Greater than a Sum of its Parts
TBY talks to Libérat Mfumukeko, Secretary-General of the East African Community (EAC), on Tanzania's importance to the EAC, the major achievements of regional integration, and obstacles ahead of a monetary union.
What are the mutual benefits of Tanzania's membership in the EAC?
The United Republic of Tanzania is one of the founding partner states of the EAC. Tanzania is also the home to a number of pioneer African nationalists and Pan-Africanists, foremost among whom is the late Mwalimu Julius Nyerere. Pan-Africanism is important in this context, because the EAC and other regional economic communities in Africa are all part of the African Union's overarching plan to form an African economic community by the year 2063. Tanzania, the second-largest economy in the region, has also played a crucial role in promoting political liberation and stability not just in East Africa but Africa as a whole. The EAC is, therefore, richer with Tanzania as a partner state.
What has been the impact, in real terms, thus far of the EAC's economic integration process, gaining momentum now for well over a decade?
In April 2016, the community attained international recognition as the fastest-growing regional economic community in Africa. This acclaim is a result of the major achievements in terms of the integration that the EAC has attained in the recent past. For example, the EAC is now implementing a single customs territory, which means goods are cleared only once at the entry point. This has resulted in the drastic reduction of the period taken to clear goods from over 20 days to three to four days on the central corridor; from 21 days to four days between Mombasa and Kampala; and from 18 days to six days to Kigali on the northern corridor. Also, of the 15 borders earmarked to operate as one-stop border posts, 11 have now been completed. Similarly, we are now in a common market, with free movement of people, goods, and capital. Laws have already been enacted in our partner states to ensure that citizens enjoy these freedoms, moving and trading freely.
What obstacles do you foresee along the way to achieving a monetary union between EAC member states?
A high degree of economic convergence is important for individual countries planning to form a monetary union. This aspect is also important for the stability of the monetary union once formed. The loss of national monetary and exchange rate policies by individual partner states after the formation of a monetary union, and the likely constraints on national fiscal policy in the single currency area underline the importance of starting from a position in which such a loss of national discretion in macroeconomic policy can easily be borne and will not outweigh the benefit of introducing a single currency. The major challenge on the road to a monetary union is the fact that the economies of the EAC partner states are too divergent to guarantee a stable monetary union. The macroeconomic numbers for countries like South Sudan and Burundi, for example, are extremely different compared to that of Kenya. In order to promote economic convergence, EAC partner states have agreed on a set of four primary convergence criteria that must be attained and maintained for at least three years before joining the monetary union: a ceiling on headline inflation of 8%, reserve cover of 4.5 months of import, ceiling on the overall deficit of 3% of GDP, including grants, and a ceiling on gross public debt of 50% of GDP in net present value terms. Another challenge is the slow progress that is being made in establishing the key institutions to support the monetary union. For example, according to the East African Monetary Union (EAMU) roadmap, the East African Monetary Institute was supposed to be established by December 2015. However, this was not possible, partly due to the lengthy process of decision making of the community as stipulated in the EAC Treaty and also because some sectoral councils do not meet as frequently as required. The secretariat is doing its best to ensure adherence to the calendar of meetings.
Source: https://www.thebusinessyear.com/tanzania-2018/greater-than-the-sum-of-its-parts/guest-speaker