Key Note Address - ICIFA 3rd International Investment Conference (Hybrid)
1 December 2022
Allow me to convey the cordial greetings from Hon. Peter Mathuki, the EAC Secretary General who is unable to attend this important conference due to scheduling conflict. As you may know, he is currently attending the ongoing session of the East African Legislative Assembly in Kigali, Rwanda.
Chairpeson, Ladies and Gentlemen,
That said, it is now my great honour and privilege to deliver Hon.SG’s speech to this important conference.
On behalf of the EAC Secretary General and on my own behalf, I wish to congratulate you all on organizing the 3rd International Investment Conference under the timely theme: “Wealth Creation in Africa: The role of investment Professionals.” Indeed, the African continent is a wealthy continent and thus the need to diversify and create wealth in Africa through investments.
You should be immensely proud of yourselves for the excellent work done by your Institute. I take this opportunity to thank i for inviting the East African Community and making necessary arrangements to enable me to join this important gathering. I also wish to express my gratitude for the warm hospitality extended to me by Ms. Diana Maina, ICIFA CEO and her team since my arrival in this beautiful city of Nairobi.
Chairperson Ladies and Gentlemen
As you know, the East African Community (EAC) is a regional inter-governmental organisation of seven Partner States: the Republic of Burundi, the Democratic Republic of Congo (DRC), the Republic of Kenya, the Republic of Rwanda, the Republic of South Sudan, the United Republic of Tanzania, and the Republic of Uganda, with its headquarters in Arusha, Tanzania. The work of the EAC is guided by its Treaty, which established the Community. The admission of the Democratic Republic of Congo (DRC) recently expanded the region’s market size to an estimated 300 million people. The GDP is estimated to be 300 billion dollars.
As one of the fastest-growing regional economic blocs globally, the EAC continues to widen and deepen cooperation among the Partner States in various key spheres for their mutual benefit. The spheres include political, economic, and social, where there has been encouraging progress in implementing the Pillars of integration. These pillars include the Customs Union, Common Market, and Monetary Union, with steady progress towards the goal of the Political Federation.
Chairperson Ladies and Gentlemen,
The Implementation of the Single Customs Territory in 2014 has facilitated faster clearance and improved cargo movement along the Northern and Central Corridors through customs systems interconnectivity and information sharing and replacing multiple entries and documents with a single declaration.
Regional trade facilitation measures include border reforms to ensure that border operations are well-sequenced, linked, and seamless. 14 One-Stop Border Posts have been established, and others are in the process of construction. This has improved the trade environment by reducing border trade formalities of processing documents and improved border crossing speed and efficiency. For example, the time and cost of transporting goods from Dar es Salaam and Mombasa ports were reduced from 21 and 18 days to 7 and 4 days, respectively. The cost has also reduced from USD 3,100 to USD 1,025.
The Customs Union has also created room for consolidation of trade negotiations between the Partner States and other economic blocs and countries, such as COMESA, SADC, and other African Countries under the AfCFTA and the EU. The EAC has prioritised third-party markets as critical pillars for export promotion, market expansion, investment attraction and industrialisation.
The EAC aims to create an attractive environment for inward investment, economic expansion, and development. At its heart, the East African Common Market seeks to propel the growth of a larger EAC internal market and reduce administrative burdens on business and trade.
The EAC Monetary Union Protocol initially provided a 10-year roadmap to attain a Single Currency by 2024. The EAC is currently developing the necessary structures to facilitate the implementation of the Monetary Union. Financial and fiscal integration is ongoing with agreed macroeconomic convergence criteria. The East African Payments System with Real-Time Gross Settlement currently allows EAC Partner States to trade with each other using their local currencies, removing the need for expensive foreign currency and promoting business within the region
Peace and security are prerequisites to economic and social development within the Community. The building blocks of a Political Federation are being constructed through our governance, security, defence, and Foreign Policy Coordination programs. The process of drafting the East African Constitution for a Political Confederation is in progress.
Chairperson Distinguished participants
Wealth creation beyond borders: Enhancing East Africa Community Trade Ties
The 2019 edition of the Africa Regional Integration Index (ARII) ranks the EAC as the most integrated bloc among the eight regional economic communities (RECs) recognised by the African Union. The region scores highly on the free movement of people, goods and services, infrastructure (road, rail, air and waterways), macroeconomic, productive and trade integration.
The EAC Partner States have also undertaken various reforms inspired by the World Bank Group’s Doing Business indicators since 2002. EAC average scores have remained higher than other economic blocs on most ease of doing business indicators that make the EAC an attractive investment destination. The significant progress in all the phases of our integration process indicates the right path the EAC Partner States are pursuing to unlock opportunities and redesign EAC’s economic systems
The EAC continues to create an enabling environment and enhance regional investor confidence. The Partner States have agreed to cooperate in Investment and Industrial Development, as outlined in the EAC Treaty (Chapter 12, Articles 79 and 80). The cooperation seeks to harmonise and rationalise investment incentives to promote the Community as a single investment destination.
To facilitate cross border investments across the region, Partner States under the EAC Common Market Protocol guaranteed the right of establishment of nationals of the other Partner States, which entitles nationals in the region to take up, pursue economic activities as self-employed persons, set up, and manage economic undertakings in the territory of another Partner State. The value of cross border investment in the Community has gradually increased from US$ 190 million in 2010 to US$ 583 million in 2021. The EAC Region in 2020 recorded US$4.91 billion in various sectors, creating 55,552 jobs from a total of 747 projects.
To facilitate movement of capital across the region, Partner States committed to remove all restrictions covering twenty (20) capital market operations that include: direct investments, and personal capital. The CMP covers three direct investment operations: inward direct investment, outward direct investment, and repatriation of profits from sale of assets. While Partner States have made significant strides in the elimination of restrictions to enable the free movement of capital, some restrictions exist on inward direct investments as per the EAC Common Market Scorecard 2020 .
Scorecard revealed that although no EAC Partner State imposes restrictions on repatriation of proceeds from asset sales within the region, restrictions exist in Burundi and Tanzania on outward direct investments, and laws and regulations in Kenya, Rwanda and Tanzania affect some inward direct investments. The analysis further reveals that the laws and regulations relate to structure of business ownership (shareholding requirements) and difference in treatment between nationals and other East African residents in terms of enjoyment of specified rights.
The EAC Partner States have agreed to cooperate in spearheading regional investment. To this end, an EAC Model Investment Code was adopted in 2006, whereas an EAC Investment Policy was adopted in 2021, and Strategy is under preparation. The Investment Code is not a binding legal instrument but a model whose features the EAC Partner States may incorporate into their national laws. In 2016, an EAC Model Investment Treaty was adopted. However, this will be revised in line with AfCFTA Protocol on Investment, negotiated at the Continental level.
As you may be aware, negotiations for AfCFTA Protocol on Investment have been going on at the continent level, and it is now due for adoption. In their last extraordinary meeting of the Council of Ministers, it was agreed that Council would submit the Protocol to the Summit of Heads of States and Government for adoption. Therefore, EAC will align its investment instruments to this Protocol once adopted.
Key features of the EAC investment framework include: a) Duty Drawback Schemes- The drawback of import duties for materials used exclusively in the production of goods exported to a third country, as provided for in the Customs Union Protocol. b) Duty and VAT Remission Schemes- The Customs Union Protocol provides for duty and VAT remission schemes to support export promotion. c) Manufacturing-Under-Bond (MUB) Schemes- The EAC Partner States may facilitate MUB schemes within their territories under the Customs Union framework. Such schemes would allow imported goods to be used for processing or manufacturing. d) Export Processing Zones (EPZs) -The Customs Union Protocol has spelt out Export Processing Zone Regulations to ensure uniformly established EPZs and that the implementation process is transparent, accountable, fair and predictable. To further promote uniformity, the EAC Partner States propose to develop an East African Community Model Export Processing Zones Operational Manual. e) Free Ports- The Customs Union Protocol provides for the establishment of free ports within the Community. The functions of these ports include promoting and facilitating trade, providing storage, warehouses and simplified customs procedures, and establishing international supply-chain centres, which would enhance the Community’s global competitiveness f) Harmonisation of Duty Exemption Regimes- The EAC Partner States have agreed to harmonise duty exemption schemes and adopt a single list of exemptions specified in the customs law of the Community.
The role the Institute of Certified Investment and Financial Analysts and professionals can play to create wealth beyond borders
Include EAC and Regional Integration in your training curriculum Play a more significant role in shaping and informing EAC policy (advocacy), notably the Common Market Protocol (CMP), i.e. Free movement of Services and Capital, Right of Establishment, and tracking Partner States’ reforms of CMP non-compliant laws, including developing policy positions Promote cross-border investments to attract holistic investments across integrated value chains Develop an EAC compendium of bankable projects and financial feasibility studies that can attract investments Tap into EAC Diaspora as a critical strategic partner essential for harnessing resources for Africa’s transformative and inclusive socio-economic
With these remarks, I wish the Conference fruitful deliberations and I hereby declare the Conference officially open. Thank you for your kind attention