Economic Development and Regional Integration in the East African Community  

ByGrantEysterPolicy Analysis 

Indiana University Spring 2014 

  

  

AbstractAlthoughindustrializedeconomieshavestruggledtoachieveeconomicgrowthinthewakeoftheglobalfinancialcrisisof2007‐08,developingnationshaveinmanycasesachievedhighgrowthrates.InAfrica,thepotentialforgrowthisenormous.Despitehistoricalpoliticalconflictandwidespreadgovernmentmismanagementstandinginthewayofpovertyreductionandeconomicdevelopment,growthrateshavebeenconsistentlyhighinmanyareasanddramaticchangesaretakingplaceacrossthecontinent.InEastAfrica,fivenationshavedecidedtoseekdeepeconomicandpoliticalintegration,inthehopesofcombiningstrengthsandoperatingasaformidableeconomicunitintheglobaleconomy.Kenya,Tanzania,Rwanda,Uganda,andBurundicomprisethemoderniterationoftheEastAfricanCommunity,formedin2000.Widespreadeffortshavebeenmadesincethatyeartoaccomplishexpansiveintegrationplans,althoughprogresshasbeenpainfullyslowinsomeareas.Evenso,theEastAfricanCommunity,asawhole,iscapableofbecomingoneofAfrica’sleadingeconomicpowersifintegrationissuccessfulandhandledproperly.Thefocusofthisstudyhasbeentoevaluatethemoderneconomicsituationofthisregion,andtheimplicationsofitsplansforeconomiccooperationandpoliticalunity.Additionally,asabenchmarkfortheeconomicdevelopmentoftheEastAfricanCommunity,theeconomyofSouthAfricahasbeenanalyzedandcomparedwiththatoftheEACinordertogainabetterunderstandingofwaysinwhichtheregioncanmatchthesuccessesofAfrica’sleadingeconomy.Finally,riskstothesuccessofintegrationandtheoveralldevelopmentoftheEastAfricanCommunitywereexamined,leadingtorecommendationsregardingproperstepsforEACleadershiptoundertake.Inparticular,pressingeconomicandsocietalneedsmustbefirstaddressed,andthestepsofintegrationmustnotberushedorimplementedwithoutwidespreadsupportandgreatcare.

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Historical,Economic,andSocialBackground

EastAfricahasexperiencedanextensiveandcomplexhistory,influencedbyvarious

groupsoflocalsaswellasglobalpowersfromaroundtheworld.Europeancontactwiththe

areacamein1498,whenPortugueseexplorerVascodaGamanavigatedaroundtheCapeof

GoodHopeandmadecontactatMombasa,inmoderndayKenya.DaGamacontinuedonto

India,discoveringanewmaritimetraderouteconnectingtheFarEasttoEurope,providinga

newalternativetothetraditionalspiceroutesacrossspanningacrossAsiatothe

Mediterranean.RealizingtheimportanceofthediscoveryofthesearoutetoAsia,Portugal

quicklymovedtosolidifyinfluenceandauthorityintheregion.Inanattempttoachievethis

aim,thePortugueseconstructedFortJesusinMombasain1593.Thisfortwouldbewonand

lostmultipletimesinsucceedingcenturies,astheBritish,Dutch,andOmaniArabsall

challengedPortuguesepowerinthearea.1ItwastheOmaniArabs,undertheleadershipofSaif

binSultan,whoeventuallyprevailedingainingpowerintheareaaroundMombasaandthe

islandofZanzibar;FortJesusfelltoOmaniforcesin1698.2

TheOmaniArabsdrovethePortuguesefromtheEastAfricancoastlineinthefollowing

decades,allowingforArabdominanceintheIndianOceantrade.AllofthemajorEastAfrican

portscontinuedtobeinOmanihandsuntilBritishandotherEuropeannationsbegantoseek

influenceintheregion.

EastAfrica,alongwithmuchoftherestofthecontinent,becamethetargetofEuropean

imperialisminthelatterhalfofthe19thCentury.InwhatcametobeknownastheScramblefor

Africa,Europeanpowerssoughttocolonizeandpartitiontheentiretyofthecontinent.Portugal

                                                        1PortugueseauthorityinEastAfricawasgenerallylimitedtocoastalregions2 Jan Knappert, “A Short History of Zanzibar,” Annales Aequatoria 13 (1992): 15‐37

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hadbeenthefirstnationtoestablishastrongpresenceinEastAfricainthe15thCentury,while

theBritishlaterclaimedthearea’smostfertileandproductivelandsbycolonizingthelands

whichtodaymakeupthenationsofUgandaandKenya.Meanwhile,theGermanEmpire

createdastateknownasGermanEastAfrica,madeupbypresent‐dayRwanda,Burundi,and

Tanzania(withtheexceptionoftheZanzibarArchipelago).FollowingGermany’sdefeatin

WorldWarI,however,GermanEastAfricawasdismantledandtheTreatyofVersailles

dissolvedthecolony,givingparttoBelgiumasRuanda‐Urundi,asmallsegmenttoPortugal’s

Mozambiquecolony,andtherestofwhattodayisTanzaniatoBritain.3Bythispoint,theBritish

werebyandfarthemostactiveandinfluentialEuropeannationinEastAfrica,controllingthe

entiretyoftheareawhichtodaymakesuptheEastAfricanCommunity,withtheexceptionof

theZanzibarArchipelago,Rwanda,andBurundi.IndependencewasfinallygrantedtotheEast

Africanstatesintheearly1960s,withgovernmentsestablishedinthemodelofEuropean

nationsofthetimeasdemocraticrepublics.

FormationoftheEastAfricanCommunity

ThehistoryofregionalcooperationinEastAfricagoesbacktopre‐colonialtimes,with

localtribesandpoliticalstatesconductingtradeandinteractingincomplexways.Thefirst

majormovestowardscooperationbetweenmodernstatesweremadebeginningin1919,when

theBritishcoloniesofKenya,TanganyikaandUgandaformedacustomsunioninorderto

facilitatetradeandcommerce.4Economiclinkswerefurtherstrengthenedin1948,whenthe

EastAfricanHighCommissionwasfounded,creatingaunifiedincometaxaswellasacustoms

                                                        3 Sally Marks, “Mistakes and Myths: The Allies, Germany, and the Versailles Treaty, 1918‐1921,” Journal of Modern History 85 (September 2003): 632‐659 4 Joseph S. Nye Jr., “East Africa Economic Integration,” The Journal of Modern African Studies 1 (December 1963): 475‐502 

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union.5Aftertheendofthecolonialperiodintheearly1960s,twoparticularorganizations

workedtopromoteregionalintegrationinEastAfrica.TheEastAfricanCommonService

Organization(EACSO)succeededthecolonial‐eraEastAfricanHighCommission.However,for

themajorityofdecision‐makersinthe1960s,EACSOwastoocloselyassociatedwithpre‐

independencepoliticalstructures.Inaddition,attemptstoestablishacentralbankforthe

regionfounderedin1965.Further,planstointroduceacommonmarketprovedtobedifficult

toimplementwiththedisparatestatesoftheEastAfricaneconomies.Yettherewasstillstrong

interestinregionalcooperation,andsoin1967,thefirstEastAfricanCommunitywasfounded.

ThethreememberstatesofKenya,TanzaniaandUgandaagreedtocooperateonawiderange

ofeconomicandsocialissues.ThefirstEAC,andthestepstowardintegrationwhichitachieved,

washailedasuccessatthetime,buttheprojectneverthelesscollapsedin1977.Thefailureof

thefirstEastAfricanCommunitycanbeattributedtofourprimaryfactors:firstly,itslackof

steeringfunctionsandcleardirective;secondly,theunequaldistributionofbenefitstothe

respectivememberstates;thirdly,thepurelyintergovernmentalandsupranationalstructure;

and,fourthly,theirreconcilabledifferencesofopinionbetweenleadingplayers,particularly

betweentheUgandandictatorIdiAminandtheTanzanianPresidentJuliusNyerere.6Bythe

timetheoriginalEastAfricanCommunitywasdisbanded,itwasclearthatthemembernations

hadpoliticalandeconomicphilosophiesthatwereunsustainablydivergent.

IntheyearsthatfollowedthecollapseofthefirstEAC,thethreeformermemberstates

attemptedtoregulateeconomicaffairsbymeansofindividualmultilateralagreements.

                                                        5 Ibid.  6 Agrippah T. Mogumba, “Regional Organizations and African Underdevelopment: The Collapse of the East African Community,” The Journal of Modern African Studies 16 (June 1978): 261‐272 

  5 

Importantstepstowardsestablishingacommunityweretakenin1993and1997attwo

summitsoftheheadsofstate.In1993thePermanentTripartiteCommissionforCooperation

wassetup:acoordinatinginstitutionthatin1998producedadrafttreatyforthelaterEAC.

Cooperationonsecuritymatterswasalsoinitiatedduringthisperiod.InNovember1999,the

TreatyfortheEstablishmentoftheEastAfricanCommunitywassignedbytheUgandan,

Kenyan,andTanzanianheadsofstate.ItenteredintoforceonJuly7,2000,andtwonew

members,RwandaandBurundi,joinedtheCommunityin2007.

TheEastAfricanCommunityisactivelyseekinggreatereconomiccooperationandisin

thecontinualprocessoffurtherintegration,potentiallyevenleadingtoafullpolitical

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federationifintegrativeactivitiesaresuccessful.ThecombinedeconomiesoftheEastAfrican

Communitymemberstateshavesignificantstrengths,andtheregioncouldexperiencevery

largeamountsofgrowthinfuturedecadesifthecorrectmeasuresareundertaken.

ModernEastAfricanCommunityMemberEconomies

AlthoughtheEastAfricanCommunityisstrivingtoactasasingulareconomicunitinthe

future,thehealthofthecurrentEastAfricanCommunityeconomycanonlybeevaluatedby

firstexaminingandunderstandingthecurrentstateofeachoftheeconomiesbelongingtothe

fiveEACmembernations.

Burundi

Burundi’sstatusasalandlocked

countrywithfewnaturalresourceshas

contributedtoitsstandingasoneofthe

poorestandleastdevelopednationsin

theworld,andtheweakesteconomic

memberoftheEastAfricanCommunity.

OtherfactorscontributingtoBurundi’s

weakeconomicstandingincludethe

nation’spoorlegalsystem,lackof

economicfreedom,lowaccesstobasicandadvancededucation,andineffectivehealthcare

systemspairedwiththeproliferationofHIV/AIDS.Allthishasledtoapproximately80%of

Burundi'spopulationlivinginpoverty.7Agricultureisbyfarthedominantindustryofthenation,

                                                        7 The World Bank, “Burundi,” (September 2013) 

  7 

although90%ofthisagricultureisforpurelysubsistencepurposes.Coffeeremainstheprimary

cashcropforexport,though,andotheragriculturalproductsincludecotton,tea,maize,

sorghum,sweetpotatoes,bananas,manioc(tapioca);beef,milk,andhides.Themanufacturing

andindustrialsectorsarevastlyunderdeveloped,andthenationisfurtherheldbackbyalack

ofaccesstofinancialandlegalservicesformostofthepopulation.Burundi’sseverelackof

developmentandendemicpovertyposelong‐termdifficulties,althoughthenationishoping

integrationwithitsneighborswillallowforfurtheraidanddevelopment.8

Kenya

Kenyapossessesthemost

advancedandlargesteconomyinEast

andCentralAfrica,althoughthe

economyremainsinefficientand

mismanagedinmanycircumstances.

Kenyaisstillapoordeveloping

countrywithaHumanDevelopment

Index(HDI)of0.519,puttingthe

countryatposition145outof186–

oneofthelowestintheworld,and

about38%ofKenyansliveinabsolutepoverty.9AprimarystrengthofKenyaisitstemperate

climateandproductivelands,buttheimportantagriculturalsectorisoneoftheleast

developedandremainslargelyinefficient,employing75%oftheworkforcecomparedtoless

                                                        8 Ibid. 9 The World Bank, “Kenya,” (October 2013) 

  8 

than3%infoodsecuredevelopedcountries.Despite75%oftheworkforceengagedin

agriculture,asignificantamountofthepopulationoftengoeswithoutfoodandisheavily

dependentonfoodaid.Theservicesectorhasseenlargegrowthduetotelecommunications

expansionandthefinancialsector,andservicesnowmakeup62%ofKenya’sGDP.Tourismis

theprimarysourceofservicerelatedemploymentinKenya,andtourismremainsoneofthe

nation’smostsignificanteconomicandculturalstrengths.AprimaryobstacletoKenyan

economicsuccessistherelianceontheagriculturalsector,whichmakesup22%ofGDP,avery

largeamountcomparedtoafigureofaround3%formostheavilyindustrializednations.

Industryandmanufacturingmakeuptheremaining16%ofKenya’sGDP,althoughaprimary

aimofKenyandevelopmentpolicyistoinitiategrowthinthesesectorsandmoveawayfrom

theheavyrelianceonagriculturethatistypicalthroughouttheEastAfricanCommunity.10

Rwanda

Rwanda’seconomysufferedmassively

duetothe1994RwandanGenocidebutison

theroadtofullrecoverythroughthe

implementationofbusinessfriendlypolicies

andtheestablishmentofstrongnational

institutionsforgovernance.Thenation

doesn’thaveparticularlymanynatural

resources,however,andsubsistence

agricultureremainsthedominanteconomic

                                                        10 Ibid. 

  9 

activityformostRwandancitizens.Theindustrialsectorissmallandlimited,producingmostly

domesticgoodsandproducts,althoughminingisnowstartingtobeamajorcontributorto

growth.Anotherlargepotentialareaforgrowthistourism,duetoRwanda’slocationinthe

mountainsofEastAfrica,surroundedbyraretropicalforestsandtheassociatedfauna.One

particulardrawisthemountaingorilla,asRwandaisonlyoneoftwonationsinwhichthese

animalscanbeviewedsafely.Rwandaisregionallyknownformaintainingstronginstitutions,

anditsfinancialsectorisoneofthemostvibrantintheEastAfricanCommunity.Thisis

evidencedbytheintroductionofgovernment‐issuedbonds,thefirstoftheirkindinRwanda.11

Thenationcontinuestobeplaguedbyalackofnaturalresourcesandindustry,withmost

economicdevelopmentprospectscurrentlybeingassociatedwiththemodernizationof

agriculture,tourism,andservices.

Tanzania

Economicliberalizationhasbeena

primaryaimofTanzanianleadersinrecent

years,inanefforttomoveawayfromthe

socialistcommandpoliciesofformerleader

JuliusNyerere.Marketliberalizationhas

allowedthecountrytorealizelargeeconomic

gains,althoughtheeconomyremains

underdeveloped.TheTanzanianeconomy

dependsheavilyonagriculture,which

                                                        11 The World Bank, “Rwanda,” (September 2013) 

  10 

accountsformorethan25%ofGDP,provides85%ofexports,andemploys80%ofthework

force.12Topographyandclimaticconditions,however,limitcultivatedcropstoonly4%ofthe

landarea.Cashcrops,includingcoffee(itslargestexport),tea,cotton,cashews,sisal,cloves,

andpyrethrumaccountforthevastmajorityofexportearnings.Thevolumeofallmajorcrops

haveincreasedoverthepastfewyears,butlargeamountsofproduceneverreachthemarket

duetologisticalandinfrastructurelimitations.Inaddition,poorpricingandunreliablecashflow

tofarmerscontinuetofrustratetheagriculturalsector.OneareainwhichTanzaniahasseen

promisinggrowthisintheexpandingindustrialsector.Accountingfor22.6%ofGDP,Tanzania's

industrialsectorisoneofthefastestgrowinginAfrica.Themainindustrialactivitiesinclude

agriculturalprocessing(sugar,beer,cigarettes,sisaltwine),diamond‐,gold‐,andironmining,

oilrefining,woodproducts,salt,sodaash,cement,shoes,apparelandfertilizerproductions.

Foreignexchangeshortages,excessivebureaucracy,andcorruptioncontinuetodeprive

factoriesofmuch‐neededbusinessgoodsandsupport,however,andreduceindustrial

productivity.Sectorsexpectedtocontinueexperiencingsignificantgrowthincludetherich

miningindustryandthetourismindustry,thelatterofwhichremainslargelyuntappedin

comparisonwithKenyaandotherAfricantouristhotspots.13

                                                        12 Central Intelligence Agency, “Tanzania,” The World Factbook (March 2014) 13 Ibid. 

  11 

Uganda

TheeconomyofUgandahasagreat

amountofpotential,anditappearedpoised

forrapideconomicgrowthanddevelopment.

IthasevenbeensaidthatUgandahasthe

capabilitytofeedtheentiretyofAfricaif

properlycommerciallyfarmed.14However,

chronicpoliticalinstabilityanderratic

economicmanagementhasproduceda

recordofpersistenteconomicdeclinethat

hasleftUgandaamongtheworld'spoorestandleast‐developedcountries.Strengthsinclude

thesubstantialnaturalresourcesofthecountry,includingfertilesoils,regularrainfall,and

sizablemineraldepositsofcopperandcobalt.Thecountryalsohaslargelyuntappedreservesof

bothcrudeoilandnaturalgas.Servicesmakeuproughly50%ofGDPearnings,withagriculture

andindustryapproximatelysplittingtheother50%.Mostindustryinthecountryisrelatedto

agriculture,however.Largeamountsofgrowtharepossibleintheindustrialandminingsectors

inparticular,ifpoliticalstabilitycanbeachievedinthelongterm.15

InordertomorefullyunderstandthestateofEastAfricanCommunitymembereconomies,

itisimportanttoalsotakealookatoveralleconomicstatisticsasabasisforcomparisonand

                                                        14 The World Bank, “Uganda,” October 2013 15 Ibid. 

  12 

analysis.Thetablesdisplayedonthefollowingtwopagesdemonstratethedevelopingstatusof

EastAfricannations,aswellassignsofgrowthandimprovement.

ThetableaboveprovidesadditionalsummarystatisticsfortherespectiveEastAfrican

economies.16Ascanbeseen,theireconomieshavesimilarattributes.Negativecurrentaccount

balanceswerepresentforallmemberstates,withvaryingnominalamountsthattranslatedto

approximatelythesamedebt/GrossDomesticProductratioforeachcountry.Likewise,each

nationpossessednegativenetforeigndirectinvestmentfigures,andhighinflation.Burundi

experiencedthehighestrateofinflationat18.0128%,nearlythreetimesashighasthe

6.2709%inflationexperiencedinRwanda.IntermsofGDPfigures,Kenyaclearlyleadstheway

onaper‐capitabasiswithanincomeof$942.54,althoughthisstillranksamongsomeofthe

lowestintheworld.Rwanda,Uganda,andTanzaniafallslightlylowerinGDPpercapita,with

similarincomesaround$600,followedlastlybyBurundiwithananemicfigureofjust$251.01.

Despitetheextremelylowpercapitastatistics,theEastAfricanmemberstatesallexperienced

significantlypositiveGDPgrowthratesin2012,continuingatrendofcontinuousgrowthin

recentyears.Clearly,theEACstatesremaindevelopingcountriespossessingenormous

challengesaheadnecessarytoeraseaccountdebts,growinasustainableandhealthymanner,

andelevatetheirpopulationsoutofpoverty.

                                                        16 The World Bank 

!"#$%&'()*+&,- .-"/& 01)1"#$ 23&"#& 45&"#& 6&"7&"$&

81))-"'*&%%(1"'*9&:&"%-*;0(<=*%1))-"'*4>?@ A?B=CDC=DEF=GHIJHI A?CDD=EIB=KCEJDD A?ICE=ICD=HHGJIC A?C=CCG=FCH=BLCJKL A?L=KLH=ILB=LDGJCE

81))-"'*&%%(1"'*9&:&"%-*;M*(N*OP<@ AGEJBBHG AGEJLGFB AGGJDDKE AGGJGFBH AGCJIIFI

Q()-$5"*#$)-%'*$"R-S',-"'=*"-'*;0(<=*%1))-"'*4>?@ A?CBC=DBH=DIFJED A?KEB=HGHJKD A?GDH=IGB=HEBJIB A?G=FCG=GKH=EHDJCC A?G=FEK=HBK=GLFJBL

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OP<*5)(3'U*;&""1&:*M@ BJDHIE BJEGHB FJHIGG LJBCDB KJIDIF

CEGC*V&S'*WN)$%&"*V%("(,$%*>'&'$S'$%S

  13 

Thesocialstatisticslistedbelowalsodemonstratetheneedforextensiveattentiontothe

socialneedsoftheEastAfricanCommunity,aseconomicdevelopmentoftencannottakeplace

ifunderlyingissuesarenotaddressed.Lowlifeexpectancies,poorliteracyrates,andgrinding

povertyformanymakessimplysurvivingadifficulttask,althoughtechnologicaladvances,

economicgrowth,andpoliticalstabilityhavegenerallyimprovedqualityoflifeinrecentyears.

SouthAfricaasaPointofComparison

InordertoallowsomeconclusionstobedrawnregardingwhatstepstheEastAfrican

CommunitycanandshouldtaketoelevateitselftobeaneconomicpowerbothinAfricaand

aroundtheworld,thecompetitivenessoftheEastAfricanCommunityasawholecanbe

comparedwithanotherregionalpowerthatalreadyhasseensignificanteconomicsuccess:

SouthAfrica.

HistoricalandEconomicBackground

FollowingcenturiesofPortuguesecontactandDutchcolonization,theareanowknown

asSouthAfricacameunderBritishinfluencestartinginthelate18thcentury.Asthatcentury

drewtoaclose,DutchmercantilepowerbegantofadeandtheBritishmovedintofillthe

vacuum.TheyseizedtheCapein1795topreventitfromfallingintoFrenchhands,andthen

!"#$%&'()*+&,- ./)/"#$ 0-"1& 23&"#& 4&"5&"$& 67&"#&

8$9-*-:;-%'&"%1*&'*<$)'=>*'('&?*@1-&)AB CDEFD CGECC FDEDH CGEHI CJEKL

M()'&?$'1*)&'->*$"9&"'*@;-)*H>LLL*?$N-*<$)'=AB FFEG OIEJ KIEI KJEJ OCEO

P(;/?&'$("*@4('&?B G>IOG>CFG*********** OK>HJI>HOH*********** HH>OCJ>ILH*********** OJ>JIK>HLJ*********** KF>KOC>IFL***********

8$'-)&%1*)&'->*&#/?'*'('&?*@Q*(9*;-(;?-*&7-A*HC*&"#*&<(N-B FJELL JDEDL FCEIC FJEIL JKEDH

DLHD*R&A'*S9)$%&"*T(,,/"$'1*U(%$&?*U'&'$A'$%A

  14 

brieflyrelinquisheditbacktotheDutchin1803,beforedefinitivelyconqueringitin1806.17

PoweratthetimeresidedsolelywithawhiteéliteinCapeTown,anddifferentiationonthe

basisofracewasdeeplyentrenched.OutsideCapeTownandtheimmediatesurroundingland,

isolatedblackandwhitepastoralistspopulatedthecountry.

Britishsettlersbegantopourintothearea,sometimesduetoincentivesorduetoa

desiretoseekanewlifeinAfrica.ThisinfluxofsettlerssolidifiedtheBritishpresenceinthe

area,therebyfracturingtherelativeunityofwhiteSouthAfrica.WheretheBoersandtheir

ideashadbeforegonelargelyunchallenged,whiteSouthAfricanowhadtwodistinctlanguage

groupsandtwodistinctcultures.ApatternsoonemergedwherebyEnglish‐speakersbecame

highlyurbanized,anddominatedpolitics,trade,finance,mining,andmanufacturing,whilethe

largelyuneducatedBoerswererelegatedtotheirfarms.ThegapbetweentheBritishsettlers

andtheBoersfurtherwidenedwiththeabolitionofslaveryin1833,amovetheBoersstrongly

opposed.ThewideningriftbetweenBritishandBoersettlersledtotheso‐calledGreatTrek,an

eastwardandnorth‐eastwardBoermigrationawayfromBritishcontrolduringthe1830sand

1840s,followedbyconflictswiththenativeZulusandthelaterBoerWarsfoughtbetweenthe

BritishEmpireandadjacentBoerrepublics.18

TheUnionofSouthAfricacameintobeingin1910,andlasteduntilindependencein

1961,althoughtensionwasstillhighbetweenthedifferentethnicgroupsintheregion.

Gradually,whitesbeganexertingalmostcompletepoliticalcontrolinthenation.Onlywhites

werepermittedtovoteingeneralelectionsfrom1958until1994,whenthevotewasgranted

                                                        17 Eric A. Walker and Hugh A. Wyndham, “A History of South Africa,” Journal of the Royal African Society 40 (January 1941): 11‐18 18 Joye Bowman, “Reconstructing the Past Using the British Parliamentary Papers: The Anglo‐Zulu War of 1879,” History in Africa 31 (2004): 117‐132 

  15 

toallSouthAfricansoverage18.StartingfromJune4,1948,SouthAfricawasruledbythe

nationalistright‐wingNationalParty.Upontakingpowerduringthe1948generalelection,the

NationalPartybegantoimplementaprogramofapartheid–thelegalsystemofpoliticaland

socialseparationoftheraces–apolicyintendedtomaintainandextendpoliticalandeconomic

controlofSouthAfricabythewhiteminority.Apartheidwasfinallydismantledinthelate1980s

andearly1990sbyNationalPartyleaderFWDeKlerkandAfricanNationalCongressfigure

NelsonMandela.TheANCsecuredits4thelectionvictory(startingin1994),andthenationhas

eversinceoperatedunderaconstitutionalparliamentaryrepublic.

PriortothearrivalofEuropeansettlersinthe15thcenturytheeconomyofwhatwasto

becomeSouthAfricawasdominatedbysubsistenceagricultureandhunting.Apermanent

Europeansettlementwasfoundedin1652inmodernCapeTown.Europeansettlementgreatly

changedtheregion,pushingethnicgroupsawayandutilizingotherasworkers.Indigenous

peoplesandsettlersdevelopedacommercialrelationshipthough,andsalesofproduceand

stocksawthedevelopmentofablack,landedpeasantry.Tosupplementfurtherlaborneeds,

slavesandindenturedservantswerebroughtinfromAsiaandIndia

Bythemid‐1800s,theBritishprovinces,CapeColonyandNatal,werebothfairly

prosperouscolonies,withthemajorityofblackandwhitesettlerslivinginruralareasand

employedinsharecroppingortheproductionofcashcrops.Tothenorth,thetwoAfrikaner

statesofOrangeFreeStateandTransvaalwerelessdenselypopulatedandinastateof

constanteconomicrivalrywiththewealthierBritishprovinces.Theoverallpopulationofthe

SouthAfricaregionwaspredominantlyemployedinagriculturaloccupations,eithertending

cattle,orasintheBritishcolonies,cultivatingcashcropssuchassugarandcoffee.Urbanareas

  16 

weresmallinnumberandsize,andprovidedonlyasmallcontributiontotheAfrikanerand

Britisheconomies,mainlyviatheproductionofconsumergoodsandwine.

Thelate1800sbroughtgreatchangestotheeconomy.TheMineralRevolutionisaterm

usedtorefertotherapidindustrializationandeconomicchangeswhichoccurredinSouth

Africafromthe1870sonwards.TheMineralRevolutionwaslargelydrivenbytheneedto

createapermanentworkforcetoworkintheminingindustry,andsawSouthAfrica

transformedfromapatchworkofagrarianstatestoaunified,industrialnation.Theprofound

economicchangesbeganwiththediscoveryofdiamondsatthetownofKimberleyin1867.The

diamondindustryquicklyflourished,andtheneedtodigbelowthegroundafterexhausting

surfacediamondsbroughttheMineralRevolutiontoanewphase.Goldwasalsodiscoveredat

theWitwatersrandorefieldsin1886,triggeringagoldrushandafurtherfocusonmining19.

Nationalizedindustrieswereestablishedbeginninginthe1920s,suchassteeland

railways,whichreservedevenlowskilledjobsforwhites.The1930sand1940ssawtherapid

industrializationofthecountryasitsuppliedtheminingindustryandthegovernmentinvested

inmajorprojectstoprotectwhiteemployment.SouthAfricanotonlyhadgoldanddiamonds

butvastquantitiesofiron,coalandmanyotherminerals.Agriculturediminishedinimportance

asminingandthenindustrygrew.

InthetwodecadesfollowingtherisetopoweroftheNationalParty,whites(particularly

Afrikaners)weregivenanadvantageoverallotherethnicgroupsinSouthAfricathroughthe

manipulationofthelabormarketunderthesystemofapartheid.Duringthe1950s,theincome

hierarchyinSouthAfricawasessentiallyaracialone,withwell‐paidemploymentmonopolized

                                                        19 Peter Scott, “The Witwatersrand Gold Field,” Geographical Review 41 (October 1951): 561‐589 

  17 

bywhites.Repercussionsofapartheidarestillgreatlyfelttoday,withmanyblacksremaining

unskilled,illiterate,andpossessinglowlivingstandards.

Theimpositionofinternationalsanctionsonthecountrybeganeconomicpressurethat

sawtheunravelingofapartheid.Theflowofforeigncapitalstopped,andapartheidlooked

increasinglyunsustainable.In1990thewhitepresidentFrederikWillem(F.W.)deKlerk

recognizedtheeconomicunsustainabilityoftheapartheidsystemandreleasedNelson

MandelaandunbannedtheAfricanNationalCongress(ANC)thatMandelaled.Despitesocialist

rhetoricandsupportfromsocialistcountriesinitsearlyyearstheANCmaintainedthemixed

economyandencouragedthemarketeconomyincludingrelaxingforeignexchangecontrols.

SouthAfricahassinceworkedtomakeupfordecadesofapartheidwithpositive

discrimination(affirmativeaction).Althoughthishashaditsbenefits,affirmativeaction,

specificallythequotasystemthatseekstoachieveworkplacediversitytargets,drivesskilled

laboraway,resultinginpooreconomicgrowthandforeigninvestment.Amajorsourceofstress

remainstheredistributionofland.Underapartheid73%oflandwasinsocalled"whiteareas"

andmanyblackshadbeenforciblyuprootedandremovedtotribalareas.20Theslowlegaland

bureaucraticprocessofrestitutioniscausingimpatienceamongblacksandconcernamong

whitefarmersthatSouthAfricamaygodowntherouteofneighboringZimbabweandZambia,

wherethegovernmentanditssupportershaveunilaterallyseizedlandinmisguidedeffortsto

increaseblackownershipandwrestcontrolfromthetraditionalrulingminorityofwhites.

                                                        20 David Simon, “Crisis and Change in South Africa: Implications for the Apartheid City,” Transactions of the Institute of British Geographers 14 (1989): 189‐206 

  18 

SouthAfricanEconomicEvaluation ModernSouthAfricapossessesacomplexandadvancedeconomy,andthestatehas

maintaineditspositionastheleadingeconomyofAfricatothepresentday.Thecurrent

economycombinesadevelopedfirst‐worldinfrastructurewithavibrantemergingmarket

economytodrivegrowthandcreatelargeinvestmentpotential.Thenation’seconomic

strengthisalargelyalegacyoftheEuropeaninvolvementintheareaduringcolonialtimesand

thewealthofnaturalresourcespresentinwhatcomprisesthelandsofmodernSouthAfrica.

Theminingindustry,inparticular,washeavilydevelopedandexploited,andthemassive

revenuesfromthemineralexportswereavailabletobeusedforinfrastructureandfurther

economicdevelopment.AgriculturehasconsistentlybeenanotherstrengthoftheSouth

Africaneconomy,andthenationholdsacomparativeadvantageintheproductionof

agriculture,mining,andthemanufacturingprocessesrelatedtothosesectors.ModernSouth

Africahaslargelymovedtowardshavingaservice‐driveneconomy,however,indicatingthe

advancednatureofitseconomyandthegradualmovetowardsbeingadevelopedcountry.The

nationisoftenconsideredtobeaNewlyIndustrializedCountry(NIC),alongwithcountriessuch

asBrazil,China,andMexico,assignificantsocietalandeconomicissuesarepresentinSouth

Africadespitepossessingthecontinent’swealthiestandmostproductiveeconomy.

TheSouthAfricaneconomyhasanumberofstrengthsthatcontributetoitsstandingas

Africa’slargestandmostadvancedeconomy.Thestatepossessesrelativelystablepoliticaland

financialinstitutions,withaprogressiveconstitutionandstronglegalprotectionsforitscitizens.

Thestabilityofthenationsincetheendofapartheidin1994hasallowedSouthAfricato

capitalizeonitseconomicadvantages.Thesolidresourcebasepresentinthecountrypropelled

  19 

theeconomytonewheightsincolonialtimes,andremainsthestablecoreoftheSouthAfrican

economy.Inadditiontohavingawell‐organizedcommercialagriculturesystemwhichexportsa

varietyofproducts,SouthAfricaisendowedwithoneoftherichestandmostdiverse

concentrationsofmineralresourcesintheworld.SouthAfricaisoneoftheworldleadersin

diamondandcoalmining,andoccupiesadominantpositionintermsofreservesand

productionofavarietyofmetalandmineralresources.Additionally,itisbelievedthatthereis

stillalargepotentialforthediscoveryofevenmoremineralreserves.21

AprimarydifferencethatsetsSouthAfrica’seconomyapartfromthatofotherAfrican

nationsisthediversifiednatureofitseconomy.Althoughnaturalresourceswerewhatmade

SouthAfricainitiallywealthy,miningandagriculturenowmakeupjustasmallportionofthe

totaleconomy.Instead,servicesnowcomprisethemajorityofeconomicactivity.Examiningthe

economybysector,servicesmakeup65.9%oftotalGDP,followedbyindustrywith31.6%,and

agriculturewithjust2.5%.22Lookingfurther,themaineconomicsectorsinSouthAfricaare:

mining,agricultureandfishing,vehiclemanufacturingandassembly,foodprocessing,clothing

andtextiles,energy,financialandbusinessservices,tourism,andtransportation.

Anumberofotherfactorscontributetotherelativeeconomicdominanceexperienced

bythecountrywithinAfrica,manyofwhichowetheirexistencetoSouthAfrica’shistorically

closetieswithprivatebusiness,trade,andtheinternationalcommunity.Withthecountry'sre‐

integrationintotheglobalspherein1994,corporategovernancerules,disclosure,transparency

andaccountabilityhavebecomeanintegralpartofdoingbusinessinSouthAfrica.

                                                        21 Industrial Development Corporation, “Sectoral Trends: Performance of the Primary and Secondary Sectors of the South African Economy,” (1st Quarter 2012)  22 Central Intelligence Agency, “South Africa,” The World Factbook (March 2014) 

  20 

Regulationsgoverningthefinancialsector,andparticularlyriskmanagement,haveundergone

considerablerefinementtoalignthemtointernationallyrecognizedstandardsandbest

practices.DuetothestabilityandsophisticationofSouthAfrica’sfinancialsector,aswellas

legalsector,thecountryprovidesanenvironmentconducivetoprivatesectorinvestmentfrom

bothinternalandexternalsources.Additionally,thereexistsarelativelylargedomesticmarket

forgoodandservicesinSouthAfrica,andthereiseasyaccesstointernationalmarketsthrough

first‐worldlogisticalinfrastructureforland,water,orairtransport.

Ascanbeviewedinthetableofsummarystatisticsabove,SouthAfricapossessesa

numberofstrengthsandweaknessesregardingitscurrenteconomicstate.AlthoughSouth

Africa’spopulationdoesnotfarexceedthatofKenyaorTanzania,itsGrossDomesticProduct

remainsmorethanthatofallEastAfricanCommunitymembernationscombined.Likewise,per

capitaGDPisoverroughly7timesashighasinKenya,andnearly30timesashighasin

Burundi,themostpoverty‐strickennationwithintheEAC.

DespitethepositivegeneralstateoftheSouthAfricaneconomy,significanteconomic

andsocialissuesexistwhichthreatentoderailprogressandgrowth.Twoofthemostvisible

andchallengingproblemsfacingthenationincludesocietalinequalityandahigh

unemploymentrate.PovertyremainswidespreadamongmanyinSouthAfrica,despitethehigh

qualityoflifeforsomesegmentsofthepopulation.In2008,forexample,thewealthiest10%of

!"#$%&'()*+&,- .(/'0*12)$%&

3(4/5&'$("*67('&58 9:;:<=;>?@A@:************

BC3*D)(E'0*6&""/&5*F8 GA9H<9

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BC3*6%/))-"'*I.J8 J><H;>:G;@KH;HH9A9>

!"25&'$(";*%("L/,-)*4)$%-L*6&""/&5*F8 9AH:><

I"-,45(M,-"';*'('&5*6F*(2*'('&5*5&N()*2()%-8 G9

G?:G*.(/'0*12)$%&"*O%("(,$%*.'&'$L'$%L

  21 

thepopulationearned58%ofthetotalincome,andthetop5%earned43%ofthetotal

income.Meanwhile,62%ofBlackAfricans,29%ofColoreds,11%ofAsians,andjust4%of

Whiteslivedinpoverty,clearlyindicatingtheeconomiclegacyoftheapartheideralivesonin

someregards.Intermsofunemployment,SouthAfricahasacriticallyhighrateofcitizens

unabletofindwork.Althoughlistedofficiallyaround25%,theunemploymentraterisesto

nearly35%ifthosewhohavegivenupseekingworkandleftthejobmarketareincluded.Other

significantsocialissuesincludepooreducationandhealthcaresystems(bothofwhicharealso

susceptibletoinequalityissues)andhighcrime.Corruptionalsoremainsaverytroublesome

topic,withaccusationsofcronyismandcorruptionthroughoutthepublicservice.Theseissues,

pairedwithotheradditionalfactors,leadexcellingSouthAfricanstooftenconsidermigratingto

amorepromisingopportunityelsewhereintheworld.AccordingtotheSouthAfricanBureauof

Statistics,itisestimatedthatbetween1‐1.6millionpeopleinskilled,professional,and

managerialoccupationshaveemigratedsince1994andthat,foreveryemigrant,10unskilled

peoplelosetheirjobs.

TheEastAfricanCommunityisfacedwithmanyofthesameopportunitiesandthreats

asSouthAfrica,andcanutilizelessonslearnedthroughthedevelopmentofthatnation’s

economytoplanforsuccessfulandsustainablegrowth.Nowthatanunderstandinghasbeen

createdregardingthecurrentstateoftheEastAfricanCommunityandSouthAfrican

economies,focusmustbegiventoexaminingthespecificplanstheEAChasdevelopedfor

economicdevelopmentandregionalintegrationaswellasdeterminingtheprimaryadvantages

andweaknessespresentfortheEastAfricanCommunitymovingforwardintime.

  22 

FutureoftheEastAfricanCommunityEvaluationofFutureIntegrationPlans

TheEastAfricanCommunityhasdevelopedthoroughandextensiveplansforfurther

regionalintegration.AccordingtotheTreatyfortheEstablishmentoftheEastAfrican

Community:

ThePartnerStatesundertaketoestablishamongthemselvesandinaccordancewiththe

provisionsofthisTreaty,aCustomsUnion,aCommonMarket,subsequentlya

MonetaryUnionandultimatelyaPoliticalFederationinordertostrengthenand

regulatetheindustrial,commercial,infrastructural,cultural,social,politicalandother

relationsofthePartnerStatestotheendthatthereshallbeaccelerated,harmonious

andbalanceddevelopmentandsustainedexpansionofeconomicactivities,thebenefit

ofwhichshallbeequitablyshared.23

Initialestimatesforthetimelineofintegrationwerequiteambitious,andthemajorityofthe

largeraimsoftheEAChavebeenpushedbackfromtheiroriginaltargetdates.Evenso,

significantstrideshavebeenmade,andCommunityleadersarehopefultostillaccomplishall

thatwassetoutininitialmeetingsandsubsequentDevelopmentStrategies.

Oneoftheprimarynear‐termaimsoftheEastAfricanCommunityistosuccessfully

establishacustomsunionandcommonmarket.Asingleunifiedmarketwithabout120million

consumerswillbeacatalystfortheeconomicgrowthofEastAfrica,allowingforrecordlevels

oftradeandeconomiccooperation.Theoverallgoalforthecommonmarket,signedin2010,is

toallowforfreemovementofgoods,people,capital,labor,servicesandrightofestablishment

                                                        23 Treaty for the Establishment of the East African Community 

  23 

ofresidencewithintheEACinsupportoftheintegrationprocess.24Customsprocessesandfees

havebeenstreamlinedandharmonizedbetweenmemberstates,althoughtheCommunityis

stillworkingtowardsfullimplementationofboththecustomsunionandcommonmarket.

Commonmarketinitiativeshavelargelybeenslowedbytheindifferenceofmemberstatesto

taketheinitiativeandseekoutreformsnecessarytocomplywithEACmarketgoals.Apartfrom

Rwandaforthemostpart,memberstateshavebeenslowtoimplementthemarketreform

protocol,mainlyduetoalackofpoliticalwilltomakemeetingnationalreformguidelinesa

priority.Politicianshavebeenslowedbyfearsamonglocalconstituentsthatreformsleadingto

acommonmarketwillcreatejoblosses,underminelocalcompetitiveness,andleadtosocietal

problemsduetothepotentialmigrationofpeopleswithintheEastAfricanCommunity.

Anotherofthemorevisibleandtransformativepolicyaimsofthememberstatesofthe

EACistoenterintoamonetaryunion,withtheEastAfricanSchillingasthenewcurrency.The

successoftheMUundernegotiationwillcallforconcertedinterventionstoharmonizethe

policyandregulatoryframeworksbenchmarkedtobestpractice,undertakeregionwidecivic

education,strengthenandempowertheinstitutionsthatimplementandmonitormonetary

andfiscalaffairsattheregionalandnationallevels.TheMonetaryUnionProtocolwassigned

bycommunityheadsofstateinKampala,Uganda,onNovember30,2013,outliningaten‐year

roadmaptowardsmonetaryunion.Guidelinesforfurtherharmonizationandcooperationare

given,andtheroleandresponsibilitiesoftherespectivemembernationsandtheEastAfrican

CentralBankarediscussed.25ThiscamejustdaysaftertheformalstartoftheEastAfrican

                                                        24 EAC 4th Development Strategy 25 East African Community, “Protocol on the Establishment of the East African Monetary Union,” (November 2013) 

  24 

Cross‐BorderPaymentSystem,asignificantoperationalstepincreasingmonetaryandeconomic

integration.Withtheagreementaimingtoestablishamonetaryuniontakingplaceasrecently

as2013,theroadtofullimplementationofamonetaryunionandcommoncurrencywillbea

longone,withdelayslikelytopushthetimeframepastthestatedtenyearmark.

Finally,theultimategoaloftheEastAfricanCommunity,beyondtradeliberalizationand

economicunity,istopursuefullpoliticalfederation.Themovetowardsthepoliticalfederation

isintendedtobeanchoredonestablishingregionalstructuresandbuildinginstitutional

capacitythroughdevelopmentofregionalpolicies,promotionofgoodneighborliness,and

cooperationintheareasofinternationalrelationsandstrategicinterventions.26Asoutlinedin

theEastAfricanCommunity’s4thDevelopmentStrategy,themovetowardspoliticalfederation

canonlybefulfilledthroughestablishingcertain‘KeyPillarsofEACIntegration.’Theseinclude,

inorder,toconsolidatethebenefitsofafullyfledgedcustomsunion,tofullyimplementthe

EACCommonMarketProtocol,toestablishtheEACMonetaryUnionandbegintheprocessof

implementationofasinglecurrency,andfinallytolaythefoundationforeventualpolitical

federation.Currently,however,ithasbeenKenya,Rwanda,andUgandaleadingthechargein

seekingpoliticalfederation,anditisunclearwhetherTanzaniaorBurundiwouldwantorbe

invitedtojoin.Nevertheless,thetalksforeventualpoliticalfederationarequiteyoung,andthe

processcouldbealteredordisruptedbyanynumberofeventsorcircumstances.

AdvantagesPresentfortheEastAfricanCommunity TheEastAfricanCommunityispoisedforcontinuedeconomicgrowth,andcertain

advantagesmayallowtheregiontogreatlyadvanceineconomic,political,andsocialways.

                                                        26 East African Community,”4th Development Strategy, 2011/12‐2015/16,” (August 2011)  

  25 

Representingapopulationofnearly150millionpeople,secondtoonlyNigeriainpopulationin

Africa,theCommunityretainsmanystrategicadvantagesthatcanbeutilizedtobringeconomic

developmentandraisequalityoflifeintheregion.Fosteringthesuccessfulmanagementof

theseadvantageswillbecriticaltothehealthoftheEastAfricanCommunityasawhole,andis

necessarytoelevatemanyareasoftheregionoutofimpoverishment.

OneoftheEastAfricanCommunity’sprimaryenduringstrengthsastimeprogresseswill

beitsstrategicallycentrallocation,facilitatingthemovementofgoods,services,andpeople.In

particular,theportsoftheEACmayallowtheregiontobecomeacentralshippinglocation

linkingSub‐SaharanAfricatotheMiddleEast,SoutheastAsia,andEuropethroughtheuseof

theSuezCanal.Anumberofportsaredevelopedthusfar,althoughsignificantupgradeswillbe

necessaryforsometocompeteonaglobalscale.Thelargestportfacilitiesarecurrentlylocated

inMombasa,Mtwara,DaresSalaam,andTanga.Mombasapossessesanaturaldeep‐water

harbor,andtheportfacilityhasbeenrecentlyexpanded.OnAugust29,2013,expansionofthe

portenabledittohandlePanamaxVessels.TheprojectwaslaunchedinJuly2011atacostof

$82.15millionbytheKenyanGovernmentandwascarriedoutbyChinaRoadsandBridge

Corporation.Anewberth,Berth19,with15acresofstackingyard,hasprovidedadditional

annualcapacityof200,000TEU.Theprojectistoincreasetheportthroughputby33percent,

consolidatingtheleadingstatusofMombasaaswellasKenyainEastAfrica.27Further,Kenya’s

portsystemsmaybeadaptedtotransportcrudeoilfromSouthSudan,ifpoliticalwilland

initiativeisstrongenoughtofacilitatetheconstructionofanoilpipelinelinkingthatcountryto

EastAfricanports.

                                                        27  XinhuaNewsAgency,“NewlyExpandedPortBerthReopensinKenya’sMombasa,”(Aug.29,2013) 

  26 

  TheEastAfricanCommunitymaybepoisedtobecomearegionalorevencontinental

hubforgoodsandpeopletobetransportedbyair,aswell.ToreachLagos,Nigeria,for

example,thedistanceis2,368milesfromNairobi,Kenya,whilethetripis2,800milesfrom

Johannesburg,SouthAfrica,thecurrenthubformanybusinessesandfinancialservicesin

Africa.Similarly,itrequires5,428milesbyairtotravelfromJohannesburgtoParis,France,

whilethedistanceisreducedto4,032fromNairobi.Lastly,the3,992milesitrequirestotravel

betweenJohannesburgandDubai,UAE,isnearlytwicethe2,210milesneededtoflytoDubai

fromNairobi.

  AnotherlastingadvantagefortheEastAfricanCommunity,ifmanagedcorrectly,isthe

highdemandfortourismintheregion.TheEAChasallofthe‘BigFive’game:lion,leopard,

elephant,buffaloandrhino.TheWildebeestMigrationiswidelyconsideredasthe7thNatural

wonderoftheworld,andanimalsconstantlytraversetheSerengetiNationalPark(Tanzania)

andMaasaiMara(Kenya).ThediversityofEastAfrica'swildlifehasgarneredinternationalfame,

especiallyforitspopulationsoflargemammals,particularlyrarespeciessuchastheMountain

GorillaofRwanda.Itisalsofamousforitsdiversepopulationofbirds,includingFlamingosand

Maasaiostriches.TheEastAfricanCommunityishometosomeofthemostdiverseflorainthe

world.ThisextremediversityowesitselftoEastAfrica'svaryingclimate,witharidandsemi‐arid

areasinNorthernKenyaandUganda,forestsinWesternKenyaandUganda,andtheAfrican

savannathatstretchesacrosstheTanzanianandKenyanplains.Furtherdiversitycanbefound

withglaciersonmountainsinCentralKenyaandNorthernTanzania,andmangroveforestson

theEACcoast.

  27 

TheEastAfricanCommunityisfurtheraidedbytheabundanceofnaturalresourcesin

someareas,aswellasthesheerpotentialforgrowthinaregionthathasbeenmismanagedfor

decades,ifnotcenturies.

RisksandHindrancestoRegionalIntegrationandDevelopment

AlthoughtheEastAfricanCommunityhasbeenconsistentlyworkingtoachieveits

statedaimsofgreatereconomicintegrationandcooperation,thereremainsignificantissuesto

overcomeinordertoachievethemoredramaticandloftygoalsoftheCommunity.

Additionally,somethreatstoeconomicdevelopmentmaypersistevenifEACplansarefulfilled,

andfurtherconcernsmayariseasintegrationpoliciesbeingenactedproduceunintended

consequences.Issuesthatmayhinderprogressincludepoorinfrastructure,widespread

corruption,lowlevelsofeducationandunderdevelopedhealthcaresystems,politicalinstability

andsecurity,difficultyofdoingbusinessintheEAC,andthelackofapositiveinvestment

climate.

Oneoftheissuesmostdifficulttosolveisthatofthequestionofsovereignty,asmoving

towardfullpoliticalfederationwillinevitablycreatetensionwithintheEastAfricanCommunity

inregardstopowersharingandtheauthorityandenforcementpoweroftheEACoverthe

individualmemberstates.

Anotherissuethatislikelytoappearincreasinglyoftenisonethathelpedleadtothe

demiseoftheoriginalEastAfricanCommunity:incompatiblepoliticalandeconomicstatuses

andbeliefs.Additionally,thepeopleoftheEastAfricanCommunitymaybewaryofintegration

leadingtopoliticalfederation,withthoseinpoorerareasfearingthattheirlandswillbetaken

overbywealthiermigrants,andthoseinmoreaffluentareasfearingthattheywillhavetofoot

  28 

thebillfordevelopmentinstrugglingregions.WorrieshavealreadysurfacedamongEast

AfricanCommunitycitizensregardingthepotentialfordetrimentaleffectstotheircommunities

throughtheimplementationofintegrationplans.Creatingconsensusamongmemberstatesto

formeconomicpolicyandenactmeaningfulchangewillbeasignificantchallenge,asnational

politicscanoftentakecenterstageandovershadowregionalefforts.Additionally,whilethe

EACmemberstatesaregovernedbyrelativelysimilargovernmenteconomicpolicies,

differencesinwealthanddevelopmentmaycreatetensionandissuesinthefuture.

Corruptionandpoorgovernanceremainperhapsthelargestandmostdauntingissues

toEastAfricandevelopment,problemssowidespreadandseverethattheycanderailother

initiativesandhindergrowth.Asthetablebelowshows,EACmemberstatesgenerallyrankvery

poorlyintermsofcorruption.AsrankedbyTransparencyInternational,theonlyEACstateto

placeinthetophundredincorruption(orlackthereof)isRwanda.Nationsareratedonascale

ofzerotoonehundred,withzerobeingextremelycorruptandonehundredrepresentinga

corruption‐freesociety.AsidefromRwanda,whichperformsrelativelywellinfighting

corruption,theEACmembersareratedaslowas21(Burundi)toashighas33(Tanzania).

Clearly,corruptionisalargeissueinthesestates,andtheGDPpercapitareflectsthestrain

corruptionplacesonacountry.Burundi,withoneofthehighestcorruptionratesintheworld,

alsohasoneofthelowestpercapitaGDPratesaswell.

!"#$%&'()*+&,- .-"/& 01)1"#$ 23&"#& 45&"#& 6&"7&"$& 8(1'9*:;)$%&

<())1='$("*>-)%-='$("?*!"#-@A*BCDE BF BD GE BH EE IB

<())1='$("*>-)%-='$("?*!"#-@*2&"J* DEH DGF IK DIC DDD FB

LM>*=-)*%&=$'&*N%1))-"'*48OP OKIBQGI OBGDQCD OHDKQKE OGIFQCD OHCRQFB OFAGCFQFC

<())1='$("*S?Q*LM>*>-)*<&=$'&A*T:<*?'&'-?*&"#*8(1'9*:;)$%&

  29 

DespitemarketreformsinEastAfrica,businesssurveysrevealthatbusinesscorruption

isstillwidespreadandthatcompaniesfrequentlyencounterdemandsforbribesandinformal

paymentsto'getthingsdone.’ThepublicprocurementsectorintheEastAfricanCommunity

sufferswidespreadcorruption.Theuseofagentstofacilitatebusinessoperationsand

transactionsiswidespreadandposesariskforcompanies,particularlyatthemarketentryand

businessstart‐upstage.

Theeffectofcorruptionhasmanydimensionsrelatedtopolitical,economic,socialand

environmentaleffects.Inpoliticalsphere,corruptionimpedesdemocracyandtheruleoflaw.

Inademocraticsystem,publicinstitutionsandofficesmaylosetheirlegitimacywhenthey

misusetheirpowerforprivateinterest.Corruptionmayalsoresultinnegativeconsequences

suchasencouragingcynicismandreducinginterestofpoliticalparticipation,politicalinstability,

reducingpoliticalcompetition,reducingthetransparencyofpoliticaldecisionmaking,distorting

politicaldevelopmentandsustainingpoliticalactivitybasedonpatronage,clientelismand

money,andmore.

Theeconomiceffectsofcorruptioncanbecategorizedasminorandmajor.However,

bothinonewayortheotherhaveseriousimpactontheindividualcommunityandcountry.

Firstandforemost,corruptionleadstothedepletionofnationalwealth.Itisoftenresponsible

forincreasedcostsofgoodsandservices,thefunnelingofscarcepublicresourcesto

uneconomichighprofileprojectsattheexpenseofthemuchneededprojectssuchasschools,

hospitalsandroads,orthesupplyofpotablewater,diversionandmisallocationofresources,

conversionofpublicwealthtoprivateandpersonalproperty,inflation,imbalancedeconomic

development,weaklingworkethicsandprofessionalism,hindranceofthedevelopmentoffair

  30 

marketstructuresandunhealthycompetitiontherebydeterringcompetition.Large‐scale

corruptionhurtstheeconomyandimpoverishestheentirepopulation.

AstothecurrentinvestmentclimateintheEAC,interestratesintheregionhave

remainedalmostconstantandaboveinflationrates,confirmingthatsecuringcreditfor

investmentislargelyprohibitiveintheregion.Further,noneofthePartnerStateshadachieved

asingledigitinterestrateasenvisionedbyguidelineslaidoutinthe3rdDevelopmentStrategy,

anissuethatisstillunresolvedasidefromKenyaandRwanda.Itishopedthatwithconsistent

developmentofthefinancialsector,theinterestratescanfurtherbeloweredtolevelsthatcan,

inpart,increaseinvestmentsthroughaccesstoaffordablecredit.28Furthercontributingtothe

investmentclimateintheEACistheeaseofconductingbusinessintheregion.Accordingtothe

DoingBusinessorganization,aserviceoftheWorldBankandtheInternationalFinance

Corporation,EastAfricannationslargelypossesspoliciesdetrimentaltotheconductof

business.Economiesarerankedfrom1‐189basedontheeaseofdoingbusiness,madeupof

factorssuchasdealingwithconstructionpermits,accesstoelectricityandcredit,legal

protections,tradingacrossborders,andmore.Rwandaisthesolenationtobreakintothetop

100ofnationsintheEAC,withasurprisingjumptorank32intheworldin2013,reflectingthe

strongworkRwandahasundertakentoallowbusinesstoprosper.Ontheothersideofthe

spectrum,Tanzaniacomesinatrank145,withwidespreadissuesinbeingabletostarta

businessandoneoftheverylowestranksindealingwithconstructionpermitsandregistering

property.TheremainingEACnationsrankinthemiddleofthesetwonations,withBurundiat

                                                        28EastAfricanCommunity,“4thDevelopmentStrategy,2011/12‐2015/16,”(August2011)

  31 

rank140,Ugandaatrank132,andKenyaplacingatrank129intheworld.29Clearly,businesses

willnotseektorelocatetoorinvestintheEastAfricanCommunityinlargenumbersifthecost

anddifficultyofdoingbusinessintheregionremainssohigh.Rwanda,however,hasbeena

successstory,andtherestoftheEastAfricannationswouldbewisetousetheexampleof

Rwandatomakereformsaswell.

Anissuethatwillcreatenumerousproblemsifnotpartiallyresolvedisthatofthe

underdevelopedandcrumblinginfrastructurenetworksofEACnations.Withoutadequate

infrastructure,theloftygoalsofeconomicdevelopmentandintegrationwilllargelybefor

naught,asgoodsandpeopleremaindifficulttotransportandbusinessesareleftwithoutvital

services.Thedevelopmentofportfacilitieshasbeenongoingandsuccessful,butinland

transportroutesareoutdatedandinefficient.RoadsystemsareviablesurroundingtheEAC’s

largestmetropolitanareas,butdirtpathsaboundinthemoreruralareasoftheregion.Further,

railsystemshavenotbeenupgradedfordecades,andareinsoreneedofrehabilitation.A

seriesofimprovementsunderthenameoftheEastAfricanRailwayMasterPlanhasbeeninthe

worksinthelastseveralyears,withtheprimaryaimoflayingastandardgaugerailsotofurther

boosttradewithsurroundingregions.Oneofthemostpressingaspectsofinfrastructure

developmentisensuringthatelectricityisubiquitousandconsistentlyavailable.Theneedof

businessesandhomeownerstopurchaseandmaintainpersonalgeneratorsisenormously

costly,andelectricityshortagescanbeextremelydamagingforbusinessesororganizations

requiringasteadysupply.Themostpromisingwaytoensureconsistentelectricityaccessmay

bethroughthedevelopmentofnewhydroelectricgeneratingstationstotakeadvantageofthe

                                                        29 DoingBusiness,“EconomyRankings,”(2013)

  32 

naturalpoweroftheregion’swater,asiscurrentlybeingdoneinEthiopiathroughamassive

damontheRiverNile.

AfinalhindrancetothesuccessofEastAfricanintegrationmaybethevolatilenatureof

politicalstabilityintheregion.EACmemberstatesarenostrangertoconflict,withcasessuch

astheRwandanGenocidethathighlighttheneedforregionalsecuritystructures.Conflict

continuestoknockatthestepsoftheEACaswell,withalawlessSomalia,activemilitiasinthe

junglessurroundingtheAfricanGreatLakesregion,andethnicstrifecurrentlyoccurringin

SouthSudan.WhilethegovernmentsoftheEACaregenerallystable,concernsarepresentfor

themethodsthroughwhichstabilityisachieved.InBurundi,forinstance,therehavebeen

recentconcernsaboutthearrestofoppositiondemonstratorsandthequellingofdissent.With

thatinmind,therehasbeentalkofthepotentialsuspensionofBurundifromtheEAC,although

thereappearstobelittlechanceofthatoccurringbarringadditionaldevelopments.

ConclusionandPolicyRecommendations

WithathoroughunderstandingoftheEastAfricanCommunityanditsplansforfuture

integration,itisimportanttoconsiderstepswhichmayhelpaidtheCommunityreachitsgoals

ofbecomingaformidableeconomicunion.

Firstandforemost,itiscriticalthattheEACdoesnotrushstepsinintegrationsimplyfor

thesakeofappearingtomakeprogress.Integrativestepstakenwithoutcaremaydomore

harmthangoodinthelongrun,andcouldrisksplinteringtheEACifnegativeconsequences

follow.Itisvitaltothesuccessofintegrationplansthatstepsintheprocessaretakenin

succession,asthelaterstepscannotbeviablyaccomplishedwithoutasolidbaseofinitial

reforms.Inasimilarvein,thelargerstepstowardintegrationsuchasamonetaryunionand

  33 

politicalfederationshouldbeviewedinacautiouslightandonlytentativelyconsideredwhile

earlierstepsinintegrationcontinuetoprogress.Thecaseoftheimplementationoftheeuro

currencyinEuropeshouldserveassomedegreeofwarningtotheEastAfricanCommunity,

demonstratingthatnationswithdifferingeconomicstatusescannotbeeasilyabsorbedintoa

singlemonetaryunionwithoutextremecare.Politicalfederationshouldnotbeseriously

considereduntilEACmemberstateshaveprovenawillingnesstocooperatefullyandworkasa

singleunit,whichthusfarhasnotbeenevident.

EveniftheloftiestgoalsofintegrationareaccomplishedintheEAC,theregionmay

continuetostruggleifcareisnotfirstgiventothesevereissuesplaguingEastAfricansocieties.

Educationsystemsmustbeoverhauledandexpanded,withafocusonliteracyandthe

establishmentofareliableeducatortrainingsystem.Medicalcaremustbegreatlyimproved,

andfertilityratesmustbekeptincheck.Butperhapsthetwomostimportantstepsthatcould

contributetosignificantgrowthinthenearandlongtermsaretomakeinfrastructure

improvementsapriorityandtocrackdownheavilyoncorruption.Futureregionalsuccesson

theglobalscalemayhingeontheabilitytoserveasatransporthubandmovepeopleand

goodsonroadsandrailroads,andbyairandseatoregionsaroundtheworld.Infrastructure

healthwillalsoencouragetheinvestmentofbusinesses,whichtypicallyseektolocateinwell‐

connectedareasoftheglobe.Inregardtocorruption,allmeaningfulreformsinitiatedbythe

EACmayservelittlepurposeifcorruptgovernancecontinuesunabated.Corruptionisamassive

drainontheresourcesofacountry,andnegativelyimpactsnearlyallpartsofsociety.

Frameworksfortheprosecutionofcorruptionshouldbefurtherestablished,withstiffpenalties

forthosefoundguiltyofcorruptpractices.Inaddition,publicawarenessaboutwaystoreport

  34 

andstopcorruptionshouldbepromoted,andadvisoryinstitutionsshouldbecreatedto

monitortheactivitiesofgovernmentagenciesandindividuals.

InlookingtowardsemulatingthesuccessofAfrica’slargesteconomy,SouthAfrica,the

EastAfricanCommunityshouldapplyseverallessonsfromthatnation’seconomicexperience

toitsowninitiatives.ThenotableaspectoftheSouthAfricaneconomyisthepresenceand

activityofinternationalcorporationsandorganizations,whichutilizeSouthAfricaasthe

continentalhubforbusiness.TheEastAfricanCommunitymustefforttoachieveasimilar

situation,becominganotherhubforeconomicactivityinCentralandEasternAfrica.As

demonstratedthroughSouthAfrica’simpressiveinfrastructurenetwork,theprioritizationof

infrastructureimprovementsintheEACwillsimilarlyspurgrowthanddevelopment.

Additionally,theEACshouldstrivetoachievethesamekindofeconomicdiversificationthat

hasallowedSouthAfricatoprosper,andreduceheavyrelianceonthevolatileagriculture

sector.TheEACcanalsolearnfromsomeofthemistakesofSouthAfrica,aswell.Inequalityin

SouthAfricaremainsextremelyhigh,particularlyamongraces,andspawnsfrustrationand

economicinefficiency.TheEastAfricanCommunityshouldembraceitsdiversepeoplesandaim

foreconomicbenefitstobedistributedequally,givingallcitizensoftheEACagreaterchance

forabetterlife.

TheEastAfricanCommunityleadershiphassetoutanimpressiveandvisionaryplanfor

thefuture,yetthesimplecreationofplansdoesnottranslateintoeconomicdevelopmentor

regionalintegration.HardworkandtoughchoicesmustbemadebyeachoftheEACmember

states,orelseintegrationprocesseswillsputteranddieout,muchasinthewaytheoriginal

iterationoftheEACcouldnotachieveitsgoals.Caremustbegiventoimprovingthebasic

  35 

essentialsofEastAfricaneconomiesandsocietiesbeforeloftygoalsofintegrationare

considered,andlargestepsinintegrationcannotberushed.IftheEastAfricanCommunityis

abletoresponsiblypursueregionalintegrationandeconomicdevelopment,however,the

regionispoisedtobecomeaneconomicforcenotonlyinAfricabutaroundtheworldincoming

decades.

  36 

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History in Africa31(2004):117‐132“EconomyRankings,”Doing Business – The World Bank Group (2013)Knappert,Jan.“AShortHistoryofZanzibar,”Annales Aequatoria13(1992):15‐37Marks,Sally.“MistakesandMyths:TheAllies,Germany,andtheVersaillesTreaty,1918‐1921,”Journal of Modern 

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475‐502“NewlyExpandedPortBerthReopensinKenya’sMombasa,”Xinhua News Agency(Aug.29,2013) “ProtocolontheEstablishmentoftheEastAfricanMonetaryUnion,”East African Community(November2013)Scott,Peter.“TheWitwatersrandGoldField,”Geographical Review41(October1951):561‐589“SectoralTrends:PerformanceofthePrimaryandSecondarySectorsoftheSouthAfricanEconomy,”Industrial 

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Additionalsourcesconsultedforfurtherreading:http://unctad.org/en/Docs/iteiia20054_en.pdfUNInvestmentguide–EastAfricanCommunityhttp://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Special‐Reports/DB13‐EAC.pdfDoingBusinessintheEastAfricanCommunityhttp://www.economist.com/node/14376512

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Economist–EastAfricanFederation(2009)http://www.eac.int/index.php?option=com_docman&task=doc_view&gid=650&Itemid=163EastAfricanCommunityDevelopmentStrategy(2011/12‐2015/16)http://www.irgamag.com/regions/africa/item/4663‐the‐difficulties‐of‐creating‐an‐east‐african‐federationDifficultiesofcreatinganEastAfricanFederationhttp://blogs.worldbank.org/psd/coordinated‐reform‐efforts‐are‐key‐develop‐east‐african‐communityWorldBank–ReformsneededtodevelopEAChttp://ec.europa.eu/trade/policy/countries‐and‐regions/regions/eac/EuropeanCommissioninfoandlinksaboutEAChttp://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Economic%20Brief%20‐%20State%20of%20Infrastructure%20in%20East%20Africa.pdfAfricaDevelopmentBank–InfrastructureinEastAfricahttp://www.grailresearch.com/pdf/ContenPodsPdf/Grail‐Research‐The‐East‐African‐Community.pdfGrailResearch–TimeforbusinesstotakenoticeofEAChttp://www.ft.com/cms/96cb2e42‐1a53‐11e1‐ae14‐00144feabdc0.pdfFinancialTimes–DoingBusinessinEastAfricanCommunityhttp://unctad.org/en/Pages/Statistics/About‐UNCTAD‐Statistics.aspxUNConferenceonTradeandDevelopment(UNCTAD)Statisticshttp://www.uneca.org/UnitedNationsEconomicCommissionforAfricahttp://www.brookings.edu/~/media/research/files/reports/2012/1/intra%20african%20trade/01_kenya_trade.pdfBrookingsInstitute–InstitutionalandRegulatoryBarrierstoEACTradeforKenyahttp://nmc.rw/IMG/pdf/reshaping_eac_econimic_integration1.pdfWorldBank‐EastAfricanCommunity:ReshapingEconomicGeographyofEastAfrica:FromRegionaltoGlobalIntegrationhttp://www.csae.ox.ac.uk/workingpapers/pdfs/csae‐wps‐2012‐01.pdfCSAE–MarketIntegrationandBorderEffectsinEasternAfricahttp://www.uneca.org/sites/default/files/document_files/assessment‐of‐progress‐on‐regional‐integration_en_0.pdfAssessmentofProgressonEACintegration–UNEconomicCommissionforAfrica