Category Archives: COMESA

Africa’s New TFTA Economic Bloc

So what’s the TFTA (download an English language PDF here)? Why is it so important?  And what’s good about it for Kenya? A lot of that is in this nice article by the Oxford Business Group titled Kenya to benefit from newly agreed TFTA. 

Extracts

  • The Tripartite Free Trade Agreement (TFTA) is an economic integration initiative pursued by the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC), which will create a 26-country integrated economic bloc.
  • Members of the TFTA aim to progressively eliminate tariffs to trade in goods, liberalise trade in services, cooperate on customs matters, among other areas.
  • Kenya is expected to be 1 of only 5 countries in the bloc to see exports increase by more than $100m following full implementation of the TFTA.
  • The TFTA gives Kenyan exporters preferential access to 6 new markets not already covered by the EAC or COMESA, namely Angola, Botswana, Lesotho, Mozambique, Namibia and South Africa.
  • “Sensitive” agricultural goods like sugar, maize, wheat and rice will be subject to duty and quota restrictions, as will other products such as cement, plastics, electronics and paper till at least 2017 to give these industries in some countries time to adjust to increased competition.Highland tea export journey
  • Members of the TFTA aim to progressively eliminate tariffs to trade in goods, liberalise trade in services, cooperate on customs matters, among other areas.

Ahead of the World Trade Organizations (WTO) 10th Ministerial Conference (MC10) to be held later this month in Nairobi, Kenya’s parliament (national assembly) hurriedly ratified the TFTA . This was in a debate just before their year-end recess, and during this, some members chastised the government (executive) for being slow to bring  the TFTA before parliament – and legislative assent is a condition that all member states must meet.

Sugar crisis countdown

Mumias is Kenya’s main sugar company with diversified operations and whose future plans include ethanol production and electricity generation.

However, while they believe they are ready to compete in the future, they worry that other companies and the sector will be negatively affected and could collapse after March 2008 when an import restriction expires – thus allowing unlimited amounts of sugar to be imported duty-free from other COMESA countries.

As such they are commissioning a study (pre-proposals to be sent to the company by 5/4) to see what impact this will have on the sector and calling for urgent action.

Issues they are raising:

  • Other countries – Brazil, Pakistan, Australia, Mauritius, SA, Zambia etc. protect their sugar sectors through tariff and other non-tariff means like subsidies – so why not Kenya?
  • Is the sugar imported from COMESA country Egypt – truly Egyptian in origin? Mumias suspects much of it is dumped from Brazil and under-invoiced by the time it reaches Mombasa. Malawi and Swazi sugar are also suspect.
  • The sugar sector has not been supported by in terms of tax breaks, subsidies, infrastructure and incentives like other Kenyan agricultural sectors such as coffee, dairy, tea, and livestock. Also, when the sector was liberalized/privatized it was not recapitalized as expected leaving companies with debt burdens.
  • Does Kenya benefit from COMESA more than it loses by supporting the local sugar industry? What is the value of Kenya exports to / imports from other COMESA countries? Are sugar, ceramic, textiles and rice from Egypt truly Egyptian products. What is the value of exports to COMESA by Kenyan owned companies?
  • Ascertain Kenya sugar contribution to the economy in terms of taxes, infrastructure, and employment.

For Mumias: It’s troubling that you can buy rice from Pakistan at Uchumi or Nakumatt is priced cheaper than the local Mwea rice (which I buy). So what will happen with sugar? The March 2008 date has always been a crucial day for any Mumias shareholder to consider and the company will certainly benefit from a continued exemption. Mumias makes a great deal of mileage as the only widely circulated Kenya branded sugar product – with the connotation of buy Kenyan, your taxes at work etc.