by John-Paul Iwuoha and Dr. Harnet Bokrezion
Doing business in Africa is not about engaging in one single emerging market- but rather 54 countries with very distinct characteristics. This is one of the major factors why doing business and investing in Africa is so much more challenging than doing business in any of the BRICS countries, namely the emerging economies of Brazil, Russia, India, China, and South Africa.
But little known and discussed are the various Regional Economic Communities (REC) that Africa has. These are economic communities made of several African member states that seek to boost regional growth, cross-border trade, and cooperation; some of them are fast growing in relevance.
There are 8 major African RECs, but it is the East African Community (EAC) the smallest of them all that lately makes the biggest progress and is fast gaining popularity among investors.
Here are 8 Great Benefits You Should Know About Doing Business In The East African Community (EAC):
BENEFIT 1: GET ACCESS TO A VIBRANT AFRICAN MARKET OF AROUND 140 MILLION PEOPLE
The East African Community (EAC) is the regional intergovernmental organization of Kenya, Rwanda, Tanzania, Uganda, and Burundi with its headquarters in Arusha, Tanzania. The EAC is strongly working towards a united, coherent market place, which will enable you to do business in a single market with around 140 Mio people! Ethiopia, Sudan, and South Sudan may even join. So watch this space!
BENEFIT 2: EAC CROSS-BORDER PAYMENTS MADE EASIER
Kenya, Tanzania and Uganda linked their Real Time Gross Settlement systems, which means that a major barrier to the flow of capital has been dealt with. Here is what it means: If you trade in the region through your local accounts you now do not need third parties for currency exchange. So when you are in Uganda for example, you don’t have to use a third party such as a Forex bureau or a commercial bank to first buy Kenyan currency or US dollars in order to pay an invoice in Kenya. You can now make a direct money transfer across borders.
BENEFIT 3: EAC WORKING TOWARDS STRENGTHENING A SINGE CUSTOMS TERRITORY
Cargo that has to be moved between the ports is a major headache to anyone trading in the region. Trucks driving between Kigali (Rwanda) and Mombasa (Kenya) have to pass 47 road blocks! But things are visibly improving: Tanzania has launched an electronic cargo systems around the region to significantly reduce the number of weighbridges and roadblocks with the entry of the Single Customs Territory. Burundi, Rwanda, Uganda and Kenya are working on expanding the system.
BENEFIT 4: SINGLE VISA ISSUING
Kenya, Rwanda and Uganda now have a single joint visa in a bid to boost tourism revenues and other business links. The tourist cross-border visa between Kenya, Rwanda and Uganda was launched on January 1, 2014 and costs currently USD $100. This will save you $30 if you visit the three countries, but above all it will save travelers and some businesses time and hassle. Tanzania did not (yet) join.
BENEFIT 5: EAC TOP DESTINATION FOR PRIVATE EQUITY INVESTORS
Private equity investors seem to be closely following these developments and recent reports confirm that East Africa has become their favorite investment destination. They have surely done their homework on the continent, so why not follow their lead? You are following a popular trend starting your investments or business in East Africa.
BENEFIT 6: EAC PROVIDES GREAT POTENTIAL FOR BUSINESS GROWTH AND MITIGATED RISK
One reason why equity firms are flooding into the East African Community market place is the potential to diversify their operations within this common market and mitigate risk. Operating in the East African community allows you at the one hand to quickly grow your operations from one country into the next, but should one country be hit by unforeseen circumstances such as conflict, terrorism, or natural disaster it also means that you can mitigate the risk by operating in the other member states without changing an entire market.
BENEFIT 7: GET ACCESS TO THE NEW EAST AFRICA EXCHANGE (EAX)
East African states progressed even further a few days ago with the official launch of the East Africa Exchange (EAX) in Kigali, Rwanda. This is a transparent electronic trading platform that will facilitate a regional commodity exchange for the first time. The regional commodity exchange will connect buyers and sellers throughout East Africa and create easier access to intra-African and global markets.
BENEFIT 8: GREAT OUTLOOK FOR MORE BARRIERS TO FALL
Yes, much more is in discussion in the East African Community….including the establishment of a cheap regional airlines offering more affordable flight deals and some are calling for cheaper regional telephone rates. The region is steadily becoming an attractive investment option for both domestic and foreign business-minded people!