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:

1. 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.

2. 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