High inflation in E Africa blamed on trade barriers

By Luke Anami in Arusha

Reduction of barriers to trade could reduce inflation and the high costs of food prices within the East African Community.

According to the Chief Executive Officer of Trademark East Africa Frank Matsaert, construction of roads and removal of roadblocks could increase border trade among East African Community countries by over 10 per cent, thereby having a direct effect on inflation.

He said the free movement of goods, especially the time it takes to move them from one destination to another, has a direct effect on retail prices.

He said if farm produce is harvested and transported on time, the price of food is likely to reduce thereby affecting inflation rates in EAC partner states.

"Currently inflation brought about by a weak shilling has seen an increase in food prices. This could be reduced if EAC countries concentrated on improving the road network in the region," Mr Matsaert said after signing of an agreement with the East African Business Council in Arusha.

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"It is not only the roads construction but also a reduction of the amount of paper work, lead time and the number of regulations at our border posts needs to be reduced."

A number of issues such as the harmonisation of tax laws and the free flow of labour, goods and services are perceived as key ingredients for business development.

"Free movement of capital within the banks in the EAC will help reduce inflation and food prices," he added.

He cited the World Bank Business Climate Index Surveys, which have shown that the business community in East Africa is generally interested in a rapid regional integration process.

He said the construction of the Arusha-Namanga-Athi River-Nairobi road, which is almost complete, will play a critical role in boosting intra-regional trade.

"Goods between Tanzania and Kenya are already moving fast, save for the number of regulations and bureaucracy at the border post of Namanga," he said.

Private sector

While lauding the signing of a grant worth over $800,000 and the memorandum of understanding worth over $1 million meant to build EABC’s institutional and advocacy capacity, its chairperson Consolata Ndayishimiye said the private sector is willing to enter into partnership with donors and civil society to improve infrastructure projects in the region.

"We share our objectives to deepen the participation of the EAC private sector in the integration process through advocating for business conditions conducive to increasing intra-trade and enhancing opportunity for attractive returns to investment," she said.

EAC Secretary Richard Sezibera said EAC has opened up one stop border post at Akagera, between Rwanda and Burundi.

"We expect to open a one stop border post at Namanga next year to ease free movement of goods."