TANZANIA manufacturers have hailed East African Community (EAC) leaders for allowing individual member states to sign separate trade agreements with the European Union (EU) if a joint deal is not reached within the next four months.
The Chairman of the Confederation of Tanzania Industries, Subash Patel told the ‘Business Standard’ that the decision reached by the EAC Heads of State at Arusha summit recently would benefit domestic industries of the member states and the economies of the countries when the pertinent issues of concern are clarified.
“The decision of the summit to seek for more clarification on the pertinent issues and eventually allow member states to sign or not individually can be considered as an appropriate measure for the benefit of domestic industries and for the economy as a whole,” he said.
East African leaders decided member states can individually sign separate Economic Partnership Agreement (EPA), designed to replace preferential trade deals struck down by the World Trade Organisation.
The East African Community (EAC) and the EU have been at loggerheads for years over signing the trade agreements with the European Union (EU), designed to replace preferential trade deals.
“The summit decided that the EAC engages the EU on the matter in the next four months to get more clarification on the pertinent issues of concern. Thereafter, partner states who wish to, may or may not sign the EPA,” East African leaders said in a joint statement.
Kenya and Rwanda signed the EPA in September 2016, and Kenya has ratified it. However, for the EPA to enter into force, the three remaining EAC members needed to sign and ratify the agreement.
In 2016 Tanzanian Members of Parliament (MPs) unanimously called on the East African country’s government not to sign an Economic Partnership Agreement (EPA) saying it has potential negative implications for Tanzania’s industrialisation strategy if the deal is inked in its current form.
Tanzania is among five African economies whose manufacturing sector are key success stories in Africa after outpacing other countries, which started from similar baselines in 2000, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
The growth of the sector has led to increased output which has pushed out export portfolio improving balance of payment significantly.
Latest data on the manufacturing sector show it recorded 9.0 per cent growth in the first three quarters of 2018, being the highest rate after construction (13 per cent) and information and communication sector (12.5 per cent).
It accounted to 10 per cent to the real GDP growth, according to the Bank of Tanzania’s Monetary Policy Statement.
Tanzania is aiming to transform the economy to semi-industrial economy by 2025 in line with the national development vision. And under the second National Five Year Development Plan 2016/17 - 2020/2021, on average, manufacturing sector is expected to grow by over 10 per cent per annum with its share in total exports increasing from 24 per cent in 2014/15 to 30 per cent in 2020.
In Kenya, the manufacturing sector grew by 3.5 per cent in 2015 and 3.2 per cent in 2014, contributing 10.3 per cent to gross domestic product (GDP), according to Kenya National Bureau of Statistics.
On average, however, manufacturing has been growing at a slower rate than the economy, which expanded by 5.6 per cent in 2015.
But according to the CTI Chairman, Tanzania was not prepared to sign the trade deal with European Union because it needs more time to nurture its burgeoning manufacturing sector whose growth started late compared to Kenya.
“The real growth started in the 1990’s when the government established Investment Promotion Centre (IPC) to protect investors’ interest and guarantee there will be no more nationalisation...We are not in the same level with Kenya that’s why the government was skeptical about the (EPA) deal in the first place,” he said.
He said CTI was of the view that within the four month period of seeking clarification on pertinent issues about EPA from the European Union, the government needs to take drastic measures to reduce cost of doing business and boost local industries competitiveness.
The government should hasten implementation of business reforms as outlined in the blueprint for regulatory reforms to improve business environment launched last year, he said.
Local manufacturers were struggling with high imports cost at the Dar es Salaam port and various business regulatory challenges that are increasing the cost of doing business and making them uncompetitive in the East African region, he said.
“The cost of doing business in Tanzania is higher than any other country in the region. You have very high port charges. We face excessive bureaucracy in some offices of regulatory agencies which is encouraging corruption,” Mr Patel remarked.
Mr Patel said they were also grappling with challenges brought about by the multiplicity of regulatory bodies and cumbersome licencing procedures for products which create rent seeking opportunities for corrupt bureaucrats.
“We have to go to TBS (Tanzania Bureau of Standards), TFDA, (Tanzania Food and Drugs Authority) and OSHA (Occupational Safety and Health Authority). We have so many regulatory and non-regulatory inspections and duplication of regulations, processes and taxes,” he said.
The CTI boss said President John Magufuli had expressed strong commitment to deal with the challenges that undermine the business environment but he is let down by some government officers who cannot match his pace in dealing with the challenges.
“The President (John Magufuli) has clear intention and strong commitment in dealing with these issues but it seems he is let down by some of his lieutenants. Otherwise you can’t explain why implementation of some of things takes so long,” he said.
Tanzania’s manufacturing sector, among the fastest growing in Africa, is the third most important to the economy behind agriculture and tourism. However, it is struggling with a number of policy and regulatory problems that compound the challenges of doing business in Tanzania.
To deal with the challenges, the government launched a blueprint for regulatory reforms last year to improve business environment. The blueprint was expected to provide the main framework for a holistic review of the business environment in order to improve the business climate in Tanzania.
The ministry of Industry, Trade and Investment launched a business clinic to identify challenges impeding business growth and provide their long and short-term solutions after the blueprint was approved by cabinet.