Kampala — Almost two months after the commencement of a fully-fledged Customs Union, several bottlenecks are still said to be stalling trade within the partner states.

The East African Community Customs Union opened borders to duty-free movement of goods among partner states. However, traders are not yet contented as they still cite some bottlenecks. "There are still formalities at border points between partner states inhibiting free movement of goods," Mr K.R Sridharan, the general manager-marketing at Britania Industries, told Business Power in a recent interview.

Mr Sridharan also said Ugandan traders find it hard exporting to Tanzania due to delays caused by Contecna, the certifying company whose office is in South Africa. Contecna is based in South Africa and this takes goods two - three days at the port of Mwanza before goods can be cleared to enter the country (Tanzania). "This affects our business so much," he said.

The EAC Director General Directorate of Customs and Trade, Mr Peter Kiguta, however, said the secretariat was not aware of the situation and promised action. "Unless traders tell us what's happening at borders, we cannot know. We encourage them to help us with such information that is crucial in the process," he said. Britania intends to start a factory in Tanzania before the end of this year and also owns Manji Biscuit industry in Kenya.

Non-Tariff Barriers

Other key challenges remaining are the removal of some non-tariff barriers such as the difficulty of getting foreign trucks through Tanzania and the slight differences in quality standards between some of the EAC countries.

"One of the barriers is the re-occurrence of Non-Tariff Barriers (NTBs) that manifest themselves in the form of administrative and legislative measures coupled with infrastructure bottlenecks to the movement of goods," EAC Customs Director Kenneth Bagamuhunda says in a report reviewing five years of the Customs Union.

Mr Kiguta, however, said the secretariat is developing a mechanism to monitor and eliminate NTBs. "Those barriers are imposed by governments but they will soon be dealt with," he said. NTBs are aimed at frustrating businessmen to trade across borders and roadblocks among others. Mr Kiguta said that EAC intends to employ the use of technology to have all points of entry automated. "We are still in the process of connecting all border points on an IT system," he said.

Ray of light

EAC got money from African Development Bank for the project but Mr Kiguta said they were still studying to see how systems of partner states can be incorporated into the process of clearing customs and they expect to use IT before the end of this year.

Mr Kiguta said internal borders shifted to points of entry outside member states and that traders should deem them non-existent. He said the elimination of internal tariffs among partner states shows commitment of the people of East Africa to the objectives of the Community. The Customs Union was established in 2005 and member states agreed upon duty-free movement of goods with the exception of Kenya, which is considered to be the region's dominant economy.

The five-year transition period that ended on December 31, last year was aimed at addressing economic development imbalances that existed among the three original partner states by allowing producers in those countries sufficient time to restructure their operations so they could face increased competition from Kenyan imports. The zero-tariff regime kicked-off on January 1, 2010. Customs Union was the entry point into the EAC integration process.

It is to be followed by the Common Market in July, the Monetary Union and later a political federation. The Customs Union has, however, bolstered the EAC market and further unleashed the opportunities of the expanded market to EAC citizens.

A trade official at EAC secretariat said recently that they expect intra-regional trade to move to 14 per cent by the end of the year, up from 12 per cent when the customs union was launched on January 1, 2005. From 2005 to 2008 intra-EAC trade has risen by 49 per cent. A conspicuous positive performance has been registered by Tanzania and Uganda whose export growth to the region has more than doubled since 2005. Similarly Kenya has continued to register increases in total trade with the other partner states that stood at 25 per cent in 2008.

Even after the two months of the fully fledged Customs Union, Uganda has not yet realised the benefits as yet. Uganda Revenue Authority Commissioner Customs Peter Malinga recently told Business Power that there was hardly a major increase in inflow and outflow volumes of goods into the country.

Exports Vs Imports

However, according to a source who preferred anonymity because figures were not yet confirmed, Uganda's exports within the region for the month of January 2010, compared to those of the same period last year, had increased from Shs53 billion to Shs56 billion.

Imports are, however, said to have reduced from Shs75 billion to Shs66 billion contrary to fears expressed by the Uganda business community that opening borders to tax-free trade across borders would put them out of business due to stiff competition.

Mr Sridharan, however, said Customs Union might be a blessing for big companies allowing them to explore new markets but predicts that the future for Uganda's small manufacturers could be at stake because of stiff price competition from imported goods especially from Kenya, which may be cheaper. "Britania has already established a brand but small manufacturers may face it rough and might end up in extinction," Mr Sridharan told Business Power.