Enhancing Implementation of East Africa’s Nationally Determined Contributions (NDCs) for Climate Resilience: Is it an Exercise in futility?

The Paris Agreement in 2016 set targets to cut global cut global emissions and keep temperatures below 2 degrees Centigrade by 2030 and total net zero by 2010. But so far, we doing so badly, that these targets are largely likely to be missed. In the last few years C02 emissions have been hitting record new high levels ever recorded in billions of years.

Author: Nader M. Khalifa, Governance & Economics Policy Centre, Tanzania, October 2024

  1. Introduction

East Africa faces increasing climate risks, including unpredictable rainfall patterns, severe droughts, and flooding. These climate challenges threaten livelihoods, economic development, and environmental sustainability across the region. Under the Paris Agreement, East African nations have committed to ambitious Nationally Determined Contributions (NDCs) aimed at reducing greenhouse gas (GHG) emissions and enhancing resilience to climate impacts. This policy paper explores the state of NDCs in East Africa and offers a comparative analysis of Kenya, Tanzania, and Uganda’s NDCs, emphasizing recommendations to increase funding, strengthen climate adaptation and mitigation efforts.

  1. Context of NDCs in East Africa

Countries in East Africa are committed to reducing emissions and adapting to climate impacts. Kenya, Tanzania, and Uganda have outlined ambitious NDCs centered on expanding renewable energy, promoting climate-smart agriculture, and building climate-resilient infrastructure. However, significant challenges hinder the implementation of these targets, including financial constraints, limited technical capacity, and political and social barriers. Addressing these challenges is essential to achieve East Africa’s climate resilience goals.

  1. Comparative Analysis of East African NDCs: Emission Targets and Key Factors

East African countries exhibit varied commitments and approaches within their Nationally Determined Contributions (NDCs) based on their unique socio-economic contexts, vulnerability to climate impacts, and institutional capacities. Below is a detailed comparison of emission targets, adaptation and mitigation efforts, financial requirements, and implementation challenges among Kenya, Tanzania, and Uganda.

  • Emission Reduction Targets

  • Kenya: Kenya has committed to reducing its GHG emissions by 32% by 2030 compared to the Business-as-Usual (BAU) scenario. Kenya’s mitigation efforts focus primarily on the energy sector, which includes an ambitious plan to expand renewable energy (particularly geothermal) and enhance energy efficiency across industries.
  • Tanzania: Tanzania’s NDC commits to reducing emissions by 30% by 2030 relative to its BAU scenario. Tanzania’s mitigation focus is on increasing the share of renewable energy, combating deforestation, and improving energy efficiency in industries.
  • Uganda: Uganda aims for a 22% reduction in emissions by 2030. Like Kenya and Tanzania, Uganda’s mitigation strategy heavily emphasizes renewable energy, particularly hydropower, and afforestation efforts, along with energy efficiency improvements in households and industry.

These are quite high targets. For these to be achieved EAC will have to plant so many trees and decarbonize to zero emission in so many sectors such as manufacturing, transportation, agriculture and construction.

Adaptation Strategies

  • Kenya: Kenya is highly vulnerable to climate change, particularly in agriculture, water resources, and human settlements. Its adaptation strategies include promoting drought-resistant crops, improving irrigation and water management systems, and investing in climate-resilient infrastructure (such as flood-proof buildings and early warning systems for extreme weather events). Kenya’s NDC prioritizes ecosystem-based adaptation (EBA) practices to enhance resilience in both rural and urban areas.
  • Tanzania: Tanzania’s adaptation efforts center around sustainable agriculture and forestry, recognizing the importance of these sectors for food security and livelihoods. The country prioritizes improving water resource management, soil fertility restoration, and expanding agroforestry. Adaptation initiatives also target improving the health sector’s ability to cope with climate change-induced diseases.
  • Uganda: Uganda’s adaptation strategies are focused on improving agricultural productivity, increasing resilience in water resource management, and developing sustainable forestry practices. A major component of Uganda’s adaptation plan is strengthening community-based adaptation, particularly in regions vulnerable to extreme weather events like floods and droughts.

Renewable Energy and Mitigation

  • Kenya: Kenya is one of Africa’s renewable energy leaders, with over 90% of its electricity generated from renewable sources, predominantly geothermal, hydropower, and wind. The country aims to further increase its share of clean energy, making it central to its mitigation strategy. The government’s expansion plans include increasing solar installations and expanding geothermal capacity.
  • Tanzania: Tanzania’s renewable energy sector is less developed compared to Kenya. However, the country plans to expand its reliance on hydropower and solar energy, with targeted investments in rural electrification projects powered by renewables. Tanzania’s NDC also prioritizes improving energy efficiency in both industrial and domestic sectors.
  • Uganda: Uganda’s energy mix is primarily hydropower-based, and its NDC targets further expansion of this sector. The country is also exploring solar energy as part of its rural electrification strategy. Uganda’s mitigation efforts also focus on reducing emissions from deforestation and promoting sustainable land management practices.

Financial Requirements and Challenges

NDC is proving  too expensive for EAC Countries to achieve. The cumulative estimated mitigation and adaptation  funding requirement for Uganda, Tanzania and Kenya is about USD109.3Bln 

  • Kenya: Kenya has estimated that it will need $62 billion to implement its NDC by 2030, of which 87% is expected to come from international climate finance. Financial constraints, particularly in securing adequate international support, remain a critical challenge for implementing large-scale renewable energy projects and climate-resilient infrastructure.

 

  • Tanzania: Tanzania’s NDC estimates the need for $19.2 billion by 2030 to meet its mitigation and adaptation targets. Securing adequate financing from both domestic and international sources is a major hurdle, especially for funding long-term initiatives like reforestation, energy efficiency programs, and renewable energy development.
  • Uganda: Uganda’s NDC implementation is projected to cost $28.1 billion, with a significant portion expected from external sources. Uganda’s challenges revolve around mobilizing sufficient funds for rural electrification projects, water management systems, and agricultural resilience initiatives.

 

Implementation Barriers

  • Kenya: While Kenya has strong institutional frameworks for implementing its NDCs, challenges include weak local capacity in monitoring, reporting, and verification (MRV) systems, as well as difficulties in attracting consistent international funding. Political stability in the country helps foster a more conducive environment for climate action, but there are gaps in integrating climate policy across sectors.
  • Tanzania: Tanzania faces significant barriers in terms of technical expertise and capacity for implementing its NDCs. Limited access to data and modern technologies, particularly in rural areas, hampers the effective rollout of renewable energy and agricultural adaptation strategies. Political commitment is strong but often challenged by competing development priorities.
  • Uganda: Uganda’s main implementation challenges include a lack of technical capacity and institutional coordination. While Uganda has ambitious NDC targets, the limited financial and technical resources available for adaptation, especially in agriculture and water management, slow down progress. Moreover, the country struggles with integrating climate action into local governance structures.

The global total emissions is over 50 bln tones annually shared out per sector as follows

No Sector % Co2 Emissions
1 Manufacturing (Oil, Gas, Steel, Cement, Chemicals & Mining) 29%
2 Electricity (Coal, Natural Gas, Oil) 29%
3 Agriculture (Landuse, Waste, Crops & Livestock) 20%
4 Transportation 15%
5 Building (Cooling, Heating) 7%

Source:  Netflix Documentary; What is Next? The Future with Bill Gates

 

The long-term trend is that are not seeing any decline in Co2 emissions in the next future. The last time the planet was this hot was about 20,000,000 years ago. To get to net zero requires netting out to zero by sectors for each Country and this is a gigantic task.

  • Regional Cooperation and Potential Solutions

There is potential for stronger regional cooperation among East African countries to address common climate challenges, particularly around renewable energy development, cross-border water resource management, and shared capacity-building efforts. This includes:

  • Joint Renewable Energy Projects: Collaborative renewable energy initiatives, such as regional geothermal or hydroelectric projects, can reduce costs and improve energy access across borders.
  • Capacity Building through Regional Bodies: Institutions like the East African Community (EAC) and African Union (AU) can help facilitate knowledge sharing, technical training, and the development of MRV systems tailored to regional needs.
  • Shared Climate Finance Mechanisms: Establishing a regional climate fund or enhancing existing ones could help streamline the mobilization of climate finance to meet the collective NDC ambitions of East African countries.
  1. Recommendations for Enhancing East African Countries’ NDCs and Climate Resilience

East African countries like Kenya, Tanzania, and Uganda have made significant strides in formulating their Nationally Determined Contributions (NDCs) to combat climate change. However, to effectively meet their climate goals and enhance resilience, the following strategic recommendations are essential:

  • Increase Climate Financing Access

Recommendation: Establish a more structured approach to accessing international climate finance and improve domestic resource mobilization.

  • Actionable Steps:
    • Strengthen partnerships with international financial institutions such as the Green Climate Fund (GCF), Global Environment Facility (GEF), and bilateral climate finance partners.
    • Develop and refine national climate finance strategies to better align with donor priorities and global climate funding criteria.
    • Encourage private sector participation by developing incentives such as tax breaks, green bonds, and public-private partnerships to fund renewable energy and adaptation projects.
    • Enhance Regional Cooperation

Recommendation: Foster collaboration among East African countries for shared climate solutions, leveraging regional strengths and resources.

  • Actionable Steps:
    • Establish regional climate action platforms under the East African Community (EAC) to facilitate joint renewable energy projects, share best practices, and coordinate climate adaptation measures.
    • Promote cross-border initiatives like regional renewable energy projects (e.g., geothermal, wind, and hydroelectric plants) that can serve multiple countries and reduce costs.
    • Strengthen regional bodies for coordinated action on shared ecosystems, such as the Nile Basin Initiative, to ensure joint management of water resources affected by climate change.
    • Strengthen Technical Capacity and MRV Systems

Recommendation: Develop and improve Monitoring, Reporting, and Verification (MRV) systems to ensure more accurate tracking of NDC implementation and climate progress.

  • Actionable Steps:
    • Invest in training programs for local technical experts on MRV systems, GHG inventory, and data management, with support from international partners.
    • Collaborate with international organizations like the Initiative for Climate Action Transparency (ICAT) and UNEP to implement best practices in MRV across sectors.
    • Develop a regional MRV framework within the EAC to allow for collective data tracking, knowledge sharing, and standardization of methods for measuring progress on NDCs.
    • Focus on Climate-Resilient Agriculture

Recommendation: Prioritize climate-smart agriculture to safeguard food security, livelihoods, and ecosystem health.

  • Actionable Steps:
    • Expand the adoption of climate-smart agriculture (CSA) practices, such as promoting drought-resistant crop varieties, efficient water use systems, and agroforestry.
    • Increase investment in agricultural research and development to identify crops and farming techniques that are more resilient to changing climate conditions.
    • Provide capacity-building support to smallholder farmers through training programs on sustainable agricultural practices and offering financial mechanisms (e.g., microloans) for adopting these methods.
    • Develop Green Infrastructure and Urban Resilience

Recommendation: Promote the development of climate-resilient infrastructure to adapt to future climate risks in urban areas.

  • Actionable Steps:
    • Invest in green urban planning that includes building flood-proof structures, expanding public green spaces, and improving waste and water management systems in urban centers.
    • Encourage the adoption of eco-friendly public transportation systems, such as electric buses or improved public transport infrastructure, to reduce emissions from the transport sector.
    • Create urban climate resilience strategies that incorporate natural solutions, such as restoring wetlands and reforestation to serve as buffers against climate impacts like flooding and heatwaves.
    • Promote Renewable Energy Development

Recommendation: Expand renewable energy initiatives to reduce reliance on fossil fuels and enhance energy access.

  • Actionable Steps:
    • Fast-track the development of large-scale solar, wind, and geothermal projects to increase renewable energy capacity.
    • Provide incentives for both local and international private investments in clean energy infrastructure, including tax reliefs, subsidies, and regulatory reforms that encourage clean energy deployment.
    • Integrate renewable energy initiatives with rural electrification programs to provide off-grid renewable energy solutions to rural areas, improving both energy access and climate resilience.
    • Integrate Climate Adaptation into National Development Plans

Recommendation: Ensure climate resilience is mainstreamed across all sectors of national development policies and strategies.

  • Actionable Steps:
    • Align national development goals (e.g., poverty eradication, healthcare, and education) with climate action priorities to foster sustainable development pathways.
    • Develop sector-specific adaptation plans (e.g., in agriculture, water, health, and infrastructure) and ensure these are supported by legislation and long-term budget commitments.
    • Promote community-based adaptation strategies that empower local communities to develop localized solutions to climate impacts, such as improved land management or water conservation techniques.
    • Support Gender-Responsive Climate Action

Recommendation: Ensure that NDCs are gender-responsive and include strategies to protect vulnerable populations, particularly women and children.

  • Actionable Steps:
    • Mainstream gender considerations into all climate action projects, ensuring that women, who are disproportionately affected by climate change, are included in decision-making processes.
    • Develop gender-specific programs that focus on building women’s resilience to climate impacts in areas like agriculture, water resource management, and entrepreneurship.
    • Collaborate with women-led organizations and networks to amplify their role in climate adaptation and mitigation efforts.
    • Promote Innovation and Climate Technology Transfer

Recommendation: Accelerate the deployment of climate technologies to enhance adaptation and mitigation efforts.

  • Actionable Steps:
    • Establish a regional climate technology hub to facilitate the transfer and development of clean technologies tailored to East Africa’s unique climate challenges.
    • Create a favorable policy environment that incentivizes innovation, such as offering grants or tax credits for start-ups and businesses that develop climate solutions.
    • Encourage collaboration with international partners for access to cutting-edge technologies, including in renewable energy, early warning systems, and agricultural resilience technologies.
    • Strengthen Institutional Governance and Policy Coordination

Recommendation: Improve governance frameworks and inter-sectoral coordination to enhance the implementation of NDCs.

  • Actionable Steps:
    • Establish national climate task forces to oversee the integration of NDCs across various government departments, ensuring climate policies are effectively coordinated and implemented.
    • Improve policy coherence between climate action, agriculture, energy, and economic development sectors to avoid conflicts and inefficiencies in NDC implementation.
    • Ensure strong participation from civil society, local governments, and the private sector to promote inclusive climate governance.

 

Conclusion

Kenya, Tanzania, and Uganda have demonstrated strong commitment to their NDCs, yet significant challenges—such as financial constraints, technical capacity gaps, and implementation barriers—continue to hinder their climate ambitions. Overcoming these obstacles will require enhanced regional cooperation, dedicated capacity-building efforts, and innovative financing solutions, with support from the international community playing a crucial role. By embracing these strategies and recommendations, East African countries can strengthen their resilience to climate impacts, close the gap between climate goals and actions, and contribute substantially to sustainable development and global climate efforts, ultimately improving the quality of life for their citizens.

 

 

 

 

  1. References:
  1. African Development Bank (AfDB) (2020). African Economic Outlook 2020: Developing Africa’s Workforce for the Future. AfDB, Abidjan.
  1. Africa NDC Hub, https://africandchub.org/
  1. East African Community (EAC) (2021). EAC Climate Change Policy and Strategy. EAC, https://www.eac.int/environment/climate-change/eac-climate-change-policy-framework
  2. IPCC (2022). Climate Change 2022: Impacts, Adaptation, and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge University Press.
  1. IPCC Sixth Assessment Report – Chapter 9, https://www.ipcc.ch/report/ar6/wg2/chapter/chapter-9/
  1. Kenya Ministry of Environment and Forestry (2020). Kenya’s Updated Nationally Determined Contribution (NDC). Government of Kenya, Nairobi.
  1. NDC Partnership Knowledge Portal, https://ndcpartnership.org/climate-finance
  1. Uganda Ministry of Water and Environment (2022). Uganda’s Nationally Determined Contribution (NDC). Government of Uganda, Kampala.
  2. United Nations Framework Convention on Climate Change (UNFCCC) (2015). The Paris Agreement. United Nations, Bonn, Germany.
  3. Tanzania Vice President’s Office (2021). Updated Nationally Determined Contribution of Tanzania. Government of Tanzania, Dodoma.

 

Unlocking Non-Tariff Barriers (NTBs) in Regional Agricultural Trade in East Africa: An Analysis of Sanitary and Phytosanitary (SPS) Regime for Horticultural Products in Tanzania and Its Effects on International Trade.

Generally, Non-Trade Measures (NTMs) are good for safe and ethical international trade; however, when poorly regulated and applied irregularly, they transform into Non-Tariff Barrier (NTBs) and can be harmful to trade. Our short analytical study shows that Tanzania is both a perpetrator and victim of irregular SPS measures and could be losing billions in international trade and revenue foregone from its horticultural sector

By Jacob Mokiwa, Researcher , Governance and Economic Policy Centre

(Featured  top image, Courtesy of UNDP-Tanzania, Kizimba Project, Itete Ifakara Youth) 

Sanitary and Phytosanitary measures (SPS) are standards and regulations put in place as Non-Tariff Measures (NTMs) to ensure the safety and quality of food, as well as to protect humans, animals, and plants from risks associated with diseases, pests, and contaminants based on science. SPS decisions are supposed to be science based. These measures are integrated into Tanzania’s regulatory framework, including through legislation, policies, and adherence to international agreements like the WTO SPS Agreement and the International Plant Protection Convention (IPPC) IPPC.

Also, the normative framework governing East African Community (EAC) SPS measures include but are not limited to Article 108 (c) of the EAC Treaty; Article 38 (1C) of the Customs Union Protocol, EAC SPS Protocol, SPS Information Sharing Platform, etc.).

This short policy brief analyzes Tanzania’s Sanitary and Phytosanitary (SPS) regime for horticultural products, assessing their impact on international trade and concludes with recommendations for enhancing SPS policy measures to ensure safety, compliance and a facilitative smooth international trade in Tanzania horticultural products. It emanates from our economic governance work on regional economic cooperation, trade and investment, with multiple aims of creating awareness about SPS as a major regulatory tool in regional and international trade that small traders and aspiring international horticulture exporters must know.

State of Horticultural Products

Faraha Salim sells vegetables in the market in Lushoto thanks to a small loan from a community savings and lending group-VICOBA.

Tanzania is a largely an agricultural producing and exporting country with its horticulture sector becoming a rapidly expanding sector with a huge potential to contribute to Tanzania’s economy through employment, trade and export foreign income earning. The country has large chunks of arable land, water bodies and favorable climate for horticulture in many regions across the country.

Tanzania’s horticultural sector encompasses various products, including fruits, vegetables, flowers, and spices.

In recent years, Tanzania has registered impressive export performance of different horticultural products, and this presents an advantageous opportunity to the smallholder farmers to increase their production. Despite this huge potential, the horticultural sector still suffers multiple challenges, including financing, regulation and export standardization. 

The local market infrastructure  conditions are still poor. The cold storage chain for horticultural products from the gardens to the market is limited. Horticulture products are transported in hot trucks, sold in open markets damaging quality  and export standards. The net effect is that Tanzania’s export share of the regional and global horticultural trade has been growing but remains low, compared to its neighbors such as Kenya. According to Ministry of Agriculture statistics, the horticulture sector has become the second largest growth driver of the entire agricultural sector, after food crops contributing about 25% of the sector but has remained stagnant in  growth at 11% annually.

According to the Tanzania Horticultural Association (TAHA) and the BoT Monthly Economic Review (MER), for the year ending in December 2023, the value of horticultural crops’ exports grew to $417.7 million (Sh1.044 trillion) as compared to $290.1 million (Sh725.25 billion) recorded in 2022. This shows that exports grew by $127.6 million (Sh319 billion), which is equivalent to 43.9 percent. The growth in exports comes after a decline from $384.9 million (962.25 billion) reported in 2021 to $290.1 million (Sh725.25 billion) in 2022. The decline accounted for a total of $94 million (Sh237 billion), which is equal to 24.4 percent[1].

This data if extrapolated for the last five years indicates that the Horticultural sector can be a major game changer in Tanzania’s international trade exports, serving as a major source employment to the bludgeoning unemployed youthful population of foreign revenue through increased investment in horticulture and export trade.  Moreover, the sector can leap frog Tanzania to a regional competitor, outpacing its neighbors and rivals in the horticultural sector.

However, the limited awareness, selective and uncoordinated application of SPS standards by both export and importing partners in intra-regional and international trade has gradually turned them from being Non-Tariff Measures (NTM) to become Non-Tariff Barriers (NTBs) to trade in Horticultural products amongst others.

According to Land O Lakes Trade of Agriculture Safely & Efficiency (TRASE) report, the East African Community (EAC) represents one of the fastest growing regional economic communities in the world. And yet, trade of agricultural products from and within this region has been hindered by Sanitary and Phytosanitary (SPS) issues 

SPS Measures Regime in Tanzania

Tanzania’s SPS regime consists of several legal frameworks articulated and differentiated under the three SPS functions of animal health, food safety and plant health. This involves the Plant Health Act, 2020 with the mandate of issuing phytosanitary certificates, among other functions, Standards Act No. 2 of 2009 with the mandate of regulating and developing mandatory standards and responsible for inspection and certification). 

The regulatory institutions include the Ministry of Agriculture and Livestock, Ministry of Trade and Industry, Tanzania Pesticides and Plant Health Authority (TPPHA) established under the Act No. 04 of 2020 with a mandate to comply with the requirements of International Plant Protection Convection (IPPC) on sanitary and phytosanitary measures[2].  The other regulatory institution is the Tanzania Bureau of Standards (TBS) established under Act No. 3 of 1975 as the National Standards Institute and subsequently renamed Tanzania Bureau of Standards under Act No. 1 of 1977. On 20th March 2009, the Standards Act No. 3 of 1975 was repealed and replaced by the Standards Act No. 2 of 2009.

The Bureau was established as part of the efforts by the government to strengthen the supporting institutional infrastructure for the industry and commerce sectors of the economy. Specifically, TBS is mandated to undertake measures for quality control of products of all descriptions and to promote standardization in industry and commerce[3]. So far, the regime has been quite robust, enabling Tanzania to enforce its SPS measures, however faces multiple challenges that would benefit from improvement.

Challenges

The agricultural sector already faces multiple challenges but the SPS regime in Tanzania adds another layer of complexity, potentially hindering Tanzania’s ability to invest in the horticultural sector, produce, export and compete effectively in the global market. For instance, some stringent SPS requirements cannot be met by small farmers in Tanzania due to the limited resources required for modern agriculture and consequently hinder the export of horticultural products, as meeting the standards can be costly.

Additionally, inconsistent enforcement of SPS regulations across different institutions and regions within Tanzania creates confusion and delays in trade processes and hence affects the competitiveness of Tanzanian products in international markets.

Furthermore, procedural framework for SPS regulation has shortcomings in the institutional framework and that, as a result, application of the existing legislations is impaired. There is limited capacity for speedy and quality testing and certification facilities. This lead to bottlenecks in the export process, delaying shipments and increasing costs for exporters.

Other challenges are; limited funding to attract and retain high quality talent, lack of transparency in certification, duplication of regulatory functions, poor coordination among the various SPS control agencies, lack of mutual confidence between enforcement agencies in different countries and non-existence of arrangements and mutual recognition agreements signed to facilitate trade.

Impact on regional and International Trade

 The effectiveness of Tanzania’s SPS regime significantly influences its international trade in horticultural products and therefore, there is a need to balance regulatory practices for health protection with trade facilitation. However, if not addressed, the regime may, and for purposes of enforcement of SPS controls, create trade constraints such as;

  • Market Access Restrictions: Non-compliance with SPS measures restricts access to lucrative international markets that is with stringent regulations, the production costs for horticultural producers may increase and making Tanzanian products less competitive compared to those from other countries. Kenya, Tanzania’s immediate horticultural competitor has been successful in meeting the standards at lower costs and thereby dominating the regional and international market of horticultural products.
  • Loss of Revenue: Inability to meet SPS standard leads to rejected shipments, financial losses, and diminished competitiveness in global markets, affecting the revenue generated from horticultural exports and thus undermines economic growth potential in the horticultural sector.
  • Diminished Reputation: Persistent challenges in meeting SPS standards tarnish Tanzania’s reputation as a reliable supplier of safe and high-quality horticultural products, thereby reducing consumer confidence and market demand.
  • Market Diversification: Strict regulatory requirements may incentivize Tanzanian exporters to explore new markets where compliance costs are lower or where there is greater alignment between domestic and international standards.
  • Quality Perception: Adherence to rigorous quality and safety standards can enhance the perception of Tanzanian horticultural products in international markets, positioning them as premium offerings valued for their quality and reliability. This could open up opportunities for niche markets and premium pricing strategies.

Policy Recommendations

Addressing challenges in Tanzania’s SPS regime for horticultural products is crucial for unlocking the sector’s full export potential, facilitating more investment and fostering sustainable economic growth. By implementing the recommendations outlined in this brief below, Tanzania can overcome SPS-related barriers to international trade and position itself in the global horticultural market as a reliable supplier of high-quality horticultural products and maximize the benefits of international trade for the citizens and economy. The following recommendations are proposed:

  1. Improve coordination among regulatory agencies and investing in digital platforms for documentation and compliance verification to simplify and accelerate SPS certification procedures for horticultural products and this will cut costs, reduce trade barriers and enhance market access.
  2. Strengthen enforcement mechanisms by putting in place an enabling legal framework to create effective and expeditious administrative mechanisms and provide clear administrative redress mechanisms for handling trade complaints and disputes. Also, the framework should provide for coordination of the various SPS control agencies to avoid overlaps and duplication. The current regime lays a solid foundation for further improvement.
  1. Improve infrastructure by allocating resources for upgrading SPS-related infrastructure including laboratories, inspection facilities and cold chain logistics that will enable producers and exporters to meet international standards and capitalize on emerging market opportunities. Tanzania has a deficit of cold storage capacity and its location along the equator exposes horticultural products to heat waves and vulnerability rapid quality deterioration and waste.
  1. Recruit and retain high quality staff with the of international testing and certification requirements. This must also be followed by addressing administrative limitations and sealing off opportunities for corruption.
  1. Prioritize capacity building, awareness and improve dissemination of information on SPS particularly for producers, small-scale traders, exporters and raising initiatives for regulatory agencies, on legislation and regulations, processes, procedures, standards, best practices, and technological advancements to enhance competitiveness in global markets.
  1. Foster partnership between public and private sector stakeholders to develop and implement SPS-related programs, training, research & development, technology adoption and technical assistance so as to address common challenges and promote innovation in the horticultural value chain. This must be backed by scaled up SPS technical assistance, going beyond the implementing institutions but also extended to horticultural farmers.
  1. Advocate for harmonization of SPS standards with international norms and regional trade agreements to streamline trade procedures and facilitate market access for Tanzanian horticultural products. Horticulture farmers and exporters still complain of disharmony in application and enforcement between Tanzania and its trading partners such as the Tanzania-South Africa Avocado case in 2021[4].
  1. Establish and empower the National SPS Committee to address and resolve technical SPS issues faced by traders and increase transparency on SPS requirements. Moreover, the committee should also be the main source of information on new SPS regulations, including measures introduced by trading partners.
  1. Constantly review to ascertain the extent to which Tanzania’s SPS regime is aligned to the EAC SPS protocol and its application is consistent and facilitative of international trade. There are cases of selective application and enforcement even among EAC member states.

References

Ministry of Agriculture. (2022). “National Horticulture Development Strategy.” Retrieved from Online:    https://www.kilimo.go.tz/uploads/books/Mkakati_wa_Kuendeleza_Horticulture.pdf

Tanzania Bureau of Standards (TBS). (2022). “Sanitary and Phytosanitary Measures for Horticultural Products: Regulations and Compliance Guidelines.” Retrieved from Online: https://www.tbs.go.tz/uploads/files/LIST%20OF%20COMPULSORY%20TANZANIA%20STANDARD%20AS%20OF%20JULY%20%202022.pdf

Trade of Agriculture Safely and Efficiently in East Africa (TRASE) (2021). “Assessment of SPS Legal/Regulatory Frameworks in the EAC Partner States”. Retrieved from Online: https://storcpdkenticomedia.blob.core.windows.net/media/idd/media/lolorg/publications/assessment-of-sps-legal-systems-in-eac-partner-states-4th-june-2021.pdf

Trade of Agriculture Safely and Efficiently in East Africa (TRASE) (2021). “Assessment of SPS Systems in the EAC Partner States”. Retrieved from Online:  https://storcpdkenticomedia.blob.core.windows.net/media/idd/media/lolorg/publications/assessment-of-sps-systems-in-eac-partner-states-18th-march-2021-print-file-4th-june-2021.pdf

TradeMark East Africa: (2021). Standards, Quality Infrastructure, and SPS Programme: Project Brief: Retrieved from Online: https://www.trademarkafrica.com/project/standards-quality-infrastructure-and-sps-programme/

Food and Agriculture Organization of the United Nations (FAO). (2021). “Good Practices for Strengthening National Plant Protection Organizations.” Retrieved from Online: https://www.fao.org/3/i6677e/i6677e.pdf

 [1] https://www.thecitizen.co.tz/tanzania/magazines/what-44-percent-rise-in-horticulture-exports-means-to-tanzania-4510004

[2] https://www.tphpa.go.tz/

[3] https://www.tbs.go.tz/pages/historical-background

[4] https://www.theeastafrican.co.ke/tea/business/tanzanian-avocado-exports-poised-to-grace-sa-tables-3506248

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

Oil and Energy Transition: Why Sudan conflict provides new hope for EACOP

The Sudan conflict is a catastrophe that must be stopped but its unintended consequences provide new optimism for the East African Crude Oil Pipeline (EACOP).

By Moses Kulaba, Governance and Economic Policy Center

With the constant fighting and insecurity along the pipeline and its pumping stations, the South Sudanese government is now open to exploring new opportunities via EACOP to guarantee its future oil exports.

On March 16th the government of Sudan admitted that it cannot guarantee the smooth export of oil from South Sudan, as a year of war has made it difficult to maintain or even protect the pipeline to Port Sudan.

In a letter to major oil companies involved in the oil production and export, Sudan’s Minister of Energy and Petroleum Dr Mohieldin Nam Mohamed Said admitted that the war had made it difficult to provide any guarantees for safety.

He acknowledged that the conflict was hampering the flow of oil to Port Sudan, as it took time to repair pipelines ruptured during the fighting. In addition, there was a telecommunications breakdown between the pumping stations (PS4) and PS5 in Sudan, which were shut down in the midst of heavy fighting. The area was an active military zone and access for repairs was not guaranteed.

As a response the South Sudanese government had declared a force majeure, making production and export impossible and thereby revamping suggestions to explore new possible safer routes for South Sudan’s oil.

The war in Sudan added to the challenges South Sudan faces in maximizing its only major resource – oil – to fund a financially constrained government and other operations.  As a consequence of the war, South Sudan’s oil production fell from 160,000 barrels per day in 2022 to 140,000 barrels per day in 2023. This is was more than half of the previous peak of 350,000 barrels per day before civil war broke out in 2013.

Talks to have South Sudan pump its oil south wards had all along been explored and presented as part of Uganda’s grand plan to make the EACOP an East African project by connecting and supplying all the EAC member states with oil and gas.

Under this grand plan and initial drawings, the Oil pipeline would radiate from its nerve center in Hoima with an artery of pipelines running northwards to South Sudan, westwards to the Democratic Republic of Congo (DRC), eastwards to connect Kenya’s oil from Turkana and southwards with an arm extended to Rwanda and long route via Tanzania to Tanga port.

Map showing initially considered alternative EACOP routes

But the progress of this was partly hampered by Uganda’s fall out with the Kenyan route and the existing agreements signed between Khartoum and Juba during the independence talks. Provisions in these required among others a concession that Sudan will retain territorial control of some oil rich territories and that South Sudan would continue exporting its oil via Port Sudan. By doing this, the government in Khartoum would maintain some revenues from the oil sector that had been largely lost with South Sudan’s cessation and independence.

I remember in a private conversation with a friend from Sudan some years ago he confided that during one meeting with   Sudanese youth and young professionals, President Omar Bashir, before his overthrow, had admitted that he was not sure about the economic future of Sudan without South Sudan. He clearly predicted a catastrophic economic meltdown leading to chaos and that was why Sudan had to maintain a grip on South Sudan. The oil pipeline was a win-win infrastructure politically and economically anchoring the two countries as good neighbors.

By Sudan admitting that the safety cannot be guaranteed and reconstruction of the damaged infrastructure will take longer than usual provides South Sudan with a legitimate cause to start exploring new safe routes for its oil.

An oil route from Juba southward would be beneficial to South Sudan, the EACOP but also good for the East African Community as a region. South Sudan derives 90% of its revenues from oil exports and would like to have a constant flow of this oil to sustain its economy. EACOP would guarantee that flow. South Sudan would also have access to other EACOP related infrastructure such as the refinery and international airport for other logistical needs.

An extended pipeline from Hoima northwards to connect with the oil from South Sudan would increase volumes of oil pumped out of EACOP by at least 150,000 to 200,000 barrels per day, increasing EACOP’s profitability and attractiveness to investors.

Moreover, with its oil, South Sudan would become a major regional player with a stronger voice in EAC matters perhaps more than it is today. The pipeline would bring Sudan in the north closer to the EAC, increasing its prospects for joining the EAC and thus facilitating the region’s expansion ambitions.

There could be some differences in the chemical composition and technical aspects of the two oils (Uganda and South Sudan) with perhaps one being waxier than the other but these complexities can be handled through technical re-engineering and design of the oil pipeline.

The EACOP has always been a controversial project with environmental activists and anti-oil crusaders campaigning against its construction.  Environmentalists argued that the world’s longest heated pipeline will have serious environmental impacts and contribute to global warming. The future profitability of the pipeline was also questioned given the global push towards a transition away from fossil-based system and uncertainty about the future of oil as an energy source.

None the less, plans for construction of the pipeline are ongoing.  Land compensations in Uganda and Tanzania was completed. An advance consignment of pipes was delivered and a coating and insulating plant for the pipelines was commissioned and already operational in Tanzania, paving way for the pipeline construction and ground laying to commence before end of 2024.

The conflict in Sudan therefore provides more impetus to the project as it opens a new door for possible access and increased volumes from South Sudan’s oil and taping into already existing markets can be guaranteed.

The future of oil as a dominant fuel in the global energy system is a controversial subject and a debate exists whether it makes sense to construct new oil pipelines and infrastructure.  

However, the crisis and the significance of oil in driving South Sudan’s economy comes at a time when there are all indications that major global super powers such as the United States and United Kingdom are backtracking on their commitments to end and move away from fossil or oil as source of energy.

Despite the announcements made at the COP27 and 28, in his maiden speech to Parliament, King Charles in November 2023 announced that the UK government will issue new licensing rounds for exploration and drilling of oil and gas in the North Sea. The rounds will go ahead each year so long as the UK remains a net importer of oil and gas and if emissions from UK-based production remain lower than those associated with imports.

In the US, Republicans have maintained a firm support for oil and Donald Trump, the most preferred Republican nominee for President has vowed to overturn any existing legislation and commitments made by the Democrats against the fossil energy sector, by signing an executive order to issue new rounds oil and gas drilling.  According to Trump this would be his first executive order immediately signed, if he was elected to power in November of 2024. Clearly, the US political will is divided and the future US policy terrain on oil and gas cannot be guaranteed.

Quietly, the leading oil producers are strongly supporting continued pumping of oil. Despite global campaigns, large oil producers are still skeptical that renewables can replace oil in the medium term and by 2050. They believe that the focus should be on decarbonizing oil and not ending its supply and use all together. Ending use of oil would be returning the world to stone age error, one Middle East leader remarked at COP28 before backtracking after coming under intense criticism. The approved language at COP28 was phase down and not phaseout. Oil therefore may have a longer lifetime than earlier anticipated.

Despite the catastrophe that the war has caused, that we all condemn, Uganda and Tanzania should exploit the opportunity it provides to ramp up and conclude talks with South Sudan on the viability of exporting its oil via EACOP.

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/

Critical Minerals: EAC destined large critical minerals block, yet benefits remain elusive

With the DRC and Somalia on board and new coltan discoveries made in Kenya, the East Africa Community (EAC) is now destined to become one of the largest critical minerals deposits rich and source region in the world, yet maximizing value and benefits as region remains elusive.

By Moses Kulaba, Governance and Economic Policy Center

@criticalminerals @energytransition

On the 15th December 2023, the Federal Republic of Somalia became a full member of the EAC becoming the 8th country to join this economic block. With its admission following closely on the DRC in 2022, the EAC has a total population of 320 million people with a geographical size of about 5.4million sqkm straddling from the Indian Ocean coastline to the Atlantic coastline.

The EAC now boasts as one of the largest single economic block with large deposits of minerals critical for mitigating climate change by driving the green industrial revolution and transition to clean energy. There are already prospects that Ethiopia and Djibouti will be joining the EAC. If this happens the EAC’s geographical size, population and mineral wealth will expand to rival or overtake other economic regions such as the European Union.

The size of Mineral Deposits combined

According to the EAC reports, the region is endowed with a variety of minerals, including fluorspar, titanium and zirconium, gold, oil, gas, cobalt and nickel, diamonds, copper, coal and iron ore. Such mineral resources present an opportunity for development of the mining industry, which is currently underdeveloped.

Mineral Resources in EAC

Country Precious metal, Gemstones & Semi-Precious Metal Metallic Minerals Industrial minerals
Burundi Gold Tin, Nickel, copper, cobalt, niobium, coltan, vanadium, tungsten Phosphate, Peat
Kenya Gemstones, gold Lead, zircon, iron, titanium Soda ash, flour spar, salt, mica, chaum, oil, coal, diatomite, gypsum, meers, kaolin, rear earth
Rwanda Gold, gemstones Tin, tungsten, tantalum, niobium, columbium pozzolana
Tanzania Gold, diamond, gemstones, silver, PGMs Nickel, bauxite, copper, cobalt, uranium Coal, phosphate, gypsum, pozzolana, soda ash, gas
Uganda Gold, diamond Copper, tin, lead, nickel, cobalt, tungsten, uranium, niobium, tantalum, iron Gypsum, kaolin, salt, vermiculite, pozzolana, marble, soapstone, rear earth, oil
South Sudan Gold, silver Iron, copper, tungsten, zinc, chromium Oil, mica

Source: EAC Vision 2050 and South Sudan Development Strategy

With the pressure of climate change and the 4th industrial revolution driven by a few green minerals, the EAC hosts vast deposits of minerals such as coltan, nickel, tantalum, copper and others vital in driving the green technological revolution to a cleaner energy future.

The admission of the DRC to the EAC was a game changer to the region’s positioning as a global player in the critical and strategic mineral’s space.  According to multiple sources the DRC is the world’s leading producer of cobalt, used in the manufacture of batteries. It is also the world’s fourth-largest producer of copper, used in the assembly of electric cars and the infrastructure of most renewable energy sources. Lithium deposits, estimated at over 130 million tones, are also present in the southeast.

The DRC has most of the mineral ores that produce key components in making computer chips and electric vehicles, technologies that are powering the drive to the future. In a typical computer, copper and gold are key components used in making the monitor, printed circuit boards and chips. Cobalt constitutes 6.45 percent of the materials that make electric vehicle batteries while copper constitutes 25.8 percent. Jointly, copper and cobalt constitute more than a third of EV batteries.

DRC is rich in these minerals, producing 68 percent of the world’s cobalt — the largest globally — and over 1.8 million tons of copper annually. Copper is estimated to gain and maintain more value on longterm compared to other minerals.

Before the DRC and Somalia’s membership, the EAC was already a major player. According to Geological Survey of Tanzania, Tanzania has close to 24 documented critical minerals such as Nickel, Tantalum and sits on the 4th largest premium grade graphite deposits in the world. Between 2005 and 2020, there was an exploration boom relative to other minerals for Tanzania’s Critical Minerals.

Uganda has vast deposits of copper and tungsten in its south western border areas while Rwanda is one of the world’s largest producers of tin, tantalum, and tungsten (3Ts) and coltan. Burundi has copper, cobalt and nickel in 2019, Burundi produced about 2% of the world’s production of tantalum.  Kenya has vast deposits of titanium, a mineral used in the manufacturing of aircraft transportation and solar panel parts. The new discoveries of coltan announced in Embu County in 2024 adds to Kenya’s list of valuable minerals. Although the commercial volumes of the new discoveries are yet to be determined, Kenya’s announcement expands the EAC’s critical or green mineral deposit map and its role in the green energy transition. Somalia, the EAC’s new entrant has some deposits of tantalum, tin and uranium.

These minerals lie along a common geological mineral belt running from Ethiopia and South Sudan downwards across the DRC, Uganda, Kenya, Rwanda, Burundi and Tanzania into Mozambique. The combined volume of these green minerals’ deposits competitively will rival other countries like China, Australia and regions such as the Lithium triangle in Latin America.

Given the global challenges related to climate change and the potential transition to a clean future. Energy Security and Energy transition are among the hottest areas of investment. The dash to secure deposits and supply chains of minerals critical to the development of green technology is on. Many countries endowed with these minerals are seeking to create wealth based on this transition.

Despite this critical mineral resources’ wealth, the EAC has failed so far to leverage and maximize economic benefits as a single region remains elusive. The EAC’s share of global investment in this lucrative extractive sector remains small. The EAC is riddled with extractive policy fragmentation, overriding nationalistic political desires and catastrophic death of joint extractive policy and governance actions.

According to the EAC treaty, the EAC partner states have agreed to take concerted measures to foster co-operation in the joint and efficient management and sustainable utilization of natural resources within the Community. Yet the EAC has no publicly available documented comprehensive regional plan on governing or managing mineral resources. The EAC has focused on management of aquatic and terrestrial ecosystems.  Minerals are categorized as other natural resources.

By treating Minerals as a somewhat lesser regional priority, the EAC is missing out on a huge current and future economic opportunity internally and externally to drive the region to prosperity. We will discuss more about what these opportunities are and how the EAC can benefit in a separate article. Keep reading.

 

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

Tanzania’s removal of penalties on transfer pricing: What did government seek to achieve?
Tanzania Finance Hon Mwigulu Nchemba

In this year’s (2021/22) budget speech Tanzania’s Minister for Finance, Mr Mwigulu Nchemba, made a surprising announcement that government would/had scrapped the 100% penalty for transfer pricing. The announcement was surprising as transfer pricing or mispricing in international transactions and currently a point of discussion globally as one of the leading enablers of illicit financial out flows and capital flight from developing and extractive rich countries.  From a Tax justice perspective, the government’s decision was received as a slight slip in the gains scored over the past 10 years.

According to Global Financial Integrity (GFI) and the Mbeki High-Level Panel Report on IFFs latest reports, shows that IFF’s from the African continent have been increasing with losses estimated between USD50 Million and USD 80 Million over the past years. Corruption and the extractive sector has constantly provided a major conduit for tax avoidance and illicit resource outflow from Africa

Transfer pricing is an accounting practice that represents the price that one branch, subsidiary or division in a company charges another branch, subsidiary or division for goods and services provided. Transfer pricing allows for the establishment of prices for the goods and services exchanged between a subsidiary, an affiliate or commonly controlled companies that are part of the same larger enterprise.

A transfer price is based on market prices in charging another division, subsidiary, or holding company for services rendered. Transfer pricing can lead to tax savings for corporations.  However, companies have used inter-company transfer pricing to reduce the tax burden of the parent company. Companies charge a higher price to divisions in high-tax countries (reducing profit) while charging a lower price (increasing profits) for divisions in low-tax countries.  This is what is also often referred to as transfer mispricing which is problematic for tax collection purposes. We have discussed this concept in detail via another publication via: https://gepc.or.tz/how-to-curb-transfer-pricing-tax-dodging-and-illicit-financial-flows-in-extractive-sector/

Why were heavy penalties imposed in Tanzania’s statutes?

Heavy penalties were imposed for transfer pricing  in Tanzania’s tax statutes because many companies dodged taxes through complex structures and subsidiaries in foreign jurisdictions which made it difficult or impossible for government to track transactions for tax purposes.

According to Financial Secrecy Index (2018) reported that Tanzania lost billions of shillings through potential transfer arrangements between mining companies.

The government was not explicit why it had taken this dramatic decision and therefore left experts and civil society actors bewildered and speculating. The reasons given were pointing towards improving Tanzania’s investment climate. The investment motive was more than the tax revenue imperative.

The potential hefty penalty for transfer mispricing was an inhibiting factor for attracting foreign investments as companies feared or found it difficult to structure their businesses with an international network of subsidiaries and branches anchored to Tanzania making sourcing for foreign financing and sourcing or procurement difficult.

The difficulties in determining market price or an arms price in transactions between related parties and establishing without any iota of doubt whether a given transaction was a mispricing arrangement and illicit in the face of Tanzania’s statute may have been another factor.

The Minister made another drastic announcement.  Effective 2021/22 the Minister responsible for finance was empowered to grant tax exemptions on specific projects without full cabinet approval.

The Minister proposes to restore the power of the Minister to grant income tax exemption on projects funded by the government on specific projects, grants and concessional loans if there is an agreement between the donor or lender with the government providing for such exemption. The measure would streamline and make it efficient for such exemptions to be provided as it has been a pain sticking point for many projects.

The government was attempting to address bureaucracy in approving exemptions and waivers which was a major stumbling blocks to investment and vitality to the success of some strategic projects. This was certainly a welcomed change for players in the construction and large-scale investment projects. At the time of presenting the budget some big and strategic projects were in offing. These included the OreCorp Nyazanga Gold Mine project in Mwanza, Kabanga Nickel project, the ongoing Standard Gauge Railway project and the East African Oil Company project (EACOP). The government announced a specific exemption of VAT on imported and local purchases of goods and services for East African Crude Oil Pipeline (EACOP). The government aimed to ensure the costs of EACOP are minimised.

However, by doing this, the government is walking a very tight rope and contentious terrain with a significant risk of returning to bedeviled fiscal policy regime era which dogged its tax revenue collection efforts in the early 2000s.  Hon Jerry Slaa, Member for Parliament for Ukonga Constituency in Dar es Salaam posted a passionate that perhaps the Minister may have been deceived or even this dangerous paragraph may have been smuggled into the Minister’s Speech. He passionately appealed to the Minister does not sign off this years financial appropriation bill which this provision. It is a dangerous route to take with potential risks.

In our opinion, for these latest decisions to be effective government will have to

  1. Strengthen its monitoring and surveillance capacity to ensure the international companies do not structure their operations and tax arrangements in a manner that facilitates tax avoidance and evasion.
  2. Strengthen its (TRA’s) International Tax department to detect in advance and reverse any transactions of a potential transfer pricing arrangement before they happen.
  3. Improving data collection capabilities to establish the true arm’s length price for potentially contentious transactions, such e-commerce, services, and intellectual property.
  1. Increase transparency around exemption by perhaps requesting the Minister to publish the list of all exempted projects and values within a short period of 30-90 days after approval, clearly stating the purpose and rationalisation for the exemption.
  2. Retain some mechanism for punishment for noncompliance to the commensurate level deterrent enough to the induce compliance.

Highlights of Tanzania’s Budget 2021/22

Projected Total Budget 36.6% Trln (3.2% increase) Domestic 26.0 Trln (72%)
Expected GDP Growth 5.6% Grants 2.9 Trln (8%)
Inflation forecast 3.3% Development 13.3 Trln
Tax to GDP ratio 13.5% from 12.9% (2020/21 Recurrent 23.0 Trln
Debt to GDP ratio projections 37.3% Domestic Loans 5.0 Trln (14%)
Projected Budget Outturn 2020/21 86% – 95% External Loans 2.4 Trln (6%)

** The key challenge to government will be to raise domestic revenues in the face of shrinking grants and concessional loans and the COVID 19 pandemic which is stiff affecting key sectors such as tourism.