EAC divisionism complicates single customs territory

EAC divisionism complicates single customs territory

By Charles Kazooba

It is factual that ideological differences within the East African Community (EAC) member states have built cracks that are delaying full integration.

Apparently, Kenya, Uganda and Rwanda are pursuing a progressive line whereas Tanzania and Burundi are being forced to abandon their conservative tendencies.

This is greatly affecting implementation of the single customs territory (SCT). At most technical meetings towards the rolling out of the single customs territory Tanzania and Burundi have been ignored.

The two even expressed displeasure for being left out of the project. However, towards the end of last year, together, the five countries re-united and endorsed the customs territory to reduce the cost of doing business on the northern corridor. 

The three states under the unpopular arrangement of ‘coalition of the willing’ agreed to post customs officials to assess and collect revenue at Mombasa port and oil installations in Western Kenya–Nakuru, Kisumu, and Eldoret.

The January 1, 2014 commencement date of the SCT was agreed upon during a summit in November 2013 that brought together presidents from the five EAC partner States of Kenya, Uganda, Rwanda, Burundi and Tanzania.

The summit agreed to implement the single customs territory under a destination model of clearance of goods where assessment and collection of revenue is done at the first point of entry, which allows free circulation of goods in the single market with variations to accommodate goods exported from one partner state to another.

In November last year the Uganda Revenue Authority had tried out the single customs territory with big oil companies mainly Vivo Energy and Total. URA said they would implement the SCT progressively to avoid a massive switch over. 

But along the way implementation of the customs territory is getting complicated.

Only assessment is being done at the point of entry and payment of taxes will still be done at point of final destination—in Partner States even though the summit that both assessment and collection of revenue be done at point of entry.

The argument by the council of ministers and bureaucrats is that collection of revenue should wait until a single revenue collecting body and a revenue sharing model are put in place.

So, the Partner States will in the meantime continue to retain control over their revenue collection function.

Secondly, Tanzania and Burundi will wait until in June when Tanzania and Burundi can start implementing the programme.

In reality though the implementation, which was initially planned to begin in January with the three countries moving their revenue staff to common entry and exit points to begin goods clearance has been delayed after Tanzania and Burundi protested their exclusion.

The three states have been prompted to go slow on their plans. Therefore more time has been given to Tanzania and Burundi allowing the two countries the opportunity of preparing for the shift towards the single customs territory.

The cracks between EAC member states were first visible on June 25 last year when Presidents Yoweri Museveni (Uganda), Uhuru Kenyatta (Kenya) and Paul Kagame (Rwanda) decided to fast track the integration process and distributed responsibilities among themselves.

 It was agreed that Uganda chairs the railway development and political federation sector, Kenya chairs the oil pipeline development and electricity generation and distribution while Rwanda chairs the Customs, single tourist visa and EAC e-identity card sector.

Since then the three leaders have severally met to update themselves on the progress. However, they appear to be getting stuck having sidelined the other two members, Tanzania and Burundi.

For instance, there is little talk lately about the political federation project. In fact, at the November summit, all Heads of State stayed away from a planned rally at Kololo Airstrip, Kampala for the launch of the federation campaign.

Tanzania has since argued that Kenya, Uganda and Rwanda were being insensitive by rushing the integration process. 

And most analysts agree that slow pace should also apply to the implementation of the single customs territory.

They argue that the partner states need to put in place payment systems to manage transfers of revenues between states and an independent audit system for early detection of deviations to the protocol

They say that enabling laws should be put in place to authorize acceptance of electronic information as evidence for transactions, a centralized bond guarantee system and operational single window borders including a centralized customs administration.

The region should also first harmonize domestic taxes on goods through adopting common domestic laws, procedures, codes structures and definitions, incentive regimes, minimum and maximum tax rates in the short run with a view to adopting common rates in the long run.

And most importantly, the future success of the single customs territory can only be guaranteed if the region has got institutions that protect integration vision, and able to drive the territory even when political will-power fails nationally.

Once the customs territory has been fully implemented return journey transporting cargo from Mombasa to Kigali would take less than 10 days compared to the 20 days trucks currently take and there would also be fewer checks along the route.

It has been taking weeks to transport cargo because of roadblocks and weighbridges yet the longer a truck stays on the road, the more costs to maintain the drivers. 

These costs are not absorbed by the truck owner, but are passed on to a trader who in turn passes them on to a consumer.

The cost of transporting a 20-foot container from Mombasa to Kigali is expected to drop from $383 to $193, resulting in savings of about $45 million annually, according to a study by the East African Community.

Generally, the cost of doing business in the region will reduce by between 15 per cent and 30 per cent.

The single customs territory will therefore ensure clearance of goods at the first point of entry within East Africa and cut off time and resources used by various governments to collect customs tax at various borders.