Business associations apex body says level of cushion is crucial to preserve vital industries
Kenya and other East African Community (EAC) countries appear reluctant to let go the era of protectionism after they introduced various tariffs to cushion local manufacturers.
The development unfolds even as the region moves to embrace the African Continental Free Trade Area (ACFTA) that intends to open the borders to commerce and make Africa the largest free-trade area in the world. Africa has been pushing for more regional integration by means of regional economic communities.
In March, 44 African heads of state and government, including Kenya, met in Rwanda, to sign the African Continental Free Trade Area agreement, a long-standing ambition of the African Union.
However, a fortnight ago, Finance Ministers of Kenya, Uganda, Tanzania and Rwanda proposed a wide range of import duty rates to protect industries when they presented respective budget statements.
Industries targeted included producers of crude palm oil, palm stearin, edible oils, nails, tacks, drawing pins, corrugated nails staples, safety matches, potatoes, mineral water, edible offal, sausages, textiles, footwear, and Iron and Steel products.
The rates, implemented under the framework of duty remissions and stay of application of the EAC Common External Tariffs (CET), are aimed at complementing the efforts by the governments to revive local industries. Duty remission refers to permission granted to a country to import goods or inputs used in the export product either duty free or reduced rate of duty. A stay of application of CET is when a country asks for special import rates to import them from outside the EAC because they do not have the capacity to produce the particular good.
While some analysts say such economic restrictions will hamper trade, business community lobby groups counter that they were key in protecting manufacturers in the region.
“It is praiseworthy to see that the EAC Partner States governments are keen to offer appropriate protection, incentive structures and support for the growth of domestic nascent industries in the region,” said Lilian Awinja, CEO East African Business Council. However, the proposals in relation to the motor vehicle and motor cycle industry are bittersweet.
In the budget proposals, Rwanda grants stay of application of EAC-CET and apply a duty rate of 10 per cent instead of 25 per on road tractors for semi-trailers, motor vehicles for transport goods with gross weight exceeding 20 tonnes and buses for transportation of 50 persons and above. Uganda on its part grants stay of application on EAC-CET and apply a duty rate of 0 per cent instead of 10 per cent on road tractors for semitrailers. It also proposes to reduce import duty from 25 to 0 per cent on motor vehicles exceeding 20 tonnes and reduction of import duty from 25 per cent to 10 per cent on buses for transportation of more than 25 persons.
“Uganda’s proposed ban on importation of motor vehicle of 15 years and above is commendable as it paves the way for the region to embark on harmonisation of age limits of imported vehicles, to boost the motor vehicle industry,” Awinja said.