Assessing Implications of Trumps Tariffs on Intra East Africa’s Regional and International Trade

By Moses Kulaba, Governance and Economic Policy Centre

Effective 5th April 2025 (with a pause of 90 days) the US President Donald Trump slapped a global tariff of 10% on all exports to the US. The US tariffs has caused a lot of turbulence and uncertainty about the future of the WTO rules based global trade as we knew it. The future of EAC -US trade is unknown and during this period loses will be counted particularly in the agriculture, textiles, apparel and handcrafts sector. However, in the midst of turbulence, the EAC has an opportunity of re-inventing its intra-regional and international trade, and perhaps emerging stronger.  This policy brief analyses the implications of the US tariffs on EAC intra-regional trade and what options the member states can take.

Background on EAC -US Trade Relations and Trade Flows

The East African Community (EAC) and Sub-Saharan Africa generally have been major trading partners with the United States for decades and so far, the fastest growing markets in the world according to the International Monetary Fund.  The US has signed multiple trade agreements allowing smooth trade flows across the two regions, with the US enjoying an overwhelming trade surplus for decades. In 2008 the U.S. signed Trade and Investment Framework Agreements (TIFA) with the EAC regional economic block in 2008.

The purpose of the TIFA was to strengthen the United States-EAC trade and investment relationship, expand and diversify bilateral trade, and improve the climate for business between U.S. and East African firms. Earlier in 2000 the US had passed the African Growth Opportunity Act (AGOA), a trade preference program that allowed selected goods from EAC duty free market entrance into the United States. AGOA had helped expand and diversify African exports to the United States, while at the same time fostering an improved business environment in many African countries through the application of eligibility requirements.  In 2015, the U.S. Congress extended AGOA through 2025. 

According to the Office of US Trade Representative data the U.S. goods exports to East African Community in 2022 were $1.1 billion, up 2.0 percent ($22 million) from 2021 and up 15 percent from 2012. U.S. goods imports from East African Community totaled $1.3 billion in 2022, up 40.4 percent ($367 million) from 2021, and up 121 percent from 2012. The U.S. trade balance with East African Community shifted from a goods trade surplus of $211 million in 2021 to a goods trade deficit of $135 million in 2022[1].Although the US suffered a goods trade deficit in 2022, it has continued to enjoy trade surpluses with individual EAC member Countries as reported by the US trade Administration.

Table of US-EAC Trade flows and Surplus for 2023-2024

Country

Total Goods Trade with US 2024 (USD)

US Exports

(2024)

US Imports

(2024)

Surplus (2024)

% Increase in Surplus compared to 2023

Kenya

1.5Bln

782.5Mln

737.3Mln

45.2Mln

110 (454.6Mln)

Tanzania

778.1Mln

573.4Mln

204.7Mln

368.7Mln

45.8 (115.8Mln)

Uganda

238.9 Mln

106.3 Mln

132.6 Mln

26.3Mln

574.3 ($31.9Mln)

Rwanda

75.0Mln

44.8Mln

30.2Mln

14.5Mln

4,060 (($14.2Mln)

Democratic Republic of Congo

576.4Mln

253.3Mln

323.1Mln

69.8M

20.9 ($18.4 Mln)

Burundi

$10.4Mln

$6.6Mln

$3.7Mln

$2.9Mln

224.3 (5.2Mln)

South Sudan

$60.1Mln

$59.3 Mln

$0.8Mln

$58.5 Mln

16.0(8.1Mln)

Somalia

$51.6Mln

$49.1 Mln

$2.5 Mln

$46.6Mln

0

Source: Office of US Trade Representative data analyzed and presented by GEPC researcher

Over the years, through its trade diplomacy, the US had cemented long lasting relations paving way for other strategic economic, political and security relations, with the EAC member states including defense. With the new tariff wall, if not changed, this long-term relationship could be bound for a new trajectory.

Knock-on Effects of Tariffs

Tariffs have knock offs whose effects can trickle down the goods and services value chain in many ways, affecting both producers, exporters and consumers down the trade supply chain.

A tariff is a duty imposed by a national government, customs territory, or supranational union on imports of goods. Besides being a source of revenue, import duties can also be a form of regulation of foreign trade and policy that burden foreign products to encourage or safeguard domestic industry[1]. At their core, tariffs are simple: they raise the domestic price of imported goods. But their effects ripple through the economy in complex ways – altering prices, wages, exchange rates and trade patterns.

Simply put, a tariff is a tax on imported products. It creates a difference between the world price and the domestic price of a product. Tariffs raise the price of imported goods relative to domestic goods (good produced at home).  For example, if a US Tarif of 10% is applied on world price of coffee of USD200, the domestic price of coffee in the US market becomes USD 220 per kilogram. The government collects the difference of USD20 dollar as tariff revenue to finance other public expenditures.

Tariffs can also affect the world price of a product, particularly when they are imposed by a large economy. The logic is that higher domestic prices reduce domestic demand, which in turn lowers world demand, and thus world prices. In our example, the world price might fall to $150 after the tariff is imposed, resulting in a domestic price of $165. In this case, part of the tariff is effectively paid by foreign producers[2].

This cost-shifting creates incentives for large economies to unilaterally impose tariffs. However, this so-called optimal tariff argument overlooks the possibility of retaliation. If country A imposes tariffs on country B, country B has an incentive to respond in kind. The end result is a trade war that leaves both sides worse off[3].

With the current US tariffs, the prices of goods entering into the US market will increase by 10%. For example, the price of coffee will increase by 10% making it more expensive for Americans to afford. Similarly, the costs for other agricultural products, textiles and handcrafts will suffer the same fate. The resultant effect of this will be a low demand for these goods in the US markets affecting EAC farmers and exporters. We can further illustrate this with a simple of the effects of the tariffs on handicrafts from the EAC. 

Because of increased tariffs and a decline in demand for the Makonde carvings, the exporter of Makonde Carvings and paintings will buy less. The Makonde carver and painter in Mtwara and Mwenge will lose business and sell less. The transporter of Makonde carvings will have little business and therefore send a few trucks to collect and deliver the carvings to Dar es Salaam. The exporter will send a few containers and therefore the port handlers and clearing firms will have no business. The Makonde artist may completely close and ultimately the transporter and port handler may lay off staff. A similar experience can be the same for the Coffee producer in Uganda and Kenya, whose knock off effect of the US tariffs will trickle down the supply chain in a similar manner.

Tariffs in the Context of WTO and GATT rules

In the World Trade Organisation (WTO) rules-based system, when countries agree to open their markets for goods or services, they “bind” their commitments. A country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade[1].

Under the WTO (GATTs, GAT and TRIPs agreements) international trade and commerce is run based on a rule-based system and principles. These include;

  1. Most-Favoured-Nation (MFN), which requires treating other people equally. Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members[2]
  2. National Treatment of foreigners and locals equally where by imported and locally-produced goods should be treated equally — at least after the foreign goods have entered the market. This also applies to services, trademarks, copyrights and patents. (Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS) although there can be some variations in applications depending on an existing arrangement such as a Regional Economic block or once a product, service or item of intellectual property has entered the market can be a subject to customs duty or any other applicable duties.
  3. National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, charging customs duty on an import is not a violation of national treatment even if locally-produced products are not charged an equivalent tax.
  4. Freer trade gradually through negotiations and reducing of trade barriers such customs duties (tariffs), import bans or quotas, selective restriction on quantities, bureaucracy and exchange rate policies.
  5. Predictability of trade through binding commitments and transparency. This encourages investment, job creation and consumers can enjoy the benefits of competition
  6. Promotion of fair competition, with an allowance of a limited. number of tariffs for limited protection, allowing thriving of domestic industry and protection against entry of harmful products.
  7. Generally, encouraging development and economic reforms aimed at increasing global trade flows and particularly allowing less developed countries to equally enjoy benefits of the global trade system.
    Tariffs as Tools for Trade Policy and Geopolitical Statecraft

    Tariffs are not universally banned from trade policy. Tariffs can be a useful tool for protecting domestic industries, generating revenue, and supporting economic development, especially in developing countries. They can equally be used as a foreign policy instrument to advance economic diplomatic ties between nations.

    According to the WTO, tariffs must not be used as weapon for trade distortion, carry the risk of increased costs for businesses and consumers, potentially stifling economic growth and competitiveness. However, the recent US Trump measures reorganize the rules on International Trade. Tariffs are now used as a political tool for advancing geopolitical and national security interests, including cajoling other trading partners and WTO member states into curving in to pressure aimed at achieving domestic political gains.

    There are contending views (including from the US Council on Foreign Relations) that according to the WTO rules, the US Trump tariffs are illegal, arbitrary, based on a wrong formular, not reciprocal, distortionary[1] and must be fought either at the WTO or through reciprocal measures taken by affected Countries. Poor application of tariffs can spark a contagion effect of tariffs wars across nations.

    EAC Response options for Trade Creation and Diversion to new markets

    To date the EAC as a regional block has remained silent while its respective member states have decided to individually not to retaliate.  Uganda’s Ministry of Finance, clearly stated that it had taken a decision not to retaliate[2].  Similar statements were made by Kenya’s Ministry of Trade[3].

    Uganda’s trade volumes with the US were small and the US was a major beneficiary of this trade relationship, enjoying a goods trade surplus, while its nationals enjoyed cheap high quality agricultural exports such as coffee, tea, fruits and handcrafts from the EAC.

    The AGOA partnership agreement was bound to expire at the end of 2025 and the US and EAC were already on the road towards negotiating new trade arrangements, if AGOA was not extended. Moreover, some Countries such as Uganda, Burundi, South Sudan and Somalia were not eligible for AGOA in 2024 due to among others sanctions imposed by the US for various reasons (including conflicts, human and political rights violations) and were already searching for markets elsewhere.

    The EAC as a regional block was pushing for increased intra-regional trade. The East African Business Council, an apex body of businesses and companies, has always been concerned with low volumes of intra EAC trade as compared to other economic regions. 

    This has been widely linked to existence of tariff and non-tariff barriers, including stringent rules of origin, Stay of Applications which allows member states to charge or exempt different tariffs on some specific goods different from the Common External Tariff, differences in taxes such VAT, Income Taxes and Exercise duties. It was further concerned with the bilateral negotiations of trade deals with third parties. The East African Business Council (EABC) advocated and has been pushing the EAC to continue negotiating the EAC-EU Economic Partnership Agreements (EPA) and the EAC-UK EPA as a region to avoid creating mistrust and distortion of the EAC Common External Tariff (CET)[4]

    The new US tariffs therefore offer the EAC and Sub-Saharan Africa region with a window of an opportunity to disconnect itself from the US markets by deepening intra-regional trade, diversifying and diverting its trade to other regions such as Africa via Africa Continental Free Trade Area (AfCFTA), the EU, the Middle East and China.

    AFCTA offers flexible rules and unfettered free access to a market population of about 1.3 billion people and a combined GDP of approximately US$ 3.4 trillion[5]. The AfCFTA aims to eliminate trade barriers and boost intra-Africa trade. In particular, it is to advance trade in value-added production across all service sectors of the African Economy[6]. There are a lot of opportunities in the AfCFTA for the Private sector in the EAC as it offers a larger and diversified market for goods and services. According to President Museveni Uganda will now focus on African markets[7]

    The EU has been a major trading partner and EU trade in goods (imports and exports) with the EAC has risen steadily comparatively to 2007 volumes[8]  In 2023 the EU trade in goods and services with the EAC region amounted to EUR106Bln. The EU trade in services amounted to EUR 5.9bln. If compared to 2022 the EU trade in goods with the EAC region reached EUR 5.7bln while imports from the EAC were EUR4.9bln. Exports in services were valued at EUR3.0Bln compared to EUR2.9 bln imported from the EAC[9]. The major exports to the EU from the East African Community are mainly coffee, cut flowers, tea, tobacco, fish and vegetables. Imports from the EU into the region are dominated by machinery and mechanical appliances, equipment and parts, vehicles and pharmaceutical products[10].  Kenya and Tanzania were the leading EU trade partners.

    China is already a major trading partner with the EAC and had surpassed the EU and the US. In 2023, China was the largest source of imports for the East African Community (EAC), with imports valued at $11 billion. The EAC’s exports to China in the same year were valued at $15.8 billion. China is closely followed by the United Arab Emirates (UAE) at US$6.4 billion in 2023[11].

    From the statistics, the EAC already enjoys a trade surplus with China. Although there are concerns over unethical business conducts, including the risk of stifling industrial growth by flooding the EAC with cheap substandard goods, China remains a huge market of about 1billion people, it is the second largest economy in the world and the largest one in RCEP with a GDP of 16,325 billion USD in 2022 (World Bank, 2023).  Chinese demand for EAC products is enormous and projected to grow.

    The EAC also has an opportunity of benefiting from arbitrage practices, whereby producers from highly US tariffed countries set up business to produce, buy, sell or reroute their products via the EAC to take advantage of the tax and price differences. In this case highly taxed countries such as China and Lesotho would be interested in setting up business in EAC.  Kenya has already made a move with President Ruto’s visit to Beijing to attract Chinese businesses to set business in Nairobi.

    Recommendations

    For this to happen, the EAC and its member states will have to

    1. Diversify, Divert and Create trade. This happens when new or existing regional economic grouping (Free Trade Areas or Customs Unions) leads to creation of new trade that never existed before or leads to shifts in trade flows from efficient nonmember exporters to non-efficient member exporters among others due to preferential tariffs charged amongst member states.
    2. Invest in processing and industrial production of agricultural products and raw materials into finished products that can be sold or consumed locally and in the new markets
    3. Address existing tariffs and non-tariff barriers to trade such as VAT, Excise duties, income taxes, bureaucracy and infrastructure which have been an obstacle to intra-regional trade.
    4. Revive old economic partnerships with the EU and explore new partnerships with the EU, South America, Middle East and China
    5. Establish linkages between the farmers and manufacturer so as to create value and sustainable supply chains of quality products for the market
    6. Address political differences, instability and conflicts affecting cordial economic cooperation and free flow of goods across EAC and African borders.

     References 

    European Commission: Trade and Security available at https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/east-african-community-eac_en

    Ralph Ossa; Views of the Chief Economist, World Trade Organisation, available at: https://www.wto.org/english/blogs_e/ce_ralph_ossa_e/blog_ro_11apr25_e.htm accessed 14 April 2025

    The New Times (May 02, 2025) available at https://www.newtimes.co.rw/article/21152/news/africa/eabcs-adrian-raphael-njau-advocates-for-stronger-eac-market

    WTO; Principles of the Trading system available at: https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm#:~:text=In%20the%20WTO%2C%20when%20countries,the%20case%20in%20developing%20countries.

    [1] https://www.cfr.org/blog/five-things-know-about-trumps-tariffs

    [2] Mr Ramadhan Ggobi , Permanent Secretary for Treasury made these remarks while addressing a press conference at the Ministry of Finance

    [3] Mr Lee Kinyanjui, PS for Trade, Kenya in an Interview with  Citizen TV available on Citizen digital via https://www.citizen.digital/news/what-it-means-for-kenya-after-us-imposes-10-export-tariff-trade-cs-kinyanjui-n360379

    [4] https://www.newtimes.co.rw/article/21152/news/africa/eabcs-adrian-raphael-njau-advocates-for-stronger-eac-market

    [5] https://au-afcfta.org/about/

    [6] ibid

    [7] https://eastleighvoice.co.ke/african%20markets/140091/museveni-says-uganda-to-focus-on-african-markets-amid-us-tariff-hike

    [8] https://www.europarl.europa.eu/RegData/etudes/BRIE/2024/766228/EPRS_BRI(2024)766228_EN.pdf

    [9] ibid

    [10] https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/east-african-community-eac_en

    [11] https://www.eac.int/trade/79-sector/trade#:~:text=China%20is%20the%20dominant%20source,US%246.4%20billion%20in%202023.

[1] ibid

[2] https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm#:~:text=In%20the%20WTO%2C%20when%20countries,the%20case%20in%20developing%20countries.

 

Webinar Series: Assessing Implications of Trumps Tariffs on Intra East Africa’s Regional and International Trade

The rules of world trade are being redefined. We are delighted to invite you to plug and join in as we explore and discuss this interesting topic on regional economic cooperation, trade and investment. 

The East African Community (EAC) and Sub-Saharan Africa generally have been major trading partners with the United States for decades and so far, the fastest growing markets in the world according to the International Monetary Fund.   Since 2001, the US has signed multiple trade agreements (including AGOA in 2001 and TIFA in 2008) allowing smooth trade flows across the two regions, with the US enjoying an overwhelming trade surplus for decades. Under AGOA EAC selected products had duty free access to US markets. US trade relations with EAC member states were booming.  For instance, in 2024 the US trade surplus with Rwanda increased more than 4000% compared to 2023.

Effective 5th April 2025 the US President Donald Trump slapped a global baseline tariff of 10% on all exports to the US. The US tariffs have caused a lot of turbulence and uncertainty about the future of the WTO rules based global trade as we know it. The future of EAC -US trade is unknown and during this period loses will be counted particularly in the agriculture, textiles, apparel and artifacts sector. However, in the midst of this turbulence, the EAC may have an opportunity of re-inventing its intra-regional and international trade, and perhaps emerging stronger by looking elsewhere. 

This webinar will enable stakeholders and the public understand the issues at play and the potentially new World Trade Order that we could moving towards. Expert speakers at this webinar will analyze the implications of the US tariffs on EAC intra-regional and international trade and what options the EAC block and member states can take.

The Governance and Economic Policy Centre (GEPC) is a regional governance and development policy organization, based in Tanzania, interested among others in promoting economic and fiscal governance, with a national and regional focus on East and Africa Great Lakes Region.

The webinar is organized as part of GEPC’s project on promoting regional economic cooperation, trade and investment implemented in collaboration with the Africa Economic Diplomatic Study Circle (AEDSC), a loose network of practicing professionals, students of economic diplomacy, international relations and development based on the African continent, working to promote Africa’s position in the global space.

Our distinguished speakers will be;

Ms McDowell Juko, Chairperson East Africa Business Network (EABN): Elsa Juko-McDowell, a native of Uganda, is a remarkable individual with a deep passion for people and business. Her journey began in 2015 when she joined the East Africa Chamber of Commerce (EACC), an 18-year organization devoted to fostering trade and investments between the United States and East Africa, currently known as the East Africa Business Network. owns multiple businesses, including real estate development, investments, and consulting ventures. Additionally, Elsa serves as a North Texas District Export Council member.  Can be reached via: info@eabn.co or chairman@eabn.co

Mr. Adrian Njau, Ag. Executive Director, East African Business Council: Adrian Njau is the Executive Director of the East African Business  Council (EABN), the apex advocacy body of private sector associations and corporates from the 7 East African Community (EAC) Partner States (Kenya, Democratic Republic of the Congo, Tanzania, Rwanda, Burundi, Uganda and South Sudan). Adrian holds a Master’s Degree in International Trade and a Bachelor’s Degree in Economics, both obtained from the University of Dar es Salaam. His academic background is complemented by professional certifications and specialized training in trade, investment, policy and regional integration from Switzerland, Singapore, and Sweden, among others. With over two decades of experience, Adrian has been instrumental in research and policy at the Chamber. Can be reached via: Email: info@eabc-online.com

Mr Robert Ssuna, International Trade and Tax Expert, Researcher and Consultant, Governance and Economic Policy Centre:  Robert is an Independent Consultant on Tax Trade and Investment. He is Chartered Economic Policy Analyst (CEPA), a Fellow of the Global Academy of Finance and Management with over 15 years of experience in economic policy analysis focusing on tax, trade, and investment at national, regional, and global levels. He is also a member of the Base Erosion Profit Shifting (BEPS) Monitoring Group. Prior to this, he served as a Supervisor Research Statistics and Policy Analysis in the Research and Planning Division of the Uganda Revenue Authority. Can be reached via: ssuunaster@gmail.com

Hon: Dr Abullah H Makame, Member of East Africa Legislative Assembly (EALA):  Dr Makame, is a distinguished member of the East African Legislative Assembly (EALA) based in Arusha, Tanzania, where he is a commissioner and a former Chairperson of the Standing Committee in Agriculture, Environment, Tourism and Natural Resources. Dr Makame has served in various senior capacities in both the Government of United Republic of Tanzania and Zanzibar; academically, his docorate is from Birmingham UK and MSc from Strathclyde – Scotland, he holds a Professional Certificate in International Trade from Adelaide and has published both locally and internationally. Dr Makame serves in various boards across the EAC region. Can be reached via email: abdullah.makame@gmail.com

Mr Moses Kulaba, Executive Director & Convenor, Governance and Economic Policy Centre: Mr Moses is a political economist, tax and economic diplomat with more than 20 years of active service in international public, private and civil society sector.  Prior to joining GEPC he served as the East Africa Regional Manager for the Natural Resources Governance Institute, where he worked with various stakeholders including governments to advance fiscal policies and governance of the extractive sector. Has served on the international board of the EITI and in consultancy roles for UN, DFID and the EU. Can be reached via : moses@gepc.or.tz or mkulaba2000@gmail.com

Webinar Date: Tuesday, 6th May, 2025

Time: 10:30AM-12:30 PM (Nairobi Time)/ 9:30AM (CAT)/ 7:30AM (GMT)

Online Participation via Google meet video link: https://meet.google.com/odd-ysgh-dtf

Tanzania’s Mining Investment Climate: Reforms that government should take to attract and retain new mining investors

According to the Ministry of Minerals, government stands ready to facilitate investor meetings and explore potential business ventures in Tanzania. However, investors operating under the current mining regime in Tanzania still face challenges which require a thorough regime review and fix, for the challenges to go.

Author:  Governance and Economic Policy Centre

Tanzania is endowed with a variety of mineral resources and has been successful in attracting large mining investments. However, over the past few years, this investment curve stagnated and has zigzaged out, as potential new investors stayed away in fear of a potentially unpredictable regulatory mining regime.  In order to attract and retain new large-scale projects, investors suggest, that pertinent reforms must be made.

This brief traces Tanzania’s mining history and from an investor perspective, shows how the country started losing the momentum and its share as a leading mining destination. It proposes some actions and reforms that could be made to reclaim its glory while at the same time achieving a win-win regime for sustainable mining and development.

Tanzania’s mining in a historical context

Mining and minerals trading has a long history in Tanzania, dating back to 18th century when Arab traders plied the Tanzanian coastal towns bringing spices from the Arabian gulf in exchange for gold, copper, iron and other minerals.  Records show that the German colonialists discovered gold in Geita and Sekenke (Singida) where the first gold mine was established in 1909.

In 1940 a Canadian Geologist Dr. John Williamson discovered the Mwadui Kimberlite pipe and established a diamond mine there.  After his death in 1958 his heirs sold the mine to De Beers (50%) and the British colonial government (50%).

In 1971 the government of Tanzania nationalised all mines.  The State Mining Corporation (STAMICO) took ownership of the Diamond mine and run it between 1974 to 1993 when years of ill maintenance took their toll to cause an urgent need of recapitalisation and equipment overhaul.  This need came at a time when the country was going through a tough economic situation that it was not possible to accommodate the need.  A decision was made to invite De Beers to the rescue. They agreed to recapitalise the company and in return acquired a 75% stake in the mine in 1994.  In 2009 DE Beers sold their 75% stake to Petra Diamonds.

Following economic troubles of the seventies, raising fuel prices, geopolitical tensions between ‘east and west’, the 1978/79 war between Tanzania and Uganda, low commodity prices for the country’s backbone agriculture produce (cotton, coffee & sisal) exports, the Tanzanian economy continued to deteriorate to the extent that the country was left with no other option but to embrace free market economic policies advocated by the Bretton Woods Institutions. 

With advice and guidance from the World Bank and IMF, Tanzania liberalised its mining sector and invited foreign investors.  This was during the 3rd phase government of H.E. Benjamin William Mkapa (RIP). The shift to free market economy and liberalised mining industry required new policies, laws and regulations.

New Mining Reforms and knock off effects

A Mineral Policy was formulated in 1997.  The policy gave way for private sector to take the lead in mineral exploration, development, mining, beneficiation and marketing.  Instead of being an active participant, the government would become the facilitator, the regulator and the administrator. This policy was complimented by the Mining Act 1998.

The Mineral Policy 1997 and accompanying Mining Act 1998 together with personal efforts by the late President Benjamin William Mkapa resulted in foreign mining investors in their multitudes flocking the country.  In a span of about eleven years (1998 – 2009) six large scale gold mines were opened.  These are:

  • Golden Pride Mine in 1998, owned by Resolute Mining Limited of Australia
  • Geita Gold Mine in 2000, owned by Anglogold Ashanti of South Africa
  • Bulyanhulu Gold Mine in 2001, owned by Barrick Gold of Canada
  • North Mara Gold Mine in 2002, owned by Sutton Resources of Canada and later the mine was acquired by Barrick Gold of Canada
  • Tulawaka Gold Mine in 2005, owned by Pangea Minerals – a wholly owned subsidiary of Barrick Gold of Canada
  • Buzwagi Gold Mine in 2009, owned by Barrick Gold

Despite the many benefits that the new mines brought, including improved balance of trade realised by increased gold exports, increased government revenue collection through import & employment taxes, the multiplier effect that was created by new business opportunities to local suppliers and contractors, there was still a public outcry that the country was not getting enough.

It deemed necessary to form various committees and task them with reviewing the country’s policy, law, regulations and public views on the mining industry and compare the findings to the practice in other African countries.  The aim was to improve the playing field to achieve a win-win situation.  Four committees were formed for the cause at different times between 2002 and 2009:

  • General (Rtd) Robert Mboma Committee in 2002
  • Kipokola Committee in 2004
  • Lau Masha Committee in 2008
  • Judge Mark Bomani (RIP) Committee in 2009

Observations and opinions collected from the various committees led to the formation of a new Mineral Policy in 2009 and enactment of the (new) Mining Act 2010.

Vision of the Mineral Policy 2009 was to attain an effective mineral sector that contributes significantly to the acceleration of socio-economic development of the country, through sustainable development and utilization of mineral resources by the year 2025.  This included attaining a GDP contribution of 10%.  Note that the GDP contribution of the mining sector was 2.7% in 2010 (BOT Annual Report June 2011). Focus of the Mineral Policy 2009 was to integrate mining with other sectors of the economy.

It’s interesting to note that:

  • After establishment of the Mining Act 2010 and its accompanying regulations, only one ‘medium scale’ gold mine was constructed – the New Luika Mine in 2012.
  • Thereafter, there have been a limited number of medium scale mines (smaller in size and production capacity than New Luika) which have been constructed, but not a single large scale mine has been built ever since.

Following the change of government in 2015, the Mining Act 2010 was further overhauled in 2017 and led to the current version of the act – Mining Act CAP 123 R.E. 2019.  This overhaul was complemented by two new acts:

  • The Natural Wealth and Resources (Permanent Sovereignty) Act, 2017
  • The Natural Wealth and Resources Contracts (Review and Renegotiation of Unconscionable Terms) Act, 2017

The Mining Act CAP 123 R.E. 2019 introduced new clauses which imposed more control of natural resources by the government.  It banned export of mineral concentrates and put more emphasis on local refining of extracted minerals.  It revoked retention licenses and introduced new clauses to govern local content and corporate social responsibility.  The intent was to see more participation of Tanzanians in management of the foreign owned mining companies and in the value chain of the mined minerals.  Instead of exporting raw minerals the companies were required to beneficiate locally before export. The Government was also enabled by the law to acquire at least 15% un-dilutable free carried interest in Mining Licenses and Special Mining Licenses.

Key takes from the new law on ‘permanent sovereignty’ were introduction of clauses which mandated for:

  • Arbitration of commercial disputes in local courts and using Tanzanian law
  • Review by Parliament of agreements entered on natural resources
  • Local beneficiation of mined minerals
  • Retention of earnings in local banks

The ‘review and renegotiation of unconscionable terms’ act gave mandate for the Parliament to review any agreement on natural resources previously entered by the government, to be reviewed and renegotiated if the terms entered appeared to be unconscionable.

In a 2017 commentary, titled: Tanzania Overhauls Mining Laws, Fines Investor US$190 Billion: Is Your Investment Protected?  the JonesDay, a leading commercial law firm wrote; ‘The new laws heighten the government’s role and power in investment contracts, increase the costs of foreign investment, and substantially reduce investment protections, including international arbitration. Investors should take immediate action to mitigate the risks associated with the Tanzanian government’s actions pertaining to the mining industry[1]. Despite current government reassurances, to date these fears have continued to revibrate among risk averse investors, who remain uncertain of Tanzania’s future investment climate. For these laws have never been repealed.

Factors driving mining investment decisions

To put matters in context, one crucial criterion that attracts mining investors to a country is rich geology that has a scientific potential to host high grade orebodies. Tanzania is among the African countries blessed with such geology.  But to attract mining investors rich geology cannot stand on its own.  Rich geology must be complemented by:

  1. A conducive business environment
  2. A stable fiscal/mining regime
  3. Security of tenure
  4. Political stability and peace in the country
  5. Skilled artisans
  6. Good infrastructure – roads, rails, power, etc.

Over the years until in the recent past the country managed to do well in the list above on items 4 to 6.  Items 1 to 3, however, have been a challenge.

 Wins and missed opportunity

When the first large scale mine was established in 1998 at Lusu ward, Nzega district, Tanzania had a challenging road, rail and power infrastructure.  Some important mining skills were lacking.  But the country was politically stable, mining companies owning Special Mining Licenses had their fiscal issues stabilised by the Mining Development Agreements (MDA) signed with the government, there was security of tenure and a good business environment.  Over time, good progress continued to be made in some areas, but there was deterioration of circumstances in other areas as noted by  investors. 

Frequent and unilateral changes to laws and regulations led to breach of mine development agreements (MDAs).  Some concessions given to investors through the signed Mine Development Agreements were not honoured by the Tanzania Revenue Authority because they were not gazetted, and despite requests from concerned investors the Ministry of Finance avoided gazetting the MDA’s.

Significant improvement and upgrade made to road and power infrastructure; and skills development was defeated by unnecessary red tape brought about by introduction of a multiplicity of regulators who appeared to be more focused in raising revenue through hefty fines rather than providing oversite and regulating the sector.

Security of tenure was put at risk by uncontrolled gold rushes and haphazard trespassing by unlicensed artisanal miners. Investors who had invested millions of US Dollars in green field exploration witnessed invasion of their tenements by unlicensed artisanal miners with no serious intervention by authorities to rescue the situation, allowing the invasions to be politically concluded at the demise of the investor.

In summary, the current mining industry in Tanzania has been a mixed grill of successes and failures. Despite the many ups and downs over the years, several ‘wins’ have been witnessed by the sector following revision of the Mining Act CAP 123 R.E. 2019 and enactment of the laws on sovereignty in natural resources and renegotiation of unconscionable terms on agreements entered by the government on natural resources:

  • Renegotiation of the Mining Development Agreement entered between the Government of Tanzania and Barrick Gold Corporation which led to Acquisition of a 15% un-dilutable free carried stake by the Government in Barrick Gold mining projects in Tanzania (Bulyanhulu & North Mara Gold Mines) and signing of a Framework Agreement between the Government and the company.
  • Acquisition of a 15% un-dilutable free carried stake by the Government of Tanzania in the Kabanga Nickel project (Tembo Nickel Corporation).
  • Acquisition by the Tanzanian Government of a 15% un-dilutable free carried stake in the Ecograph Epanko graphite project
  • Acquisition by the Tanzanian government of a 15% un-dilutable free carried stake in the Peak Resources Ngualla REE project (through Mamba Minerals)
  • Acquisition of a 15% un-dilutable free carried stake by the Government in the Strandline Resources Heavy Minerals Sands project through Nyati Resources
  • Acquisition by the government of a 15% un-dilutable free carried stake in the Evolution Energy Chilalo Graphite project through Kudu Graphite Limited
  • Acquisition of a 20% un-dilutable free carried government stake in the Perseus Mining Nyanzaga Gold Project through Sota Mining Ltd.
  • Increased royalty collections following increase of the royalty on gold to 6% from the previous 4%
  • Increased gold revenue collections through the introduction of 1% inspection fee on gold exports
  • Construction of 3 gold refineries in Mwanza, Geita and Dodoma which have not only facilitated purchase of refined gold by the Bank of Tanzania but have also created employment opportunities to Tanzanians.
  • Enforcement of local content regulations which have in turn facilitated the participation of Tanzanians in the mines supply chain.
  • Enforcement of new local content regulations have made it possible for several Tanzanians to take over senior management positions in foreign mining companies investing in Tanzania
  • Enforcement of new CSR regulations have enabled CSR projects to be managed in a fair and transparent manner, ensuring value for money of the projects.
  • Introduction of the online Mining Cadastre system has revolutionised the licensing process by modernising it. The ‘first come first served’ approach in license application is working fine and fairly.  So long as they have all the required supporting documents in soft / electronic form, applicants are now able to lodge license applications from wherever they are in the world. They just need to be connected to the internet.
  • Significant improvements in power generation and transmission capacity have enabled connection of major mines to the national electricity grid. It was heartwarming to witness connection of the Geita Gold Mine (Anglogold Ashanti) to the national power grid.  This event shall not only save the company millions of US Dollars in energy cost, but it will also increase Tanesco’s revenue.  The Geita mine used to consume about 8 million litres of diesel every month to generate electricity using a rented thermal plant.

But, have the country now achieved a win-win situation? How is this goal going to be realised?

In the business world the investors would always want to maximise their profits and governments would always want to maximise their tax and fees collections to support socioeconomic development.  An attractive and well researched mining regime that involved stakeholder participation in its making is the only one that will manage to at least strike a delicate balance between the profits anticipated by the investors and the taxes and fees anticipated by the Government.

Obstacles that Tanzania Mining investors face

Courtesy Photo: Tanzania Minerals Minister, Anthony Mavunde speaks to stakeholders in Dar es Salaam

According to the Ministry of Minerals, government stands ready to facilitate investor meetings and explore potential business ventures in Tanzania. This unwavering commitment to attracting foreign investment underscores the nation’s dedication to unlocking the full potential of its mining sector. Tanzania Mining industry is highly important since it accounts for a significant share of the country’s export revenues. The Government plans to have this sector contribute 10% of GDP by 2025.

However, investors operating under the current mining regime in Tanzania still face challenges which require a thorough regime review and fix, for the challenges to go.

  • Several advanced mining projects including the ones in Graphite, REE, Heavy Mineral Sands and Gold have continued to struggle in raising project finance due to some clauses in different laws governing the mining sector in relation to the ownership of won minerals as well as banking of mineral sales proceeds
  • Extended negotiations on the making of framework agreements have been one area that frustrates many investors whose projects have reached that stage in their development
  • If left the way they are, some local content procurement tendering procedures have the potential to cause costly delays during the construction phase of the advanced projects
  • If left as currently reads, some wording on Section 56 of the Income Tax Act CAP 332 R.E. 2006 will end up ‘taxing’ capital of exploration companies when shareholding changes. Triggering imposition of Section 56 will cause a 30% capital gain tax on a junior exploration company when part of whose shares are acquired by another company for the intent of capitalising the junior company.  It should be noted here that exploration companies are not operating mines and instead of making money they normally burn money trying to find a mineable mineral deposit.  Trying to tax a non-trading company is weird and unheard in the mining industry.  The only way we can generate new mines to replace closed ones is by promoting exploration – not discouraging, investors say
  • The Income Tax Act CAP 332 R.E. 2006 disallows deduction of Royalty costs when calculating taxable income of a mining entity. This is a concern because no company is allowed to export minerals unless it has paid Royalty, meaning that royalty is part and parcel of the costs incurred to generate revenue of the company and should therefore be an allowable deduction

The above listed are only a few issues of concern to mining investors and something that the Government needs to have another look about or even conduct a study to see their quantitative impact in discouraging mining investment in Tanzania and what will be the impact (pro or cons) if some of the clauses will be amended to reflect investor’s proposals.

Proposed remedial actions and reforms that government should take

 There is a raft of measures that government can take. These include;

  1. Asses the current investment climate with a view to determine whether the 2017 mining reforms achieved any significant dividend to the mining sector
  2. Re-examine the current laws, particularly those passed in 2016 and 2017 to see if there are any remaining clauses that may be of concern to the mining investors. Some changes were made , however government should evaluate and see if there are any areas that need further review, without losing the core purpose of securing maximum value for Tanzania.
  3. Re-evaluate Tanzania’s mineral geology and mining potential in the current context and future mining investments trends, with a view of keeping aligned and on course to attract and retain new large-scale investors
  4. The final approach would be to form yet another task force made of representatives who are experts in the field of mining business and mining taxation, from the government and the mining private sector, to mutually consult and come up with a proposal that would attain a level play field balancing the profit anticipation of the investors and the tax and fees anticipation of the Government.

Minerals will always be a finite resource. Value can only be derived from them when they are extracted from underground and used to the benefit of the country.

The opportunity is still there to exploit minerals in Tanzania for the fair benefit of both the Government of Tanzania (on behalf of its people) and the investors. With tweaks to some of the current mining laws, bolstered with stability and government confidence building measures, the Tanzania can recapture and retain its glory as the prime mining investment destination in Africa.

While contemplating on the next move, the government should also make a thorough assessment of mark-timing mining projects – public (like the Liganga iron ore and Mchuchuma coal) and private ones (like the Kabanga Nickel, Mkuju River Uranium and Nyanzaga Gold), to see how such projects can be fast tracked and brought to production stage. With the speed at which technology is developing in the world, Tanzania faces the big risk of having some of its mineral deposit being stranded.  The coal deposits at Mchuchuma are faced with the highest risk with the current push for the world to go green and stop the use of fossil fuels.

With determination and the right people and policies at the forefront, the government can profitably and timely exploit the country’s minerals for the social economic development of its people.

[1] https://www.jonesday.com/en/insights/2017/08/tanzania-overhauls-mining-laws-fines-investor-us190-billion-is-your-investment-protected

The Petals of Blood: Dissecting the contagion effect of Sudan war on South Sudan and EAC with lessons on governance and state failure

The Sudan war has been raging for almost a year, with catastrophic effects now spreading beyond Sudan’s borders, affecting its neighboring South Sudan and the East Africa Community (EAC) in many ways.

By Moses Kulaba, Governance and Economic Policy Centre & James Boboya, Institute of Social Policy and Research (ISCPR), South Sudan

According to the United Nations, since it started, the war has now destabilized the entire region, leading to the deaths of more than 5,000 Sudanese and displacing millions both within the African nation and across seven national borders.[1]  Sudan is now home to the highest number of internally displaced anywhere in the world, with at least 7.1 million uprooted.[2] More than 6 million Sudanese are suffering from famine, and these numbers are growing every day.  The health system has broken down, and more than 1,200 children have died from malnutrition and lack of essential care. [3]The UN now describes the Sudan conflict as a forgotten humanitarian disaster, while the International Crisis Group has warned that Sudan’s future, and much else, is at stake.

Lest we forget, within a short period, the third largest nation in Africa, with a size of more than 1.8886 million square kilometers and at least 46 million people, has no properly functioning government, and all state institutions have collapsed with the effects of its meltdown spilling over to its neighbors, particularly South Sudan.

South Sudan is host to thousands of Sudanese refugees forced across the border into South Sudan, exerting social and economic pressure on an already fragile state that was already sinking under the burden of its own civil war and internal conflicts.

The Norwegian Refugee Council (NRC) reports that more than 500,000 people have now fled from the war in Sudan to South Sudan. [1]This means that over 30 percent of all the refugees, asylum seekers, and ethnic South Sudanese were forced to flee Sudan since the war exploded in April 2023 for protection in one of the poorest places on earth. “South Sudan, that has itself recently come out of decades of war, was facing a dire humanitarian situation before the war in Sudan erupted. It already had nine million people in need of humanitarian aid, and almost 60 per cent of the population facing high levels of food insecurity.

As of 28 January 2024, more than 528,000 ethnic South Sudanese, Sudanese refugees, and other third-country nationals had crossed at entry points along the South Sudan border into Abyei Administrative Area, Upper Nile, Unity, Northern, and Western Bahr El Ghazal. The majority, 81 percent, entered at Jodrah before making their way to the transit center in Renk. Ethnic South Sudanese who have crossed the border from Sudan are commonly referred to as “returnees.” Still, in reality, many of them were born in Sudan and have never been in South Sudan, and therefore have no kinship connection in host communities.

The conflict has spilled deeper into other East African countries, with thousands seeking refuge and safety from it. The education system collapsed, sending thousands of learners back home and hundreds who could afford to flee exile to continue their studies. Some of these were admitted to Rwandan and Tanzanian Universities.

The Sudan and South Sudan experiment was a governance disaster in the waiting and perhaps serves as a lesson of how a firm grip on power, corruption, and misgovernance can ultimately lead to catastrophic state failure and collapse.

Donald Kasongi, Executive Director of Governance Links and a former senior officer with the Accord, a regional conflict organization, describes the post-Garang South Sudan and post-Bashir Sudan as a protracted governance failure. The diverse strategic roles of Khartoum, Beijing, and Washington in the Sweet South Sudanese oil are now evident.  So far, none is a victor.

The role of external interests in shaping national discourse has been at play. Sudan is caught between the interests of the West and the Middle East and China, with both interested in controlling access to Sudan’s resources, cultural wealth, and strategic positioning as a buffer between the North and South. Before the war, Sudan identified itself with the Islamic world and pronounced itself as an Islamic state. Despite this alignment, the OIC and the larger Islamic world has not come to its help. Sudan remains an isolated state left to collapse at its fate.

In South Sudan, the Garang vision of a strong independent nation was lost. After his demise most of the post Garang political elites or military war generals became pre-occupied on restoring the lost years at war by amassing wealth through corruption and sharing out of the limited resources from the oil resources. As a consequence, a strong nation is yet to be built. They had won the war but lost their country. The same mistake plays out in Sudan. Perhaps the conflict is a lesson on what it means to lose what is so dear to one- A country.

In short, the transition in both countries (Sudan and South Sudan) were not well managed and what we see are petals of blood from toxic flowers of bad governance which have flourished like a forest planted along the banks of the river Nile.

According to James Boboya, the Executive Director of the South worrisome. The raging war has made South Sudan’s oil exports via Port Sudan difficult. Oil exports have collapsed by more than half from 160,000 barrels per day in 2022 to 140,000 barrels per day in 2023. This was more than half of the previous peak of 350,000 barrels per day before civil war broke out in 2013.[2] The South Sudanese dollar collapsed in value. There is a financial crunch and the South Sudanese government has not paid its public and civil servants for months. There is a risk of insurrection and demonstrations by public servants that will be likely joined by the military. This would plunge South Sudan into chaos and total collapse just like its Northern neighbor.

Moreover, this conflict and its associated effects comes in an election year for South Sudan.  The general elections are viewed as a watershed moment which may see a transition from President Salva Keir to a new cadre of leadership. With the economic crunch, South Sudan may not be able to organize and fund a credible general election. This will be not good for South Sudan’s democracy and desired future.

With the world’s media focused on the Russia-Ukraine war and the Israel-Gaza wars, little is covered about the Sudan conflicts nor the total economic catastrophe that South Sudan faces.

If not addressed, the Sudan war will be soon inside the borders of the EAC. Can the EAC afford to stand by and watch longer as its member state, collapses.  Mediation efforts led by Kenya and Djbouti were postponed last year. Direct talks between Abdel Fattah al-Burhan, Sudan’s army chief and de facto head of state, and General Mohamed Hamdan Dagalo, known as Hemedti, head of the RSF paramilitaries remain futile.  What can South Sudan and the EAC do now to avert further catastrophe?

During a joint webinar organized by the Governance and Economic Policy Center (GEPC) and the Institute of Social Policy and Research (ISCR) in South Sudan in April, a distinguished panel of experts discussed and enabled us to understand the contradictions and magnitude of this war with implications and lessons on extractive governance, and state collapse drawn for East Africa and Africa generally, can be taken to avert the situation and its contagion effect on the EAC and Africa generally. The panelists and participants highlighted some key lessons and takeaways that can be drawn from the conflict.

Key lessons and takeaways

Ethnicization of politics and governance can lead to a spiral of violence and catastrophic state collapse, especially when the strong ruling elite and regime finally lose control of power.

A previously united Sudan started getting balkanized when the ruling elites started practicing the politics of ethnicity and religion pitting the largely Muslims in the northern and western parts of the country against their Christian southerners.  The Christians were portrayed as slightly inferior, denied political and economic opportunity, and subjected to forced Islamisation, and inhumane conditions such as slavery. Faced with what was considered unbecoming conditions the Southerners opted for a rebellion and demand for independence. The first and second Sudanese civil war (including the Sudanese Peoples Liberation Movement (SPLM/A) were born and the political dynamics in Sudan changed for decades after. New factions such as the Sudanese Liberation Army (SLA) and the Justice Equality Movement (JEM) emerged and Sudan never remained the same.  Sentiments for cessation and independence in Darfur flared and faced with an insurgency, President Omar enlisted militias including the Janjaweed to quell the rebellions. Around 10,000 were killed and over 2.5 million displaced. The balkanisation of Sudan was continuing to play out.

Militarisation of politics erodes democratic values and principles which can take decades to rebuild.

Omar Bashir came to power in 1989 when, as a brigadier general in the Sudanese Army, he led a group of officers in a military coup that ousted the democratically elected government of Prime Minister Sadiq al-Mahdi after it began negotiations with rebels in the south. Omar Bashir subsequently replaced President Ahmed al-Mirghani as head of state and ruled with the military closely fused into the politics and governance of Sudan.

The military elites elevated to power during President Omar Bashir’s government enjoyed privileged positions.  Even with his overthrow in 2019, these generals maintained a firm grip on the Transition Military Council and the Civil-Military Sovereignty Council.  These are less likely to accept any position below total control of the central authority. The net effect is that the return to full civilian and democratic rule of state governance in an entrenched militarized political environment such as Sudan can or may take decades to be rebuilt.

Vulnerability to geopolitical manipulation and fiddle diddle can be a driver to political instability and eventual weak governance

Both Sudan and South Sudan have been victims of well-orchestrated geopolitical game plans from external powers interested in taking control of the rich natural resources wealth that these countries possess. Sudan and South Sudan have vast oil deposits and forestry products.  With eyes focused on these resources external powers succeeded in playing one community against another and one country against the other and successfully throwing the region into an abyss of endless crisis. Religion was used as a tool to play the North against the South and continues to be used in some segments of the Sudanese and South Sudanese communities.

Key Takeaways

  1. The East African Community (EAC) governments cannot afford to take a wait-and-see attitude. The problems facing Sudan and South Sudan are latently present in several other EAC countries. For this reason, therefore without taking lessons from Sudan and South Sudan other countries can also easily erupt in the future, bringing down the entire EAC. The EAC has therefore an obligation to ramp up support for the resumption of the peace process and finding lasting solutions for peace and tranquility in the two countries. For this to happen there has to be trust and objectivity of the actors to the crisis and the EAC mediators. 
  1. Stop ethnicization and militarization of politics and state governance: The Sudan experience demonstrates this, whereby the collapse of President Omar Bashir’s strong grip on power let loose the lid off a can of worms that had eaten the state to its collapse. Similar conditions of ethnic rivalry in state governance have created uncertainty about guaranteed stability in South Sudan. In some other EAC member states there have been attempts to elevate dominant ethnic groups to power and military influence in state politics built around one strong leader. The Sudan experience demonstrates that the absence of such a strong leader holding the center together can lead to a lacuna, leading to a trail of conflict and instability leading governance to fall apart and eventual state collapse.
  1. The EAC countries must stop viewing at South Sudan as merely a market but as an independent viable state whose stability is good for the entire region. According to the EAC trade statistics, South Sudan was the leading market for goods from Uganda and Kenya. With a total population of 11 million and a collapsed agricultural and industrial base, South Sudan has provided a ready market for agricultural goods and manufactured goods from Uganda and Kenya. According to UN Comtrade Data Uganda exported goods worth USD483.9Mln and Kenya’s exports to South Sudan were worth USD170Mln. Uganda’s exports to Sudan also increased by 154% from around USD48Mln in 2016 to USD123Mln in 2022.  With the eyes largely focused on trade opportunities, there can be a tendency to lose track of the human suffering that the people in these countries face. Also, the jostle for geopolitical control over trade deals can overwhelm the genuine solidarity intentions of good neighbors. The EAC members should focus on the stability of these countries. 
  1. The International Community Must not give up on Sudan and South Sudan. Despite the donor fatigue and reports of corruption, the international community has a moral obligation to continue engaging with the protagonists in the war, facilitating the avenues for a peaceful resolution of the conflict and providing humanitarian aid to the suffering people. The Sudan and South Sudan conflict must be treated with equal measure with the Ukraine-Russia, Israel, and Gaza conflicts. The EAC must scale up diplomatic efforts and be an Anchor in Chief in this process, coordinating and connecting Sudan, South Sudan to the world. 
  1. The EAC media and Civil society must continue highlighting the suffering in Sudan and South Sudan. With the Israel and Gaza war ongoing, the Sudan and South Sudan stories that were largely covered by the Western media have since died out.  There has been little coverage given within the EAC of the recent developments in this war and how it is affecting its neighbors. Moreover, with limited internet connectivity and restrictive conditions, communication advocacy from inside Sudan and South Sudan is quite difficult.  The media and civil society in the EAC therefore must speak loud on behalf of their Sudanese counterparts

 

[1] War in Sudan displaces over 500,000 to South Sudanhttps://www.nrc.no/news/2024/january/sudan-refugees-to-south-sudan/#:~:text=%E2%80%9CMore%20than%20500%2C000%20people%20have,the%20poorest%20places%20on%20earth.

[2] The East African Business Khartoum unable to ensure smooth export of South Sudan oil https://www.theeastafrican.co.ke/tea/business/khartoum-unable-to-ensure-smooth-export-of-south-sudanese-oil-4564064

[1] Sudan conflict: ‘Our lives have become a piece of hell’ https://www.bbc.com/news/world-africa-67438018

[2] War in Sudan: more than 7 million displaced – UNhttps://www.africanews.com/2023/12/22/war-in-sudan-more-than-7-million-displaced-un//

[3] More than 1,200 children have died in the past 5 months in conflict-wrecked Sudan, the UN sayshttps://apnews.com/article/sudan-conflict-military-rsf-children-measles-malnutrition-ec7bb2a1f49d74e7b5f01afa12f16d99

How EAC can benefit from its Critical or Transitional Minerals

The EAC has vast deposits of minerals critical to driving technology to support the green industrial revolution and yet the region lacks a proper framework to govern and maximize benefit from this mineral potential.  Our analysis shows that all is not lost. There is still an opportunity for the EAC to reorganize and take a share from the increasing critical or transitional minerals demand.

By Moses Kulaba, Governance and Economic Policy Center

@critical minerals @mineralsgovernance @eac 

What is the EAC’s regional problem?

Critical or transitional minerals are loosely defined as mineral commodities that have important uses to industrial technology to support the transition to a clean energy future, have no viable substitutes, yet face potential disruption in supply. These minerals include (but limited to); Graphite, Coltan, Nickel, Tungsten, Tantalum, Tin, Lithium, Manganese, Magnesium, palladium, Platinum, Beryllium, copper, fluorspar, Holmium Niobium, Rhodium, Titanium, Zinc etc. The EAC has vast deposits of some these and yet the region lacks a proper framework to govern and maximize benefit from this mineral potential.

Minerals as a national resource vs regional resource

The issue of mineral is politically sensitive. It lies at the intersection of national pride and sovereignty. Minerals are considered as a national resource whose value cannot be discussed or shared at regional level. Most countries have chosen to address mineral issues at a national level, carefully safeguarding what they consider their national interests.

Unfortunately, by taking this route, EAC mineral rich countries have exposed themselves to weaker negotiation power, and fallen easy prey to the divide and rule game played by some quick profit accumulation seeking multinational mining companies.  These mining companies take on each country as an independent jurisdiction, setting each up for competition against the other and demanding exorbitant favorable terms to invest.  The net effect is that EAC mineral rich countries have weaker negotiating powers and signed off bad deals. It is perhaps for this reasons that the EAC has selected to focus on protecting aquatic and terrestrial ecosystems such as forests and mountains in shared areas.

Raging political instability and counter accusations for harboring insurgents.  East Africa’s mineral rich regions face raging political instability, with each member states accusing the other of supporting and harboring hostile insurgent’s, violation territorial sovereignty and plundering of the abundant mineral resources.  For example, the DRC accuses Rwanda of supporting the M23 in Eastern Congo while Rwanda has constantly accused the DRC of harboring the FDRL. Similarly, Uganda’s Ailed Democratic Forces (ADF) rebels have found refuge in the DRC.  Burundi accuses Rwanda of supporting hostile rebel groups against the Burundi government. As a consequence, EAC’s mineral rich regions have failed to secure maximum economic benefits from its mineral wealth. Efforts to jointly pacify the region through a military intervention by the East Africa Regional Standby Force failed miserably with the force withdrawn at the end of 2023.

Failure to curb cross border smuggling and illicit minerals trade.  The UNCTAD data from COMTRADE and other online sources show a big difference between reported mineral exports and imports data from receiving countries. For example, in 2021 the DRC reported exporting a net weight of cobalt of 898,869 kg valued at USD 3,277,615 while China reported importing a net weight of 190032 kg valued at valued at USD92,065, 332 in the same period. The difference between the reported export value by the DRC and the reported import value by China was a whooping USD 88,784,717. There are large disparities between the DRC’s minerals trade data with Dubai and similarly Kenya’s mineral trade data with Dubai.

Yet, the vice has continued unabated. The recent arrests of fake gold traders in Nairobi’s upscale Kileleshwa suburb confirms that illicit mineral business is rife in the region. Illicit minerals are crossing borders undocumented, with cartels exploiting the weaknesses in the border control mechanisms to make shoddy deals worth millions of dollars. The arrested illegal mineral traders had fake Uganda Revenue Authority (URA) documents and stamps showing that Uganda was the source country. There are reports that DRC’s gold and coltan is smuggled through Rwanda and Uganda. Rwanda , a fairly none rich mineral country is a large mineral exporter. According to government reports, Rwanda’s annual mineral export earnings in 2023 was USD1.1billion reflecting a 43% increase from USD772bln in 2022. Clearly illegal trade is denying the EAC millions of dollars in economic benefits.

Lack of regional harmonization of the extractive sector regulatory framework. There were attempts to develop a model minerals legislation but all these efforts suffered a silent death. As expressed by one of the EAC members of parliament, Arusha has become a cemetery of good policy intentions. Good at expressing desire and slow at action and implementation.

Poor geological survey data, compared to superior data sets in possession of mineral companies. This has often tilted the negotiation power balance in favor of the companies, leading to signing off poor deals by mineral rich host countries.

What opportunities exist?

 Maximizing on current EAC partners trade in minerals and mineral based products.

According to EAC regional statistics, the trade by EAC partner states in minerals fuels, mineral oils, products of their distillation, bituminous substances and mineral waxes were the most traded with a value of USD810.7million dollars in 2022. This was followed by trade in natural or cultural pearls, precious or semi-precious stones, precious metals valued at USD588.3million. Trade in nuclear reactors, boilers, machinery and mechanical appliances thereof ranked third with a value of USD238million[1]

This therefore shows there are a raw material and there is a market for mineral based products even within the EAC.  Scaled value addition and intra trade in minerals and mineral based products to serve the existing demand can significantly boost internal regional industrialization, create jobs and economic growth

Leveraging on current and future global critical/transitional minerals demand

With a regional approach, the EAC could benefit from the rapidly expanding demand and prices for green transitional minerals. Since 2020 the global commodity prices for Nickel, Cobalt, Coltan, Lithium and Copper has been on the rise. According industry experts, such as Equity Group’s CEO, Dr James Mwangi, the demand for these minerals can only go up, and prices can only go up because of their limited supply versus the global targets to reduce emissions by 2030. It is for this reason that global consumers such as China, Australia are in the rush to secure supply chains all over the World.  Tech players such as Tesla’s Boss, Elon Musk have equally explored possibilities to establish plants in the DRC and Tanzania so as to secure the raw materials and add value at source. So far, neither the EAC nor its member states have capitalized on these interests to develop a regional road map for investments into the green or transitional minerals subsector. Elon Musk’s investment plans have not materialized.

Use critical/transitional minerals demand to forge new strategic economic relationship

According to the Carnegie foundation, the combination of key mineral endowments in African countries and U.S. objectives to reorient clean energy supply chains away from competitors like China can serve as the foundation for a new economic and strategic relationship. In 2022 the US announced its desire to re-establish a new relationship with Africa driven by trade and investment. The EAC can use its abundant critical or transitional minerals potential to negotiate new long-term relationships based on mutual economic benefits away from the traditional donor recipient approach.

Attracting investments in Energy Sector

The EAC has large opportunity for investment into its renewable energy sector. Uranium, a key fuel in nuclear plants and nuclear fission, is found in eight locations in the South Kivu and Katanga provinces in the south of DRC. Tanzania and Uganda have large deposits of Uranium. These clean energy minerals are also backed with hydropower potential of the giant inga dam and Kenya’s geothermal potential.

The EAC commits to development of the energy sector covering both renewable and non-renewable energy sources. This is aimed at facilitating the broader EAC objectives of attracting investments, competitiveness and trade for mutual benefit. Despite this, there has not been joint EAC investment attraction drive purposed towards its regional power potential.  The regional plans to develop the giant inga dam as a flagship Agenda 2023 project contributing to the towards East Africa’s power pool have remained stagnant.

What EAC member states can do

  • Abandon limited nationalistic views and pursue large economic interests, from a regional lens
  • Conduct regional mapping and improve mineral geodata sets
  • Rekindle and accomplish plans to develop regional frameworks for mineral governance
  • Facilitate regional investment campaigns profiling critical minerals and clean energy sources as tier one commodities available for investment for the EAC
  • Stop the guns and think development

What would be the benefits of acting as an EAC region

  1. Joint investment promotions and attraction of the best investors
  2. Increased negotiation power and leverage for better deals
  3. Expanded regional value additional chains and industrial projects driven by large economies of scale. According to global statistics the DRC was the largest cobalt reserve (about 3.6million metric tons yet China was the largest processor(85Mt)
  4. Increased cooperation and opportunities for lasting peace
  5. Expanded economic opportunity and benefit for citizens.

 

[1] https://eac.opendataforafrica.org/

Evaluating East Africa’s economic trends and outlook 2024: What should EAC governments do to reduce further hardships?

The East Africa Community is so far the largest economic block, with 7 members states with a vast territory straddling from the Indian ocean coast to the Atlantic Coast, with a staggering population of estimated 283.7 million citizens, 4.8 million square kilometers of land area and a combined Gross Domestic Product of US$ 305.3 billion[1], the EAC region is a big silent economic giant.  As of November, the UNDP estimated the EAC had 489,766,467 million people (6% of the total world population)[2], making it one of the fastest growing regional economic blocs in the world and number 1 in Africa among subregions ranked by population. Despite this potential, the region faces multiple economic and political setbacks.

In 2023, the EAC faced significant economic meltdown, with depreciating currencies, rising costs of living and political unrests, tainting the prospects for 2024. The rising cost of fuel, high costs of transportation and production, exerted high pressure on the cost of living, with inflation hoovering above 6% and reduced the region’s economic growth to around to about 3.3% in 2023. Already, the tight economic hardship has caused general anxiety across the East Africa region and social-political unrests in some countries such as Kenya.  Governments have experienced a crunch on revenue collections and significant reductions in external aid. They have resorted increasing taxation to shelter the governments against adverse effects of depreciating shilling against the dollar and heavy costs of borrowing which have surged over the past one year.

The latest World Economic Outlook report released in October predicts that the world’s economy will remain on a downward trajectory for the rest of 2023 and 2024, with the rate of growth decelerating to 2.9 percent next year, from this year’s 3.0 percent. Although the World Bank has predicted a positive outlook for East Africa, with a projected growth of 5.7%, amongst ordinary citizens, life is difficult and questions are everywhere. Where have governments gone wrong.

The purpose of this webinar is to facilitate public discussion assessing the current economic trend and government economic performance, with a view of influencing policy priorities, and practical economic choices that governments should make now to cushion its citizen against the rising cost of living and future hardships in 2024.  During this webinar our experts will paint an economic slate of the region and the extent to which socio-economic interventions such the Parish Development Model in Uganda and heavy taxation, can be a solution to the current and future economic quagmire facing the region. Most significantly, they will try to answer whether Kenya is headed to lose its economic mantra and Tanzania could emerge as new economic giant in the region

Expert Speakers

Dr Kasirye Ibrahim, Executive Director, Economic Policy Research Centre (EPRC), Makerere University, Kampala: Uganda’s experience: Are government social interventions such as PDM working to shelter the poor and vulnerable against poverty?

Expert perspectives on Uganda’s economy, the government interventions through projects such as the PDM and a quick glimpse of what 2024 could look like and what practical measures the government should take to avert the increasing economic hardships.

 

Mr Kwame Owino, Chief Executive Officer, Institute of Economic Affairs (IEA), Kenya: Can taxation be a solution and should we expect more taxes moving forward?

Perspectives on Kenya’s economy, the government’s economic hardship interventions and a quick glimpse of what 2024 could look like. With a depreciating shilling, dwindling FDI and choking debt are we likely to see more taxation in Kenya and this gradually snowballing across East Africa? Is there a significant risk that Kenya is or could fall from its pedestal as a major economic hub in the near future?  What practical measures should the government take to avert the increasing economic hardships across the country and the East African region.

Dr Mugisha Rweyemamu, Research Fellow, Economic Social Research Foundation, ESRF-Tanzania: Could Tanzania overtake its regional peers as the new regional economic giant?

Expert perspectives on Tanzania’s economy, the government’s economic hardship interventions and a quick glimpse of what 2024 could look like. With major strides made in attracting tourism, FDI and having a significant cache of valuable Minerals such as gold and green or critical minerals such as Nickel, Tungsten etc., could Tanzania overtake its East African peers to become a major economic hub in the near future?  What practical measures should the government take to avert the increasing economic hardships across the country and the East African region.

Hon: Zittto Kabwe, Economist and President of AcT-Wazalendo Political Party, Tanzania:  What is totally wrong-Could we expect economic-political unrest amongst the youth-What should political actors do to avert a near economic catastrophe and social uprising (Azania Spring) similar to the famous Arab Spring. Is an economic inspired Azania Spring inevitable if things don’t change?

Professional perspectives on the current economic hardships and what governments could do to avert further hardships in 2024. What are governments not getting politically or fundamentally right. In some countries such as Kenya we have seen some socio-political unrests over economic times, are we likely to see this ‘Azania economic springs’ in more countries in 2024?

Moses Kulaba, Convener, Governance and Economic Policy Centre

Can the EAC escape the current global economic meltdown, evade social-economic disruptions to remain soaring above its peers as the strongest economic subregion in Africa. What political-economic choices will make it maintain a comparative and competitive advantage against the tide

 

 

 Date: Thursday, 30th November, 2023

Time:  11AM-12:30 PM EAT

Registration and participation link: https://zoom.us/j/94699182519 

Meeting ID: 946 9918 2519

Passcode:  yJC673

 

[1] https://www.eac.int/overview-of-eac

[2] https://www.worldometers.info/world-population/eastern-africa-population/

Financing of the Green Economy and prospects for Africa-Can Green Banks offer a viable alternative?

Achieving Green Economies and a just energy transition for Africa cannot be achieved without financing. It is said there is sufficient liquidity and capital to finance climate change and green economic revolution in Africa. Unfortunately, much is not reaching the African continent. In East Africa, access to financing of clean renewable energy such as solar is limited and expensive for many rural communities and poor households. There is potential for solar energy but the existing government policy, legal and financing have gaps limiting cheap financing and solar uptake for rural communities.

The US experience show successful green and clean energy financing models through Green Banks which can be adopted and replicated in East Africa.  Large and small financial institutions on the African continent have leveraged instruments and facilities towards financing the green economy, but these are largely unknown. Governments such as Tanzania are considering carbon trading mechanisms while others look towards imposing carbon taxes to raise the necessary financing for the next green economy. What are the viable options?

The problem

African countries still face significant challenges in financing their climate transition. While investment needs resulting from NDCs are estimated at $2.8 trillion by 2030, funds invested on the continent still represent a limited share of global green finance flows, and the share covered by the private sector remains limited[1] Governments, local financial institutions and communities find it difficult to mobilise or access financing. Large private sector players are reluctant to invest due to the high cost of capital, small scale of projects and inhibiting policy terrains that make it difficult to attract capital and financing into the green economies. Much of the available financing is not yet reaching the communities and thus scantly creating lasting change.

Viable options?

Green banks have been so far lauded as one of the most innovative policy developments that can be used to support and deployment of clean energy[2]. Green banks are financial institutions established primarily to use innovative financing to accelerate the transition to clean energy and fight climate change[3]. They mix commercial, public, and philanthropic approach to capital making it cheaper to finance new clean energy projects that otherwise couldn’t be built. They are a good vehicle for leveraging finance and directing investment to areas which are needed to scale up the green economy.  They are good tools for driving or achieving public policy with a social enterprise angle[4].

An assessment by the African Development Bank and the Climate Investment Funds revealed the potential of Green Banks in six African countries, namely Benin, Ghana, Mozambique, Tunisia, Uganda, and Zambia.

“The assessment revealed that green banks have significant potential for attracting new sources of catalytic funds when supporting low-carbon, climate-resilient development through blending capital and mobilising local private investment for green investments in Africa,” the AfDB reported.

Multilateral development banks and international financial institutions had a crucial role in enabling local financial institutions to develop a green pipeline of projects and ease their access to resources. It is for this reason that the AfDB has established the Africa Green Bank Initiative (ABI).

The AfDB’s Green Bank Initiative (AGBI) is described as a powerful tool for reducing financing costs and mobilising private sector investments in climate action in Africa. The African Green Bank Initiative will be backed up next year by a $1.5 billion trust fund due to close in 2025. The initiative will bolster the capacity of local financial institutions to build a robust pipeline of bankable green projects, while de-risking investments and entrenching long-term investor confidence toward climate-resilient and low-carbon projects in Africa.  “It will do so through investing in sectors such as energy efficiency and renewable energy, climate-smart agriculture, resilient infrastructure, and nature-based solutions, AfDB states.

According to Akinwumi Adesina, the AfDB President, the establishment of a green finance ecosystem could generate $3 trillion in climate finance opportunities on the continent, while over the period 2020-2030, the financing gap to address climate change is estimated at between $100 billion and $130 billion per year.

Moreover, there are other financing options that are or can be pursued. These include green bonds, green loans, and carbon trading mechanisms.

Coincidentally, all these financing mechanisms have upsides and downsides, which  upon evaluation climate financing justice advocates such as  the CSO network, Pan African Climate Justice Association (PACJA) and government officials like Ms Isatou  Camara of the Gambia are now calling out financial institutions  for a total re-engineering and redesign  of climate financing to ensure that more is structured in the form of grants than loans and that at least 70% of this funding reaches the communities. The loans are expensive, Africa is over indebted and yet investment in renewable energy is an expensive affair for African governments to pursue alone[5]

At national level access to green finance should be relatively cheap, driven by a combination of less profit maximisation goals and more social enterprise imperatives and back by enabling legislative and regulatory framework.

Purpose of the webinar

This webinar is the second in a series of the different webinars that GEPC plans to conduct this year on the different elements on economic governance and climate economics, with anticipation that we can contribute towards expanding knowledge, public discussion, and engagement in these spaces.

But more significantly creating opportunities for business economic opportunity in country, including space for youth and women led young businesses to benefit from the emerging context.

Our distinguished speakers will dissect this subject and help us understand Financing of Green Economy in the context of climate change and transition to clean energy: Prospects for Green banks and other financing mechanisms in East Africa with a view of

Objectives

  1. Increase awareness and knowledge about the current Climate Economics and Financing the Green Economy in Africa
  2. Provide an opportunity for stakeholders to interrogate financing structures, national policy terrains, initiative potential opportunities and inhibitors to success.
  3. Influence key stakeholders such finance institutions and potentially state parties to hasten reforms for success.
  4. Generate a potential opportunity for non-state actors, communities, and small entrepreneurs to benefit from existing financing plans.

Our distinguished speakers will be:

1. Ms Isatou F. Camara, Ministry of Finance and Economic Affairs, The Gambia, Least Developed Countries Group Climate Finance coordinator:  Restructuring of the global financing architecture for green economies-what financial institutions must do.

2. Ms Audrey Cynthia Yamadjako, Africa Green Banks Cordinator, African Development Bank (AfDB)

3.Ms Grace Mdemu, Capital Markets FSD Africa, former Business Development Officer at Africa Guarantee Fund (AGF): Leveraging of capital and opportunities to finance Green Economies in East Africa

4.    Dr Elifuraha Laltaika, Senior Lecturer of Natural Resources Law, Faculty of Law, Tumaini University Makumira, Tanzania:   Leveraging financing to poor and indigenous communities in Tanzania

5. Ms Cynthia Opakas,  Senior Legal Counsel, Green Max Capital , Kenya: Practical experiences on financing the green economy in Kenya and global best practices

6. Moses Kulaba, Convenor

Date and Time:  Wednesday, June 14, 2023 12:00 PM Nairobi , 11 AM CET and 9AM ACCRA Time

Pass Code:059752

Registration Link:  https://zoom.us/j/94532314396 

[1] https://www.afdb.org/en/news-and-events/african-development-bank-launches-model-deploying-green-financing-across-continent-56903

[2] Richard Kauffman, Yale School of Management, Financing Clean Energy Technology

[3] http://coalitionforgreencapital.com/wp-content/uploads/2019/07/GreenBanksintheUS-2018AnnualIndustryReport.pdf

[4]https://gepc.or.tz/make-it-happen-how-green-banks-acceleration-can-light-up-rural-hamlets-in-uganda/

[5] Her Excellence Dr Samia Suluhu Hassan, President of United Republic of Tanzania during her address to African leaders at a side event on the Southern Africa Power Pool (SAPP) organised during the CoP27 in Egypt

AfCFTA: Dissecting the world’s largest Free Trade Area: Challenges and Opportunities for East Africa. Is AfCFTA a window of opportunity or a fallacy?

The AfCFTA entered into force on May 30, 2019. Despite the speed at which this new Africa continental trading block is unloading, there is very limited knowledge amongst ordinary citizens, particularly youth, women, and small business.  There is a fear that AfCFTA may be built on a weak ground, set itself for an uphill task and potential failure

The Africa Continental Free Trade Area (AfCFTA) is so far the world’s largest Free Trade Area bringing together the 55 countries of the African Union (AU) and eight (8) Regional Economic Communities (RECs). The overall mandate of the AfCFTA is to create a single continental market with a population of about 1.3 billion people and a combined GDP of approximately US$ 3.4 trillion. The AfCFTA is one of the flagship projects of Agenda 2063: The Africa We Want, the African Union’s long-term development strategy for transforming the continent into a global powerhouse[1].

As part of its mandate, the AfCFTA is to eliminate trade barriers and boost intra-Africa trade. It is to advance trade in value-added production across all service sectors of the African Economy. The AfCFTA is expected to contribute to establishing regional value chains in Africa, enabling investment and job creation. The practical implementation of the AfCFTA has the potential to foster industrialisation, job creation, and investment, thus enhancing the competitiveness of Africa in the medium to long term.

The AfCFTA entered into force on May 30, 2019, after 24 Member States deposited their Instruments of Ratification following a series of continuous continental engagements spanning since 2012. By end of February 2023, 54 member states had signed up and 46 already deposited their ratification instruments, paving way for effective implementation of AfCFTA.

The problem

Despite the speed at which this new Africa continental trading block is unloading, there is very limited knowledge amongst ordinary citizens, particularly youth, women, and small business.  There is a fear that AfCFTA may be built on a weak ground, set itself for an uphill task and potential failure.   AfCFTA aims to create a supra regional economic block in an environment where previous efforts to trade and economic  integration  under frameworks such as the Economic Cooperation of West Africa States (ECOWAS), Preferential Trade Area and Common Market for Eastern and Southern Africa (PTA- COMESA), Southern Africa Development Cooperation (SADC) and East Africa Community (EAC)  have struggled to survive and fully benefit member states , particularly in expanding opportunities for small businesses, jobs and free movement of labour. Trade barriers still exits and overlapping regional configurations, with multiple membership of states to more than one block have exacerbated problems in implementation and held back member states and citizens from enjoying the benefits of regional economic integration.

From an academic perspective, there is a continuous debate on the role of regional integration and commercial diplomacy as instruments of economic diplomacy on trade export flows among African states. A study by the European University in 2016 show that bilateral diplomatic exchange is a relatively more significant determinant of bilateral exports among African states compared to regional integration. The study found a nuanced interaction between these two instruments of economic diplomacy: the trade-stimulating effect of diplomatic exchange was less pronounced among African countries that shared membership of the same regional block. Generally, this could mean that there exists a trade-off between regional integration and commercial diplomacy in facilitating exports or a lack of complementarity between these two instruments of economic diplomacy[2].

AfCFTA is therefore viewed in some analytical circles as potentially counterproductive, as may potentially open the continent to stiff external competition.  Further, cynics view AfCFTA as a potentially well-orchestrated tactical move suitable for developed economies, to open up Africa as a single market. With AfCFTA in place, its alleged, it will be cheap for large RECs such as the European Union (EU) to easily access Africa’s markets with minimal hinderance, as it may now be easy for large and well-established trading blocs such as the EU to negotiate preferential trade deals with one major African block and not with independent states. This had proven problematic in the past negotiations for trade deals such as the controversial Economic Partnership Agreements (EPAs).

Window of opportunity?

None the less, the AfCFTA is here, providing potentially a land shade moment for Africa to reclaim itself, unlock its trade potential and to take its well-deserved position in the community of nations as an economic giant.

The whole existence of the AfCFTA is to create a single continental market for the free movement of goods, services and investments. The AfCFTA Agreement covers goods and services, intellectual property rights, investments, digital trade and Women and Youth in Trade among other areas. The Secretariat, therefore, works with State Parties to negotiate trade rules and frameworks for eliminating trade barriers while putting in place a Dispute Settlement Mechanism, thereby levelling the ground for increased intra-Africa trade. Could this be a reclaimed window of opportunity for Africa?.

Purpose of the webinar

The purpose of this webinar is to dissect AfCFTA create a space for sensitisation and public dialogue with key stakeholders such as Civil Society Organizations, Africa’s economic diplomats, the Private Sector, Government Officials and Agencies, Partners, and other interest groups; in a bid to create awareness about the AfCFTA Agreement and the potential opportunities it offers, thus, securing their active support in the implementation of the Agreement.

This webinar is a first in a series of the different webinars that GEPC plans to conduct on the different elements of AfCFTA, with anticipation that we can contribute towards expanding knowledge and engagement with AfCFTA in the region and propelling its effective implementation.  But more significantly creating opportunities for business economic opportunity in country, including space for youth and women led young businesses to benefit from this new continental arrangement.

This webinar will be held ahead of marking the 4th Anniversary since the AfCTA came into force on 30th May 2023. The webinar will therefore be a major point for reflection on the aspirations and progress made and in generating views and which can potentially influence its future direction.

Our distinguished panelist speakers

  1. Ms Treasure Maphanga, Chief Operating Officer (COO), Africa E-Trade Group and Former AU Director Trade and Industry
  2. Mr Deus  M. Kibamba, Lecture Tanzania Centre for Foreign Relations
  3. Mr Elibarik Shammy, Programs Manager, Trade Mark  Africa
  4. Ms Jane Nalunga, Executive Director, Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI)
  5. Mr Robert Ssuna,  Tax and Trade Expert and Consultant
  6. Mr Moses Kulaba, Tax Law expert and Economic Diplomat (Convenor)

Tentative Dates: Wednesday, 10th May 2023

Time: 12-13:30 Hrs-EAT/ 11AM CET and 9:00 am Accra Time

To participate please register via: https://zoom.us/meeting/register/tJIsc-ispjwiGdVn1y4w9Jks-h-zs5i9QEzV

Meeting ID: 96141487831. Passcode: 391843

[1] https://au-afcfta.org/

[2] Afesorgbor Sylvanus Kwaku (2016) Economic Diplomacy in Africa: The Impact of Regional Integration versus Bilateral Diplomacy on Bilateral Trade, European University Institute, EUI Working Paper MWP 2016/18

End to false promises: Why COP27 must be a true African COP

 

Climate Change and Energy Transition negotiations should be about people.  A just transition cannot be achieved if the majority already affected by climate change and are likely to be affected by the energy transition as a mitigation measure are not heard on the negotiation table

By Moses Kulaba

The 2022 United Nations Climate Change Conference, more commonly referred to as Conference of Parties (COP), was held from 6 -18 November 2022 in Sharm El Sheikh, Egypt. This year’s COP was branded as the African COP since it  happened on the African continent.

Interestingly, this was not be the first COP on the African continent (Africa has hosted other COPs before in Morocco, Durban and Nairobi) and if going by the precedent set by past COPs, climate change commitments and targets were never honored especially by the world leading countries in terms of carbon emissions even after the Paris Agreement. The COP26 promised funds which never came.

In most cases the African political leadership was often disjointed in terms of a common position grounded on the realities of the continent’s people, livelihoods, and economies as the least contributors to the climate crisis.  Furthermore, the people’s voices and grievances are often excluded in the negotiations and processes thereafter. The net result has been a technical process which has led to a potentially slow but catastrophic climatic journey to oblivion, with Africa bearing the brunt of climate shocks and stress.

Despite being the least polluter, Africa faces the worst vagaries of climate change and energy transition risks. Previous IPCC reports indicate that Africa is experiencing more rises in temperatures and sea levels than anywhere else in the world. In the next decade, Africa will experience intense heat waves of up to 5 times more than ever recorded, more uncertain rainfall, droughts etc. Africa is facing significant total disruptions and mitigation and adaptation is required to reduce overall risks of climate change.

Currently, East and Horn of Africa is experiencing the worst drought in over 40 years, with between 22 million to 50 million facing starvation and over 3.4 million children already malnourished. The March to May rains were the lowest in 70 years which has resulted in multiple cycles of crop failure and loss of millions of livestock which are essential sources of livelihood.

For Africa, the potential risks of global warming and climate change are everywhere and daily risk that we face. With a total Forest cover of about 7,13,789 sq km which is 21.71% -24.6% of the geographical area of the country, Tanzania is one of the largest remaining carbon sink. Tanzania’s forests contain more than 2,019 million metric tons of carbon in living forest biomass. Yet, it is estimated that between 1990 and 2010, Tanzania lost 19.4% of its forest cover, or around 8,067,000 ha. At this rate, we could lose half of our forest cover by 2030.

A sudden rise in the Ocean Sea levels by around 3 feet is enough to partially submerge Zanzibar. National Geographic scientists estimate that the islands of Zanzibar and Mafia are likely to disappear under water by 2100 due to a rise in sea level triggered by global warming. Globally, sea level has risen about eight inches since the beginning of the 20th century and more than two inches in the last 20 years alone. Every year, the sea rises another .13 inches (3.2 mm.) New research published on February 15, 2022, shows that sea level rise is accelerating and projected to rise by a foot by 2050.

It was this reason that I argued for CoP27 and any future negotiations on Climate Change and Energy Transition negotiations to be meaningful, they should be about people.  A just transition cannot be achieved if the majority already affected by climate change and are likely to be affected by the energy transition as a mitigation measure are not heard on the negotiation table.  Tangible results for Africa can only be achieved by;

Making climate change technology available

Make climate change technology available and cheap on the African continent. The unit cost of several low emission technologies has fallen since 2010 and innovation policy packages have also enabled the costs to go down. Both innovation systems and policy packages have helped to overcome the distributional, environmental, and social impacts potentially associated with global diffusion of low technology. Unfortunately, this investment and technological advancement are not evenly distributed. They are scantier in less developed countries and Africa in general.

As that transition is happening, Africa is being left behind, but it is rushed and expected to catch up at a similar pace like its developed counter parts. Therefore, a just transition in real sense is required that allows or enables Africa to benefit in the ongoing climate change technological advancement.

Africa should not only be a market but also a producer of climate change mitigation technology. As a matter of essence and fairness, let production of these be based on the African continent to make use of existing technology input resources, adding values, and creating jobs.

Harnessing Africa’s Oil Gas and Coal, without locking into a fossil future

Allow Africa to exploit its fossil resources in the short term as it gradually transits. Africa has vast deposits of coal and is largely an emerging producer of oil and gas. There are different views on the continent on the future of gas as a source of energy. The question that is often asked is whether gas can be described as ‘a clean’ fossil. But based on its energy poverty status, growing population and sustainable development goals. It is evident that Africa will continue to rely on oil as a source of energy for a longer foreseeable future than its developed counterparts.

The emerging African political leadership consensus appears to support the continued investment and use of gas as a transitional source of energy to bolster their energy mix plans to meet increasing energy demand required to propel Africa into the future. It is true that statistical data shows investment and deployment of clean and renewable energy has been increasing globally however the pace has not yet reached a tipping point to overtake fossil based sources on the African continent.  It is therefore imperative to have a balance that allows Africa to use its gas for development but is careful not to lock itself into a non-sustainable gas or fossil future.

Africa has vast deposits of coal. The recent Russia Ukraine war showed that despite earlier predictions, the use of coal as a source of energy may now have a longer lifetime than earlier predicted, as European Countries such as Germany planed to re-fire their coal plants as a way of diversifying away from reliance on Russian gas, meeting current energy demand and securing their future energy security. This therefore meant that perhaps this can allow Africa to exploit and benefit in the short-term demand, with or without totally losing out and locking itself in a coal carbon future. This could be a risky bet but worth trying as strategies are developed for a gradual phaseout.

Leveraging Africa’s transition minerals

There is need to leverage Africa’s transition minerals to drive economic prosperity and smooth domestic transition. Africa is endowed with vast deposits of minerals which are critical to the clean energy technology required in support of the energy transition and road to net zero. Africa produces less oil but more minerals. According to statistical data between 48% to 70% of cobalt (which is used in the manufacture of batteries for electric car vehicles and phones) and 4% of copper and 1% of lithium is found in the DRC. Tanzania, and Mozambique account for 45% of global graphite, with Tanzania ranked alone ranked to have around the 5th largest global reserve.

Historically, Africa has been a source of materials for global progress.  Unfortunately, minerals in Africa have been largely a source of misery and death.  The heart wrenching stories of mineral driven conflicts in Eastern DRC is well documented. A just transition, therefore,  cannot be achieved if Africa’s minerals are exploited to serve the technological advancement and energy security elsewhere. Africa’s resource rich countries should not be bystanders in this potential energy revolution. This time around Africa must be thinking about how to position itself, so it doesn’t find itself riddled with the resource curse which has bedeviled the continent for so long.

Pegging  Africa’s development on Africa Agenda 2063

Capping global warming at 1.5°C requires a transition to clean energy by 2030 and that global emissions reach net zero by 2050. This is barely less than eight years from now and many African Countries will not beat this deadline. Africa  can not be rushed into an energy transition. To have a just transition in Africa, governments and Africa people’s participation is critical in setting the agenda for the COP negotiations and securing targets that are feasible.

Africa needs to develop or redefine its vision and mission on climate change and energy transition. This redefined vision may be slightly different from the global vision but aligned to Africa’s vision, needs and development determinant factors or drivers of development. For example, setting Africa’s energy transition targets to Agenda 2063 could plausible idea.

Implementing NDCs and NAPs at government level

At government level, implementation of the Nationally Determined Contributions (NDCs) and National Adaptation Plans is critical At the previous COPs, the NDCs were lauded as a major breakthrough demonstrating global political commitment by member states towards climate change mitigation and adaptation. Unfortunately, in many African countries these plans have largely remained unimplemented. Leveraging financing of the NDCs will be an essential game changer in turning the tide against climate Change.

Financing Climate Change and the transition

One of the major obstacles holding back efforts to combat climate change is finance  and finance!. A just energy transition for Africa cannot be achieved without financing. Globally, there is sufficient liquidity and capital to finance climate change. In 2010 developed countries committed provide USD100 billion annually towards climate change. Unfortunately, this promise has not been honored. Much  of what is available is not reaching the African continent.

Africa requires and faces acute shortage in access to energy. Around 759 Mln people in Africa still lack access to electricity. According to the UN Road Map to 2030, it requires only 35bln annually to bring electricity to the 759 million who lack it in Sub Saharan Africa. Indeed, with as low as USD 25 bln annually spent, can raise all 2.6bln people who have no access to electricity, yet Africa seems not to get this money. CoP27 should be where this stain of shame in the fight against climate change is put to an end.

Financing Africa’s climate change and energy transition pathways is mutually beneficial to both Africa and the developed world. By virtue of its location and current low levels of emission, Africa so far is the largest existing carbon sink and buffer that so far can help save the globe.

Africa is not ready to finance a just transition because governments have a limited fiscal space to finance it due to debt servicing pressures and competing priorities for social expenditures. Developed countries must provide financing which was committed and follow by curbing illicit capital and financial out flows from Africa to enable the continent to use it to finance the transition.

Curb illicit financial flows from the continent.

For Africa to be ready for climate change and energy transition, there’s need to seal the existing  loopholes that are facilitating Illicit Financial Flows from Africa to the tune of U$ 89 billion annually (according to the 2020 United Nations Conference Trade and Development report). Much of these outflows trace their destination to developed countries and tax havens whose headquarters are located in developed countries. They are facilitated by weak governance structures, tax avoidance and white collar corruption. If these loopholes are closed, Africa could effectively meet and exceed its financing gap of U$ 70 billion for renewable energy.

In a nutshell, give Africa the financial means to deliver on climate change. Provide cheap technology for Africa to deliver on renewable energy. Facilitate Africa to add value to its green minerals so countries such as Tanzania, DRC and Zambia can share the benefits from their mining resources. Provide Africa with adequate timelines to catch up with  its developed counterparts and most importantly listen to our voices at the COPs if we are to collectively deliver on climate change and targets to net zero.

**A modified version of this article also appeared in the Citizen Newspaper of 10th November 2023 to coincide with the COP27

Uganda-Tanzania East Africa Oil Pipeline: signed deal yes, but hurdles lie ahead.

Samia, Museveni witness pipeline project final actsThe East African Oil Pipeline project received significant boots in April 2021 with Uganda with a series of key oil infrastructure related agreements signed between the government of Uganda and Tanzania and the oil companies for the East Africa Crude Oil Pipeline (EACOP) project to transport crude from Uganda to the Tanzania port of Tanga.

According to the government communications, these agreements signal Final Investment Decision (FID) which could be announced soon with production, expected around 2025. There has been already significant work going on at the oil sites in Hoima and as one of the Company officials remarked, work has started. The project is very important to the East Africa region as it promises great economic benefits to the governments and their citizens in the form of jobs, revenues, and other associated economic linkages.

Despite this rekindled hope, shortly after the signing of these agreements, it was evident that multiple uncertainties still lie ahead.

The details of the signed agreements remained undisclosed and technical experts involved in the negotiations remained secret on essential information on key fiscal terms surrounding the tariffs.

The project financing arrangement remains a quagmire.  Few days after signing of the agreements, several banks in France where the lead investor Total is based announced that they were staying away from the financing of the pipeline. The French banks included, BNP Paribas, Société’ Générale and Credit Agricole, Credit Suisse of Switzerland, ANZ of Australia and New Zealand and Barclays.

According to earlier government reports, The Standard Bank of South Africa, China’s ICBC and SMBC of Japan are lead advisors of the EACOP financing. These were under immense pressure from their counterparts Bank Track, Reclaim Finance and Energy Voice for what they described as pushing responsible financing of projects worldwide. According to these banks and activists EACOP’s environmental credentials were failing.

The Uganda government announced that it was not bothered by announcement, describing it as not new. However, the announcement by the banks signalled that the project could be still facing serious negative diplomacy from environmental activists and other political interested actors regionally and globally.

President Museveni described the project and the agreement signing occasion as an act economic liberation. This followed the political liberation which in his view happened some decades ago when Tanzania helped exiled Uganda political groups to take power in Uganda and change the course of history. With the hurdles still to overcome, it was evident that perhaps the financial, environmental, and political woes were not over, and the project was yet to fully get on track.