Budgets Must Unleash Opportunity for East Africans

Published on 7th June 2010

A local news channel captured Kenya’s coastal citizens celebrating the arrival of ferries MV Likoni and MV Kwale. One particular individual’s remarks caught my attention: "Whereas we are happy to get new ferries to ease travel; what is Kenya doing to set up its own ferry assembly industry?" he asked. Germany, where the ferries were procured from, has a reputation of high engineering skills nurtured by a culture of close collaboration between industry and academia.

There has to be a deliberate system in place to nurture the productivity sector. Will budgetary allocation in East Africa member states promote a culture of innovation and enterprise among its citizens?

East Africa's 130 million people must push for structures and systems that transform the region’s potential into opportunity. The Eastern Africa Community has already shown the way by allocating 38% of its estimated $60 million budget for the Financial Year 2010/2011 to development. This allocation, according to Mr. David Nalo, Kenya's Permanent Secretary in the Ministry of East Africa Community, is a welcome shift from a national focus on infrastructure development to a regional focus. The spirit of regional focus ought not to be left only to the regional government; member states too must lead by example through their 2010/11 budgetary allocations.  

Developing infrastructure without enabling individual citizens and local industries to scale up productivity will put the region in a state of a long wait for "MV Maendeleo." To tap into the expanded market, producers not only want simplified tax policy and processes that are easier to administer by officials in all member states, but also reduction of costs on inputs and energy. On the governance aspect, lessons from the financial crisis demand that governance evaluation and transparency indicators be subjected to both governments and corporate citizens. 

The new expansive market is keen to see harmonized tax systems involving Value Added Tax, Excise Tax, Personal Income Tax, and Corporate Income tax and administration procedures. Last year for instance, Kenya had 16% V.A.T for supply and importation of taxable goods and services while Tanzania and Uganda had 18% respectively. In a one market arrangement, such an approach will increase unethical business practices. On administration procedures, whereas a consumer may enjoy a variety of prices on the same product across the borders; producers are likely to suffer in terms of the cost of doing business in the region.

There ought to be a drive towards regional infrastructure connectivity and growing of the local industrial base through sound public policy. Collaboration between industry and Academia must be promoted. Budgetary allocations that promote a productivity culture will download the East African Community benefits to the ordinary citizenry. Stimulation and growth of the financing culture is imperative. Innovative East Africans have been starved of financing because of a system that has long focused only on urban centers. 

Member states must invest in popularizing opportunities and harmonizing protection of individual rights. Granted that levels of democratic development is not the same in all member states; there ought to be an agreement on safeguards for those who would wish to take advantage of the bigger market. I laud the steps already taken by East Africa member states to allow for free travel, and opening up of the region. 

The combined talent of this region can indeed manufacture and assemble ferries and other engineering works if only we made the manufacturing sector competitive. To create job opportunities, promote industries that sublet enterprise capabilities to the masses. Individual citizens must take proactive steps to fish in the ocean of opportunity presented by the East African Community. 

By James Shikwati.

Mr. james Shikwati james@irenkenya.org is Director of Inter Region Economic Network.

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