East and West Africa build trade ties

by Thabile Manala 0

Kenyan and Ghanaian government officials are set to gather in November, with the aim of opening new economic frontiers to boost development and intra African trade between the countries.

The President of the two countries met earlier in the year and agreed on protocols regarding ICT, farming and tourism to establish a co-operation between the two countries.

The core contribution to East Africa’s trade flow is informal trade which accounts for 30 to 40 per cent.

Sarah Warren, Structured Trade Transactor at Rand Merchant Bank, shared a relative example that a preliminary report of informal trades in Gauteng showed  that R2.6 billion is contributed to Johannesburg’s economy by them coming across South Africa’s borders and purchasing goods to take back.

“We are not talking about small numbers despite the fact that a lot of these informal traders are small scale traders on an overall basis, we are still looking at very big numbers, “shared Warren.

An identified concern in this sector is that many of these traders are moving unprocessed goods across the value chain and they do not retain much from that. Warren said there are regulations that are aiming to formalise the informal sector in the EAC (East African Community).

“There are some clear benefits, they would increase tax revenues because often this kind of trade evades normal tax procedures, also for security processes, tracing them back and moving them in the banking sector,” Warren said.

James Ngomeli, Managing Director of Brands and Beyond, said, “We see a lot of opportunity in the intra-trade between the two countries.  Ghana is mainly an import country and Kenya has a lot of talent.”

Although the geography of the two countries is a challenge, Ngomeli said the trade would create an incentive to build the Trans-Africa freight that has been in talks, because trade between the countries faces a big obstacle when there are large volumes of goods.

Warren said another important consideration for policymakers is safety, establishing if the goods and products moving across the borders are being safety-checked correctly. There are a fair amount of measures for smaller traders but not enough incentives for the larger, more formalised sectors to move their trade across formally.

One of the key opportunities for the EAC is increasing revenue given the low commodity prices that we are facing and in diversifying economies and infrastructure, “the benefits there are enormous,” said Warren.

With recent initiatives to strengthen regional trade in East Africa neighbouring countries, Warren said these regimes should simplify things like less complex documentation, and goods less than 2000 dollars should not be taxed.

Ngomeli reinforced that saying, “There are very good incentives, Ghana is waiting for us. There are tax incentives, there’s no visa to go to Ghana, their goods are the same price as in Kenya.”