throughout East Africa and create easier access to intra-African and global markets. Through the new project, farmers and traders are able to connect on price transparency in real time.
The five partner states include Kenya, Uganda, Rwanda, Burundi and South Sudan, while Ethiopia and Tanzania currently act as observers.
BENEFIT 8
Great Outlook for More Barriers to Fall ( Yeah !)
Yes, much more is in discussion in the East African Community….including the establishment of a cheap regional airlines offering more affordable flight deals and some are calling for cheaper regional telephone rates. I am curious to see how this all develops.
The region is steadily becoming an attractive investment option for both domestic and foreign business people. The key is getting rid of the red tape and harmonizing cross-border interaction, and in this sense the East African Community is the only regional economic community in Africa that seems to be marching ahead at fast speed. There, the free movement of goods, services, capital and people across borders is becoming a reality – a vision that the African Union wants to achieve for the entire continent. The plan is to build a continental free trade area in Africa by 2028.
Let us know in the comment section below, what you think about doing business in the East African Community or what your experiences have been trading across borders.
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On payments, one can buy and send money using bitcoins (bitpesa.co and bitsoko) are some of the providers of this service. This also allowed locals to engage in freelance work online – something that has not happened before – to get paid in bitcoins which gets instantly converted in the local currency by bitpesa & bitsoko. One can now run a business in east africa and pay wages for work done without being in the country!