By adding DRC, East Africa upgrades into a coast-to-coast trading bloc of 280m people

By Musinguzi Blanshe
Posted on Tuesday, 29 March 2022 13:45

Kenya's President Uhuru Kenyatta welcomes DRC President Felix Tshisekedi in 2019 (Photo: Twitter)
Kenya's President Uhuru Kenyatta welcomes DRC President Felix Tshisekedi in 2019 (Photo: Twitter)

East African Community (EAC) heads of state approved the entry of Democratic Republic of Congo (DRC) into the regional trade bloc on 29th March. DRC, which becomes the seventh member state, increases the bloc’s market population by about 50% to 280 million, and its geographic size now stretches from the Indian Ocean to the Atlantic Ocean in West Africa.

Kenya’s president and EAC chair, Uhuru Kenyatta, said it was a “historic” day, while President of Uganda, Yoweri Museveni, described DRC’s admission as a “great event of significance.”

DRC shares borders with all EAC member states except Kenya, and the country’s admission process was fast-tracked because of the huge potential for trade.  For example, DRC precious metal exports may enhance trade for the bloc, if it is formalised.

According to the US Treasury, approximately 90% of DRC’s gold is smuggled into Uganda and Rwanda. Meanwhile, Somalia’s application to join the EAC has been pending for over five years.

Apart from South Sudan, of which data is not available, no EAC country has a trade deficit with DRC, according to UN trade data as of 2019, the latest available. According to the data, EAC members exported goods worth $941 million in 2019 meanwhile,  imports were worth just 5% of export value.

More exports will flow

A study by Economic Policy Research Centre, a think tank in Kampala, says the bloc could earn an extra $240.7m in export volume – equivalent to a 28% increase – as a result of trade with DRC, with Rwanda and Uganda set to benefit the most.

Economist Dr. Aaron Ecel says EAC member states have a chance to benefit from DRC imports, which had been overwhelmingly captured by countries outside the bloc including Zambia. “DRC imported prepared foodstuffs worth $514.2m [from] Zambia [a country] that doesn’t enjoy any geographical advantage over EAC states,” he says referring to 2019 trade data.

But for EAC member states to gain the trade advantage, Ecel says they will need to find out which are the most sought after products in DRC. “Without this knowledge and taking advantage of preferential trading terms, the union will only be for politics,” he says.

To date, the rest of the EAC exports processed food, iron and steel products, cement, petroleum products and palm oil products to DRC.

However, it may be possible for the region – especially Kenya, which has a higher manufacturing capacity than many of its peers – to broaden its export base by positioning itself as an assembly hub for high technology products such as machinery, electrical equipment and motor vehicles and export items to DRC, says Mugeme.

Jostling for a bigger share of the market

Cognisant of the country’s market potential, countries have in the past years been positioning themselves to benefit from a more formal relationship with the DRC. In November last year, Kenya organised a 200-member trade mission to the country. The delegation held meetings with Congolese economic operators in four of the country’s largest cities: Kinshasa, Lubumbashi, Goma and Mbuji Mayi.

The country also plans to open a consulate in Goma, North Kivu, and appoint an Honorary Consul in Lubumbashi, South Kivu to facilitate trade.

Uganda has also made efforts to court the DRC. Last year, it initiated a joint road construction project with DRC, which would cover 233 kilometres. Uganda will contribute more than $60mn to the project.

In November 2021, Ugandan and Congolese soldiers launched a military operation to fight Allied Democratic Forces (ADF) rebels along the border between the two countries. Uganda argues that trade opportunities can’t be fully exploited if parts of eastern DRC are not at peace.

Uganda will also send a trade delegation to DRC next month, which is being coordinated by presidential advisor Odrek Rwabwogo, an in-law of the Ugandan president.

Tanzania last year opened a new port on Lake Tanganyika with a railway link to Lubumbashi, which it hopes will attract more of eastern DRC sea-route imports. Meanwhile, Rwanda has set it sights on deepening private sector ties with EAC’s newest member.

Drawbacks

DRC remains one of the poorest countries in the world. The World Bank estimated that 73% of the Congolese population, equaling 60 million people, lived on less than $1.90 a day. This means EAC is rushing for a market largely made up of poor people whose purchasing power is very low.

Poor infrastructure and insecurity in eastern DRC and along the Uganda-DRC border will also remain a key challenge to market exploitation.

Meanwhile, the race to become DRC’s partner of choice will likely pit EAC countries against another and exacerbate existing tensions. For example, Uganda confiscated fish Kenyans were exporting to DRC last year on suspicion that the fish had actually come from Uganda.

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