How Far To a Central Common
Securities Wing in the East African Community?
It has been a long time since 1977, the date the EAC
bloc collapsed courtesy of some little discourtesies of leadership across the
borders. Flashback more than four decades later and one realizes the progress,
albeit gradual and sometimes not fulfilling, of the fully-fledged regional
community. From shared ideals of the ‘60’s to a common market of the 2010’s,
now the East African Community awaits the final straw of its success story, a
common securities market with a single currency.
The East African Business
Council
One of the momentous areas of inclusiveness that the EAC
leadership can claim is establishing the East African Business Council (EABC).
This, via its Strategic Plan, will oversee the fast-tracking of the common
agreements that will pave the way for a fast harmonization framework. If the
EAC will become the next European Union, at least as a growing formality, then
EABC must address the following areas:
- Common Securities. Currently, the initial phase
of harmonizing the major capital markets of the inclusive states has but a
year to complete. It began in 2011 and culminates 2014, ready for the take
off of the ultimate phase that lasts up to 2019. The hindrance, however,
is the eclectic mixture of tiny and large markets across the borders.
Kenya has shown acumen in claiming the largest piece
of the cake at the expense of neighbors. 14 local entities have border-listed in
Security Exchanges, including seven in Kampala, five in Dar es Salaam and two
in Kigali. In comparison, only an electric-generation company from Kampala has
found a listing in Nairobi. This is the inequality that the EABC ought to rein
in before a single securities’ market comes into existence.
Local companies that are building equity in regional
securities include EABL, KQ, KCB, Equity Bank and Nation Media, alongside
Centum Investments Co. Ltd.
- Extracting non-tariff barriers. Some of the
freedoms that have always failed in their maturation stages, due to conflict
of financial interests, in sovereign nations, are taxes. The region has no
harmony in the levy-enforcement design. It is the purpose of EABC to
remove many of these unnecessary barriers and make the region one that
enjoys a single levy. Happy news is that at the onset of the Common Market
in July 2010, five nations, devoid of Kenya, eradicated duty-enforcement
across the borders.
Rwanda also helped lobby the removal of tariffs that
hindered the mobility of transit content from ports to landlocked nations. This
saw the region increase a one-time border fee but remove barriers that
protracted the entry of goods from one country to another via long-distance
vehicles.
A Snapshot of the Recent
Past
In theory, a shared currency was to have made headway
by 2012. This became a pipe dream, at least for now, until the ratification of
the common securities agenda, which vaunts two phases, beginning 2011 to 2019,
came in place. Had a shared denomination hit the region in 2012, this could
have meant eradicating the various barriers including the free-duty premise
that only Kenya, the region’s economic powerhouse, had declined to sign.
The predecessor to the common currency, in the offing,
has been the Common Market. This came up in July 2010, when member signers
removed barriers to trade, particularly on long-distance carriers, through the
agency of especially Rwanda.
Why the Common Securities may
not be Long Overdue
Courtesy of the East African Business Council, a lot
of new happenings are apparent from a civil point of view. These include
private-sector partnerships, workshops and labor harmonization, across the
board.
Some of the events perpetually on the calendar are national
employers’ organizations’ conferences that seek to proffer better labor relations
across the borders. This means doing away with diverse entry visas throughout
the region. The EAC Single Tourist Visa will be the new boy in town once labor
policies go under the microscope.
Vimal Shah, the chair of Kenya Private Sector Alliance
(KEPSA) is the new head of EABC for tenure of 12 months:
“Our key areas of advocacy include…the removal of Non-tariff
Barriers…and the introduction of the EAC Single Tourist Visa.”
Another key area of harmonization is that of
standards. A conference going back to 2012 showed that even if traders can
cross the lines on the map in search of new pastures scot-free, they have to
cope with new regulatory mechanisms guiding the kind of goods they can sell in a
new land. There is KeBS in Kenya just like Uganda has its own, and so does
Tanzania, Burundi and Rwanda. Each presents quality regulations that may label legitimate
goods contraband in their own jurisdictions. This is one of the major
challenges that intra-regional commerce brings to distributors.
Benefits of Securities
The secret behind a common securities market, such as,
the one the EAC bloc is contemplating is the agility of movement of financial,
asset, non-asset and futures trade. According to a head of a
section in the Nairobi bourse (NSE), one market for all stakeholders would
ensure that funds transfer easily with no inconveniences.
“EAC investors should be able to invest in other EAC
domestic markets through local intermediaries,” he said in the second week of
July.
Thus, it is fair to say that the integration of the
EAC as a Common Market may only be the first step of a deserved common securities
market. Though the transition is taking a snail’s pace, no one knows whether or
not the fair wind of change that will drive the ship fast to harbor is in the
East African Business Council. Where leaders have failed, these business-savvy
connivers may yet help toggle the fifth gear. Let the gears hold for a while as
every one waits for the promise that a common currency will be in place by the
year 2015.
Furthermore,
the involvement of regional leaders may be
the remaining jerk that will make the integration a practical one for everyone,
including inter-border securities companies