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EAC's vision of a single currency

Theresa Krinninger / abjApril 12, 2016

The East African Community (EAC) is now successfully asserting itself as a regional trading bloc. Trade volume may have increased but dreams of monetary union are still far-fetched.

Uganda's President Yoweri Kaguta Museveni (front L3), Rwanda's President Paul Kagame (R3), Kenya's President Uhuru Kenyatta (R2) and the host Tanzania's President John Magufuli (C) attend the 17th EAC Heads of State Summit in Tanzania's northern city of Arusha, March 2, 2016 Photo by: Xinhua
Image: picture-alliance/dpa/Xinhua

"Between 2005 and 2014, trade within the East African Community (EAC) increased by 300 percent," Dirk Smelty, business consultant with the Tanzanian Chamber of Commerce, Industry and Agriculture told DW.

Kenya, Tanzania and Uganda formed the EAC in 2000 and introduced a customs union five years later. Burundi and Rwanda joined the union in 2007.

The customs union is promoting trade and is going from strength to strength. The EAC reported that in 2005 Kenya recorded imports worth $3.5 million (3.8 million euros)and exports valued at 5.8 million dollar. By 2014 imports had doubled to $6 million and exports tripled to $18.3 million.

Uganda also doubled its exports in the same period and its imports nearly tripled. Tanzania however made the biggest leap by quadrupling its exports. Trade in Rwanda and Burundi however remained low.

Chinesen bauen Straßen in Kenia
Several EAC projects still remain unfinished due to logistical challengesImage: picture alliance/Photoshot

The three driving forces: Kenya, Uganda, Rwanda

According to Smelty, trade within the EAC is mainly benefiting countries with stronger economies including Kenya, Uganda, and Rwanda. "Kenya as an economically strong country also has the strongest interest in improving exports and regional cooperation," he said.

The same applies to Uganda. President Yoweri Museveni maintains close ties with Kenya's leader Uhuru Kenyatta. Rwanda is the third driving force in the union but the landlocked nation has no access to the sea. By promoting regional infrastructure development, the EAC can help Rwanda overcome this obstacle.

But much more is at stake than trade. "We have to emphasize that the region shares a common language," economist James Shikwati said. He heads the not-for profit organization Inter Region Economic Network in Nairobi.

Präsidenten von Ruanda & Tansania - Paul Kagame & John Magufuli © Getty Images/AFP/D. Hayduk
Analysts say the economic community is majorly benefiting countries with stronger economiesImage: Getty Images/AFP/D. Hayduk

Shikwati's organization has been lobbying regional leaders to facilitate free movement in the region. "EAC citizens can now move freely," he said. He also said investors are now broadening their horizens. "Companies think now of the 148 million East Africans when they make their business plans," Shikwati added.

Tanzania is moving ahead

How is Tanzania coping? Even though the country has stable economic growth of around 7 percent, it has not made many strides in integrating its economy. "Tanzania is a special case," Shikwati said. "As a result of its socialist past, the state still has a major say on how companies should expand."

Hence Tanzania is still rather careful about backing liberal economic policies. However, the new president, John Magufuli, is signaling interests in greater cooperation with other nations in the region.

Meanwhile, many EAC projects remained unfinished. "They get stuck on logistics and infrastructure," Smelty said. There are not enough railroads and highways. But over the past year development in this sector has started to gain momentum.

Tansania Daressalam Chinesisches Entwicklungsprojekt Photo by: JOHN LUKUWI/AFP/Getty Images
EAC leaders are embarking on major railroad and highway projects to connect the region and make transportation of goods to landlocked countries easierImage: Getty Images/AFP

There are currently ten rail projects in progress including a railway connecting the Kenyan port city of Mombasa with Uganda's capital Kampala. An oil pipeline will run from Uganda to the port of Lamu in Kenya. There are also five large-scale road construction projects.

Common market in sight

In the meantime, however, the EAC has its sight set on a much bigger project. Since 2010, the union has been working on the creation of a common market and currency.

In March 2016, South Sudan became the sixth member of the EAC, which now comprises nearly 150 million citizens. But South Sudan is unstable and Burundi too is deep political crisis.

Therefore, a monetary union is likely to remain a distant hope for the six EAC members, who individual markets are still very nationally oriented.