Understanding the customs and trade dynamics in East Africa

The Africa Development Bank predicts that the East African Community (EAC) region will experience the highest regional economic growth on the continent in both 2023 and 2024. In the face of a global economic slowdown, rising commodity prices, changes in international trade policies, and political unrest, the region is expected to rely on its service sector for growth, with natural and cultural attractions attracting tourists and increasing demand for accommodation, dining, and entertainment services.

Kenya and Tanzania are the biggest fish in the East African pond, with GDPs over USD 100 billion and USD 55 billion, respectively. Both economies are expected to record some growth in 2024. Although their economies are smaller, Uganda, Ethiopia, Somalia, South Sudan, Rwanda, and Djibouti are also expected to experience significant growth throughout the year.

Kenya’s trade volumes in 2023 hit USD 25 billion, while Tanzania’s were USD 22 billion. Both countries traded more with China, India, and the United Arab Emirates than countries within the EAC, likely due to trade disputes and non-tariff barriers that are choking trade within the bloc.

The resolution of these trade disputes is at the forefront of the EAC’s agenda, with lawmakers having met early in 2024 to settle the deadlock between Tanzania and Kenya. Amicable solutions to these challenges will bring the EAC closer to realising its objectives of trade within the region, which include management of customs and trade liberalisation, simplifying documentation requirements for trade and customs, better flow of information on customs and trade statistics, and placing the region in better standing for foreign investment.

Advances in customs process improvements

The Kenya Revenue Authority (KRA) hopes to improve customs clearance through the Integrated Customs Management System (iCMS), which has addressed operational inefficiencies, clearance delays, and misdeclarations. The digitalised platform has also aided in the automation of major customs procedures, providing traders with a single point of contact for submitting documentation and dealing with customs. Furthermore, when integrated with the Regional Electronic Cargo Tracking System, the iCMS can track cargo in real-time to ensure it arrives at its intended destination.

Similarly, Tanzania has implemented the Tanzania Customs Integrated System (TANCIS), which uses digital technology to streamline the customs clearance process. Customs clearance times were reduced from 31 days to 16 days using the digital system, resulting in a more than 60% increase in revenue. TANCIS provides a single point of contact for traders to clear customs obligations with the Tanzania Revenue Authority (TRA). Additional system upgrades are being implemented, with AI expected to provide predictive analysis of potential issues affecting cargo movement.

There is an increasing need for EAC member states to align customs procedures to capitalise on regional trade opportunities. As Sudan, Somalia, and Ethiopia work to establish proper customs infrastructure to facilitate trade, the other member states must ensure that their national policies, procedures, and trade agreements are consistent with the EAC customs union prescription. This will go a long way towards streamlining regional trade and avoiding clashes like the one Kenya encountered when it entered trade deals with the UK and EU, quoting significantly lower tariffs than those recommended by the EAC Common External Tariff.

Agility in trade

The East African Community is at a critical juncture if member states are to benefit from bloc trading. Furthermore, the EAC's goal of establishing a unified currency through the EAC Monetary Union is likely to influence trade and customs policies. The regulatory environment is expected to change quickly as East African countries improve their customs processes for greater efficiency and adherence to regional goals. When combined with political tensions and trade disputes, these regulatory changes necessitate agility on the part of businesses to avoid disruptions in cross-border trade.

Partnering with the right logistics partner, equipped with knowledge and expertise of handling customs regulations smoothly, can help businesses sail through these winds of change.