East African Community member states will have to wait longer for a monetary union. A taskforce to look into the matter has proposed to delay the implementation of the East African Monetary Union (EAMU) until 2031 from initial date of 2024, saying it is too soon considering members have not attained all requirements.

The proposed delay is an indictment on the members’ commitment to achieve EAMU, a key pillar of integration.

The EAMU is the third pillar of the EAC, others being the Customs Union and the Common Markets Protocol. The region, under EAMU, is expected to adopt a single currency by 2024.

“We have a roadmap that was supposed to be implemented between 2013, when the Monetary Union protocol was signed, and 2024. But we did not manage to implement most of the activities in that roadmap,” said Dr Pantaleo Kessy, Principal Economist, EAC Secretariat.

“According to the roadmap, the EAC convergence criteria were to be attained by 2021 and be maintained for three years in the run-up to the establishment of the Monetary Union in 2024.”

Behind schedule

However, going through each activity, shows that all the partner states – Burundi, Kenya, Uganda, Tanzania, Rwanda and South Sudan – are behind schedule.

According to the EAMU roadmap, four broad prerequisites need to be achieved ahead of the establishment of the Monetary Union and the first one includes the full implementation of the Customs Union and Common Market protocols.

However, both the Customs Union and Common Market Protocols are currently under implementation. Although much progress has been made, the protocols are not yet fully implemented.

“Partner states are at different levels of implementation and that partly slows the implementation of the EAC third pillar, the EAMU,” said Dr Kevit Desai, Principal Secretary at the EAC and Regional Ministry of Kenya.

Second, not all partner states have attained the four macroeconomic convergence criteria, for the implementation of the monetary union.

Headline inflation

These include ceilings on headline inflation of 8 percent; reserve cover of 4.5-month import; on overall deficit of 3 percent of GDP; and on gross public debt of 50 percent of GDP.

“Attainment of these criteria has been challenging to most Partner States, partly due to increased demand for infrastructure development and spending to mitigate the economic impact of the Covid-19 pandemic,” Dr Kessy explained.

“Kenya, Uganda, Tanzania and Rwanda attained the headline inflation target of less than 8 percent in 2021. But only three Partner States attained the official foreign exchange reserve target of 4.5 months of imports.”

Long past deadline

Further, three Partner States attained the debt to GDP target of less than 50 percent; while none was able to attain the fiscal deficit criterion of 3 percent of GDP (including grants).

The EAC is yet to put in place institutions that will carry out the mandate and implement the EAMU protocol.

The taskforce is made up of financial experts from EAC’s partner states’ ministries of Finance, Central Banks, capital markets, insurance and pension firms.

The East African Monetary Institute is one of the institutions expected to carry out the preparatory work for the One Single currency under EAMU which was planned to be in place by 2024.

The Council of Ministers designated July 1, 2021, as the date for the coming into effect of the EAMI, the precursor to the East African Central Bank.

But the deadline is long past.

The other three institutions proposed under the EAMU include the EAC Financial Services Commission; the EAC Surveillance, Compliance and Enforcement Commission; and the EAC Statistics Commission. Establishment of these institutions is lagging behind, partly due to lack of resources.

The fourth criteria that is still lacking behind is the harmonisation of Policies and legal frameworks to support implementation of the EAMU Protocol.

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East Africans are second-guessing what the projected global recession in 2023 could mean for them, given the International Monetary Fund says about a third of the world will be in recession, led by the globe’s largest economies including the US, China, and Europe.

The recent growth projections by the international financier puts East African countries’ prospects for this and next year better than the global average, but analysts say the region will not be spared from the coming recession.

According to the IMF’s World Economic Outlook report released last month, the global GDP growth rate will fall from six percent last year to 3.2 percent in 2022, further decelerating to 2.7 percent in 2023 as a result of disruptions caused by the eastern Europe conflict.

East Africa’s economy is, however, predicted to grow by averagely 5.2 percent this year, dropping from 6.4 percent last year, but is expected to accelerate to 5.6 percent next year, highlighting a better performance than the rest of the world.

Harder economic times

But despite this, economists and financial analysts say citizens will need to brace for harder economic times next year as the looming recession could result in mass job losses, pay cuts, and a general slump in economic activity disrupting livelihoods.

“Most of the global economies are rapidly headed towards recession and Kenya is no exception,” said Rufas Kamau, the lead markets analyst at Nairobi-based financial markets broker FXPesa.

According to Mr Kamau, Kenyans should take necessary actions to save the most they can right now to be able to stay financially stable in the event of pay cuts, and improve their work efficiency to reduce their chances of retrenchment.

“With October inflation hitting 9.59 percent and the CBK raising policy rates to 8.75 percent, the environment for economic growth becomes tougher for Kenyans as the cost of loans becomes more expensive and consumer budgets continue being suppressed by inflation,” Kamau told The EastAfrican.

“Access to credit is still tough for the SMEs as banks prefer investing in government bonds since they bear less risk and the highest returns of any asset class in the country.”

Hold on to cash

American billionaires Jeff Bezos and Elon Musk have also been very vocal lately of the looming recession, similarly advising people to hold on to their cash instead of spending on luxuries such as cars, television sets or refrigerators.

Ken Gichinga, the chief economist at Kenyan analytics firm Mentoria Economics, agrees that Nairobi and the rest of East Africa might slump into recession next year, but the effect won’t be as fast nor as vast as it will be in the more developed markets.

“The effect will be immediate in the more developed western countries which have a wider credit market, meaning that rising interest rates will impact more people and entities almost instantly,” Mr Gichinga told The EastAfrican.

“In East Africa, the dynamics are a little different. Many people won’t feel the pain of rising interest rates immediately because they don’t rely on credit and the impact won’t be immediate.”

The rising interest and inflation rates and job losses resulting from the recession in the west, Gichinga said, will eventually trickle down to the region ultimately causing “what will feel like a recession.”

Tread carefully

According to both Kamau and Gichinga, while there is no certainty that East Africa’s economy will fall into a recession next year, people should tread carefully with their finances as there isn’t a guarantee the economy will evade the coming global recession either.

Eyes are now on policymakers to employ the best tools to stabilise economies to minimise the impact pf the looming recession and help save jobs and livelihoods as the coming recession sparks fear.

Kristalina Georgieva, the IMF managing director said countries should try to get the right mix of monetary and fiscal policy measures to overcome the threats posed by the global financial conditions.

“With monetary policy stepping on the brakes, fiscal policy should not step on the accelerator,” Ms Georgieva said last week while speaking at the Asia-Pacific Economic Cooperation leaders’ summit. “We should be in a mode of alert, not alarm, and develop policies to address these risks.”

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Road tolls have again emerged as hurdles to smooth trade between East African Community member countries as each government charges its own fees on trucks moving into its territory.

The region’s business stakeholders are however optimistic that trade in the bloc will increase by 11 percent in 2022-2023 if toll fees and domestic taxes are harmonised to prevent distortion and create a level playing field for businesses.

“We are proposing that EAC partner states charge a uniform fee of $10 per 100km on all trucks the way Uganda does,” said John Kalisa, chief executive of the East African Business Council.

“Once collected, the amount should be used for the purpose for which it was intended — that is to repair and maintain the same roads,” he added. Tolls are usually implemented to help recoup the cost of road construction and maintenance, as well as finance other infrastructure projects.

The $10 charge that the EABC has proposed translates to close to $144 for the region, down from $500.

Flat rate

he anticipated $144 levy is the flat rate across the Common Market for Eastern and Southern Africa (Comesa).

EABC is reacting to complaints by importers who have highlighted the rising cost of doing business in the region occasioned by the varying charges in each member country even as normal cross border trade returns free of pandemic restrictions.

The reopening of the Katuna-Gatuna One Stop Border Post on January 31, 2022, for instance, has seen some 160 trucks cleared daily to cross between Uganda and Rwanda, paying at least Ush470 million ($125,735) in tax collections to Uganda per month. At least 1,000 people cross here daily too.

However, the two countries are charging different road tolls.

“Rwanda charges a fixed rate of $76 for small trucks and $152 for large trucks, while Uganda charges $10 per every 100km,” said Kalisa.

“Tanzania is charging more than $156 per truck, which is very expensive,” he added.

The same applies at the Mutukula border crossing between Tanzania and Rwanda where trucks are also charged different road tolls.

“As the business community in the region we are advocating for a common standardised fee because any variation distorts trade,” Kalisa said.

Most affected

He identified Uganda, Tanzania and Rwanda as some of the most affected EAC partner states where different toll fees are distorting intra-regional trade, which is still below 15 percent.

Tanzania — which serves as a gateway to the sea for its landlocked neighbours Uganda, Burundi, Rwanda, the Democratic Republic of Congo, Zambia and Malawi — is charging Ugandan cargo trucks $500 as fees for road repairs and maintenance.

Rwanda has also threatened to levy a similar amount on Tanzanian trucks coming through the Mutukula border crossing. The two countries are in discussion over the same.

“There is a need to harmonise road tolls across the region and we are glad that the EAC Secretariat and respective ministries have been tasked to hasten harmonisation of road toll fees in the region,” said Pascal Bizimana, commissioner general Rwanda Revenue Authority, when he held talks with the EABC last week.

Mid this year, Tanzania announced plans to cut road toll by about 71 percent on Uganda-bound cargo trucks, as part of an agreement reached at bilateral talks between Presidents Samia Suluhu Hassan and Yoweri Museveni.

However, the plans are yet to be effected.

Reduce costs

The harmonisation of the toll fee is expected to reduce the cost of doing business.

Transport and logistical barriers to regional trade are estimated to cost East African economies between 1.7 percent and 2.8 percent of gross domestic product every year.

Trade liberalisation and improvements to infrastructure will help reduce these costs, creating ease in doing business across the region and in turn benefitting consumers through lower prices.

The EAC has been tasked with harmonisation of toll fee on the Northern Corridor (1,700 km long) that begins at the Port of Mombasa and serves Kenya, Uganda, Rwanda, Burundi and Eastern DRC.

The Central Corridor (1,300 km long) begins at the Port of Dar es Salaam and serves Tanzania, Zambia, Rwanda, Burundi, Uganda and Eastern DRC.

The improved infrastructure is expected to have a large knockoff effect in poverty reduction in the region through trade-induced changes in prices while reduction in border delays and costs will cut the overall cost of investment for businesses.

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The increasing risk of debt distress, widening fiscal and current deficits and limited economic diversification plans in the economies of East Africa, have combined to weaken prospects for growth this year.

The African Development Bank forecasts the region’s GDP at four per cent this year, before recovering to 4.7 per cent in 2023, helped by the reopening of the economies after the Covid-19 containment measures.

However, countries are yet to achieve their pre-Covid growth levels, according to the bank’s East Africa Regional Economic Outlook 2022 released last week.

According to the report, the projected strong growth is not uniform across the wider eastern African region, with top performers being Ethiopia, Kenya, Rwanda, Seychelles, Tanzania, and Uganda.

Invasion of Ukraine

The Russian invasion of Ukraine, which has increased global food and energy prices, could further slow the economic recovery, according to AfDB.

The report reviews economic performance of 13 countries (Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania, and Uganda) over the past year with short to medium-term projections.

According to the IMF review of fuel taxes remains an option for countries seeking to deal with the high fuel prices and surging inflation in the region but this will depend with the countries’ internal revenue and expenditure policies.

Harsh, unpopular prescriptions

The fund has also backed elimination of fuel subsidies, prudent management of public resources, complete reforms of inefficient and loss-making state-owned enterprises and balanced funding plan tilted towards concessional loans to help navigate the biting economic crisis.

“The options to consider those taxes (fuel taxes) are things that countries can consider. Countries have the options to consider the domestic tax systems and reform measures taking into account the specific government policies. It is a sovereign decision they can make,” said Catherine Pattillo, the fund’s Deputy Director-in-charge of African Department.

Rising crude prices

EA’s pace of economic recovery from the pandemic faces new threats from rising crude prices and the Russia-Ukraine war that has disrupted global supply chains leading to higher food and energy prices, depreciating currencies, and falling forex reserves.

Currency depreciations have resulted in higher energy and wheat prices in local currency terms compared with the price in dollars. Also, consultants at Deloitte say EA countries are going through difficult period that will see economic decline this year, driven by political instability and unreliable rainfall that has adversely impacted agricultural yields.

The economists in the report “Resilience through tough times” show that the region’s GDP has been heavily impacted by political instability in Kenya and Ethiopia, the major economic growth drivers in the region, and reduced agricultural sector growth.

EA’s inflation is forecast to increase to 8.6 per cent in 2022 from 7.7 per cent in 2021 driven by elevated global food and energy prices, amid Russia’s invasion of Ukraine.

According to the World Bank’s latest Commodity Markets Outlook report released last week the weakening of currencies of most developing economies is driving up food and fuel prices in ways that could deepen the food and energy crises.

Elevated prices of energy commodities that serve as inputs to agricultural production have been driving up food prices, with food inflation in Africa averaging between 12 and 15 per cent.

Globally, energy prices are forecast to still be 75 per cent above their average over the past five years , next year while the price of Brent crude oil is expected to average $92 a barrel in 2023 — well above the five-year average of $60 a barrel.

“The forecast of a decline in agricultural prices is subject to an array of risks,” said John Baffes, Senior Economist in the World Bank’s Prospects Group.

Globally, inflation is expected to increase to 9.2 per cent in 2022 from 5.3 percent in 2021 largely attributable to the high energy and food inflation that is a result of negative spillover stemming from the Russia-Ukraine conflict.

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Workers in the East African Community member countries could soon transfer their pension savings from one country to another, guaranteeing no losses even when one moves jobs.

This is part of a proposal for the bloc to harmonise and make pension funds attractive to workers who until now have been saving in state-sponsored or private schemes in countries where they work.

Retirement savings

The urgency of reform was touched off last week by Kenyan President William Ruto, who tabled proposals to reform Kenya’s National Social Security Fund (NSSF).

One such proposal is to make it mandatory for anyone with a regular income to contribute to the fund for their pension irrespective of their contractual terms, as well as making employers liable to match the regular contributions by employees.

“We intend to overhaul our social security infrastructure to make it inclusive. To encourage those excluded to save, I will be proposing a national savings drive to encourage those in the informal sector to set up their retirement savings plan,” said President Ruto in an address to the joint house of parliament two weeks ago.

For every Kenyan who will save Ksh6,000 ($49.65) per month, the president said, the government of Kenya will contribute an additional half of that every month.

At the regional level, the East African Community is expected to publish a report on the social protection laws and policies that will inform and guide the legal process for the portability of social security benefits as directed by EAC ministers of Labour.

On October 6, stakeholders in labour regulation met to discuss the portability of workers’ retirement savings within the EAC.

Benefits

A draft on the EAC co-ordination of social security benefits that is being validated in each partner state will provide rules and procedures for the co-ordination of social security benefits.

These benefits fall within the framework of the free movement of workers and self-employed persons in order to contribute towards improving their standard of living and conditions of employment.

The draft proposes that employment benefits such as maternity, employment injury/occupational disease, health and sickness benefit, family benefit, and unemployment benefit shall be applicable according to the legislation of partner states; and shall not be portable.

However, it is President Ruto’s calls for enhancing Kenya’s NSSF contributions that have ignited calls for reforms in the labour sector.

Kenyans save a flat rate of Ksh200 ($1.65) per month in the scheme, which Ruto argued is too low to build savings that would offer decent living upon retirement.

In Tanzania, the law provides for savings of 10 percent of one’s gross earning and the employer contributes a similar amount to the NSSF.

In Kenya, the NSSF is a social security provider for Kenya’s workers in the formal and informal sector. But for many years since its formation, NSSF only serves those in formal employment, which is about three million people.

The draft EAC policy proposes that the processing and payment of a legitimate claim shall be completed in a period not exceeding45 days after the date of receipt of the said benefit application.

Policies

Where the claim cannot be paid within the stipulated period, the institution shall notify the relevant Competent Institution and explain reasons for the delay.

“There is a need to promote labour migration in the region, through the harmonisation of labour laws, enhancement of the use of ICT in collection, analysis and dissemination of labour market information, and data and statistics on migrants,” said Simon Chelugui, Kenya’s Cabinet Secretary nominee for Labour and Social Protection, and Cooperative.

Chelugui chaired the EAC Labour ministers’ committee who came up with the draft proposals.

“EAC partner states may in future have to consider honorary consul services in key labour destination countries to improve the provision of necessary consular assistance and protection of the social, economic, labour and human rights of EAC migrant workers,” he added.

The Kenyan leader is promising to overhaul that completely so that it can work for all Kenyans including those in the informal sector who form the largest population outside the pension sector.

He may have to work on the institution’s credibility as NSSF’s history has been marred by scandals and ill-conceived investment policies.

Critics are worried that President Ruto’s call for more contributions without the requisite legal regime to protect the funds from theft is just another way for those in government to interfere with the management of NSSF funds.

“That is not the case right now. You know pension is protected. If I take it and keep it you can’t reach it,” said Anthony Omerikwa, managing trustee of NSSF, defending the leadership direction the fund has taken in the recent past.

“Currently, the contribution and people who are in the ambit of NSSF are around 2.9 million. But those people in the informal sector are about 18 million. The way to get them on board is two ways; make it statutory and thus incentivise contribution. That awareness is also not there. We are moving into ‘space’ for citizenry who not only want to spend more but they also want to spend what they don’t have. We are moving into a new deep credit space.”

Critics of the NSSF also argue that efforts by NSSF to convert it from a National Provident Fund Scheme to a Social Insurance Pension Scheme have been hampered by lack of a clear legal and lack of political will.

If converted as a social insurance scheme, the new NSSF will operate as a mandatory National Social Insurance Pension Scheme, serving as workers the 1st pillar of social protection.

“We have a draft bill in place. It is very important so that Kenya start saving. The employer matches for those in employments; for those in voluntary scheme, the government matches. You remember the 1 to 2 ratio and I think that will expand the saving space and also facilitate the government to do so many things that it needs to do,” said Omerikwa.

“We already have the NSSF Act of 2013. But we also need mandatory contributions by people from the informal sector and so we need a voluntary provident fund within the NSSF Act. Both of hose components are very important for us as a country, which calls for a law that will guide the pension industry,” said Sandeep Raichura, Group CEO of Zamara, a pension and investments firm.

“Whether you are in casual, contractual or permanent employment there is a mandatory contribution. It has to be an automatic contribution by the employer as well. It has to be made compulsory irrespective of your employment status.”

Compliance

Everyone with an income should be registered as a contributing member and a law enacted to ensure compliance.

“The truth of the matter is that the money we are paying to NSSF cannot even run or sustain the administrative work at NSSF. They require more funds and we as Cotu had agreed on that,” said Francis Atwoli, Secretary General of Cotu (K). “So what the president is saying is what we had endorsed sometimes back.” Atwoli said permanent jobs are on decline, thereby reducing contributions towards NSSF.

“They are about 6 to 7 million of people on permanent jobs. But the rest of Kenyans are in the informal sector on contractual and casualization jobs. Of these categories majority of Kenya workers are seasonal and those categories of workers are not contributing to NSSF because they are not on a check off system.”

He added, “My proposal was that we had already agreed that for those people who are not on the check off system be paying directly to NSSF, to open and boost their own accounts.”

According to the International Labour Organisation (ILO) Country Director for Tanzania and EAC region, Wellington Chibebe, Africa has a high informality rate which currently is estimated at 82.9 per cent.

“When measured in terms of gender, the informality rate of women at 86.6 percent is higher than that of males, which stands at 80 per cent. Africa’s informality rate translates into 379 million people being in informal employment. The problem of informality is higher in Sub-Saharan Africa than in North Africa at 84.9 percent and 70.8 per cent in North Africa,” said Mr. Chibebe.

“Informality” is a term used to describe the collection of firms, workers, and activities that operate outside the legal and regulatory frameworks or outside the modern economy.

Mr Chibebe revealed that the social protection expenditure in Africa amounts to less than 5 percent of GDP compared to a global average of 12.9 per cent, thus adding to the reasons as to why the region is in need of a common social protection legal framework.

The draft EAC policy proposes that the processing and payment of a legitimate claim shall be completed in a period not exceeding forty-five (45) days after the date of receipt of the said benefit application.

Where the claim cannot be paid within the stipulated period, the Competent Institution shall notify the relevant Competent Institution and explain reasons for the delay.

“There is a need to promote labour migration in the region, through the harmonization of Labour laws, enhancement of the use of ICT in collection, analysis and dissemination of labour market information, and data and statistics on migrants,” said Simon Chelugui, Kenya’s Cabinet Secretary for Labour and Social Protection, and Cooperative CS nominee.

Hon Chelugui chaired the EAC Labour ministers who came up with the draft proposals.

“EAC partner states may in future have to consider Honorary Consuls services in key labor destination countries to improve the provision of necessary consular assistance and protection of the social, economic, labor and human rights of EAC migrant workers,” he added.

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The East African Crude Oil Pipeline (Eacop) has attracted $300 million from alternative lenders as its proponents rush to save the project from pressure groups citing environmental concerns.

This week, Uganda received an additional pledge of $200 million from the Afriexim Bank towards erecting the pipeline whose total cost is $5 billion.

On October 3, Afriexim Bank executives, led by their chairman, Prof Benedict Oramah said they viewed the implementation of Eacop and related oil and gas projects, including financing of Uganda’s refinery, as a strategic business that will uplift African economies’ armoury to fight poverty.

Last month, the Islamic Development Bank also announced $100 million for the construction of Eacop, saying the lender’s Board of Executive Directors was ready to help in funding the project due to the importance of the oil and gas industry to the Uganda economy.

The money may be a trickle for now, but it could provide backup for the governments in Uganda and Tanzania to swat away growing pressure to abandon the project over pollution concerns.

French oil major TotalEnergies last month received censure from the European Parliament, citing rights violations and environmental problems.

Eacop is financed on a 60-40 percent debt-equity split, with lenders expected to provide loans while the shareholders – TotalEnergies, Uganda National Oil Company, Tanzania Petroleum Development Corporation and CNOOC – would raise the remainder through equity contribution.

The governments of Uganda and Tanzania have defended the project’s route as an integrated energy corridor that will transport crude oil and carry gas exports to the region, while eventually saving the environment by providing cleaner cooking fuel to villages.

Last week, President Yoweri Museveni said he initially did not support the idea of a pipeline as the best means to commercialise Uganda’s oil but later changed his mind on Eacop as it provides an alternative import channel for gas to Uganda.

“While we have a lot of oil, we don’t have much gas. Tanzania and Mozambique have a lot of gas. The same corridor where Eacop will run can bring a return pipeline to transport gas to Uganda. This is one of the reasons I am in support of the pipeline,” he explained at an oil and gas forum in Kampala.

Tanzania envisages final investment decision in 2025 for its $30 billion liquefied petroleum gas project, and production in 2029. Standard Bank Group, through its Ugandan subsidiary Stanbic Bank is one of the transaction advisors for the financing of Eacop, whose cost jumped from $3.5 billion to an estimated $5 billion, due to the increased cost of loans after major banks shunned the project as an environmental risk, lead investor TotalEnergies said in 2021.

Energy Minister Ruth Nankabirwa says Uganda is aware of the global push from fossil fuels to clean energy, but the country’s oil and gas projects are critical to enabling it to make the energy transition and should be accorded patience and understanding of the stage of its development.

“As a country, we are earnestly pursuing energy integration before we can talk about energy transition,” she said during the seventh edition of the Uganda International Oil and Gas Summit held in Kampala September 27 to 28.

She added that the Lake Albert oil and gas projects will see the government provide LPG to its citizens that still use biomass and argues that the oil and gas sector will thus play a key role in enabling the country to meet its climate change obligation as it provides cleaner energy options.

“The discovery of oil in Uganda is a unique chance to transform its economy by improving infrastructure and reduce poverty. We are proud to support the government with $100 million for the East Africa Crude Oil Pipeline Project to help export its oil,” the board said.

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East African member states have dominated the list of countries that have domesticated the Africa Continental Free Trade Area (AfCFTA) adequately to facilitate commencement of trade under the trading bloc’s framework.

Speaking during the launch of the Guided Trading Initiative on October 7 in Accra, Ghana, AfCFTA Secretary General Wamkele Mene said that so far three out the eight countries that have set the stage for trading under AfCFTA are from East Africa.

The Guided Trade Initiative facilitates trade under AfCFTA through matchmaking businesses and products for export and import between these interested state parties.

“I want to thank those countries that have expressed readiness to start trading under the AfCFTA. Those countries are Ghana, Kenya, Rwanda, Tanzania, Egypt, Mauritius, Cameroon and Tunisia. More and more state parties are expressing interest as they conclude the process of domesticating the AfCFTA in their law,” Mene said.

Kenya and Uganda have already undertaken trade under the AfCFTA Guided Trade Initiative with Kenya having exported exide batteries worth $77,000 on September 23 to Ghana following importation by Yesudem Company Ltd. Kenya made its second export under the AfCFTA Guided Trade Initiative on October 5 which consisted of tea exports to Ghana.

“In Kampala, there was a very successful trade fair where goods that are traded under the AfCFTA were being flagged off by the Prime Minister for export to Zambia. In Kenya, President William Ruto told me that all of the tea consignment that was being exported to Ghana had been produced by small-scale farmers and so there is a significant opportunity for small-scale,” Mene added.

Kenya’s High Commissioner to Ghana, Eliphas Mugendi Barine, says that whereas this is a step in the right direction, Africa still faces significant challenges in navigating logistical hurdles which present non-tariff barriers to the acceleration of trade under the Guided Trade Initiative.

“Logistics still remains one of the hindrances because moving goods within the continent is becoming a challenge. I just learned that the container that was launched for the tea export to Ghana from Nairobi will take six weeks to arrive in Accra. Six weeks is quite a long time and therefore we need to re-think matters infrastructure and logistics,” Barine said on the sidelines of the launch of the AfCFTA Guided Tourism Initiative in Accra.

AfCFTA has been billed as one of the interventions geared towards deepening the penetration of pan-African trade.

The United Nations Conference on Trade and Development (UNCTAD) places intra-African exports at 16.6 per cent lagging far behind Europe’s 68.1 percent and Asia’s 55 percent. The agreement establishing the AfCFTA was signed in Kigali, Rwanda, on March 21, 2018.

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The increase in transit tolls for ships passing through the Suez Canal by 15 percent is likely to impact exports to Europe from the region, the shippers warned.

Egypt has raised the fees for all vessel types, except bulk and cruise ships, whose fees will increase by 10 percent from next year.

Suez Canal Authority chief Osama Rabie said in a statement that the increment will take effect from January 1, 2023.

The authority cited rising energy prices, freight rates, and daily charter rates for ships, which are predicted to continue next year.

“The (tolls) increase is inevitable and is a necessity in light of the current global inflation, which translates into increased operational costs and the costs of the navigational services provided in the canal,” said Mr Rabie.

The key waterway connecting the Red Sea and the Mediterranean accounts for nearly 10 percent of global maritime trade.

The Shippers Council of Eastern Africa (SCEA) chief executive Gilbert Lagat said exports from East Africa destined to Europe would be the most affected.

“East Africa depends on most of its imports from Asia, which uses an alternative channel, whereas goods being exported from the region have to pass through the Suez Canal. This will complicate export, and some ships might opt to change their destinations considering the economies of scale,” said Mr Lagat.

He added, “We hope as shippers we shall come up with solutions or renegotiate with the authority for better rates.”

Exports to Europe from the region are mainly agricultural commodities such as coffee, tea, tobacco, cut flowers, fruits, vegetables and fish. Others are textile and clothing, and handicrafts, among others.

The Suez Canal is the main route used by vessels from Europe to the East African ports.

Daily charter rates for crude oil tankers increased on average in 2022 by 88 percent compared to 2021, while daily charter rates for liquefied natural gas (LNG) carriers rose on average by 11 percent during this year compared to the year earlier.

Mr Rabie said the current increased energy prices also impacted the authority’s fees calculations.

“The continued rise in crude oil prices above the level of $90 per barrel and the rise in the average prices of LNG above the level of $30 per million thermal units have led to a surge in the average prices of ship bunkers,” he said.

Consequently, there was an increase in the savings that ships achieve by transiting through the Suez Canal compared to other alternative routes, he explained.

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