East Africa must streamline operations – IMF

February 24, 2012

, NAIROBI, Kenya, Feb 24 – Improvements to infrastructure, streamlining of legal documents and eradication of other non-tariff barriers will be necessary to sustain growth in the region according to the International Monetary Fund (IMF).

Over the last decade, the East African Community (EAC) experienced some of the fastest growth rates in the world with per capita income growing by more than 3.5 percent annually between 2005 and 2010.

Catherine McAuliffe from the IMF Africa department said in order for the EAC countries to accomplish their goals of reaching middle income status over the next decade, they would not only have to maintain the growth momentum but accelerate the pace for sustainable growth.

A new IMF study recently released by the IMF analysed lessons the EAC countries could draw from their Asian counterparts such as China and Malaysia to sustain economic growth.

According to the study, the EAC countries were able to maintain macroeconomic stability during their economic take off of the last couple of years. However, McAuliffe said the EAC countries would have to build their exports to sustain that growth.

“They (EAC countries) fall short in exports. Their exports are much lower than the sustained growth countries. That’s an area, if they want to maintain their high growth rates, they’ll have to work on,” she said.

Between 2007 and 2008 total EAC exports increased by 26.2 percent from US$ 7.79 million (Sh644.9 million) to US$ 9.83 million (Sh812.8 million).

McAuliffe highlighted the high cost of doing business in the region as a major road block for exporters crippling their ability to be competitive on a global scale.

“Transportation costs are six times higher in the EAC than in Asia. The container costs in Rwanda are about $2,800 whereas in China it’s only $500. In Burundi it takes 47 days to export a product compared to the Dominican Republic where it takes eight days,” she revealed.

Transport and logistics costs are 70 to 80 percent higher than those in the US and Europe.

Failure to harmonise domestic taxes and implement a mechanism for revenue-sharing are to aspects that have added to the high costs in the region.

Moving forward McAuliffe said the EAC countries will have to boost capacity by building the skill levels of their work forces to improve the productivity of their economies.

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