Internet edition only

UNITED NATIONS International Chamber of Commerce

The world business organization

AN INVESTMENT GUIDE TO THE EAST AFRICAN COMMUNITY

Opportunities and conditions

July 2005

UNITED NATIONS
New York and Geneva, 2005
ii
UNCTAD

The United Nations Conference on Trade and Development (UNCTAD) was established in 1964 as a per-
manent intergovernmental body. Its main goals are to maximize the trade, investment and development
opportunities of developing countries, to help them face challenges arising from globalization, and to
help them integrate into the world economy on an equitable basis. UNCTAD’s membership comprises
192 States. Its secretariat is located in Geneva, Switzerland, and forms part of the United Nations
Secretariat.

ICC

The International Chamber of Commerce (ICC) is the world business organization. It is the only body that
speaks with authority on behalf of enterprises from all sectors in every part of the world, grouping
together thousands of members, companies and associations from 130 countries. ICC promotes an open
international trade and investment system and the market economy in the context of sustainable growth
and development. It makes rules that govern the conduct of business across borders. Within a year of
the creation of the United Nations it was granted consultative status at the highest level (category A)
with the United Nations Economic and Social Council. This is now known as General Category consulta-
tive status.

Notes

The term “country” as used in this study also refers, as appropriate, to territories or areas; the designa-
tions employed and the presentation of the material do not imply the expression of any opinion whatso-
ever on the part of the Secretariat of the United Nations concerning the legal status of any country,
territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.
In addition, the designations of country groups are intended solely for statistical or analytical convenience
and do not necessarily express a judgement about the stage of development reached by a particular
country or area in the development process.

References to “dollars” ($) are to United States dollars, unless otherwise indicated. References to “tons”
are to metric tons.

While every reasonable effort has been made to ensure that the information provided in this publication
is accurate, no business or other decision should be made by the reader on the basis of this information
alone, without a further independent check. Neither UNCTAD nor ICC accepts any responsibility for any
such decision or its consequences.

UNCTAD/ITE/IIA/2005/4

An Investment Guide to the East African Community © United Nations, 2005.

All rights reserved.
 iii
Three good reasons to invest in the EAC

• Market size and market access

When the process of regional integration is completed (expected by 2013), the East African Community
(EAC) will offer investors the second largest single market in Africa, of around 100 million consumers,
second only to Nigeria with its 137 million. A customs union protocol has already been implemented, as
of 1 January 2005, and other steps in the integration process are to follow soon. Nor is the internal EAC
market all there is to it. Through Kenya or Uganda, investors have access to the COMESA market of 385
million consumers and, through Tanzania, to the SADC market of 215 million. (COMESA is the Common
Market for Eastern and Southern Africa and SADC the Southern African Development Community.)
All three EAC partners also have preferential access to the EU market and qualify under the African
Growth and Opportunity Act (AGOA) for access to the US market for a variety of products (see chapter I).

• Resources and opportunities

Many parts of the EAC offer soil and climate conditions ideal for a variety of agricultural products, includ-
ing tea, coffee, fruits, flowers and vegetables. Kenya’s recent track record in this area testifies to the
potential for agricultural exports (see chapter III). In tourism, the EAC has enviable natural assets, above
all in Tanzania, which has allocated 25% of its land to game reserves and national parks. The migration
of enormous herds of wildebeest from the Serengeti plains to the Maasai Mara and back, between June
and November every year, is one of the best-known features of East African tourism. Somewhat less
known, and certainly less exploited, is the 2,000-kilometre coastline of the EAC. Other opportunities can
be found in mining, manufacturing, infrastructure and services (see chapter III).

• An environment conducive to investment

Politically as well as economically, the EAC offers a stable environment, marked by democratically elected
Governments, low inflation and steady growth. The region is well located for access to African markets,
with Tanzania alone sharing its borders with eight other countries, as well as overseas markets, with a
large number of airlines flying into Nairobi. The economy has been and is being liberalized in each of the
three countries, with Uganda having moved the fastest and furthest. The Community shares a common
culture, with English widely used in business, government and the judiciary. Kenya in particular also
offers a skilled and enterprising workforce.
iv
Acknowledgements

A great many individuals and institutions have contributed to this project and to the production of this
guide. Although we cannot list each and every contributor, some merit special mention. These include
the donors to the second phase of the investment guides project, specifically the Governments of
Finland, Italy, Norway and Sweden; the UNDP offices in Kenya, Tanzania and Uganda, which facilitated
work in the countries; the company executives and government officials who participated in the consul-
tations in Dar es Salaam, Kampala and Nairobi; and our consultants in East Africa – Lucia Mary Mbithi
and Lucy Nkuranga.

The cooperation of the Investment Promotion Centre (IPC) in Kenya, the Tanzania Investment Centre (TIC)
in Tanzania and the Uganda Investment Authority (UIA) in Uganda was essential to the success of this
project. Our thanks are owed to their heads: Luka Obbanda (IPC), Samuel J. Sitta (TIC) and Maggie
Kigozi (UIA). Our thanks are also owed to the East African Community Secretariat, which hosted a small
meeting to discuss the guide.

This guide was prepared, with the assistance of consultants and advisers both external and internal,
by a project team led by Vishwas P. Govitrikar. Valuable input or feedback was provided by a number of peo-
ple, including Renata Brandstatterova, Kipyego Cheluget, Sophie Frediani, Fernando Garcia, Stewart
Henderson, Peter Kiguta, Elly Manjale, Nick Mathews, Brenda Mbithi, Flora Musonda, B. Mutambi, Tina
Mwasha, Moses Ogwal, Eva Ruganzu, R.K. Rugendo, Hirji Shah, Mauso Sirali, Michael Stahl, Pankras Uwoya,
Isabelle Waffubwa, Philip Wambugu and David Watene. The map on page 5 was supplied by Vladimir
Bessarabov of the UN Cartographic Section. Photographs were provided by Aluminium Africa; Bata Shoe
Company (Kenya); General Motors East Africa; Export Processing Zones Authority (Kenya); Kenya Tourism
Board; La Chataigneraie, International School of Geneva; Ranger Safaris; Eva Schneider and Serena Hotels.
The guide was edited by Chris MacFarquhar and designed and typeset by Nelson Vigneault. Administrative
support was provided by Katia Vieu. Anne Miroux and Karl P. Sauvant provided overall guidance.

Note to the reader

This document is published as part of the UNCTAD–ICC series of investment guides. The publications in
this series are intended for the use of foreign investors who are largely unfamiliar with the countries
(or, in this case, the region) covered. They are thus designed to offer overviews of potential locations for
investment, rather than constitute exhaustive works of reference or provide detailed practical instruction.
They do, however, offer pointers to sources of further information in the private as well as the public sec-
tor. (In the case of this particular guide, readers are also urged to consult the country guides to Kenya,
Tanzania and Uganda, in the list of sources consulted at the end of this guide.)

There are two other features of these publications that the reader will find worth noting. One is that they
are third-party documents, intended to offer a balanced and objective account of investment conditions.
Their principal advantage in drawing the attention of investors to the countries they cover is credibility.
The other feature is that both their general structure and some of their specific content are the result of
consultations with the private sector.

The executive summary is followed by a brief introductory chapter. Then come the three chapters that
account for the bulk of the contents. Chapter II describes the general conditions in which investors must
operate: macroeconomic conditions, infrastructure, human resources, and so forth. Chapter III describes
areas of potential interest to foreign investors. Chapter IV discusses the legal and institutional framework
as it affects investors. The fifth and final chapter provides a summary of the perceptions of the private
sector in the region, both foreign and domestic.

The primary sources of further information on investing in the East African Community are the investment
agencies of the three EAC partner States: the Kenya Investment Promotion Centre (shortly to become the
Kenya Investment Authority), the Tanzania Investment Centre and the Uganda Investment Authority.
Contact details of these agencies are provided in appendix 3, along with those of other sources of further
information, including websites. Appendix 2 provides a list, including contact details, of 83 foreign
investors in the EAC.
 v
Preface

The Millennium Development Agenda of the international community emphasizes the potential role of
the private sector in helping countries achieve their development goals and targets. Foreign direct invest-
ment is recognized as an important factor in this context, since it brings to host countries capital, tech-
nology, innovation and management know-how, as well as access to supply chains and new markets.
Under the right policy conditions and institutional frameworks, it can thus contribute to economic devel-
opment and growth.

The United Nations Conference on Trade and Development (UNCTAD) and the International Chamber
of Commerce (ICC) launched this series of investment guides in 1998. The idea was to help bring togeth-
er two parties with complementary interests: companies seeking new locations and countries seeking
new investors. This is not necessarily a straightforward exercise, for firms are driven by their global strate-
gies as much as by the search for specific commercial opportunities, while countries pursue broad eco-
nomic and social objectives in which foreign investment is only one element among many in the complex
process of upgrading competitiveness and enhancing livelihoods.

These investment guides are the products of dialogue, including that among and between the represen-
tatives of business and government during the workshops that accompany the preparation of the guides.
The guides in their turn are intended to contribute to the dialogue, helping to strengthen and sustain it.
In the long run, such dialogue can make a real difference to investment conditions.

An Investment Guide to the East African Community is the fifteenth publication in this series and our first
regional guide. We hope that it will be useful in the efforts of the Governments and the business com-
munity in the EAC to attract greater flows of investment and that the flows in turn will benefit the
Community.

Carlos Fortin Maria Livanos Cattaui

Officer-in-charge Secretary-General
UNCTAD ICC
vi
The UNCTAD–ICC series of investment guides

• An Investment Guide to Ethiopia, 1999; revised edition in new format, 2004

• Guide de l’investissement au Mali, 2000; revised edition in new format, 2004
• An Investment Guide to Bangladesh, 2000
• An Investment Guide to Uganda, 2001; revised edition, 2004
• An Investment Guide to Mozambique, 2002
• An Investment Guide to Nepal, 2003
• An Investment Guide to Cambodia, 2003
• Guide de l’investissement en Mauritanie, 2004
• An Investment Guide to Mauritania, 2004
• An Investment Guide to Kenya, 2005
• An Investment Guide to Tanzania, 2005
• An Investment Guide to the East African Community, 2005

(The first editions of the guides to Ethiopia and Mali were published in cooperation with PricewaterhouseCoopers.)
 vii
Contents

Three good reasons to invest in the EAC iii

Acknowledgements iv
Note to the reader iv
Preface v

Executive summary 1

I. Introducing the East African Community 7

- Region and people 7
History and objectives 8
Market size and access 10
Priorities of EAC Governments 11
Privatization 12

II. The operating environment 15

Economic environment 15
Trade and investment 16
Infrastructure and utilities 19
Human resources 24
The financial sector 26
Taxation 27
The private sector in the EAC 29
Investment climate: Key factors for foreign investors 31

III. Areas of opportunity 33

Priority areas 33
Agriculture and related activities 33
Tourism 38
Other areas 40
Infrastructure 40
Mining and manufacturing 43
Services other than tourism 48
Export-processing zones (EPZs), incentives and related matters 50

IV. The regional framework 53

Legal and institutional framework 53
Investment framework 54
Trade regime 57
Main regional issues and initiatives 60
Other issues 64

V. Private-sector perceptions 67
General observations 67
Specific points 68
Concluding remarks 69

Appendices 71
1. Sensitive products in the EAC trade regime 71
2. Major foreign investors 74
3. Sources of further information 85
4. List of public holidays in 2005 93
5. Protocols and other tripartite instruments of the EAC 94
6. Privatization 96
7. Major laws and regulations affecting foreign investment 97

Sources consulted 102

Kenya and the East African region offer excellent investment opportuni-
ties in a wide range of sectors. GM has operated effectively in the region
for over 27 years in an industry that has been totally transformed
through liberalization and changes in consumer behaviour. The basis
for our sustained success is a combination of factors: an educated work
force, a moderate climate, and recent improvements in banking and
telecommunication. The formation of the East African Community in
January 2005 provides even greater opportunities for those considering
Kenya to invest in. Come to Kenya and invest in the future of Africa!

William Lay, Chief Executive Officer, General Motors East Africa

Tanzania has no shortage of opportunities – in tourism, in agriculture,

in energy. The political maturity of the country and its economic stability
are major strengths that investors can rely on. With some serious
attention to infrastructure, the Government could ensure that the
country’s potential becomes reality. Aluminium Africa looks forward
to its role in the new Tanzania.

Manu Chandaria, Chairman of the Board, Aluminium Africa

Executive summary

1
The East African Community (EAC) that came into Why the EAC?
existence in July 2000 (see box in chapter IV) is actu-
ally the second to bear that name. The same three The first reason for investors to consider locating in
countries – Kenya, Tanzania and Uganda – had the EAC is the size of its market. With some 100
established its predecessor in 1967, only to see it dis- million consumers, a fully integrated EAC will be
solve 10 years later. In the 80-year-long history of the second largest market in Africa, after Nigeria.
East African cooperation, the present EAC is only the The only internal constraint on the flow of goods
latest milestone, but it is a particularly notable one. within the EAC – the tariffs on the import of goods
For the first time, the three countries have commit- from Kenya into Tanzania and Uganda – is set to
ted themselves to a short, step-by-step process that disappear in five years (as noted above). To be
is to end in political federation – by 2013, according sure, this is a market composed mostly of poor
to the recommendation of the Committee on Fast consumers, but it is a growing one. Growth rates
Tracking East African Federation (hereafter “Fast- in Tanzania and Uganda have averaged 6% or
tracking Committee”). The first critical step, the initia- more for a number of years. Kenya, the strongest
tion of a customs union, has already been taken. economy in the region, has been a laggard in
The Fast-tracking Committee has proposed that the growth, but there are signs that this may be set to
next major institutional step be the establishment of change. Nor is the internal market the only one to
a regional currency for the EAC by September 2009. which investors in the EAC have access. Kenya and
Uganda are members of the Common Market for
There are good reasons to be optimistic about the Eastern and Southern Africa (COMESA), which has
prospects for progressive regional integration in the 385 million consumers, while Tanzania belongs to
EAC. One reason is the history of regional coopera- the Southern African Development Community
tion. Kenya, Tanzania and Uganda have been deal- (SADC), which groups 13 countries with 215 million
ing with one another under the umbrella of one people. As least developed countries (LDCs),
regional entity or another for a very long time. Tanzania and Uganda also qualify for preferential
There was a customs union between Kenya and access to the European Union’s market under the
Uganda in 1917, an East African High Commission EU’s Everything But Arms (EBA) initiative, as does
from 1948 to 1961 and an East African Common Kenya under the Cotonou Agreement between
Services Organisation from 1961 to 1967. Even the EU and the African, Caribbean and Pacific
the experience of the ill-fated predecessor EAC States (ACP). All three countries qualify for access
(1967–1977) can be turned to good account. One to the US market for a large variety of products
of the factors that created difficulties for the last under the African Growth and Opportunity Act
EAC was the economic dominance of Kenya, espe- (AGOA).
cially in manufacturing. This dominance is not quite
so overwhelming today but, in addition, the cus- Other advantages that the EAC offers include polit-
toms union that came into effect on 1 January ical and economic stability, which is well estab-
2005 explicitly provides for a five-year period in lished in all three countries. There is also the
which imports from Kenya into Tanzania and location of the EAC, which offers access to a num-
Uganda will have a declining tariff levied on them. ber of the landlocked countries bordering it. Its
coastline of nearly 2,000 km (1,424 km in Tanzania
The three countries also share a common culture and 536 km in Kenya) and its two major ports –
and history, with some variations. Kiswahili is wide- Dar es Salaam and Mombasa – are yet further
ly spoken in the region and English is common to advantages. A large number of international air-
educational, judicial and commercial life in all three lines fly into Nairobi and the highly regarded
countries. Although there is considerable ethnic Kenya Airways has built a substantial international
diversity – there are 130 different tribes in Tanzania and regional network. Other attractive features
alone – intertribal relations have mostly been include a skilled and enterprising workforce in
peaceable. Finally, the leadership in all three coun- Kenya; some of the world’s richest natural re-
tries is quite aware of the considerable advantages sources for tourism in Tanzania; and one of the
of creating a common market with a common set most liberal African economies in Uganda.
of institutions and policies in an increasingly inter-
linked and competitive global economy.
2
Opportunities the Government plans to relinquish most cargo
handling and related services to the private sector.
Opportunities are many and varied in the EAC. The There are also substantial opportunities in informa-
soil and climate (the latter varying from tropical tion and telecommunication infrastructure and ser-
along the coast to temperate in the highlands) are vices. Telecommunication privatization is a priority
ideal in many parts of the EAC for a variety of agri- in Kenya and Tanzania; in Uganda, the process has
cultural crops. Kenya’s success in the exporting of already been completed. Other opportunities in
tea and flowers is an indication of what foreign infrastructure include those in energy as well as
investment can help achieve in this area. Kenya is those in water and sanitation services.
the world’s second largest exporter of tea, and
horticulture is the country’s top export earner. In mining, Tanzania has for some years been the
Huge opportunities still remain in this field as, for main magnet for foreign investment, but there
all its success, Kenya accounts for only 1% of the are opportunities in mining in all three countries.
EU-15 market share in vegetables and a tenth of Kenya has four mineral belts, including the gold
that in fruit. And although Kenya has taken the greenstone belt in western Kenya. Tanzania is the
lead here, soil and climatic conditions make agri- third largest gold producer in Africa and has
cultural opportunities available in all three EAC deposits also of cobalt, copper, diamonds, iron
countries. ore and coal, among other minerals. Uganda’s
resources include copper, tin, tungsten, beryllium,
Tourism offers the second great opportunity in limestone and feldspar. A specific opportunity in
the EAC. The region’s natural assets for tourism are Uganda is offered by the Government’s forthcom-
among the finest in Africa. Many of these are well ing divestiture of Kilembe Mines, which produces
known: the Serengeti plains in Tanzania, with their copper and is 90% owned by the State. There has
spectacular annual migration of wildebeest herds; also been growing investor interest in the oil
the Ngorongoro crater in northern Tanzania, which and gas field in the EAC and the three countries
has a tremendous concentration of wildlife in have responded by agreeing to harmonize their
an area of around 8,000 sq. km; the Bwindi legal and fiscal regimes applying to petroleum
Impenetrable National Park in Uganda, which har- exploration.
bours the famous mountain gorilla; and the coast
around Mombasa and Zanzibar. In addition to Opportunities in manufacturing, both for the EAC
these well-known attractions, there are others less market and for the wider region, can be found in
known but with great potential. The Selous game the assembly of electronics and automotive com-
reserve, the Rift Valley and Lake Victoria are only ponents; in plastics, paper, chemicals and pharma-
three of these. Specific opportunities include the ceuticals; in canning, bottling and glassware; and
development of international-standard accommo- in a variety of processed foods. The African
dation, the development of sea and lake cruising, Growth and Opportunity Act (AGOA) has also gen-
the development of eco-tourism, and the devel- erated export opportunities in textiles and apparel.
opment of training institutions to cater to the These have thus far been seized mainly by Kenya,
tourism sector. which has attracted some 30 companies, mainly
from Asia, into its export-processing zones.
Yet other opportunities range over a number of
sectors, including infrastructure, mining and manu- Difficulties facing investors
facturing. In infrastructure, the needs of the region
are great, and the Governments, recognizing this, The difficulties confronting foreign investors in the
are eager to invite private participation in meeting EAC are those to be expected in most of sub-
them. Privatization has been a major preoccupa- Saharan Africa. They lie in infrastructure and gover-
tion of all three Governments over the past nance above all, with human resources following.
decade. In railways, the process is already well
under way (see box II.1). In roads, Tanzania in par- The transport infrastructure is quite inadequate in
ticular is keen on attracting investors into build- the EAC. Investors complain that it costs more
operate-transfer (BOT) schemes. Port facilities offer to move cargo overland from Dar es Salaam in
opportunities as well, particularly in Kenya, where Tanzania to Mombasa in Kenya than to get it from
 3
Antwerp to Dar es Salaam. Roads are a problem changes in the police force, including the appoint-
everywhere in East Africa once one gets beyond ment of a new chief drawn from the army, but the
the perimeter of the main urban centres, but they effect has not so far been obvious.
are particularly a problem in Kenya. Railways are
not in much better shape, with the Kenya Railways Investment trends
Corporation running at only one third of its cargo
capacity; Uganda doing much better, with two The EAC presents a mixed picture when it comes to
thirds of its capacity in use; and Tanzania some- foreign direct investment. Its strongest and most
what worse, with only a quarter of the capacity diversified economy (Kenya) has been its poorest
of TAZARA in use. Privatization is the recognized performer over the past decade and a half, while
solution here and the three Governments are all in the other two partners have done very much bet-
the process of privatizing through concessioning. ter, Uganda in particular. In the late 1990s, both
The Mombasa port, which serves not only the Tanzania and Uganda attracted about as much FDI
three countries in the EAC but also Burundi, the (proportionately to their GDP) as did the develop-
Democratic Republic of the Congo and Rwanda, is ing world as a whole – and over 50% more than
less than efficient and delays in cargo clearing are did sub-Saharan Africa. Since 2000, Uganda has
common. Electricity supply is erratic and fixed-line outstripped both the developing-country average
telecommunication inadequate and costly, al- and (except in 2001) the sub-Saharan Africa aver-
though the latter has now been compensated for age very substantially, while Tanzania has largely
to some extent by the remarkable growth of matched it. In Tanzania, FDI has gone mainly into
mobile telephone subscriptions. When it comes to mining, while in Uganda the flows have been more
workforce skills, there is significant variation, with diversified, with a large part going into manufactur-
Kenya offering the best resources. Uganda still has ing. All indications are that investment will continue
a shortage of technical and managerial skills and to flow into the EAC and even Kenya may be
Tanzania an even greater shortage. Hiring expatri- beginning to catch up.
ates can be very expensive for companies and can
substantially increase their costs of doing business. Prospects and challenges

Bureaucracy is another major investor concern. The prospects are very bright for the EAC. The
There is too much red tape and things move far too advantages of the region are huge – it has a 2,000-
slowly in too many organs of Governments. (The km coastline, some of the best soil and climate for
investment agencies are generally well regarded.) agriculture, exceptional resources for tourism, a
Corruption is a problem in all three countries, mostly English-speaking workforce with a concen-
although its character varies. In Kenya, it is grand tration of talent in Kenya, political and economic
rather than petty corruption which is the main stability, and a substantial domestic market com-
issue, while in Tanzania the reverse seems to be the bined with privileged access to several large and
case. Non-tariff barriers, involving the administra- rich markets abroad. All that is needed to make it a
tion of such matters as certificates of origin and the real magnet for FDI is steady and rapid progress
valuation of goods, are an area of concern as well, towards integration, which looks likely, and major
although this may change with the full implemen- improvements in infrastructure and training, which
tation of the customs union. are somewhat less certain. With strong and dedi-
cated leadership, there are few limits to what
Security is also an issue, though mainly in Kenya. the EAC could achieve. Investors would be well
Despite the bombings in 1998 and 2002 (see box advised to heed the promise of this remarkable
I.2), it is not mainly the insecurity arising from region.
possible terrorist threats that worries investors. It is
the insecurity created by domestic, and especially
urban, crime. (One should note, however, that
crime is by no means directed specifically at for-
eigners.) The Government of Kenya has taken a
variety of measures to control crime, including the
drafting of a new licensing policy for firearms and
4

The East African Community at a glance

Official name East African Community (EAC)

Member States Republic of Kenya

United Republic of Tanzania
Republic of Uganda

Heads of partner States Kenya: President Mwai Kibaki

and Governments Tanzania: President Benjamin Mkapa
Uganda: President Yoweri Museveni

Secretary General of the EAC Hon. Amanya Mushega

Main institutions of the EAC Summit; Council of Ministers; East African Court of Justice;
East African Legislative Assembly; Secretariat.

Features and objectives of the EAC Treaty on the establishment of the EAC: 30 November 1999
Customs union: since 1 January 2005
Proposed dates for further integration:
Common market: December 2007
Single currency: September 2009
Political federation: March 2013

Surface area 1.8 million sq. km

Population 93 million

Population density 73 per sq. km

GDP per capita (2003) $270 (at purchasing power parity, $1,039)

Currency Kenya: Kenya Shilling (KSh)

Tanzania: Tanzania Shilling (TSh)
Uganda: Uganda Shilling (USh)
Exchange rates (July 2005) $1 = 76.80 KShs 1 = 92.64 KShs
$1= 1,126 TShs 1 = 1,358 TShs
$1= 1,753 Ushs 1 = 2,114 UShs
Official language The official language of the EAC is English.
English is also the official language of Kenya and Uganda.
Kiswahili is widely spoken in the region. It is also the official
language of Tanzania and the national language of Kenya.

Principal religions Christian: 60% (78% in Kenya, 35% in Tanzania, 85% in Uganda)
Muslim: 19 % (10% in Kenya, 30% in Tanzania, 12% in Uganda)
Other: 21% (12% in Kenya, 35% in Tanzania, 3% in Uganda)

Time zone GMT + 3

Climatic conditions Vary from tropical to temperate, depending on elevation.

Two rainfall seasons: the long rains, from late March to early May,
and the short rains, from late October to early December.
1 The capital of Tanzania is even- Main cities/towns Kenya: Nairobi (capital), 2.1 million
tually to move to Dodoma. Thus and their populations Mombasa, 655,000
far, only legislative offices have
been transferred to Dodoma, Tanzania: Dar es Salaam (capital),1 2.5 million
where the National Assembly Mwanza, 475,717
now meets on a regular basis. Uganda: Kampala (capital), 1.2 million
Jinja, 80,520

Source: UNCTAD, drawing on various sources.

5
 Introducing the East African Community

For more detailed and

country-specific informa-
tion, the reader should
Region and people

The East African Community (EAC), constituted by

I
The region has an extraordinary natural resource
in its wildlife. Governments in the region have
designated large areas as national parks or game
7

consult UNCTAD’s recently

published investment
the three countries of Kenya, Tanzania and reserves, which are great tourist attractions.
guides to Kenya, Tanzania Uganda, covers a total area of 1,768,812 sq. km Twenty-five per cent of Tanzania’s land is designat-
and Uganda and lies between latitudes 4.5o north and 12o south ed as game reserve or national park and includes
(see list of sources consulted of the equator and longitudes 29 o and 41o east of the largest game reserve in the world: the Selous
at the end of the guide). the Greenwich Meridian, with the equator crossing in southern Tanzania.
right through Kenya and Uganda. The region bor-
ders the Indian Ocean and Somalia on the east, The region is also endowed with a variety of min-
and Ethiopia and Sudan on the north. On its west- erals, including fluorspar, titanium and zirconium,
ern side, it borders Burundi, the Democratic Re- gold, oil, cobalt and nickel, diamonds, coal and
public of the Congo (DRC) and Rwanda, while on iron ore. This presents an opportunity for develop-
the south it borders Malawi, Mozambique and ment of the mining industry, which is currently
Zambia. The climate of the region ranges from underdeveloped. The region has several water
tropical to temperate, depending on the elevation. masses in the form of freshwater lakes, rivers and
marine waters. The freshwater masses (lakes and
The region has some magnificent physical fea- rivers) harbour much biodiversity and provide food
tures. The two highest mountains in Africa, Mt. and employment to the nearby communities.
Kilimanjaro (5,895 m or 19,340 ft) and Mt. Kenya Other lakes are special because they have hot
(5,199 m or 17,058 ft), are located in East Africa. springs or because they harbour rare species of
Together with the Rwenzori range (5,000 m or birds such as the flamingo, which makes them
16,000 ft), along the Uganda–DRC border, these tourist attractions. The marine waters at the coast
mountains rise above the snowline. Mt Kenya lies provide food, employment and a source of foreign
in central Kenya, while Mt Kilimanjaro lies on the exchange. The coastal beaches are a major tourist
border between Kenya and Tanzania. The longest attraction in both Kenya and Tanzania. Ports at
river in Africa, the Nile, has its source in the Mombasa and Dar es Salaam, among others, serve
region’s largest lake, Lake Victoria, which is also both the region and the landlocked countries bor-
the largest lake in Africa and the second largest dering the region.
freshwater lake in the world. Connecting the three
EAC countries, a symbol as it were of their “natural The people of East Africa comprise many ethnic
and lasting unity”, Lake Victoria covers an area of groups, including the Bantus, Nilotes, Hamites and
69,000 sq. km and is an important natural Cushites. The dominant religion in the EAC is
resource shared by the three countries. Christianity. Christians are in the majority in Kenya
and Uganda, which have small Muslim minorities.
The Great Rift Valley is another spectacular feature In Tanzania, Christianity and Islam account for
of the region, extending for some 4,830 km from roughly a third of the population each, with the
Syria in the Middle East to Mozambique in southern remaining third accounted for by traditional
Africa and marked by a chain of lakes and a series African religions and very small numbers of Hindus
of volcanoes. In Africa, it continues from the Red and others. Kiswahili, a Bantu language with sig-
Sea south-west across Ethiopia and south across nificant word borrowings from Arabic, Persian and
Kenya, Tanzania and Malawi to the lower Zambezi European languages, is the most widely spoken
River valley in Mozambique. The Valley ranges in language in the region and has official or quasi-
elevation from some 395 m below sea level (at the official status in two of the three partner states.
Dead Sea) to some 1,830 m above sea level in English is the language of commerce, higher edu-
southern Kenya. The Rift Valley itself together with cation and the judiciary. Many local languages are
some of its special features such as the Ngorongoro of course spoken by the many tribes (Tanzania
and Menengai craters are major tourist attraction alone has 130) of East Africa.
points. According to the findings of anthropologists
Louis and Mary Leakey, humanity may have origi-
nated in Tanzania’s Olduvai Gorge at the edge of
the Great Rift Valley over a million years ago.
8
History and objectives Objectives of the EAC

A brief history of EAC cooperation The objectives of the community are to develop policies
and programmes aimed at widening and deepening
Since the beginning of the 20th century, the integration among the partner States in the political,
three EAC partner States — Kenya, Tanzania and economic, social and cultural fields; in research and
Uganda — have engaged in some form of cooper- technology; in defence and security; and in legal and
ation under successive regional integration judicial affairs for the benefit of the citizens of the
arrangements. These arrangements have included: EAC member countries (EAC Secretariat, 2002b).

• The Customs Union between Kenya and To achieve these objectives, the Treaty provides for
Uganda in 1917, with Tanzania (then the establishment of a Customs Union, followed
Tanganyika) joining in 1927; by a Common Market, a Monetary Union and a
• The East African High Commission (1948–1961);
Political Federation. In the six years since the treaty
• The East African Common Services
establishing the East African Community was
Organisation (1961–1967);
signed in 1999, the three partner States have
• The first East African Community (1967–1977);
• The East African Cooperation Commission signed ten major protocols or other tripartite
(1993–2000); and agreements (see appendix 5) covering a variety of
• The East African Community again matters, including a protocol on the Customs
(from July 2000). Union. The Customs Union was launched simulta-
neously on 31 December 2004 in the three capitals
The first EAC (1967–1977) contributed to the cre- of the EAC Partner States: Dar es Salaam, Kampala
ation of such major institutions as the East African and Nairobi. It went into effect on 1 January 2005.
Development Bank, the East African Legislative
Assembly, the East African Harbours Corporation, The integration process was given an impetus with the
the East African Posts and Telecommunications establishment of the Fast-tracking Committee in 2004,
Corporation, East African Railways and East with the mandate to propose ways and means of
African Airways. The former EAC collapsed in 1977 accelerating and compressing the process of integra-
because of various tensions among the three tion. After consultations throughout the Community,
countries, including economic ones. the Committee has recommended a road map which,
if followed, will lead to federation much sooner than
Following the collapse of the first EAC in 1977, the expected. Key steps and their dates of realization as
partner States negotiated and signed a Mediation proposed by the Committee are summarized in figure I.1.
Agreement for the Division of Assets and Liabilities
in 1984. As one part of the provisions of the At their Extraordinary Summit on 29 and 30 May
Mediation Agreement, the three States agreed to 2005, the EAC Heads of State reiterated their sup-
explore areas of future cooperation and the port for the principle of fast-tracking the integra-
Agreement for the Establishment of the Per- tion process and asked the Council of Ministers to
manent Tripartite Commission for East African begin generating consensus among the various
Cooperation was signed on 30 November 1993. stakeholders (EAC Secretariat, 2005b).

In 1997, the East African Heads of State directed Burundi and Rwanda applied for membership in
the Permanent Tripartite Commission to start the the Community in 2002. The matter was put on
process of upgrading the Agreement establishing hold until the Customs Union was established. At
the Commission into a Treaty. The treaty-making their recent Summit on 29 and 30 May 2005, the
process was successfully concluded within three Heads of State directed the Council to expedite the
years, with the Treaty for the Establishment of the process of Rwanda’s admission, so as to conclude
East African Community being signed in Arusha on the matter by November 2005. With regard to
30 November 1999. It entered into force on 7 July Burundi, they welcomed the positive developments
2000 and the East African Community (EAC) was in that country and called on all parties to ensure
reborn. Arusha was chosen as the headquarters that the forthcoming elections are conducted and
of the organization. (On the Treaty, see box IV.1.) concluded successfully (EAC Secretariat, 2005b).
 9

F I G U R E I .1. S O M E M A J O R S T E P S I N T H E E A C I N T E G R AT I O N P R O C E S S ,
A S R E C O M M E N D E D BY T H E FA S T-T R A C K I N G C O M M I T T E E

Implementation of the Customs Union Protocol: January 2005

Creation of a single regional air space: August 2005

Setting up of a regional Capital Markets Authority: December 2005

Setting up of a Common Market: December 2007

Adoption of a single regional currency: September 2009

Swearing-in of the President of a transitional Federation of East Africa: January 2010

Drawing up of regional constituencies and swearing-in of a transitional Federal Parliament:

2010–2012

Elections for an East African President and Government: March 2013

Source: East African Community Secretariat (2004b).

10
Market size and access The Common Market for Eastern and Southern
Africa (COMESA) comprises 20 member States
The internal EAC market is currently one of about with a population of over 385 million and a total
93 million consumers. The combined GDP of the GDP of $180 billion (at purchasing power parity,
region is about $30 billion (at purchasing power $637 billion). This is one of the largest trading
parity, about $92 billion) and the average GDP per arrangements in Africa. Kenya and Uganda are
capita is about $270 (at purchasing power parity, members of COMESA, whereas Tanzania withdrew
$1,039). Table I.1. provides a picture of the broader from the organization in 2000. COMESA launched
East African market. a free trade area (FTA) in October 2000. Eleven of
its member countries — Burundi, Djibouti, Egypt,
For the implementation of the Customs Union pro- Kenya, Madagascar, Malawi, Mauritius, Rwanda,
tocol, the EAC has adopted asymmetrical transi- Sudan, Zambia and Zimbabwe — have joined the
tional provisions on internal tariff elimination, FTA and reduced their import tariffs to zero on a
which is to be progressive and achieved within a reciprocal basis. The other countries (including
five-year period, that is by January 2010. These Uganda) continue to trade on preferential terms,
provisions apply a declining tariff on the exports of with tariff reductions of between 60% and 80%.
Kenya to the other two partners. (Most internal Member countries are in the process of removing
trade in the EAC flows from Kenya to its partners.) non-tariff barriers to trade as well, although licens-
ing is required for trading in some products for
In addition to the EAC market, investors in health, security and environmental reasons.
the partner States have access to other African COMESA members have agreed to implement a
markets (e.g. COMESA and SADC) as well as to Common External Tariff (CET) with a four-band tar-
international markets through preferential trade iff structure: 0% on capital goods, 5% on raw
arrangements. materials, 15% on intermediate goods and 30%
on finished goods. This has not yet been realized,
as there are still unresolved issues regarding CET
levels, compliance, identifying alternative sources
of revenue, defining the modalities of administer-
ing the CET and the categorization of goods into
the proposed CET structure. The COMESA secre-
tariat is working towards resolving these issues.

TA BLE I .1. THE BROA D ER EAST AFRICAN MARKET

GDP PER GDP PER

COUNTRY POPULATION GDP a GDP PPP b CAPITA c CAPITA PPP d

millions $ billions $ billions $ $

2003 2003 2003 2003 2003

Burundi 7 0.7 4.5 139 627

Ethiopia 69 6.6 49.1 115 716
KENYA 32 13.8 33.0 320 1 035
Rwanda 8 1.6 10.4 301 1 268
Sudan 34 17.8 68.7 347 2 046
TANZANIA 36 9.9 21.9 221 611
UGANDA 25 6.2 37.2 366 1 471
Zambia 10 4.3 9.2 437 883
EAC 92.7 29.9 92.1 269.7 1 039

Source: Adapted from the World Bank (2004e).

a At current $. b At current international $. c At constant 1995 $. d At current international $.
Note: PPP = Purchasing power parity.
 11
The Southern African Development Community Products from EAC countries can access various
(SADC) was established in 1992 and is now com- markets in the developed world through the
posed of 13 member States with a population of Generalized System of Preferences (GSP), which
215 million and total GDP of $182 billion. Tanzania offers preferential treatment to a wide range of
is a member of SADC, whereas Kenya and Uganda products originating in developing countries. No
are not. SADC started implementing its FTA on quantitative restrictions accompany these GSP
September 2000. It is expected that, by 2008, schemes, although other non-tariff barriers to
85% of intra-SADC trade, involving less sensitive trade have in the past acted as a constraint on
products, will be liberalized. By 2010, it is expected intended beneficiaries’ taking full advantage of
that the region will be a Customs Union and by these schemes. Markets accessible through GSP
2012 a full-fledged free-trade area. The following schemes include those of Australia, Canada, Japan,
11 countries have thus far joined the FTA: Botswana, New Zealand, Switzerland and (as noted above)
Lesotho, Malawi, Mauritius, Mozambique, the United States.
Namibia, South Africa, Swaziland, Tanzania,
Zambia and Zimbabwe. Angola and the Demo- Priorities of EAC Governments
cratic Republic of the Congo are yet to join.
At the national level, the common government
2 These arrangements are based In the developed world, the European Union (EU) focus in the three partner States is on poverty
on Economic Partnership
Agreements (EPAs). Each ACP is the largest trading partner of the EAC countries. reduction and economic growth.
group is negotiating an EPA with Exports from EAC countries have had preferential
the EU within a regional setting.
Kenya and Uganda are negotiat-
access to the EU market under the Cotonou agree- In Kenya, the Poverty Reduction Strategy Paper
ing within an Eastern and ment between the EU and the African, Caribbean for Wealth and Employment Creation identifies
Southern Africa (ESA) group,
and Pacific States (ACP). Under the Cotonou agree- four core priority areas: macroeconomic stability,
while Tanzania is negotiating
within the Southern African ment, valid until 2007, the EU offers duty-free strengthening institutions of governance (by
Development Community (SADC) access to a wide range of agricultural products as adopting, inter alia, a new constitution and special
group. The ESA group is made
up of 16 Eastern and Southern well as some industrial products. Other products anti-corruption legislation), rehabilitation and
African countries, all of which can access the EU market under the “commodity expansion of physical infrastructure, and invest-
are members of COMESA.
protocols”, which offer duty-free access on a quota ment in human capital.
basis to a number of products, including bananas,
sugar, beef and veal, and rum. The EU and the Tanzania, under its Development Vision 2025, has
ACP are currently negotiating new trading arrange- identified the key objectives as achieving macroeco-
ments,2 which will be reciprocal and thus WTO- nomic stability, attaining high levels of domestic sav-
compliant. They are expected to come into force in ing and investment, broad-based human-resource
2008. As least developed countries (LDCs), development, and sustainable economic growth. It
Tanzania and Uganda are also covered by the EU’s is also implementing its Poverty Reduction Strategy,
Everything But Arms (EBA) initiative, under which which is aligned with the Millennium Development
all products from LDCs except arms and ammuni- Goals (MDG) of the United Nations.
tions have preferential access to the EU market.
According to the Uganda Poverty Eradication
Together with other sub-Saharan African countries, Action Plan (PEAP) of 2000, the highest priorities
the EAC States also qualify for duty-free access to for medium-term expenditure are security, roads,
the US market under the African Growth and agricultural research and extension, primary educa-
Opportunity Act (AGOA), which has been extend- tion, primary health, and water and sanitation.
ed until 2015 (see box III.5). They may also access
the US market under the GSP scheme (see below). At the Community level, the EAC Development
Together, AGOA and the GSP offer US market Strategy has set out the priority programmes
access to nearly 60% of EAC product lines. Most for the region for the period 2001–2005. These
African countries are currently taking advantage focus on macroeconomic cooperation; trade liber-
mainly of the textile and apparels provisions, but alization and development; cooperation in infra-
various agricultural products and manufactured structure; the development of human resources,
goods are also eligible under these schemes. sciences and technology; and cooperation in legal
and judicial as well as political affairs.
12
Privatization Tanzania, and four others are listed on the Dar es
Salaam Stock Exchange. Among the public enter-
All three EAC member States are engaged in the prises still to be privatized are the Tanzania Electric
privatization of major government corporations. Supply Company (TANESCO), the National Insur-
The privatization process has moved unevenly in ance Company, the Tanzania Railways Corporation
the three countries. In all, however, the smaller and the Tanzania Zambia Railway (see box II.1),
enterprises were the first to be divested, while the and business units under the Tanzania Harbours
larger ones have taken longer (see appendix 6). Authority, including the Mtwara and Tanga ports,
a passenger terminal and an oil jetty.
In Kenya, a parastatal reform committee was
established in 1991 to implement the privatization In Uganda, the Public Enterprise Reform and
process. At first, the process moved very slowly but Divestiture Statute was enacted in 1993 to give
gathered some speed in 2003, after the current effect to the Government’s policy launched in
Government came to power. (A prominent and 1991, which aimed at promoting the role of the
successful instance of privatization had, however, private sector and improving the performance
already occurred in the mid-1990s – see box I.1.) of the remaining public enterprises. To date, 117
Privatization should be facilitated by the passing of enterprises have been divested, including 39
the Privatization Bill. Under the draft bill, barring liquidations/strike-offs. At first, the privatization
special circumstances or legislation, privatization is process focused on small enterprises, already oper-
to be open to foreign as well as domestic investors. ating in a liberalized environment, and is now
Areas in which privatization is yet to be undertaken focusing on the utility sector and large-scale enter-
include post and telecommunications, energy prises. Privatization has had a major impact on the
development, ports, railways, roads, housing, ener- economy: annual tax remittance by privatized
gy, sugar, tourism, and banking and insurance. enterprises has increased in a range of 40% to
5,000% since privatization, and productive capaci-
Tanzania embarked on the privatization of its esti- ty in privatized enterprises grew from an average
mated 400 enterprises through the adoption of the of 11% in 1993 to 51% in 1998. To date, 36 public
Public Corporations Act 1992, which created the enterprises remain to be privatized (see appendix
Presidential Parastatal Sector Reform Commission. 6). Privatization opportunities are to be found in
Thus far, over 300 enterprises have been privatized, agriculture (Uganda Seed Ltd), banking (Post
and this has had a significant impact on the econ- Bank Uganda Ltd), mining (Kilembe Mines Ltd),
omy. The production of several enterprises has publishing (New Vision) and infrastructure (the
increased substantially. Sixteen of the privatized joint concession of Kenya and Uganda Railways
companies are among the 100 largest taxpayers in Corporations – see box II.1).

Box I.1. A first for Africa: The privatization of Kenya Airways

The sale of a major State-owned organization is usually a highly charged political event. The sale by the
Government of Kenya of 77% of the shares in Kenya Airways to private investors in 1996 was no exception.
There was much speculation that the process would fail. It did not.

The operation had already been commercialized in 1991. The privatization process itself worked well, and the
outcome was a multifaceted success. The Kenyan Treasury received $76 million from the sale of 77% of the
shares. Over 113,000 Kenyans bought a total of 22% of the shares. Kenyan financial institutions bought a further
12%, while international financial investors subscribed for 14%. KLM Royal Dutch Airlines bought 26% of
the shares.

The alliance agreements between Kenya Airways and KLM, signed on 15 December 1995, produced immediate
benefits for both partners: shared codes, shared reservation systems, joint marketing, and the joint purchasing of
aircraft, fuel, spares and insurance. Kenya Airways’ service standards and reliability began improving and, in
1999, an industry journal named Kenya Airways the “African Airline of the Year”. By 2003, the company had
made a profit of $16 million on revenues of $322 million. There are now some 60 Nairobi–Mombasa flights
a week and a much-expanded regional network.

Source: UNCTAD, based on Tiller (1997), the Kenya Airways website (www.kenya-airways.com), et al.
 13

Box I.2. Security in East Africa

Security, of both persons and property, is critical to investors and there are several different ways in which it
might be threatened – or seem to be threatened. (This is an area in which perception is nearly as influential as
reality.) Broadly speaking, one might see insecurity as arising in three different ways in the EAC: international
terrorism, problematic borders and urban crime.

On 7 August 1998, there were bomb blasts at the US embassies in Dar es Salaam and Nairobi. There were many
casualties — over 200 dead and some 5,000 injured — and they left no doubt that these were terrorist attacks,
particularly when combined with the fact that they were simultaneous attacks in different cities with identical
targets. Since then, there has been only one major incident of this kind: a suicide bomber killed 15 people in an
Israeli-owned Mombasa hotel in Kenya in November 2002. (There were also rockets fired at an Israeli jet as it
took off from Mombasa airport at about the same time, but these did no harm.) Although some Western
countries (e.g. Canada, France, the United Kingdom and the United States) still regard the region as highly
threatened by international terrorism, the reality on the ground seems to be more reassuring. This is indeed
reflected even in the changing actions and advice of such countries as the United Kingdom. In May 2003, the
United Kingdom advised all its citizens to avoid Kenya and directed British Airways to suspend flights to the
country. The following month, these warnings and restrictions were lifted, although travellers continue to be
advised to be on their guard.

A number of measures have been taken by EAC Governments to increase security in the region. In 2002,
Tanzania enacted the Prevention of Terrorism Act, which criminalizes support for terrorist groups operating in
Tanzania. Similar legislation in Kenya, the Suppression of Terrorism Bill 2003, is still under consideration, being
alleged to violate the Kenyan Constitution and international human rights treaties to which Kenya is party. The
Government of Kenya has also formed an Anti-terrorist Police Unit and stationed two army battalions on the
Kenya–Somalia border. Other countries are contributing to these efforts as well. In 2003, the United States
created a $100 million East Africa Counterterrorism Initiative, which includes military training, coastal security and
measures to strengthen control of the movement of people and goods across borders. A separate programme
aims at combating money laundering. The United States is also funding a police development programme in
Ethiopia, Tanzania and Uganda and a training programme for Kenya’s law enforcement agencies. Finally, it has
set up a computer system at selected airports in Ethiopia, Kenya and Tanzania (to be extended in 2005 to
Djibouti and Uganda) which enhances control of the movement of people and goods.

Unstable, porous or conflict-marked borders are a second source of insecurity in the region. One problematic
border is that between Kenya and Somalia. The 2002 attacks in Mombasa are thought to have been planned in
Somalia and much crime in Kenya is thought by Kenyans to have its origins in arms-smuggling from Somalia.
Another difficult border is that between Uganda and Sudan, where a conflict has raged between Ugandan
troops and the “Lord’s Resistance Army” since the late 1980s and led to some appalling violations of human
rights. The Government of Uganda has now referred the matter to the new International Criminal Court. In
western and north-western Tanzania, there are tensions between local communities and refugees from Rwanda
and Burundi. These have been linked to the proliferation of small arms and UNDP Tanzania has launched a
programme to control proliferation. Arms-trafficking is a major concern in East Africa: there are thought to be
some 3.2 million illegal weapons in the region. Given this, the decision taken in 2004 by 11 East African countries
to create an Eastern African Standby Brigade (EASBRIG) is a very welcome step. The EASBRIG is to be one of the
five formations of the African Standby Force, established by the African Union in 2002 to carry out peacekeeping
operations. The headquarters of the EASBRIG will be in Addis Ababa and its secretariat in Nairobi.

Urban crime is a third source of insecurity in East Africa. (Not that there is no rural crime, but its nature tends to
be different and generally to impinge less on foreign investors.) The level of urban crime in Kenya is one of the
highest in Africa. According to the World Bank, almost 70% of investors reported “major” or “very severe”
concerns about crime, theft and disorder in Kenya, as opposed to 25% in Tanzania and 27% in Uganda. Many
countries (e.g. France and the United Kingdom) warn visitors to Kenya against crime, particularly in Nairobi. (It is
important to note here that urban crime is by no means directed specifically at foreigners.) To counter this, the
Government has launched two major initiatives. One is a project called “Safer city and home for all”, initiated by
the City Council of Nairobi with funding from UNDP Kenya and consisting of a three-year city-wide crime
prevention strategy and action plan. Another step the Government has taken is the drafting of a new firearms
licensing policy, which would lead to the withdrawal of a majority of gun licences issued to individuals. Urban
insecurity is far less of a problem in Tanzania and Uganda, although rural and urban crime is increasing in both
countries.
Source: UNCTAD, based on a variety of sources, including the Institute for Security Studies (undated), Alusala (2004) and Shinn (2004).
Uganda’s mild climate, regular rainfall and stable political
environment make it an ideal location to invest in agriculture,
on both a large and a small scale. In addition, the logistics of
doing business in Uganda have never been better, with more
efficient and cost-effective export corridors by air, rail and
road. Investors opting for the agricultural sector and thinking
of export markets will not be disappointed, whether their
interest is in established export items like tea, coffee, cocoa,
pulses, flowers, tobacco and vanilla – or in new ones with
potential, like palm oil.

David Barry, Managing Director, Kyagalanyi Coffee Ltd (Volcafe Group)

Barrick was very proud to open its second gold mine in

Tanzania recently. The company first came to Tanzania in 1999
because it had confidence in the Government of Tanzania’s
commitment to policy reform and the establishment of an
environment in which foreign companies could make produc-
tive investments. As a result of sound policies, Tanzania is now
the third largest gold producer in Africa, after South Africa
and Ghana. We are pleased too that we are contributing to
job creation, technology transfer and skills development in a
workforce eager to succeed.

Grant Pierce, OAM, Executive General Manager (Tanzania),

Barrick Gold Corporation Limited
 The operating environment

For more detailed and

country-specific informa-
tion, the reader should
Economic environment

In the mid-1980s, Governments in EAC countries, like

II shown relatively strong growth. Uganda has com-
bined strong growth with low inflation. It also has
the most open economy in the region.
15

consult UNCTAD’s recently

published investment
those in many other developing countries, embarked
guides to Kenya, Tanzania on comprehensive economic reforms that sought to The EAC member States are predominantly agricul-
and Uganda reduce government intervention in the economy. The tural economies, with agriculture providing signifi-
(see the list of sources reforms, which were often implemented in the form cant employment opportunities in each of them.
consulted at the end of of structural adjustment programmes, contributed to About 80% of the population depends directly or
this guide).
the liberalization of productive sectors such as agricul- indirectly on agriculture. Growth in the sector has,
ture, the opening up of financial markets to foreign however, been low, owing to dependence on rain-
competition, and foreign-exchange liberalization and fed agriculture. The services sector has been
consumer-price deregulation, and generally enhanced growing strongly, on the other hand, particularly
private-sector involvement in the economy. because of the increase in the tourism, construc-
tion, and ICT sectors (particularly mobile telephony
As table II.1 indicates, although Kenya is the and Internet access provision).
strongest economy among the EAC countries, its
GDP growth rate has been very low, whereas A significant proportion of the economies of the
Tanzania (the poorest of the three countries) has EAC countries is informal. In 2003, the proportion of
the informal economy was about 34%, 58% and
F I G U R E I I .1. S E C T O R A L C O N T R I B U T I O N S 43% of the total in Kenya, Tanzania and Uganda
TO GDP (2003)
respectively (see table IV.1). The share of the infor-
Kenya Tanzania Uganda
mal economy is higher in both Tanzania and
70 Uganda than the average for sub-Saharan Africa:
60 42%. Informality has risen with the implementation
Contribution to GDP (%)

50 of liberal policies and is manifested in increased

40 goods-hawking in the region, among other things.
30

20 As figure II.1 indicates, the services sector is the

10 largest contributor to GDP in both Kenya and
0 Uganda, whereas in Tanzania, it is agriculture. In
Agriculture Industry Services
all three countries, industry contributes the least.
Source: Adapted from the World Bank (2004e).

TABLE II.1. GDP GROWTH RATES, GDI PER CAPITA AND INFLATION RATES (1999–2003)

GDP GROWTH RATES (%)

1999 2000 2001 2002 2003

Kenya 1.29 -0.16 1.13 1.03 1.26

Tanzania 3.65 5.69 6.08 6.32 5.56
Uganda 8 6 5 7 5

GDP PER CAPITA, PPP (CURRENT INTERNATIONAL $)

Kenya 1 009 1 002 1 016 1 020 1 037

Tanzania 491 517 547 581 621
Uganda 1 183 1 265 1 336 1 403 1 457

INFLATION (%)

Kenya 5.75 7.28 9.61 8.7 5.89

Tanzania 11.4 6.89 6.19 4.12 7.16
Uganda 0 4 6 -4 9

Source: Adapted from the World Bank (2004e).

16
Trade and investment The European Union is the largest developed-
country trading partner of the three EAC States in
Trade terms of both exports and imports. Asia is an
increasingly important destination of EAC regional
Trade is an important component of the EAC exports (see table II.2).
economies. In 2002, trade in goods amounted to
about 44%, 27% and 37% of the GDP in Kenya, As table II.3 indicates, in Kenya and Uganda,
Tanzania and Uganda respectively (World Bank, exports are concentrated in agricultural products
2004e). Intra-EAC trade is substantial, with Kenya (Kenya being the second larger exporter of tea in
being the largest exporter to the region and the world), while Tanzania’s exports are dominated
Uganda its largest importer. Intra-EAC trade has by minerals. Imports into the region consist mainly
shown a steady increase since 1990. of machinery, transport equipment and petroleum
products.
Other African countries are major trading partners
of EAC partners. Almost half of all Kenyan exports One should note that, within the EAC, much infor-
go to African countries. Imports from the region mal trade goes on that is not captured in the
are also relatively high, at 11.2%, 18.4% and official statistics and is thus not reflected in tables
39.4% in Kenya, Tanzania and Uganda respectively. II.2 and II.3.

TA B L E I I . 2 . E X P O R T D E ST I N AT I O N S
O F E A C PA R T N E R S TAT E S ( 2 0 0 2 )
Exports (in $ million)

SOURCE OF EXPORTS

DESTINATION Kenya Tanzania Uganda

OF EXPORTS
Kenya - 34.0 61.5
Tanzania 180.1 - 5.8
Uganda 397.3 5.3 -
TOTAL EAC 577.4 39.3 67.3
Other COMESA 353.5 - 40.2
Rest of Africa 120.3 30.7 55.1
TOTAL AFRICA 1 051.2 70.0 162.6
USA 42.9 13.1 9.2
EU 592.3 457.6 156.4
Asia and the Far East 329.2 193.9 42.3
Rest of the World 134.9 223.5 97.1
Total 2 151.0 958.1 467.6

Source: UNCTAD, based on the East African Community Secretariat (2002c).

 17

TA B L E I I . 3 . T O P 5 M E R C H A N D I S E E X P O R T S A N D I M P O R T S
O F E A C PA R T N E R S TAT E S ( 2 0 0 2 )

COUNTRY EXPORTS IMPORTS

Commodity % of total Commodity % of total

Kenya
Tea 26.2 Industrial machinery 9.9
Horticulture 21.6 Crude petroleum 9.3
Coffee 5.0 Petroleum products 8.6
Fish and fish preparations 3.2 Road motor vehicles 5.6
Iron and steel 3.1 Animal/vegetable fats and oils 4.3
Total (top five) 56 37.7

Tanzania
Minerals 42.4 Machinery 22.2
Manufactured products 7.8 Transport equipment 13.2
Tobacco 5.6 Industrial raw materials 12.5
Cashew nuts 5.3 Petroleum products 11.8
Coffee 4.0 Food and foodstuffs 8.1
Total (top five) 63.1 67.6

Uganda
Machinery and
Coffee 20.7 transport equipment 26.5
Fish and fish products 18.8 Mineral fuels and related products 16.3
Gold and gold products 12.9 Manufactures classified by material 14.2
Tobacco 9.7 Cereals and cereal preparation 6.8
Tea 6.7 Iron and steel 5.1
Total (top five) 68.8 Total (top five) 68.9

Source: UNCTAD, based on the East African Community Secretariat (2002c).

18
Foreign direct investment effort by the Government to create an enabling
environment was the passing of the Investment
3 The IPC is expected to be
Each of the three EAC member States has an Promotion Act 2004. Lately, Kenya has been
transformed into the Kenya
Investment Authority (KIA)
investment agency, which is responsible for pro- doing better: FDI flows into the country increased
some time in 2005. moting and facilitating both local and foreign from $27.6 million in 2002 to $81.7 million
direct investment (FDI). These are the Investment in 2003. Key sources of FDI in Kenya include
Promotion Centre (IPC) in Kenya,3 the Tanzania Germany, the United Kingdom and the United
Investment Centre (TIC) and the Uganda Invest- States; leading sectors include banking, agricul-
ment Authority (UIA); see appendix 3 for contact ture and food-processing.
details.
Since the beginning of the 1990s, Tanzania and
As table II.4 indicates, Kenya has performed Uganda have done remarkably well in attracting
poorly in attracting FDI over the last decade and a FDI (table II.4). In Uganda, FDI flows have been
half. FDI flows during this period were volatile increasing steadily since 1990, while in Tanzania
and fell to their lowest level of $5.3 million in they have fluctuated a little but more or less kept
2001. This is generally associated with misgover- pace with those of Uganda. Distribution of FDI in
nance and the neglect of basic production assets Tanzania is skewed in favour of mining, followed
such as infrastructure for a period of over two by manufacturing and tourism, with agriculture
decades, which greatly affected investors’ confi- receiving relatively small amounts. The manufac-
dence. The new Government that came to power turing sector has attracted the largest share of
in late December 2002 intends to change this planned investment in Uganda, with investment
undesirable trend and restore investor confi- being concentrated in beverages, sugar, textiles,
dence. It has, in particular, stepped up efforts to cement, footwear, packaging, plastics and food-
attract FDI through both national and internation- processing for the local market. Investment in
al investor conferences and the creation of a bet- agriculture is mainly in coffee, tea and cotton
ter investment environment. One part of this plantations.

TA B L E I I . 4 . F D I F L O W S T O E A S T A F R I C A : 19 8 6 – 2 0 0 3
COUNTRY 1986–1990 1991–1995 1996–2000 2001 2002 2003
in $ per in $ in $ per in $ in $ per in $ in $ per in $ in $ per in $ in $ per in $
$1,000 of millions $1,000 of millions $1,000 of millions $1,000 of millions $1,000 of millions $1,000 of millions
GDP GDP GDP GDP GDP GDP

Annual average

Burundi 1.0 1.2 0.7 0.7 3.8 2.8 0.0 0.0 0.0 0.0 0.0 0.0
Ethiopia 0.3 2.0 1.5 8.2 24.2 155.1 3.0 19.6 12.4 75.0 9.0 60.0
KENYA 4.7 38.4 1.5 12.8 3.8 39.8 0.5 5.3 2.2 27.6 5.9 81.7
Rwanda 7.1 15.9 1.9 3.6 2.4 4.3 2.2 3.8 4.3 7.4 2.8 4.7
Sudan - 0.4 - 4.4 2.7 22.1 21.5 246.4 42.6 574.0 46.9 713.2 77.1 1 349.2
TANZANIA 0.1 0.3 9.0 46.4 31.6 260.4 50.0 467.2 25.5 240.4 25.8 248.0
UGANDA - 0.3 - 0.6 12.5 54.2 33.0 200.9 40.5 228.6 43.0 249.3 45.7 283.3
Zambia 35.5 112.5 16.0 53.7 47.9 161.4 19.7 71.7 21.7 82.0 23.6 100.0

MEMORANDUM
Developing countries 9.0 27 870.2 16.5 80 793.7 32.7 205 856.8 33.6 219 720.7 24.0 157 611.9 23.8 172 032.5
Sub-Saharan Africa
(47 countries) 6.0 1 560.5 9.6 2 849.5 20.5 6 783.0 45.2 14 696.2 26.3 8 858.5 25.2 10 587.4
LDCs in Africa
(34 countries) 6.4 561.3 10.9 828.1 33.6 3 014.3 60.5 5 827.7 50.1 5 187.2 59.0 7 012.8
COMESA
(20 countries) 12.4 1 401.4 13.6 1 542.6 21.0 3 393.3 23.8 4 277.3 21.4 3 935.4 23.1 4 071.7

Source: UNCTAD, FDI/TNC database.

 19
Infrastructure and utilities Kenya has access to electricity, while for Tanzania
and Uganda these figures are 10% and 5%
Reliable physical infrastructure is essential for respectively.
improving the region’s competitiveness. Currently,
infrastructure is inadequately developed and poorly In Kenya, electricity generation, transmission and
maintained. At the national level, there are efforts distribution are handled by two State companies
by the partner States to rehabilitate and upgrade — KenGEN and the Kenya Power and Lighting
the road networks, ports and airports. Privatization company (KPLC). KenGEN deals with power gener-
plans are also being made particularly for rail trans- ation, while KPLC deals with transmission and dis-
port and telecommunications. The main concerns tribution. There are now a few independent power
with respect to infrastructure are reliability and producers as well.
costs, particularly of power, telecommunication,
transport and water services. The cost of power is In Tanzania, the electricity sub-sector is largely
significantly higher in all the EAC countries than in dominated by the State-owned Tanzania Electric
Egypt and South Africa, two of its major competi- Supply Company Limited (TANESCO), which has a
tors as locations for investment. Transport costs are vertically integrated monopoly in the generation,
also high, among other things because of bad roads, transmission and distribution of electricity in the
which result in delays and damage to carriers. country that is now being unbundled. Two inde-
pendent power producers have now been li-
The East African transport infrastructure includes censed: Independent Power Tanzania Limited and
road and rail networks, airports, oil pipelines, and Songas Limited.
inland lake and maritime transport. The two ports
of Dar es Salaam and Mombasa serve not only the Power generation, transmission and distribution in
EAC but also landlocked neighbouring countries Uganda were unbundled in 2001, ending the
such as Burundi, the Democratic Republic of the monopoly of the Uganda Electricity Board (UEB) with
Congo and Rwanda. respect to these services. Generation and distribution
were concessioned in 2003–2004, while transmis-
Power supply and energy sion is still the responsibility of the State-owned
Uganda Electricity Transmission Company (UETC). An
Power generation in the region is largely hydro- Electricity Regulatory Authority has also been created.
based, with Kenya, Tanzania and Uganda having
a total installed electricity capacity of 1,094 MW, The cost of power is relatively high in the EAC. In
620 MW and 300 MW respectively. 2003, the average tariffs in US cents per KWh
were 10, 9.7 and 6.7 for Kenya, Tanzania and
As table II.5 indicates, consumption per capita is Uganda respectively (East African Business Council,
much lower in Tanzania and Uganda than in 2005). Power supply suffers from unreliability, forc-
Kenya, while transmission and distribution losses ing investors to maintain back-up generators and
are quite high. Only 15% of the population in increasing their costs of doing business.

TA B L E I I . 5 . E L E C T R I C P O W E R P R O D U C T I O N , T R A N S M I S S I O N A N D CO N S U M P T I O N
CONSUMPTION TRANSMISSION AND ELECTRICITY
COUNTRY PER CAPITA DISTRIBUTION LOSSES PRODUCTION
(in kwh) (as percentage of output) (in thousands of kwh)

1991 2001 1991 2001 1991 2001

Burundi .. 73 .. .. .. ..
Ethiopia 18 22 10 10 1 209 1 814
KENYA 117 117 16 21 3 227 4 391
Rwanda .. 23 .. .. .. ..
Sudan 49 67 24 15 1 661 2 560
TANZANIA 54 58 22 25 1 822 2 806
UGANDA .. 66 .. .. .. ..
Zambia 731 598 4 3 9 047 8 178

Source: Adapted from the World Bank (2004e) and UNDP (2004).
20
Telecommunications Water, sewerage and health services

In the early 1990s, the EAC countries began to lib- One basic goal of the EAC Governments is to
eralize their telecommunication sectors, opening ensure access to safe drinking water within a rea-
the market to both local and foreign investors. This sonable distance for their citizens. Public water
dramatically improved communication infrastruc- supply is available to the majority of the popula-
ture to meet business needs in the region, mainly tion in urban areas throughout the EAC region:
through the advent of mobile telephony. In Kenya, 75% and 70% of the urban population in Kenya
the sector is regulated by the Communications and Tanzania respectively has access to potable
Commission of Kenya (CCK); in Tanzania, by the water. (The numbers drop to 50% and 30% for
Tanzania Communications Regulatory Authority the rural areas.) However, the supply is not reli-
(TACRA); and in Uganda, by the Uganda Com- able. Transmission and distribution infrastructure is
munications Commission. The telecommunications inadequate and wasteful, leading to losses of up
sub-sector is one of the fastest-growing in the to 52% in Tanzania. In the city of Nairobi (Kenya),
region. water and sewerage services were privatized in
2004 and a private company, the Nairobi Water
Coverage by fixed telephone lines has remained and Sewerage Company, is currently providing
low in the three countries. Fixed lines are facing these services. Planning is under way for the com-
stiff competition from mobile telephony, which has pany to expand its operations to other cities in the
greatly improved teledensity in the region. Mobile country. In Tanzania, these services are provided by
telephony subscription accounts for 82.9%, the National Water and Sewerage Corporation
85.7% and 92.7% of all telephone subscribers in (NWSC) and plans are under way to privatize
Kenya, Tanzania and Uganda respectively (table them.
II.6). The cost of calls, however, remains relatively
high. Internet use in the region is growing rapidly.
Kenya, for instance, has one of the largest Internet
sectors in Africa, with over 30 licensed ISPs. The
number of computers per capita has also been
increasing.

TA B L E I I . 6 . T E L E CO M M U N I C AT I O N S

AVERAGE COST CELLULAR MOBILE INTERNET

FIXED OF TELEPHONE CALL SUBSCRIBERS
COUNTRY TELEPHONE LINES TO UNITED STATES
As % of total Users per Estimated PCs
per 100 inhabitants ($ per 3 minutes) Per 100 inhabitants telephone subscribers 10,000 inhab. per 100 inhab.

1993 2003 2002 2003 2003 2003 2003

Burundi 0.3 0.3 4 0.90 72.8 19.7 0.2

Ethiopia 0.3 0.6 7 0.14 18.4 10.8 0.2
KENYA 0.9 1.0 6a 5.02 82.9 127.0 0.7
Rwanda 0.2 0.3 11b 1.60 85.2 30.6 ..
Sudan 0.3 2.7 4c 1.95 41.9 90.1 0.6
TANZANIA 0.3 0.4 5 2.52 85.7 70.8 0.6
UGANDA 0.1 0.2 4 3.03 92.7 48.8 0.4
Zambia 0.9 0.8 6 2.15 73.2 60.9 0.9

Source: Adapted from the ITU (2004) and the World Bank (2004e).
a In early 2005, the cost was $4.98.
b Figure for 1999.
c Figure for 2001.
 21
Domestic and industrial waste management has EAC Governments have taken measures to control
remained a serious environmental challenge in and prevent the spread of HIV/AIDS. In Kenya, the
most urban areas in the EAC member States. In National AIDS Council is mandated to spearhead
Nairobi, for instance, only 45% of the garbage the fight. Tanzania has developed a national policy
generated is collected by the City Council, private on HIV/AIDS and the Tanzania Commission for
companies collecting another 7%, while the AIDS (TACAIDS) has been established to lead the
remaining 48% continues to pile up in various process. In Uganda, the National AIDS Control
locations. Refuse disposal in the EAC region is Programme (NACP) in the Ministry of Health is tak-
inadequate, with the City Councils not having suffi- ing the lead. The HIV prevalence rate in Uganda
cient disposal vehicles and participation in solid has fallen significantly since 1999, confirming the
waste management by both individuals and com- country’s leading position in the fight against
panies being relatively low. HIV/AIDS (see box II.3 of UNCTAD’s An Investment
Guide to Uganda, 2004b). In addition to the public
The general health of the nationals of EAC mem- hospitals and health centres in the member coun-
ber States improved remarkably over the 30 years tries, there are also well-equipped private hospitals
after independence, but this changed in the 1990s. in the major cities.
The region has been hard hit by HIV/AIDs, which
has drastically reduced life expectancy in the EAC
and indeed in the surrounding region (table II.7).
Public expenditure on health, although within the
regional range, is very low by international stan-
dards. Access to medical care as indicated by
the number of physicians per 100,000 people is
also low, especially in Tanzania and Uganda.
Privatization programmes implemented in the
1990s in the EAC did not spare the health sector.
The programmes, which introduced cost-sharing in
hospitals, greatly reduced the affordability of
health care. Cost-sharing has recently been abol-
ished in Uganda.

T A B L E I I . 7. H E A LT H
HIV PREVALENCE, PUBLIC EXPENDITURE
LIFE EXPECTANCY PERCENTAGE OF PHYSICIANS a ON HEALTH AS
COUNTRY AT BIRTH PEOPLE AGED 15-49 PER 100,000 PEOPLE % OF GDP

2002 2002 1990-2002 2001

Burundi 42 6 1 2
Ethiopia 42 .. 3 1
KENYA 46 7 14 2
Rwanda 40 5 .. 3
Sudan 58 2 16 1
TANZANIA 43 9 4 2
UGANDA 43 4 5 3
Zambia 37 16 7 3

Source: Adapted from UNDP (2004) and the World Bank (2004e).
a Data are for the most recent year available during the period specified.
22
Transport Air transport

The road network The EAC has seven international airports — Jomo
Kenyatta International Airport (JKIA), Mombasa
The EAC road network consists of rural feeder International Airport (MIA) and Eldoret Inter-
roads, trunk roads joining major cities and towns, national Airport in Kenya; Dar es Salaam Inter-
and urban and suburban roads and highways serv- national Airport (DIA), Kilimanjaro International
ing mainly the urban areas and their environs. The Airport (KIA) and Zanzibar International Airport
road network in the EAC, though relatively better (ZIA) in Tanzania; and Entebbe International
developed than those in the Community’s neigh- Airport in Uganda. JKIA is currently undergoing
bours, is neither adequately developed nor well major renovations to bring it up to international
maintained, leading to high transport costs, delays standards. Each country also has other smaller
and damage, which all increase the cost of doing regional airports and several airstrips handling
business. The poor road network is especially a domestic charters.
concern in Kenya, where most investors describe
the quality of roads and public works as bad or Kenya Airways has already been privatized (see
very bad. In Tanzania, a 10-year Integrated Roads box I.1) and airport operations are now managed
Programme has been undertaken to upgrade 70% by the Kenya Airports Authority (KAA). Forty-nine
of the country’s main roads. The Road Fund Board per cent of the shares in the Tanzanian national
(RFB) and the Tanzania Roads Agency (TANROADS) airline, Air Tanzania Corporation (ATC), have been
were created in 1999 and 2000 respectively to sold to South African Airways. The Government
enhance road management and financing capacity intends to dispose of a further 10%, thus ending
in the sector. In Uganda, the Government has its majority control. In Uganda, the State-owned
launched a Ten-Year Road Sector Development to Uganda Airlines was liquidated in 2001. Cargo and
rehabilitate the main trunk roads and to build and passenger freight have increased in Kenya, where-
maintain feeder roads to open up rural areas. as they have decreased in Tanzania and Uganda
(see table II.8). Passenger travel has also decreased
For plans under the East African Road Network in Tanzania. A number of factors are thought to
Project (EARNP), see chapter IV. account for these decreases, including higher fuel
costs, better roads and reduction of the need for
business travel owing to simplification of bureau-
cratic procedures. A key concern in air transport in
the region is the high freight costs.

TA B L E I I . 8 . A I R T R A N S P O R T A N D R OA D S
AIR TRANSPORT: AIR TRANSPORT: ROADS:
COUNTRY FREIGHT PASSENGERS CARRIED TOTAL NETWORK
Million tons per km Thousands Thousands of km

1990 2002 1990 2002 1990 2000

Burundi .. .. 8 12a .. 14
Ethiopia 67 84 620 1 103 28 32
KENYA 52 118 794 1 600 61 64
Rwanda .. .. 8 .. 13 12
Sudan 13 33 454 409 10 12
TANZANIA 1 2 292 138 56 88
UGANDA 22 21 116 41 .. 27
Zambia 30 1b 407 47 35 91

Source: Adapted from the World Bank (2004e).

a Figure for 1998. b Figure for 2001.
 23
Railways government parastatals: the Kenya Railways
Corporation (KRC), the Tanzania Railways Cor-
The railway system in each of the EAC member poration (TRC) and the Uganda Railways Corpor-
States was built over 100 years ago. Before the ation (URC). Privatization of the sector is under
collapse of the old East African Community in way in the three countries (see box II.1). The
1977, the three EAC member States operated East Mombasa–Malaba–Kampala railway provides the
African Railways together. Since then, the railway linkage between Kenya, Uganda and several other
system in each has been owned and operated by landlocked Central African countries.

Box II.1. Privatizing railways in East Africa

The EAC Customs Union, launched on 1 January 2005 with the simultaneous implementation of the Customs
Union Protocol by the three partner States, is meant to create a single market of some 93 million people with a
combined GDP (at purchasing power parity) of around $92 billion.

However, the benefits of regional integration depend critically on a functioning regional transport infrastructure,
which badly needs to improve its performance. Excessive costs and frequent delays are among the main factors
limiting regional trade. Railways in particular, in Kenya, Tanzania and to some extent Uganda, are in a dilapidated
state. The three Governments have recognized that privatizing the railways is about the only way to improve their
performance and the entire regional network is therefore in the process of privatization through concession.

In Tanzania, two railway networks provide more than 3,500 km of track. The Tanzania Railways Corporation
(TRC) has a 2,600 km network of two main lines: the central line which goes from Dar es Salaam to Tabora (850
km), from Tabora to Kigoma (453 km) and on to Mwanza (386 km); and the Tanga line (430 km), which runs
from Tanga to Moshi and Arusha. The Tanzania–Zambia Railway (TAZARA), jointly owned by the Governments of
Tanzania and Zambia, operates the 1,860 km (900 km of it in Tanzania) line linking Dar es Salaam with Kapiri
Mposhi in Zambia.1 In addition to the exports and imports of Tanzania and Zambia, TAZARA also handles those
of the Democratic Republic of the Congo, Malawi, South Africa and Zimbabwe. What with inadequate resources
and poor management, its designed capacity of 5 million tons of freight a year has never been anywhere near
fully utilized.

In Kenya, the Kenya Railways Corporation operates the 2,700 km network that connects Mombasa to Tororo (on
the border with Uganda) through Nairobi. It has the capacity to handle up to 7 million tons of cargo a year but
currently handles only a third of this. The Uganda Railways Corporation operates a network of 1,300 km, linking
Kampala to Malaba in the east (providing connections to the port of Mombasa) and Kasese in the west, and
linking Tororo with Pakwach in the north. The Corporation has a capacity of 1.5 million tons a year but actually
handles only 0.9 million tons.

The privatization of these four railway networks is now in progress in various ways. The idea of creating a unified
East African Railways network through the joint concessioning of the KRC, the TRC and the URC was under
consideration until 2003, when the Government of Tanzania decided to opt out. In July 2004, the Governments
of Kenya and Uganda signed a Memorandum of Understanding approving the joint concessioning of KRC and
URC for a period of 25 years. It has been agreed that the lead investor would ensure that at least 40% of the
shareholding of the holding company would be in the hands of local investors, in the proportion of at least 20%
Kenyan and 20% Ugandan. In September 2004, the two Governments invited applications through public
advertisement. Five companies have been fully pre-qualified (CANAC Inc of Canada, the China Railways First
Group Company, RITES Ltd of India, Maersk Kenya Ltd and NLPI Private Ltd of Mauritius) and two conditionally
pre-qualified (the Sheltam Trade Close Corporation of South Africa and the Magadi Soda Company of the United
Kingdom). Pre-qualified lead investors are being requested to submit bids by April 2005.

The Government of Tanzania decided on the privatization of TRC in 1997, which would consist in a 25-year lease.
The investment requirement of the concession is projected to be around $180–200 million. The concession
process is well advanced: three bidders are fully pre-qualified (the RITES Consortium of India, the Great Lakes
Railway Company Consortium of South Africa and the NLPI/Spoornet Consortium of South Africa ) and four are
conditionally pre-qualified (Canac of Canada and Dynamic Rail, the East Africa Rail Consortium and the
Sheltam/Mvela Consortium of South Africa). Privatization is expected to occur by mid-2005. At the same time,
the Governments of Tanzania and Zambia have agreed to privatize TAZARA jointly through concession.
1The construction of TAZARA, which was completed in 1975, was perhaps the largest Chinese development project in Africa,
financed with a $400 million, 30-year, interest-free loan from the Government of China.

Source: UNCTAD, based on the World Bank (2004c and 2004d), the Government of Kenya & the Government of Uganda (2004)
and other sources.
24
Waterways and ports Human resources

Despite the existence of large water masses, Each EAC member State has well-developed public
especially the freshwater lakes, in the region, education institutions at the primary, secondary
waterways remain underutilized. Kenya Railways and tertiary levels. There are also an increasing
operates an inland waterway service in Lake number of private institutions. Uganda has one of
Victoria for the movement of freight and passen- the best education systems in Africa, with primary
gers within the Kenya section of the lake. The education being free since 1997. The language
Tanzanian Marine Services Company Limited of instruction in Kenya and Uganda is English at
(MSC), a government parastatal, manages 15 all levels, while in Tanzania it is Kiswahili at the
marine vessels on lakes Victoria (9), Tanganyika (4) primary level and English at the secondary and
and Nyasa (2). The system offers cargo freight and tertiary levels.
passenger transport services on Lake Victoria
(linking Tanzania, Kenya and Uganda), Lake Public spending on education remains low, but all
Tanganyika (linking Tanzania, Burundi, the three Governments are taking measures to in-
Democratic Republic of the Congo and Zambia), crease support to the sector. In Kenya, the Gov-
and Lake Nyasa (linking Tanzania, Malawi and ernment implemented a policy of free primary
Mozambique). The Government has earmarked education in 2003. In Tanzania, a Primary Edu-
MSC for privatization by 2005. cation Development Programme (PEDP) funded by
the World Bank has been implemented to pro-
Seaports in the region consist of the ports of mote higher enrolment and completion rates
Mombasa in Kenya and Dar es Salaam, Mtwara, in primary schools.
and Tanga in Tanzania. (Uganda is landlocked.)
The ports are managed by government parastals: In 2000, the partner States approved a structure
the Tanzania Harbours Authority (THA) and the for the revitalization of the Inter-university Council
Kenya Ports Authority (KPA). The KPA reform pro- for East Africa (IUCEA). Centres of excellence have
gramme envisages the trasformation of KPA into a been established and exchange programmes for
landlord port authority, with most cargo handling students are being facilitated.
and complementary services being ceded to the
private sector. As table II.9 indicates, enrolment in primary
schools for both females and males is much higher
The Port of Mombasa has a rated capacity of 22 in Kenya and Uganda than in Tanzania. Workers
million tons annually, while the cargo handled has have less formal education in Tanzania than in
for several years been at an average of 8 million Kenya and Uganda: some 43% of workers in
tons a year. (The port has also long attracted com- Tanzania have only a primary education, compared
plaints over delays.) The Container Terminal has a with 20% in Kenya and Uganda (World Bank,
capacity of 255,000 tonne equivalent units (TEUs). 2004b). The literacy rate is highest in Kenya,
Between 2002 and 2003, the growth of container- where the quality of the workforce is seen by
ized traffic represented one of the highest growth investors as the country’s best asset: workers are
rates in the world (24.5%). The Dar es Salaam port well trained with high educational levels and
has a capacity of 3.1 million tons of dry break-bulk strong motivation. In Tanzania, the low level of
cargo and 6 million tons of bulk liquid. education and skills represents one of the major
constraints on productivity. However, Tanzania has
All the ports have experienced increased cargo more managers with university degrees (68%)
handling. Current efforts are directed towards than either Kenya (60%) or Uganda (40%) (World
modernizing the ports, including dredging to han- Bank, 2004b).
dle world-class freighters. The two major ports of
Dar es Salaam and Mombasa serve not only the
EAC but also other landlocked countries, including
Burundi, the Democratic Republic of the Congo
and Rwanda.
 25
Wages are generally low in the region by interna- Each country has its own labour laws and regula-
tional standards and lower in Tanzania than in tions, which stipulate the terms of employment
Kenya and Uganda. Workers and their employers such as compensation, maximum working hours,
must contribute to provident funds managed by vacation, leave, the employee complaint process,
the Governments on behalf of the workers in all night and holiday work, and medical care. Wages
three EAC countries. are paid in the manner specified in the written
contract of employment, which could be on a
daily, weekly or monthly basis.

F I G U R E I I . 2 . H I G H E ST E D U C AT I O N A L
ACHIEVEMENT OF EMPLOYEES

120

100 1
6 4

80 25 12 None
30
13
60 12 Technical/vocational
15
20 43 University
40 20

20 Primary
43
32
26
0 Secondary
Kenya Tanzania Uganda

Source: World Bank (2004b).

Note: Totals may not equal 100% owing to rounding.

TA B L E I I . 9 . E D U C AT I O N

ADULT LITERACY
COUNTRY NET ENROLMENT RATIO a RATE

Primary Secondary

Total % of Female % of Total % of Female % of % of people

relevant relevant relevant relevant aged 15
age group age group age group age group and above

2001–2002 2001–2002 2001–2002 2001–2002 2002

Burundi 53 48 8 7 50
Ethiopia 46 41 15 11 42
KENYA 70 71 24 24 84
Rwanda 84 85 .. .. 69
Sudan 46b 42b .. .. 60
TANZANIA 54 54 17c 5 77
UGANDA 109 c 106c 14c 13c 69
Zambia 66 66 20 18 80

Source: Adapted from UNDP (2004).

a The net enrolment ratio is the ratio of enrolled children of the official age for the education level indicated to the total
population of that age. Net enrolment ratios exceeding 100% reflect discrepancies between these two data sets.
b Figure for 1999–2000 school year.
c Figure for 2000–2001 school year.
26
The financial sector With respect to product coverage, the financial
sectors in the EAC remain limited. Domestic credit
Each EAC partner State currently has its own finan- provided by the banking sector is only about 10%
cial sector, consisting of a central bank, commercial of GDP in Tanzania and Uganda, while it is 46%
banks, non-bank financial institutions, mortgage for Kenya (EAC Secretariat, 2003a). Problems with
companies, insurance companies, development this sector include high incidences of non-perform-
finance institutions, building societies and foreign ing loans (particularly in Kenya and Tanzania),
exchange bureaux. Kenya has a total of 43 com- low levels of monetization, weak corporate gover-
mercial banks, two mortgage finance companies, nance and the absence of credit reference
four building societies and 52 foreign-exchange bureaux. Micro-finance institutions are on the
bureaux (Republic of Kenya, 2004). In Tanzania increase in the region.
there are a total of 31 banking institutions (24 pri-
vate commercial banks and 7 non-bank financial Sources of investment finance other than domestic
institutions), 10 insurance companies, 32 insurance banks include the East African Development Bank
brokers, 267 insurance agents and 23 loss (EADB) – owned jointly by the three partner States
adjusters. Uganda has 15 commercial banks, 7 – the Preferential Trade Africa (PTA) Bank, the
credit institutions, 19 insurance companies, three African Development Bank (AfDB), the European
development finance institutions, one building Investment Bank (EIB) and the individual country
society, one social security fund (the National development banks.
Social Security Fund (NSSF), and several foreign
exchange bureaux and micro-finance institutions.
(See appendix 2 for a selection of foreign investors
in the financial sector.) The central banks — the
Central Bank of Kenya, the Bank of Tanzania and
the Bank of Uganda — regulate and supervise the
financial sector. The partner States have also start-
ed on various restructuring programmes, which
will lead to government divestment from the sec-
tor. Uganda’s restructuring is quite advanced.

Box II.2. African Trade Insurance Agency

The African Trade Insurance Agency (ATI) is an inward investment guarantee agency, as well as an import and
export credit agency, of which Kenya, Tanzania and Uganda are among the seven founding members. ATI is a
unique multilateral institution engaged in providing financial instruments and insurance and reinsurance for trade,
project and investment transactions. Its products secure policyholders against political and financial risks. ATI’s
mandate is to increase trade and investment flows into and among its member States so as to facilitate
sustainable private-sector-led economic growth. It was established by a sovereign treaty to which only African
States (and eligible international corporate members) may accede. Unlike other national and multilateral
agencies, ATI uses its member States’ own capital (provided to it under sovereign agreements between ATI, the
World Bank (IDA) and individual States), held in its trust funds offshore, as underwriting capital from which to pay
insured losses. The agency enjoys diplomatic immunities and privileges in its member States and is supported by
the World Bank and by major public- and private-sector players in the export credit and investment insurance
market.

Source: UNCTAD, based on information provided by ATI.

 27
Capital markets Interest rates and foreign exchange

Each of the three EAC member countries has an Since the liberalization of their financial sectors,
operational securities market. In Kenya, the mar- the EAC countries have had floating exchange-rate
ket consists of the Nairobi Stock Exchange, the regimes, which have served the economies rela-
Central Depository and Settlement Corporation, tively well. The function of the central bank in
6 investment banks, 13 stockbrokers, 18 invest- Kenya is limited to interventions to curb short-term
ment advisors, 8 fund managers, 1 credit rating volatility, offset variability in donor flows affecting
agency, 1 capital venture fund, 2 collective invest- external debt payments and meet the net foreign
ment schemes, 3 authorized securities dealers, reserve targets. In Tanzania, the Bank of Tanzania
and 4 authorized depositories or custodians. monitors the interest rate structure that the banks
The Nairobi Stock Exchange (NSE) has a total effectively apply by compiling and reporting
of 51 listed companies. weighted-average lending rates. In Uganda, the
Bank of Uganda carries out general regulatory and
Capital markets in Tanzania and Uganda are rela- supervisory functions. Restrictions on foreign-
tively less developed compared with Kenya and exchange transactions have also been mostly elim-
were established in 1994 and 1996 respectively. inated and are now determined by the market
The Dar es Salaam Stock Exchange (DSE) began forces. The aim is to create an environment con-
trading operations in April 1998 and has nine com- ducive to attracting investors and simplifying inter-
panies listed. The Uganda Securities Exchange national transactions. Liberalization has led to a
(USE) was launched in January 1998 and has reduction in interest-rate spreads and an increase
to date five companies listed. Kenya Airways pre- in the number of foreign exchange bureaux in
miered as the first foreign company to be listed the three countries.
on the DSE on October 2004 and is listed on all
three bourses (NSE, DSE and USE). East African Taxation
Breweries has dual listing on the Kenyan and
Ugandan exchanges. Taxes applicable to business entities in Kenya,
Tanzania and Uganda are presented in table II.10.
In each of the three countries, the capital market is They include corporate, withholding and value-
regulated and supervised by a State agency. In added taxes. (See the three country guides for
Kenya, it is the Capital Markets Authority (CMA), personal income tax rates.)
in Tanzania the Capital Markets and Securities
Authority (CMSA) and in Uganda the Capital Corporate taxes
Markets Authority (CMA). In addition to performing
regulatory and supervisory functions, the authori- In Kenya, corporate tax is levied on the profits of
ties license brokers and investment advisers. corporations such as limited companies, trusts,
clubs, societies, associations and cooperatives
based on the Income Tax Act, Chapter 470 of
the Laws of Kenya. The rate of taxation differs
between resident and non-resident companies.
Companies listed on the Nairobi Stock Exchange
(NSE) are also taxed at slightly lower rates than
other companies to encourage listing. The current
rate is 30% (harmonized at the EAC level), but it
is only 25% for newly listed companies for the
first three years. Investors in export zones enjoy a
10-year tax holiday followed by a 25% corporate
tax rate for the following 10 years.
28

T A B L E I I .1 0 . T A X R A T E S I N T H E E A S T A F R I C A N C O M M U N I T Y ( 2 0 0 5 )

KENYA TANZANIA UGANDA

CORPORATE TAX RATES (IN %)

Resident companies 30a 30 30

Non-resident companies/branches 37.5 30 30

WITHHOLDING TAXES (IN %)b RESIDENT NON-RESIDENT RESIDENT NON-RESIDENT RESIDENT NON-RESIDENT

Dividends 5 10 10c 10c 15 15

Management, technical or professional fees - 20 - 20 6d 15
Royalties 5 20 15 15 - 15

Interest:
- Housing bonds 10 10 10 10 - -
- Bearer instrument 25 25 10 10 15 15
- Others 15 15 - 15 15 15

Mining companies:
- Management or technical fees - 20 5 15 - -
- Dividends - 10 10 10 - -

VALUE-ADDED TAX

Registration thresholds (annual) KShs 3 000 000 TShs 40 000 000 UShs 50 000 000
Rates (in %)
- Standard 16 20 17
- Hotel and restaurant services 14 N/A N/A
Penalties (monthly) 2e See notef 2g

CAPITAL DEDUCTIONS (IN %)

Investment deduction:
- Plant/machinery 100 50 h 50 h
- Buildings 100 - -
First year allowance - 50 -
Industrial building allowance:
- Manufacturing 2.5 - 5
- Hotels 4 - 5i
- Commercial - 5 5i
Farmworks allowance j 331/3 20k 20 k

Source: Adapted from KPMG (2004).

a 25% for the first five years upon listing with at least 30%, and 27% for the first three years upon listing with at least 20%,
listed in a security exchange approved under the Capital Markets Act (CMA).
b This table shows only the most common withholding taxes. For a full list, see KPMG (2004).
c 5% for listed companies.
d Applies only to taxpayers not up to date with the filing of tax returns.
e 2% per month for late payment and KShs 10,000 or 5% of tax due, whichever is higher, for late returns.
f For late payment of VAT, the Central Bank lending rate plus 5%; for late submission of the VAT return, for the first month,
the greater of TShs 50,000 or 1% of the VAT payable and, for subsequent months, the greater of TShs 100,000 or 2% of the VAT payable.
g Greater of 2% or UShs 200,000 in cases of late returns; otherwise 2% compounded.
h 50% for urban areas and 75% for rural areas.
i Granted upon approval by the Finance Minister.
j Structures necessary for the proper operation of the farm.
k Allowance granted on reducing balance.
 29
In Tanzania, under the amended Laws on Invest- The private sector in the EAC
ment and on Taxation adopted in July 2004, the
tax on profits is 30% for all taxpayers resident and Private-sector development is at different stages
non-resident. In Uganda, corporate taxes for both in the three partner States.
resident and non-resident companies are the
same: 30%. By East African standards, Kenya has a very sub-
stantial private sector, including a significant num-
The withholding component of dividends, man- ber of foreign investors. The import substitution
agement, technical or professional fees and royal- policies of the 1960s and 1970s led to considerable
ties is higher in Kenya for non-resident than for diversification of the economy, and foreign invest-
resident companies. The tax rate on dividends is ment was relatively high. The domestic private sec-
10%. For resident corporations listed on the DSE, tor has been concentrated in certain kinds of
the rate is 5% of the gross amount. If a corpora- manufacturing for both the domestic and the
tion distributes dividends to entities which hold, regional market. FDI has recently played key roles
either directly or indirectly, 25% or more of the in the horticulture industry (for export to the
shares and voting power of the corporation, the European Union) and service areas such as trans-
dividend is tax-exempt. port, tourism and mobile telephony.

There has been considerable harmonization In Tanzania, the private sector has traditionally
among the EAC countries, particularly with regard been characterized by small family-owned compa-
to corporate and personal income taxes, with the nies in such areas as retail trade, import/export,
top rate now 30% in all three countries. transport and hospitality. Most businesses in man-
ufacturing focused on light industries: soaps and
Excise tax and VAT detergents, bottling, food-packaging, and so forth.
There has also been a very large informal sector.
In all three partner States, excise taxes are levied Things have begun to change, however, with the
on a number of products, including alcoholic bev- entry of a number of foreign firms. In this context,
erages, tobacco products, petroleum products, a relatively recent initiative that has successfully
motor vehicles, carbonated drinks, mineral water brought together large (mainly foreign-owned)
and natural juices, cosmetics, jewellery and cell companies and small and medium-sized (local)
phone air time. VAT is levied by all three States enterprises (SMEs) in Tanzania is worth noting –
at broadly similar rates: 16% in Kenya, 17% in see box II.3.
Uganda and 20% in Tanzania. Efforts are under
way to harmonize excise and VAT rates so as to In Uganda, the private sector is still small and frag-
preclude tax competition, particularly with regard ile. The majority of the more than 100,000 existing
to alcohol, tobacco and petroleum products. enterprises have been established in the last
decade and a half. Most of these enterprises are
Trade tariffs very small, falling in the category of small or micro
enterprises. They account for 90% of non-farm
The three EAC countries are now implementing employment. The local private sector owns around
tariffs on third-country imports of 0%, 10% and 38% of the investment projects licensed by the
25%, in line with the EAC’s Common External UIA between 1991 and 2002.
Tariff (CET) structure. (Uganda’s request for tempo-
rary exemptions from the CET is yet to be decided The private sector is now fully recognized in the
upon.) Internal tariffs are applicable only on EAC as the engine of growth and a key player
imports from Kenya into the other two countries. in the policy process. Government consultations
These are to be at declining rates and to cease with the sector have been increasing at both the
entirely after five years. national and the Community level, with private-
sector associations playing a major role in strength-
ening these consultations. At the Community level,
the partner States have agreed to provide an
enabling environment, to strengthen the private
30
sector and to promote cooperation among that of investment promotion centres, export
regional organizations and professional bodies to promotion councils and export-processing zones.
take full advantage of the business opportunities in The third category is that of companies. In mid-
the Community (Article 127 of the Treaty of 2005, the EABC had 45 members: 20 from Kenya,
Establishment). 12 from Tanzania and 13 from Uganda.

For a sampling of major foreign investors in the Eastern Africa Association

EAC, see appendix 2.
The Eastern Africa Association (EAA) was estab-
lished in 1964 to facilitate foreign investors’ partici-
Box II.3. Business linkages in Tanzania
pation in the economic development of Eastern
The business environment of many developing countries suffers from the Africa. It is headquartered in London and acts as
problem of the “missing middle” — there are a few large (often foreign) a channel of communication between foreign
corporations on the one hand and a very large informal sector with very
limited capacities on the other. The Private Sector Initiative Tanzania, known investors and Eastern African Governments. It
as Psi Tanzania, addresses this problem. It began when BP Tanzania interprets the policies and objectives of Gov-
approached SBP, a research and private-sector development organization ernments to its members and, in turn, explains the
based in South Africa, to help create an enterprise development programme.
views and needs of investors, prospective investors
Psi Tanzania was formally launched in mid-2002. The programme has been a
boon to both large companies – who can carry less stock, reduce import and foreign businesses generally to Governments.
hassles and minimize transaction costs – and local SMEs – who develop their The EAA’s members include companies from India,
capacities and find new business.
South Africa, the United Kingdom and the United
The initiative was launched by eight charter members: BP Tanzania, Kahama States, among other countries. It has a strong
Mining, Kilombero Sugar, National Microfinance Bank, Sumaria Group, Tanga
presence in the EAC but also a presence elsewhere
Cement, Tanzania Breweries and Tanzania Cigarette Company. By 2005, the
membership had grown to 17, with the following additional members: Celtel, in the region, in Eritrea, Ethiopia, Madagascar,
Coca-Cola Kwanza, CRDB Bank, Geita Gold, Mac Group, Mobitel, Placer Mauritius and the Seychelles.
Dome, Resolute Tanzania and Standard Chartered Bank. Psi has a database of
local SMEs which its members use for import substitution. There is no formal
secretariat. Psi members select one of themselves to chair the Initiative for a National associations
year and this company in effect acts as a secretariat. This informally organized
exercise has been a very substantial success, with $51 million being spent by its At the national level, all three countries have
members on local sourcing from SMEs in the first two years of its operation.
established overarching private-sector associations:
Source: UNCTAD, based on information provided by Psi Tanzania.
the Kenya Private Sector Alliance (KEPSA), the
Tanzania Private Sector Foundation (TPSF) and the
A variety of associations in the EAC serve to ensure Private Sector Foundation of Uganda (PSFU). The
that the voice of the business community is heard objectives of these associations include addressing
and its concerns understood. They include the fol- cross-cutting sectoral concerns and facilitating dia-
lowing (see appendix 3 for contact details): logue with their Governments. There are also a
number of sector-specific associations in each EAC
The Eastern African Business Council member country, which collect and disseminate
information to members, provide training and
At the Community level, the East African business marketing services, and lobby the Government on
Council (EABC) is the formal apex business body. It behalf of their members. Among the most influen-
was established in 1997 to represent the interests tial of these associations are the Kenya Association
of the region’s private sector in the EAC integration of Manufacturers (KAM), the Confederation of
process. Its more specific objectives include the Tanzania Industries (CTI) and the Uganda Manu-
promotion and maintenance of a single market facturers Association (UMA).
and investment area in East Africa and the mainte-
nance of an institutionalized interaction with the In addition, all three countries have set up organi-
EAC and its member Governments. The EABC has zations that specifically serve the purpose of
three categories of membership. One category promoting business–government dialogue: the
consists of chambers of commerce, manufacturers’ National Economic and Social Council in Kenya,
associations, employers’ federations and organiza- the Tanzania National Business Council, and the
tions in the banking, tourism, insurance, agricul- Presidential Investors Round Table in Uganda.
ture and transport sectors. A second category is
 31
Investment climate: Key factors for foreign investors

Strengths Opportunities

• Peace and political stability • Commercial agriculture and agro-processing

• In addition to the EAC population of 93 million • Tourism

consumers, access to the other regional mar-
kets of COMESA (385 million) and SADC (215 • Mining
million) as well as preferential access to the
EU and US markets • Infrastructure development

• Relatively large and low-cost pool of workers, • Development of service businesses (telecom-
some of them highly skilled and enterprising munications, health and education)

• Some of the best climatic conditions and • Privatization

natural resources in sub-Saharan Africa for
agricultural production and for tourism

Weaknesses Threats

• Inadequate physical infrastructure • HIV/AIDS epidemic and its impact on the

workforce and on productivity
• High cost of doing business
• Insecurity, arising from problematic borders
• Persistent corruption
When I was first asked to come to Kenya in 1994, my picture
of Kenya (like that of most outsiders) was of a misgoverned
country with limited resources. The reality on the ground
turned out to be very different: a community of people with
amazing resources and a real passion to go forward and
develop themselves. Yes, there were and still are problems in
Kenya, but if one comes here with a positive attitude and
focuses on niche markets, the underlying talents of the
people can transform any idea into a solid opportunity.

Stewart Laird Henderson, Chief Executive Officer, Old Mutual Kenya

Winston Churchill extolled Uganda early in the 20th Century

with the now famous words “Uganda is from end to end
one beautiful garden ... the Pearl of Africa”. This remains as
true today as it was then. In addition, the warmth and
friendliness of Ugandans are second to none in Africa.
This special combination of natural and human assets makes
Uganda as appealing to investors in tourism as it is to the
discerning tourist.

Roni Madhvani, Director, Madhvani Group (Mweya & Paraa Safari Lodges)
 Areas of opportunity

For more detailed and

country-specific informa-
tion, the reader should
The East African Community offers investment
opportunities in virtually all areas of the economy.
The tropical to temperate climate in the region
III Priority areas

Agriculture and related activities

33

consult UNCTAD’s recently

published investment
offers opportunities for commercial agriculture of
guides to Kenya, Tanzania many kinds. There are also opportunities for Agriculture is the one of the leading economic sec-
and Uganda (see the list investment in agro-processing; in manufacturing tors in the EAC. It provides a livelihood to about
of sources consulted at for the wider African region; in mining, physical 80% of the population and contributes 44%
the end of this guide). infrastructure and energy; in a variety of services to the GDP in Tanzania, 32% in Uganda and 16%
including IT-based services; and, of course, in in Kenya (table III.1).
tourism.
Opportunities for large-scale commercial farming
As for the basic strengths of the region, it is politi- exist in the region for both food and cash crops.
cally and economically stable and strategically Opportunities in the latter include crops such as
located with relatively easy access to regional and coffee, cotton, tobacco, sisal, cashew nuts, sugar,
world markets. The private sector in the region is pyrethrum, and high-value products such as
relatively well developed and each Government vanilla, cloves and other spices.
has been making efforts to create a climate
conducive to investment. Irrigation agriculture is not much practised in the
region, with most production, particularly of food
crops, being rain-fed agriculture. For instance, less
than 10% of Tanzania’s over one million hectares
of irrigable land is developed. Irrigation potential
exists in the river valleys and the alluvial plains of
the region. The freshwater lakes in the region are
also a potential source of irrigation water.

T A B L E I I I .1. A G R I C U L T U R E I N E A S T A F R I C A
VALUE ADDED RAW MATERIAL
COUNTRY AS % OF GDP EXPORTS
Percentage % of merchandise exports

1990 2002 1997 2002

Burundi 56 49 0 1a
Ethiopia 49 42 11 15
KENYA 29 16 7 11
Rwanda 33 42 15 5
Sudan .. 39 33 6
TANZANIA 46 44 23 13a
UGANDA 57 32 8 11
Zambia 21 22 .. 3

Source: Adapted from the World Bank (2004e).

a Figure for 2001.
34
Horticulture Tea

Horticulture has expanded rapidly in the region in Tea is an important export commodity in the EAC.
the last two decades. The climate, the soil and the In 2002, its exports accounted for about 26% and
existing water supplies provide an excellent mix of 7% of all the export earnings in Kenya and
the resources needed to produce high-quality hor- Uganda respectively. In addition, it is a major
ticultural produce in a natural environment. Some employer, large numbers of people being em-
of the fruits and vegetables produced in the region ployed directly in farming as well as indirectly in
are consumed within the region, while much of marketing, transport and retailing.
the produce is exported to international markets,
particularly to the EU (see boxes III.1 and III.2 Opportunities for investment exist in tea planta-
below). In 2003, fruits, vegetables and flowers tions, processing and packaging for both domestic
were together the largest export earner in Kenya, and export markets.
contributing about 26.7% of total export earnings.
Coffee
The majority of vegetable and fruit farmers in the
region are smallholders. In Kenya, they constitute Coffee is another significant foreign-exchange
about 80% of all growers and account for 60% of earner in the EAC. It accounts for the largest share
the export produce. Important fruit and vegetable of export earnings in Uganda and is the fourth
products of the region include pineapple, passion largest export earner in Kenya. The region pro-
fruit, papaya, banana, avocado, mango and duces high-quality arabica and robusta coffees.
orange. There is much export potential for passion The falling international coffee prices have nega-
fruit, apples, bananas, raspberries, beans, aspara- tively affected the sub-sector in the region, but
gus, snow peas and chillies. The main floriculture there are opportunities in the growing of arabica
export product is cut flowers. In Uganda, cut and robusta coffee, in coffee processing and pack-
foliage and potted plants are also produced for aging, and in the manufacture of coal from coffee
export. The principal export destination of this pro- husks. Other opportunities include producing for
duce is the EU, with most of the sales being made specialty markets such as the organic coffee mar-
to intermediaries at the auction centre in the ket, the production of washed robusta coffee,
Netherlands. which has a higher earning potential as compared
with dry-processed coffee, and coffee roasting.
Opportunities for the production and export of
horticultural produce (fruits, flowers and vegeta- Cotton
bles) are far from being exhausted. Other opportu-
nities exist in the production of propagation EAC countries have the potential to produce some
materials, the establishment of soil-analysis ser- of the best cottons in the world. Production in
vices, the manufacture of greenhouse plastics, the Kenya has decreased sharply since the 1980s when
production of inputs such as fertilizers, herbicides the sub-sector experienced marketing problems
and pesticides, and the production of packaging associated with increased competition from syn-
materials. There are opportunities as well in other thetic substitutes and is now lower than in
horticulture-related activities such as processing. Tanzania and Uganda. Production in Tanzania has
The provision of cold-storage facilities as well as also been decreasing. The demand for cotton has
air-cargo transport to foreign markets also offers increased recently with the growth of the textile
investment opportunities, as does the provision of and apparels industry responding to the opportu-
accreditation services to meet market and regula- nities provided by the US African Growth and
tory requirements. Opportunity Act (AGOA).
 35

Box III.1. FDI story: Investing in horticulture

Horticulture has overtaken tourism to become the second largest foreign exchange earner in Kenya, after tea.
(Horticulture here includes flowers as well as fruits and vegetables.) Vitacress Kenya Ltd., now 10 years old,
is part of this larger success story.
The company began operations in 1994 after its founding by Willem Dólleman, Gordon Murray and Vitacress
Salads. Mr. Dólleman, a native of the Netherlands who came to East Africa in 1978 to work for a Dutch seed
house and then stayed on, owns 30% of Vitacress Kenya and runs the operation. Mr. Murray, who supplied the
land (350 hectares in Timau, 225 kilometres north of Nairobi), owns another 30%. Vitacress Salads, the largest
watercress grower and marketer in the United Kingdom and Portugal, owns the remaining 40%. The total equity
is about $6 million. The company has 1,500 employees, of whom only four are expatriates. The annual turnover
is now $10 million.
The company mainly grows salad onions, broccoli, garden peas, sweet corn and baby leaf lettuce. The produce
is sold to Marks & Spencer and Sainsbury in the United Kingdom. Vitacress Kenya does more than grow its
vegetables; it also processes them to supermarket specifications, including packing and labelling. The produce is
harvested early in the morning, processed by noon, trucked to Nairobi in the afternoon, flown to Europe
overnight and placed on supermarket shelves the next morning.
Mr. Dólleman assesses the investor’s environment as fairly risky, with poor infrastructure and complicated
bureaucracy. (The company pays altogether 32 taxes!) What most needs attention in Kenya is the transport
infrastructure. The port at Mombasa is a major problem, with delays and “facilitation fees”. The railway is
dilapidated and the roads are very poorly maintained, even in the Naivasha area, famous for its floriculture.
Mr. Dólleman is also unhappy at the lack of local management. It is not so much that ability and qualifications
are lacking. It is rather that Africans with the right skills cannot be persuaded to work in a farming environment.
If this were not so, the company would have even fewer expatriate employees.
Overall, however, Mr. Dólleman thinks that Kenya abounds in opportunities for investors, specifically in
horticulture and tourism, and that both areas would become far more attractive if roads and security were
improved. In his view, perhaps the best thing about Kenya is its climate, and the Nairobi airport with its many
flights by European airlines is also a strong plus. Vitacress Kenya itself plans to keep growing. If the circumstances
were right, the company might diversify into floriculture.

Source: UNCTAD, based on information provided by Vitacress Kenya Ltd.

Box III.2. FDI story: Amfri Farms’ African Organic project

Amfri Farms Limited in Uganda, which trades as African Organic, is involved in the growing and export of organic
fruits and vegetables. Formerly known as Suntrade and Consulting INT (U) Ltd, the company started in 1990 with
about 25 individual outgrowers and cooperative farms. It was started by a Swiss engineer with an initial
investment of $20,000, using self-developed solar energy technology for processing fruits and vegetables
(organically grown pineapples, bananas, chillies, ginger, beans, mangoes and okra). Today, the company has 82
outgrowers.
Amfri Farms has concentrated efforts on ensuring control over the products it exports. The major areas of
development have been the following: certification by the Swiss Institute for Market Ecology (IMO) to process
and market organic products in compliance with EU Regulation (EEC) No. 2092/91; advising and supporting
outgrower farmers with techniques in organic/sustainable farming; development of a company-owned farm for
organic production and a pack-house facility; development and continuous improvement of solar driers to
increase efficiency; and certification (in May 2003) by USDA AMT CFR part 205, National Organic Program.
The company handles a wide range of products, both fresh (pineapples, bananas, ginger, passion fruit, baby
aubergines, okra, matoke and hot pepper) and dried (pineapples, bananas, papaya and mangoes). It owns a
farm of 1,500 acres in Luwero, 450 acres of which are certified as organic. At the moment, 90% of the produce
comes from the outgrowers, but future plans are to increase company farm production so that 40% of the
export produce comes from the farm.
At present, the company has 25 permanent employees and 75 casual workers, and owns 50 drying units. The
project uses a vacuum-gauging machine, the only one of its kind in Uganda. The Services Institute for Market
Ecology certifies the organic quality by carrying out annual inspections of the production area (soil inspection)
and the harvesting and processing operations. Exports of fresh fruit started with less than 2 tons in 2000 but, by
the end of 2002, over 282 tons of fresh and dried fruits and vegetables were exported, earning about $350,000
for the company. In the past, the main market was Switzerland, but now the market has expanded to include
Canada, Germany, Norway, Sweden and the United States.

Source: UNCTAD, based on information provided by Amfri Farms Ltd.

36
Food crops and oil seeds Livestock

EAC countries produce a wide range of food crops The livestock sector in the EAC contributes sub-
and oil seeds. These include cereals (millet, stantially to the member countries’ GDP and pro-
sorghum, maize, rice) and other grains (beans, vides employment, food and foreign exchange.
pigeon peas, other pulses), which can be produced Important livestock export products from the
several times a year. These are consumed in the region include hides and skins, dairy products
domestic markets as well as exported to regional and live animals. There is limited meat-processing
markets. Sugar, rice and wheat production in the in the region. Opportunities for investment in the
region is not fully developed, and this makes the meat sub-sector include the construction of abat-
region a net importer of those commodities. toirs that meet international hygiene standards,
the processing of leather and the processing of
There is unexploited potential in the region for the meat and its by-products. The provision of veteri-
production and export of sesame seed, sunflower nary services and drugs is another important
seed, groundnuts and cottonseed. There is also opportunity, the provision of such services having
potential for pressed organic oils. been liberalized in all three EAC countries.

Forestry and related products Other opportunities include the rearing of wild ani-
mals and the production of game meat (such as
EAC member countries have large areas of forests ostrich and crocodile farming) and the supply of
and woodlands. Some of these have been gazet- processing equipment for both small and large-
ted as forest reserves. Some are under plantation scale processors. There are also opportunities in
forestry while others are under water catchments. the provision of financial services, including credit
Softwood and hardwood plantations offer good and banking services, in areas where livestock
opportunities to invest in the establishment of keeping is a major activity.
wood-based industries such as saw-milling, partial
boards, furniture and joinery.

Natural forests, with their indigenous fauna and

flora, offer great potential for the development of
an organic honey-processing industry and related
products. Investment opportunities include honey-
processing, the manufacturing of beekeeping
equipment, beeswax processing, the development
of bee-pollination-based industries and the promo-
tion of lesser-known bee products such as royal
jelly, which have a demand in Japan and other
developed countries. Opportunities also exist for
the provision of services for the certification of
organic honey production.
 37
Dairy sub-sector Fisheries

In cattle, each of the EAC member States keeps The East African region is endowed with some of
both exotics and a traditional-exotic crossbreed. In the largest freshwater lakes in the world, which
Kenya, the dairy sector and related services were harbour substantial resources for fishery. The
liberalized in the mid-1980s. A small quantity of coastal waters of the Indian Ocean are also home
the total milk produced in each EAC member to a variety of marine fish. Of all the water masses,
country is marketed through the formal channels the most exploited is Lake Victoria, which is shared
(14% of the marketed production in Kenya and by the three EAC partner States in the following
10% in Uganda), most of it being marketed proportion: Kenya (6%), Tanzania (49%) and
through informal channels. Fifty-six per cent of the Uganda (45%). The surface area of the lake is
marketed production in Kenya and 90% in some 68,000 km2 and the shoreline length is
Uganda is sold in raw form. Processing is limited, 3,400 km. The lake is believed to contain about
particularly in Tanzania and Uganda, and this 350 species of fish. The commercially important
makes the two countries dependent on Kenya for fish species of Lake Victoria are Lates niloticus (Nile
processed dairy products. The export potential of perch), Oreochromis (Tilapia) and Rastrineobola
the EAC is nothing like fully exploited; currently, argentea (Dagaa). The other species include
only Kenya exports substantial quantities to the Alestes, Barbus, Clarius, Haplochromis, Labeo,
region. Key export markets for dairy products from Mormyrus, Protopterus, Schilbe and Synodontis.
the region include the COMESA member countries. The Nile perch is the species most widely
Exports currently also go to the Middle East and to processed for export in the region, with its princi-
UN bases and international airlines operating in pal markets being the European Union, Israel
the region. and Japan.

Investment opportunities exist in the processing Other lakes such as Lake Turkana (in Kenya) and
of dairy products such as powdered milk, Tanganyika (in Tanzania) and Kyoga (in Uganda)
ultra-heat-treated (UHT) milk, cheese, butter, and smaller lakes within the Rift Valley remain
yoghurt, ice-cream and flavoured condensed underexploited and therefore offer ample opportu-
milk; the supply of processing and packaging nity in fishing, fish processing and fish by-product
equipment for both small and large-scale proces- processing, as well as in the supply of fishery-relat-
sors; the supply of veterinary and animal-breed- ed equipment and storage infrastructure such as
ing services and of animal feeds; the supply of fishing nets, cooler transporters, processing equip-
financial services, especially credit; and the supply ment, packaging materials, and freighters and
of quality accreditation services. The planned cargo planes. Fish farming (aquaculture) is another
privatization of Dairy Corporation Limited, the investment opportunity in this area, as are accred-
largest dairy processor in Uganda, offers another ited testing laboratories.
opportunity. DCL collects and processes over
30 million litres a year into fresh milk, UHT milk, The EAC coastline extends for 2,104 km, including
yoghurt, ice cream and cheese, generating a some 680 km in Kenya and some 1,424 km in
turnover of $12 million(Uganda Government Tanzania. The marine fishery resources remain
Public Enterprise Reform and Divestiture Program, underexploited, with Kenya and Tanzania exploit-
http://www.perds.go.ug/index.html). ing mainly their continental shelves, and not being
able to fully exploit their Exclusive Economic Zone
(EEZ) owing to a lack of state-of-the-art fishing
vessels. Most of the fishing remains artisanal in
nature. The marine resources include crustaceans,
molluscs, Dermasal fish species, Pelagic fish spe-
cies, and tuna and tuna-like species. Opportunities
include investment in deep-sea fishing, the provi-
sion of deep-sea fishing vessels, storage infrastruc-
ture, and the processing of marine fish and the
related by-products.
38
Tourism small listing of some of the principal assets and
does not mention the cultures and crafts of the
Tourism is an important industry in the EAC coun- region, which have their own unique attractions.
tries. In 2002, it accounted for 9%, 47% and 26%
of export receipts in Kenya, Tanzania and Uganda The established tourist activities are primarily
respectively (see table III.2). The numbers of safaris and beach holidays, of which the former
tourists increased significantly between 1995 and can be carried out in all three countries and the
2002 in both Tanzania (from 285,000 to 550,000) latter in Kenya and Tanzania. There are many
and Uganda (from 160,000 to 254,000), although activities, however, that can be either developed or
in Kenya there was a small decline (from 896,000 developed substantially further. There are also
to 838,000). This demonstrates that the sector investment opportunities in servicing the estab-
continues to show vibrancy and potential, despite lished tourist activities. What follows is a listing
the security concerns expressed by the travel advi- of some areas and opportunities that draws upon
sories of countries such as the United States, discussions with foreign tourism companies,
caused by the 1998 bombings in both Nairobi and among others.
Dar es Salaam (see box on security in chapter I),
and increased global travel concerns following the • More accommodation facilities of international
events of 11 September 2001 in the United States. standard (hotels, lodges, guesthouses, etc.) are
Even in Kenya, the decline has not been large. needed, particularly in Tanzania and Uganda.
(In fact, in 2003, Kenya received over a million Even in Kenya, which has a more developed
international visitors.) tourism infrastructure, more accommodation
is needed in the less exploited circuits.
Among the principal sources of tourists are the
members of the European Union – in particular • Ecotourism is as yet an unexploited opportuni-
Germany, the United Kingdom, Italy and France – ty. It could be developed, for example, in the
and the United States. All three EAC countries are eastern-arc mountain ranges in Tanzania: North
interested in diversifying the sources of tourism and Pare, the Usambaras, Uluguru and Udzungwa.
adding new ones such as the countries of East, It also presents an opportunity in Kenya
South and South-East Asia and the new members (e.g. the Kakamega forest) and Uganda.
of the EU. This interest is shared by the tourism
business as well, for example Pollman’s and Ranger • Cultural heritage sites and historical locations
Services, two leading tour operators in the EAC, can also be systematically developed further.
and Serena Hotels, which operates nearly a dozen Also largely unexploited thus far are tourism
hotels and lodges in the region (see box III.3). prospects in Lake Victoria, the North Rift Valley
and the Selous Game Reserve (the largest of
The EAC is blessed with some of the finest natural its kind in the world).
tourism assets in Africa, in particular beaches and
wildlife. For example, Tanzania has allocated more • Beach tourism is mostly undeveloped around
than 25% of its total area to wildlife parks and Dar es Salaam and elsewhere along the East
protected areas. The northern circuit in Tanzania African coast, although well developed around
includes the Serengeti plains; the Ngorongoro Mombasa. There are opportunities as well in
crater, which hosts an extraordinary diversity of the development of deep-sea fishing, diving,
wildlife in an area of about 8,000 sq. km; and Mt and sea and lake cruising. Whitewater rafting
Kilimanjaro, Africa’s highest mountain. In Kenya, is another relatively undeveloped area with
the Maasai Mara wildlife ecosystem connects with potential.
the Serengeti to the south and is one of 48 parks
and reserves in the country, which include Tsavo • Finally, outside Kenya, there is a major need for
and Amboseli. In Uganda, there is the Bwindi more training in the tourism sector, particularly
Impenetrable National Park, home to some 300 in Tanzania, which has spectacular natural
mountain gorillas, the Murchison Falls and Queen assets but rather poorly developed workforce
Elizabeth National Park. This is no more than a skills at various levels.
 39

TA B L E I I I . 2 . I N T E R N AT I O N A L TO U R I S M

NUMBER OF
COUNTRY ARRIVALS RECEIPTS

Thousands Percentage of total exports Millions of current $

1995 2002 1995 2002 1995 2002

Burundi 34 36a 1 3 1 1
Ethiopia 103 148a 3 8a 26 75a
KENYA 896 838 16 9 486 297
Rwanda .. 113a 3 23 2 31
Sudan 63 52 3 3a 19 56a
TANZANIA 285 550 20 47 259 730
UGANDA 160 254 12 26 78 185
Zambia 163 565 .. 11a 47 117a

Source: Adapted from the World Bank (2004e).

a Figure for 2001.

Box III.3. FDI story: Investing in tourism (hospitality)

Serena Hotels is a chain operating in the East African region, with its main focus on Kenya, where it has seven
properties (in Nairobi, Mombasa, Amboseli and Mara, among others). In Tanzania, it owns five properties
(in Lake Manyara, Ngorongoro, Serengeti and elsewhere), and in Uganda it recently bought the old Nile Hotel,
which is undergoing renovation and will open for business as the Kampala Serena in February 2006. The Serena
hotels and lodges are distinguished by the quality of their service and their attention to local tradition
in architecture and decor. In Kenya, Serena Hotels have had an average annual turnover since the mid-1990s
of about KShs 1.2 billion (about $15 million). The number of employees is 1,100, including one expatriate.
The company recognizes its employees as its greatest single asset.

The Serena chain is owned by Tourism Promotion Services Limited (TPSL). TPSL has operated in Kenya since 1971
and floated nearly 39 million shares on the Nairobi Stock Exchange in 1997. The shares, then valued at KShs 13
each, now trade at KShs 50 each. TPSL is in turn majority-owned by TPS Holdings, a company incorporated in
Kenya and in turn majority-owned by the Aga Khan Fund for Economic Development (AKFED), which is
incorporated as a commercial entity under Swiss law. AKFED, founded in 1984, is the only for-profit entity in the
Aga Khan Development Network (AKDN), also based in Switzerland, and sees its aim as going beyond profits to
encompass employment creation, human resource development, and the preservation of natural and cultural
assets. AKDN has a history in East Africa going back to the late nineteenth century.

According to Mr. Mahmud Jan Mohamed, Managing Director of Serena Hotels in East Africa, tourism boomed in
the 1970s and 1980s in Kenya, leading, among other things, to an oversupply of hotels and an undersupply of
quality. The situation changed in the 1990s, as the economy was liberalized, inflation rose and Government
expenditures on such items as infrastructure fell. (The terrorism incidents in Nairobi and Dar es Salaam in 1998
and in Mombasa in 2002 did not help tourism either – see box I.2.) Since then, the industry has recovered,
although the investor environment remains difficult on account of corruption, insecurity, poor infrastructure
and the high cost of doing business. Nairobi in particular, with its severe image problem, represents a lost
opportunity, according to Mr. Jan Mohamed.

As to what needs the Government’s attention, Mr. Jan Mohamed thinks more focus is needed on developing
new areas of potential interest to tourists – for example, Lake Victoria and the North Rift Valley – as well as on
changing the image (and in part the reality) of Kenya as an insecure and expensive place. There have been
improvements, in tourism management and in the promotion of Destination Kenya, but much more needs to be
done. The company sees the main advantages for an investor in East Africa as the workforce and the weather in
Kenya and good tourism planning and management in Tanzania. TPSL welcomes the movement towards
regional integration in East Africa, although the pace can be frustratingly slow. It would also like to see much
more quality foreign investment in the tourism business.
Source: UNCTAD, based on information provided by Serena Hotels.
40
Other areas In Tanzania, the intention is to upgrade 70% of
the country’s 10,300 km of main roads and build
Infrastructure some 3,000 km of new ones. In the 1990s, the
Government of Tanzania launched a concession sys-
Each of the three EAC member States is imple- tem aimed at inducing both domestic and foreign
menting restructuring programmes which aim at investors to participate in build, operate and transfer
reducing government involvement in commercial (BOT) schemes in roads. An autonomous executive
activities, including the provision of infrastructure agency, the Tanzania Roads Agency (TANROADS),
services. Kenya is in the process of implementing was also established to manage trunk road con-
reforms which target a number of parastatals: struction, rehabilitation and maintenance.
Telkom Kenya Ltd, the Kenya Railways Corporation
(KRC), the Kenya Ports Authority, The Kenya Power At the regional level, EAC member countries aim
and Lighting Company (KPLC), the water sector to develop roads under the East African Road
and the Chemelil Sugar Company. The Presidential Network Project (EARNP), on which see the sec-
Parastatal Sector Reform Commission (PSRC) in tion on “Main regional issues and initiatives” in
Tanzania is coordinating and implementing the chapter IV.
privatization of State enterprises, such as the
Tanzania Harbours Authority (THA), the Tanzania Railways
Electric Supply Company Limited (TANESCO), the
Tanzania–Zambia Railway Authority (TAZARA), The regional railway system is in poor condition.
Marine Services Company Limited (MSC), the Since it was constructed some 100 years ago, it
National Insurance Corporation (NIC), the Tanzania has had no major rehabilitation. Its locomotives,
Postal Corporation (TPC) and the National Shipping wagons and equipment are as old as the system
Company, Shirika la Usafiri Dar es Salaam. Similar itself, and this has aggravated the poor perfor-
programmes are in the pipeline in Uganda. These mance of the sector. Privatization is now under
privatization initiatives present investment oppor- way (box II.1). The region is also in the process of
tunities in all three countries. extending the railway line coverage within the
region as well as linking the region with neigh-
Road transport bouring countries. Opportunities for investment
therefore exist in the extension of the railway lines
By sub-Saharan African standards, the EAC road within the region as well as in the rehabilitation of
network is not bad. However, the roads both with- existing lines, wagons and coaches.
in and between countries are poorly maintained
and a significant proportion of them are unpaved. Water transport
The poor state of the roads leads to high transport
and vehicle-maintenance costs and contributes to Water transport in the region is underdeveloped
the high cost of doing business in the region. and underexploited. Passenger transport and
There are opportunities for investment in the con- freight cargo services, especially on Lake Victoria,
struction, maintenance and rehabilitation of roads, Lake Tanganyika (shared between Tanzania,
as well as in the construction of bridges. Burundi, the Democratic Republic of the Congo
and Zambia), and Lake Nyasa (shared between
The Governments of Kenya and Tanzania are both Tanzania, Malawi and Mozambique) present sub-
implementing road-upgrading programmes. In stantial investment opportunities. The regions sur-
Kenya, the implementation of the Roads 2000 rounding Victoria, Tanganyika and Nyasa are
Programme to develop rural access roads is being estimated to host over 30 million people involved
accelerated. Other roads programmes include dou- in fishing, agriculture and trading. There are
ble-laning the Mombasa–Nairobi–Busia–Malaba opportunities in establishing fast passenger traffic
highway and reducing congestion in key urban from the commercial city of Mwanza to Bukoba in
centres through the construction of bypasses. The Tanzania, Port Bell in Uganda and Kisumu in
Government of Kenya is also reviewing its legal, Kenya. A private company has already delivered
institutional and regulatory framework to enhance two 90-passenger speedboats to Mwanza to ease
integrity in road contract procurement. transport problems in and around Lake Victoria.
 41
Air transport
Limitations in handling and storage facilities of LPG
Despite the liberalization measures taken over the at the port of Mombasa have constrained the sup-
past decade, air services in the region are still not ply and distribution of LPG in Kenya as well as in
very efficient and freight charges remain high. The neighbouring countries. Investment opportunities
Governments of the EAC countries are involved in therefore exist in the provision of handling and
reforms to modernize the operations and improve storage services.
the efficiency of airport services. The Government
of Kenya has prioritized the upgrading of Kisumu, Information and communication technologies
Malindi, Wilson and other airports important for
tourism. The privatization of commercial and non- Liberalization in the telecommunication sector
regulatory services at the airports and exploring began in Kenya and Tanzania in the early 1990s
the possibility of private-sector participation in but the parastatals Telkom Kenya Limited and
building capacity for passenger terminal facilities Tanzania Telecommunication Corporation Limited
(Republic of Kenya, 2003) are other priorities. (TTCL) remain the main gateways to international
exchanges for Kenya and Tanzania respectively.
Investment opportunities exist in modernizing the Privatization of both is scheduled for 2005. The
airport management systems under the Global Government of Kenya is also planning the licensing
Navigation Satellite System, supplying security-con- of a second fixed-line operator.
trol-related equipment, and providing commercial
and non-regulatoty services after privatization. Uganda Telecom Limited was successfully divested
There are opportunities as well in the construction in June 2000. There are still numerous investment
of state-of-the-art passenger terminal facilities, opportunities in Uganda in the information and
strengthening parking aprons, extending taxiways communication technologies (ICT) sector, including
and rehabilitating the old runways. opportunities in processing accounting data, incipi-
ent e-business services, printing and publishing
Port facilities media and television, logistics management, ICT
infrastructure and high-level ICT training facilities.
Investment in port facilities is a major area of
opportunity. The Government of Kenya has made The growing use of the Internet in the region
the privatization of port facilities one of its priori- offers opportunities for investment in the provision
ties. Kenya’s public-sector reform programme of Internet-related hardware and software. EAC
envisages the transformation of the Kenya Ports partner States are embarking on liberalizing the
Authority (KPA) into a landlord authority, relin- sector fully to make it more efficient and extend
quishing most cargo handling and complementary services to rural areas. In Kenya, for instance, plans
services to the private sector. In May 2000, the are under way to license four other Internet gate-
Tanzania Harbours Authority (the parastatal which way service providers in line with the Govern-
manages the Tanzanian ports and their operations) ment’s commitment to enhance competition in
was divested and leased to private investors. The the telecommunication sector.
National Shipping Agencies (NASACO) also divest-
ed its shipping operations, creating opportunities Other investment opportunities exist in the provi-
for private operators. sion of value-added services in voice and imaging
products, teleconferencing, data capture and pro-
Investment opportunities may be found in conven- cessing, call centres, radio paging, and broadband
tional cargo operations (stevedoring of non-bulk wireless Internet services.
liquid containerized cargo); container transport
(dedicated wagons, locomotives and communica-
tion equipment); cruise ships; dockyard facilities; a
bunkering pipeline; development of other container
terminals and ports; inland container depots; com-
puterization of port operations; estate manage-
ment; and the provision of equipment and gear.
42
Energy Water and sanitation services

The region has abundant untapped energy re- The provision of water and sanitation services in each
sources, which are very far from being fully exploit- of the EAC countries is gradually being privatized.
ed. They include coal reserves (about 1,200 million In Nairobi, some of these services have already been
tons in Tanzania), natural gas, and geothermal, privatized, with the Nairobi Water and Sewerage
solar and hydroelectric energy. In Tanzania, for Company currently providing water and sanitation
example, hydroelectric energy has a potential of management services in Nairobi, with plans to
4,700 MW, but only about 10% of this has been expand its operations to other cities in the country.
developed. Among other things better exploitation In Tanzania, the National Water and Sewerage
of the existing resources could help save the for- Corporation (NWSC) is also in the process of privatiz-
eign exchange that goes to pay for the import of ing its services. The National Water and Sewerage
petroleum products. Corporation (NWSC) of Uganda is conducting trials
with contracted private management of operations in
The energy sector in the three EAC countries has Kampala and Jinja and is in the process of identifying
been privatized to some extent: in 1994 in Kenya, the forms of private-sector involvement. Investment
1992 in Tanzania and 2001 in Uganda. Further priva- opportunities exist in the provision of potable water,
tization and restructuring are priorities in Kenya and the provision of garbage and refuse disposal facilities,
Tanzania. Uganda’s restructuring is quite advanced. and the provision of waste treatment facilities.

The EAC partner States have developed an East

Africa Power Master Plan. A study of the East
African power systems has also been undertaken
and has recommended a Zambia–Tanzania–Kenya
interconnection through the construction of a
33 kV-670 km transmission line from Pensulo in
Zambia to Mbeya in Tanzania, and Namanga to
Nairobi in Kenya. Opportunities can be found in all
of power generation, transmission and distribution.

(See section on “Power supply and energy” in

chapter II for other relevant information.)
 43
Mining and manufacturing With both domestic and international demand for
minerals expanding, mining offers a wide range of
Mining opportunities for interested investors. Investment
opportunities exist in mining stone for the con-
Minerals struction and building industry, phosphates for
agriculture, salt for domestic and chemical uses,
The EAC countries are richly endowed with a iron ore for the iron and steel industry, kaolin for
variety of mineral resources. leather tanning and pharmaceuticals, and silica
sand and trona for glass manufacture. Demand for
Kenya has four belts of minerals — the gold green- these products is growing at about 10–15% a year.
stone belt in western Kenya, which extends to Investment opportunities also exist in the explo-
Tanzania; the Mozambique belt passing through ration and development of mineral deposits includ-
central Kenya, the source of Kenya’s unique gem- ing oil, gold, copper, cobalt sulphide and hematite
stones; the Rift belt, which has a variety of iron. There is also an investment opportunity aris-
resources including soda ash, fluorspar and ing from the Government of Uganda’s complete
diatomite; and the coastal belt, which has titanium. divestment of Kilembe Mines Limited, 90% of
which is currently owned by the State.
Tanzania has a wide variety of minerals, including
diamonds, gold, base metals, gemstones (includ- Oil and gas
ing the unique Tanzanite) and a variety of industri-
al minerals such as phosphates, mica, gypsum, Investor interest in oil and gas has been growing in
limestone, graphite, quartz and vermiculite that the EAC countries. In the last two years, petroleum
have a wide range of applications in ceramics, pot- investment in the region has exceeded $100 mil-
tery, brick and tile making, and glass manufacture. lion ($60 million in Tanzania, $31 million in Uganda
Mining is more developed in Tanzania than it is in and $10 million in Kenya).
Kenya and Uganda. The sub-sector accounts for
42% of Tanzania’s exports and is its fastest-grow- In Tanzania, the Songo Songo gas field has started
ing sector. Tanzania is the second largest gold pro- gas production for the gas-to-electricity project,
ducer in Africa after South Africa. The Government commissioned in July 2004. Exploration has
has banned trade in and export of raw and uncut increased with the signing of production-sharing
gemstones, with a view to creating a lapidary contracts (PSCs) in the Mnazi Bay area, the
industry. Mineral deposits in Tanzania include gold, Rufiji/Mafia area and the Deep Sea basin. In
nickel, cobalt, copper, diamonds, gemstones, November 2004, the Government of Tanzania
apatite, niobium, tanzanite, iron ore, coal and launched the third offshore licensing round, offer-
evaporates. ing seven blocks in the Deep Sea basin. In Uganda,
investment has been concentrated in acquiring
Uganda also has a variety of mineral resources, data about land and lakes and drilling wells in the
including copper, cobalt, tin, iron ore, tungsten, Albertine Graben. In Kenya, in the offshore Lamu
beryllium, limestone, phosphates, salt, clays, Basin, seven PCS have been signed. Over 8,000
feldspar, diatomite, silica sand, glass sand, sand km of 2D seismic data have been acquired off-
gravel, and construction materials such as granites shore. All 13 on shore blocks are currently available
and gneisses. for leasing, as is one block offshore.

During the East African Petroleum Conference in

March 2005, the three EAC countries agreed to
develop their petroleum potential by harmonizing
their policies and their legal and fiscal regimes
applying to petroleum exploration.
44
Manufacturing Textiles and apparel

A wide range of opportunities for investment exist The EAC partner States have a history of textile
in the manufacturing sector in each of the EAC manufacture and are known for the production
countries. The region is currently a net importer of and export of long handpicked cotton. The manu-
manufactured products such as machinery and facture of garments has been revitalized since the
transport equipment. In 2002, the imports of signing of the African Growth and Opportunity Act
machinery and transport equipment accounted for (AGOA) in the United States (see box III.4). AGOA
35.4% and 26.5% of total imports in Tanzania gives the EAC partner States, along with other sub-
and Uganda respectively. The manufacturing sector Saharan African countries, market access to the
is most developed in Kenya among the EAC part- United States. Textile and apparel exports as well
ners. In 2002, this sector contributed to 13%, as investment in the sector have consequently
8.4% and 9.7% of the GDP in Kenya, Tanzania experienced remarkable growth, particularly in
and Uganda respectively. By offering incentives to Kenya. However, the quantities of cotton pro-
processors, such as zero-rating of various raw duced are insufficient and the capacity to produce
materials, and through various manufacturing high-quality competitive fabric is lacking. Invest-
incentive schemes, the EAC partner states have ment opportunities thus exist in cotton ginning
been trying to promote manufacturing as a way of and the production of yarn and finished textiles.
diversifying their economies. Other opportunities exist in marketing and trading
in cotton and textiles as well as in cut, make and
Manufacturing in the EAC currently includes the trim (CMT) units.
following: the manufacture of textiles and gar-
ments, the assembly of automotive components
and electronics, the manufacture of tyres, plastics,
paper, chemicals, pharmaceuticals, animal-feed
processing, beverages, cement and ceramics,
chemicals, canning, bottling and glassware, for
both the domestic and the export markets.
 45

Box III.4. AGOA and export opportunities

The African Growth and Opportunity Act (AGOA) was signed into law on 18 May 2000. It is intended to
encourage market forces in African countries by offering these countries the most preferential access to the US
market available outside free trade agreements. The Act covers some 6,400 items, including textiles and apparel.
The AGOA Acceleration Act, signed into law on 12 July 2004 and known as AGOA III, extends this preferential
access until 30 September 2015. It also extends the third-country fabric provision1 by three years, from
September 2004 to September 2007.

Eligibility for AGOA benefits is determined annually on the basis of a review by a committee chaired by the
United States Trade Representative (USTR). The criteria require that the country have established or be making
progress towards establishing, inter alia, a market economy, the rule of law, policies to reduce poverty, and a
system to combat corruption. In 2004, 37 sub-Saharan countries qualified, including the three members of the
East African Community: Kenya, Tanzania and Uganda.

Trade between sub-Saharan Africa and the United States is not large, with the former accounting for less than
1% of US merchandise exports and less than 2% of imports, but it is increasing. In 2003, US imports from sub-
Saharan Africa rose by 43% to $25.6 billion. Of this, 55% were AGOA imports, most of them in turn being
petroleum products. Of the remainder, textile and apparel products accounted for $1.2 billion. AGOA provides
duty-free and quota-free treatment for eligible apparel articles made in qualifying sub-Saharan African countries
through 2015. Among the qualifying articles are apparel made of US yarns and fabrics; apparel made of sub-
Saharan African (regional) yarns and fabrics, subject to a cap; apparel made in a designated lesser-developed
country of third-country yarns and fabrics, subject to a cap; and eligible hand-loomed, handmade or folklore
articles and ethnic fabrics.

Of the EAC members, Kenya has advantages in this field, as is suggested by the 30-plus companies, mainly from
Asia, that have set up shop in the EPZ near Nairobi. In 2003, Kenya was the third largest AGOA apparel exporter
in sub-Saharan Africa at $184 million, and AGOA-related new jobs in the country number about 30,000.

Although garment exports offer an opportunity in the EAC, the medium-term future of this industry is unclear.
Two factors need to be taken into account. The first affects the potential for exports to any destination, and the
second the potential for exports specifically to the United States. The first factor is the ending of the Multifibre
Arrangement (MFA) on 1 January 2005. The MFA imposed quotas on garment exports by developing countries
to the markets of developed countries. One of the consequences of this system was that efficient producers
(e.g. in the Republic of Korea), after filling their quotas, invested in other countries that still had unfilled quotas
(e.g. Bangladesh). The cut-make-trim (CMT) garment industry in several LDCs owes its genesis to the MFA. With
the MFA gone, competition is now open, and China looms as a very big competitor. The second factor is the
condition regarding third-country fabric provision in AGOA (see footnote), which expires in 2007. Unless it is
extended again and again, the EAC partners (along with other sub-Saharan countries) will need to develop a
high-quality price-competitive textile industry that could supply the fabric needed to make garments for export
under AGOA. This will in turn require a targeted effort to attract FDI in textiles, which is not thus far apparent.

1The preferential treatment available under AGOA for garments is intended primarily for garments assembled in a beneficiary
country from fabric (i) sourced from the United States or (ii) produced in the beneficiary country. This requirement is waived for
“lesser-developed countries” (in effect, most countries in sub-Saharan Africa) until September 2007, allowing them to use fabric
from any other (“third-country”) source.

Source: UNCTAD, based on information from the AGOA website (http://www.agoa.gov/index.html),

Office of the United States Trade Representative (2004), the Financial Times and other sources.
46
Iron, steel and other metals Vehicle parts and assembly

Each of the EAC member countries has a broad- The number of new motor vehicle registrations in
based metal products industry with various inde- the region has been increasing rapidly over time.
pendent engineering, foundry and metalwork In Kenya, about 34,000 vehicles were registered in
shops. The industry is, however, not highly devel- 2003 (Republic of Kenya, 2004). The import of
oped and the product range is limited. Iron and steel motor vehicles accounted for 6% of total imports
imports as raw material for the manufacturing indus- in Kenya in 2002. Most of these vehicles are sec-
try amount to 4% of the total in Kenya. In Uganda, ond-hand reconditioned cars imported from
iron and steel account for 5.1 % of total imports. Japan. Car parts and accessories, including tyres,
tubes, batteries, springs, radiators, brake pads,
The industry is relatively more developed in Kenya cables, rubber components and filters, are now
than in Tanzania and Uganda. It is a major export produced locally, with a number of firms fabricat-
commodity for Kenya, accounting for about 3% of ing bodies for commercial vehicles (see box III.5).
total exports (EAC, 2002c), most of which go to Car parts and accessories of some of vehicles,
Tanzania and Uganda. Iron and steel items pro- especially of European origin, are often lacking
duced in the EAC include structural steel, roofing in the market. There are still opportunities in
materials, and spare parts for equipment and the manufacture of components for use by local
machinery. Other products include ox-driven assemblers and for export to regional markets.
ploughs, wheelbarrows, hoes, tractor-trailers,
water tanks, reinforcement bars from scrap or Electronics and electrical equipment
imported billets and wire rods.
The electronics industry in EAC member countries
Opportunities exist in the development of a is still in its infancy, although the number of firms
nucleus foundry making precision castings that can in the assembly, testing, repair and maintenance of
then be processed into precision components, alu- electronic goods is rapidly growing, especially in
minium cans, high-strength reinforcement bars, Kenya. Investment potential can be found in the
ductile iron rolls, casting sand and moulding. production of motors, circuit breakers, transform-
Opportunities also exist for investment in the min- ers, switch gears, irrigation pumps, capacitors,
ing of iron ore to supply the existing steel mills, the resistors, insulation tapes, electrical fittings, inte-
production of sponge iron for steel mills and the grated circuit boards, electric cables, cookers, dry
production of steel products. cells, solar panels, automobile batteries, and a
variety of electronic appliances and equipment.
 47
Plastics Chemicals

In Kenya, the plastics industry is relatively well Chemicals, both organic and inorganic, and fertiliz-
developed and produces goods made of polyvinyl ers are important EAC imports. Opportunities for
chloride (PVC), polyethylene, polyestyrene and producing such chemicals for both domestic and
polypropylene. Plastics in both primary and non- regional markets remain unexploited. Investment
primary form accounted for 3.4% of total Kenyan opportunities can be found in the production of
imports in 2002. Exports of plastic articles, mainly PVC resin from ethyl alcohol, formaldehyde from
to the region, accounted for 2.3 % of Kenya’s methanol, melanine and urea, mixing and granulat-
exports over the same period. Opportunities exist ing of fertilizers, cuprous oxychloride for coffee-
for investment in the production of all plastic arti- bean disease, caustic soda and chlorine-based
cles to meet the domestic demand in each of the products, carbon black, activated carbon, precipitat-
EAC member countries as well as to meet the ed calcium carbonate, textile dyestuff, ink for ball-
demand in the broader region. points and gelatin capsules, among other things.

Box III.5. FDI story: Investing in manufacturing (automotive)

General Motors East Africa has been in Kenya since 1977. (It was known as General Motors (Kenya) Ltd. until
March 2004.) The company is a manufacturing and marketing operation, with 57% of the shares owned by
General Motors, a US company, 38% held by the Government of Kenya and the remaining 5% held by the
Itochu Corporation of Japan. The annual turnover is about $120 million and the number of employees 400,
of whom only three are expatriates, including the Managing Director and the Chief Financial Officer.

GM East Africa came to Kenya because the country offered attractive import substitution incentives in the 1970s.
It was the first company to spread modern manufacturing into Africa (Egypt, Kenya, Tunisia). It assembles
vehicles and manufactures parts in Kenya, and markets products assembled in Kenya and elsewhere in Africa.
For example, it recently sold 50 pick-up trucks made in Egypt to Rwanda. Its distribution network covers Kenya,
Tanzania and Uganda, as well as Burundi and Rwanda. In addition to using imports for its assembly, GM East
Africa buys substantial quantities of local supplies (worth $19 million in 2003) and has put in place an extensive
supply chain development programme.

Asked how he assesses the investment climate, Mr. William Lay, the Managing Director, says he thinks this is a
good time to get into Kenya. Locally produced buses in particular offer a good opportunity. Kenyan-made
vehicles enjoy a substantial advantage, in his view, given the nature of Kenya’s roads. As for the trend in key
areas (e.g. infrastructure or governance), Mr. Lay thinks it is positive but slow. The main challenges GM East
Africa has itself faced over the years have had to do with the unpredictability of government policies and
fluctuations in the Kenya shilling’s exchange rate.

Mr. Lay shares the priorities of most investors in Kenya: security, infrastructure and the cost of energy. Difficulties
related to these not only put off potential investors, they also affect the scale and productivity of existing
enterprises. Agriculture, for instance, is a key industry and one that has enjoyed considerable export success
in recent years; yet it is also seriously and adversely affected by the dilapidated infrastructure, especially road
conditions.

The company has a 30% market share in commercial vehicles sold in the East African Community: buses, pick-up
trucks and matatus (a privately operated cross between a taxi and a bus). The locally assembled Isuzu matatus in
particular have been a great success. The company strongly welcomes the planned regional integration that has
begun with the EAC Customs Union Protocol coming into effect on 1 January 2005, although it is concerned that
implementation will be slow. Overall, GM East Africa has a very positive vision of its future. It sees itself as being
in for a long haul and plans to increase its investment so as to remain the regional market leader. (In August
2004, it announced plans to expand its plant in Nairobi.) As for Kenya’s greatest asset as an investment location,
it is clearly, in Mr. Lay’s view, its human capital: a well-educated workforce with a strong work ethic.

Source: UNCTAD, based on information provided by General Motors East Africa.

48
Pharmaceuticals Services other than tourism

The imports of chemicals and pharmaceuticals Building, construction and housing

account for 3.4% and 4.5% of total imports into
Kenya and Uganda respectively. The main sources Building and construction is another fast-growing
of these imports are India, the United Kingdom, sector in the region. Investment opportunities here
France and Germany. A few pharmaceuticals in the include the provision of low-cost housing to cater
form of tablets, syrups, capsules, liquid mixtures, to the needs of growing populations in urban and
capsules, disposable syringes, surgical gauze, peripheral areas; the manufacture of prefabricated
aspirin and paracetamol, and injectables are man- concrete systems and other fittings for the building
ufactured in the region. Investment opportunities industry; and the processing of non-metallic min-
exist in the manufacture of drugs for the treatment erals to make sanitary fittings, tableware, floor and
of various tropical diseases, the provision of mod- wall tiles, glass, lime, cement, glazes, and so forth.
ern family-planning services, and the manufacture There may also be opportunities in the provision of
of medical equipment and sundries (surgical cot- mortgage services, although land legislation can
ton/gauze, sanitary pads, syringes, bandages, infu- make it difficult to engage in mortgage lending.
sion syrups, oxygen). The rich biodiversity of the
region also provides an opportunity in the process- Training
ing of herbal medicines. The processing of pyre-
thrum extracts and the production of vaccines, Education is a dynamically developing service sec-
antibiotics and vitamins also offer investment tor in the region. There are both public and private
opportunities. schools and training institutions in the EAC coun-
tries. The Governments of Kenya and Uganda
Beverages introduced free primary school education in 2003
and 1997 respectively. The result of this has been
The main beverage production activities in the an increased enrolment in primary schools in the
region include coffee roasting, tea processing, and two countries, leading to an overstretching of
the production of soft drinks and alcoholic bever- capacity. Tertiary institutions to absorb secondary
ages. The region has a competitive advantage in school leavers are limited in number and variable
processing these products because it produces in quality.
most of the raw material used in this industry,
including fruits, barley, coffee and tea. Investment Opportunities exist in the provision of facilities and
in this sector has been increasing, especially in pro- training services in primary and secondary schools,
ducing soft drinks. The demand for beverages is polytechnics, technical and tertiary education, and
increasing. Investment opportunities exist in pro- vocational education and training institutions.
duction targeting both local and export markets. Private universities are gaining in importance.
 49
Health care Financial services

The public health-care system in each of the EAC There is potential in all three EAC countries for
partner States comprises health-care centres/dis- expanding product and service portfolios in non-
pensaries at the lowest administrative level as well traditional services such as brokerage, asset
as hospitals at district, provincial and national lev- management, real-estate financing, lease finance,
els. Non-governmental organizations and the pri- agricultural finance and advisory services. The
vate sector also provide the same services at all informal sector (commonly referred to as the Jua
levels. The availability of affordable medical care Kali sector) in the region is growing rapidly. The
remains, however, an issue in the region. Oppor- provision of credit and related services to this
tunities for investment in this area include the fol- sector offers many opportunities (see box III.6).
lowing: the establishment of hospitals and other There is a demand also for new insurance services,
health units and modern testing facilities; training particularly for medical, educational and property
of medical personnel in specialized medical care (in insurance.
such disciplines as neurology and neuro-surgery,
urology, cardiology and plastic surgery); the manu-
facture of drugs, hospital equipment and furniture;
and the provision of family planning facilities and
services.

Box III.6. FDI story: Investing in banking

Standard Chartered is a UK-based international bank employing 30,000 people in more than 50 countries. It has
a management team that draws on 70 nationalities. Although headquartered in the United Kingdom, the bank
is focused on the established and emerging markets of Asia, Africa, the Middle East and Latin America. About
70% of its business is in Asia and another 12% in Africa. The rest is mostly in the Middle East, with a very small
percentage in the Americas. In sub-Saharan Africa, Standard Chartered has more than 130 branches in 12
countries and employs 5,500 people.

The bank first established its presence in what is now Tanzania in 1916 and was nationalized in 1967. Following
the liberalization of the banking and financial sector in 1991, Standard Chartered Bank Tanzania (SCBT) opened
for business in December 1993 and was the first foreign bank to be registered. SCBT now has six branches –
three in Dar es Salaam, one in Mwanza, one in Arusha and one in Moshi. The head office is in Dar es Salaam.

SCBT is fully owned by Standard Chartered plc, with a total investment of $23 million. The Tanzanian company’s
annual turnover is around $32 million, with profit after tax in the $10 million range. The assets of the bank are
$180 million. In early 2005, the bank had 250 employees, of whom 7 were expatriates, 5 of them African. About
90% of the bank’s business in Tanzania is corporate, with 75% of corporate customers being domestic
companies and 25% foreign ones, mainly multinationals. (Worldwide, about 50% of the bank’s business is
corporate.) Interest rates on its loans vary between 10 and 23%, with the rate on dollar-denominated loans
being around 5%.

Asked how he sees the investor’s environment, Mr. Hemen Shah, the Managing Director, identifies several issues.
Existing land regulations, for one thing, prevent mortgage lending, a business which the bank thinks has
potential. One major challenge the bank has faced is retaining skilled employees, of whom there is a shortage.
On the other hand, there are no tax hassles, especially since the revenue authorities set up a large-tax payers’
unit. There are also no major problems with foreign-exchange regulations. Mr. Shah thinks it ought to be a
priority for the Government to reform the land legislation, so that securing title and using it as collateral are
facilitated. Asked what he likes best about the country, Mr. Shah says it is the stable macroeconomic
environment. As for FDI opportunities, they are significant in the agriculture and tourism sectors, as well as
in infrastructure.

SCBT is optimistic about the country and its own business, which it hopes to see grow at the rate of 15% per
annum. The bank expects to increase its capital by 3 to 5% and its employees by 10 to 15%. It would like to do
more in the areas of infrastructure, real estate and mining. (At the moment, its corporate business is mainly in oil,
trading, agro-processing and manufacturing.) It would also like to see its business with small and medium-sized
enterprises grow to a larger share from the current 5% — perhaps to 15% — and, finally, it would like to do
more in consumer loans.

Source: UNCTAD, based on information supplied by Standard Chartered Bank Tanzania..

50
Export-processing zones (EPZs), The export promotion schemes and incentives
incentives and related matters proposed include the ones described below:

4 The Competent Authority The partner States have agreed to harmonize and Duty drawback schemes
is a body designated by the
Community to administer the
rationalize investment incentives with a view to pro-
Customs Law of the Community. moting the Community as a single investment area. Drawback of import duties upon materials used
The Customs Union has not yet
They have also agreed to support export promotion exclusively in the production of goods exported to a
specified this Competent
Authority. schemes as a way of promoting and facilitating third country is provided for in the Customs Union.
export-oriented investment. The goods to benefit The conditions and amounts are to be prescribed by
from these schemes are primarily goods for export the “Competent Authority”.4 Requirements for the
which, if sold within the Community, may attract payment of duty drawbacks include the submission
full duties, levies and whatever other charges there of an application to the Competent Authority within
may be, according to the CET. Sales within the the Competent Authority’s prescribed period, based
Community are also subject to authorization by on the date of export, with regard to any material
a competent authority and are limited to 20% of used in the manufacture or processing of goods
the total annual production of any given company. which meet the conditions prescribed by the Com-
petent Authority.

Duty and VAT remission schemes

The Customs Union Protocol provides for duty and

VAT remission schemes to support export promo-
tion. Under article 27 of the Customs Union
Protocol, the three EAC partner States agree to
establish such schemes, whose implementation
will be specified by the Customs Law of the
Community.

Manufacturing-under-bond schemes

Within the Customs Union framework, the partner

States may facilitate manufacturing-under-bond
schemes within their respective territories. Such
schemes would allow imported goods to be used
for processing or manufacture.
 51
Export-processing zones (EPZs) Free ports

The Customs Union protocol has spelt out Export The Customs Union Protocol provides for the
Processing Zone Regulations, which are intended establishment of free ports within the Community.
to ensure that the partner States establish EPZs in The functions of these ports include the promotion
a uniform fashion and that the implementation and facilitation of trade, the provision of facilities
process is transparent, accountable, fair and pre- such as storage, warehouses and simplified cus-
dictable. To further promote uniformity, the part- toms procedures, and provisions for the establish-
ner States propose to develop an East African ment of international supply-chain centres, which
Community Model Export Processing Zones Oper- would enhance the Community’s international
ational Manual. competitiveness. The Customs Union provides reg-
ulations for the operation of these ports which are
Under article 29 of the Customs Union Protocol, intended to ensure that there is uniformity among
exporting companies located in EPZs will have the partner States in port operations and that the
imported goods used directly in the production of process of establishing and operating these ports is
products for export zero-rated. Operations within transparent, accountable, fair, predictable and con-
the EPZs in each partner State have to be adminis- sistent with the provisions of the Customs Union
tered and overseen by a partner-State-designated protocol. The regulations are to be applied in con-
Competent Authority. junction with the existing national legislation relat-
ing to free port operations in each partner State,
EPZ developers are required to provide and main- and the operations in such ports are to be over-
tain certain facilities in EPZs, including adequate seen by a free port authority, appointed by a part-
enclosure to separate the EPZ from the customs ner State under the relevant national legislation.
territory. They are also expected to lease land for
the periods provided in the national legislation and Free port zones could be established at seaports,
are not expected to reside in the zones. The activi- river ports, and airports – or in other places with
ties to be undertaken in the zones are not to be similar geographical and economic advantages.
dangerous or prejudicial to the public interest, Activities to be carried out in these ports include
health or safety. Eligible activities include manufac- activities to preserve goods, improve packaging,
turing, commercial and service activities. and prepare for shipment – but not manufacturing
or processing. Examples are warehousing and stor-
A company located in an EPZ could sell in the cus- age, labelling, packaging and repackaging, sorting,
toms territory at most 20% of its annual total pro- grading, cleaning and mixing, breaking bulk, and
duction. In addition, it must obtain the necessary the assembly and grouping of packages. Sale of
permits from the Competent Authority. The goods the goods while on the free port premises is sub-
so sold will attract all applicable import duties, ject to compliance with the relevant national legis-
levies and other charges and must comply with all lation. Removal of the goods from the ports is
customs procedures. subject to approval by the customs department
of the partner State concerned.
For any company to operate in the EPZ, it must be
licensed by the Competent Authority. Conditions Harmonization of duty-exemption regimes
for licensing include the following: the company
activities should meet the objectives of the EPZs Currently, the three partner States have different
and their regulations; the companies (whether (import) duty exemption schemes and have there-
domestic or foreign) must be incorporated under fore agreed to harmonize these regimes and
the relevant legislation of a partner State; and the adopt a single list of exemptions, which is to be
activities of the companies must be eligible under specified in the customs law of the Community.
the EPZ regulations, must not be deleterious to the Harmonization of duties will cover both import
environment, must not be unlawful, must not goods destined for the local market and those
impinge on national security or constitute a health intended for export markets.
hazard, and must be conducted in accordance
with existing laws.
Tanzania is one of the most stable and peaceful countries in Africa. It
also has enlightened leadership and abundant natural resources, par-
ticularly for tourism. The combination of the world’s best game parks,
abounding in hundreds of thousands of wild animals, and the most
friendly people on earth offers tourists from around the world an
unmatchable safari experience. We at Ranger Safaris are proud of our
30-plus years of history as Tanzania’s biggest tourism company and
fully expect to grow by expanding the range of our customers.

Husein M. Taki, Group Executive Director, Ranger Safaris

Nestlé has had a manufacturing presence in Kenya for the past 40

years. Nairobi’s location and the quality of the workforce have been
big assets for us. With further improvements in governance and the
full realization of the benefits of the COMESA and EAC regional
arrangements, we believe that Kenya could offer many new opportu-
nities for investors, both foreign and local. Agriculture and infrastruc-
ture are two very promising areas.

Dominique Peterhans, Managing Director, Nestlé Foods Kenya Ltd

 The regional framework

The regulatory framework

for investment is still for
the most part a matter
Legal and institutional framework

The EAC has seven key organs: the Summit, the

IV directives of the Council are binding on the three
partner States and all organs and institutions
of the Community except the Summit, the EACJ
53

for the partner States in

the EAC. Thus for such
Council of Ministers, the Co-ordination Committee, and the EALA.
matters as investment the Sectoral Committees, the East African Court
legislation, entry and exit of Justice (EACJ), the East African Legislative The Co-ordination Committee is the technical arm
procedures, investment Assembly (EALA) and the EAC Secretariat. of the Community and is made up of Permanent
protection and incentives, Secretaries (top civil servants) responsible for
the reader should consult
Policy aspects regional cooperation in each partner State and any
the individual country
guides to Kenya, Tanzania other Permanent Secretaries as determined by
and Uganda in the list The Summit is made up of the three partner each partner. Its functions include submitting
of sources consulted at States’ heads of government. Its key function is to reports and recommendations to the Council and
the end of this guide. give general direction and impetus to the develop- implementing Council decisions.
The aim of this chapter
ment of the Community and the achievement of
is essentially to describe
the legal and institutional
its objectives. The Summit is the highest decision- Legislative aspects
framework at the making body of the Community and authorizes
Community level and the publication of all its rules and orders in the offi- The East African Legislative Assembly (EALA) pro-
discuss some of the issues cial EAC Gazette, such publication being necessary vides a democratic forum for debate and also has
likely to affect investors for them to come into effect. a watchdog function in respect of the Community’s
in the EAC.
secretariat. Inaugurated in November 2001, the
The Council of Ministers is the second highest deci- EALA is made up of 27 elected and 5 ex-officio
sion-making body of the Community. The func- members. Since its inauguration, the Assembly
tions of the Council include making policy has passed seven bills into law, the Customs
decisions, issuing directives, and initiating and sub- Union Management Bill 2004 being the latest,
mitting bills to the EALA. The Council is also approved budgets for the EAC for 2002–2003
responsible for the Community budget and for the and 2003–2004, and advised the Secretariat with
implementation of the decisions and directives respect to treaty implementation.
of the Summit. The decisions, regulations and

Box IV.1 The EAC treaty

The treaty establishing the East African Community was signed on 30 November 1999 and came into force on 7 July 2000 upon ratification by the
three partner states: Kenya, Tanzania and Uganda.
The treaty consists of a long preamble (on the background of East African cooperation) and 153 articles divided into 29 chapters. It lays down the
basic principles, objectives and functioning of the Community (chapters 2 and 28–29), and describes its structures (chapters 3–10) and the
proposed fields of cooperation (chapters 11–27).
According to Articles 2 and 5 of the treaty, the broad purpose of the Community is to further cooperation in the political, economic and social fields,
among others. The concrete objectives are to establish a Customs Union, a Common Market, a Monetary Union and a Political Federation. Chapters 11
to 27 of the treaty identify three main areas of cooperation: economic development (including trade liberalization, monetary and financial matters,
and the free movement of persons, capital, goods and services); services, science and technology (including infrastructure, health and education); and
political and legal matters. Partner States may conclude such protocols as necessary, spelling out the aims, scope and institutional mechanisms of
cooperation (Article 151). The Customs Union was established through the adoption of a protocol that came into force on 1 January 2005.
The treaty creates seven main organs to enable the Community to fulfil its mission (Articles 9 to 72): the Summit (the highest organ of the
Community), the Council, the Co-ordination Committee, the Sectoral Committees, the East African Court of Justice, the East African Legislative
Assembly and the Secretariat. The Community is headquartered in Arusha (Article 136). Its official language is English, but it recognizes Kiswahili as
a lingua franca (Article 137).
The treaty (Article 3) provides rules and conditions governing membership, including acceptance of the Community’s fundamental principles, such as the equality of
sovereign States, potential contribution to the Community, geographical proximity, and compatibility of social and economic policies with those of the Community.
Decisions, directives and regulations of the Community are binding on partner States. A member State failing to observe the fundamental principles and objectives
of the treaty may be suspended from the Community (Article 146) or expelled in the event of gross and persistent violation (Article 147).
The treaty also establishes the primacy of Community organs, institutions and law over national ones on matters pertaining to the implementation
of the treaty (Article 8).

Source: UNCTAD, based on the East African Community Treaty of 1999 and the East African Community Secretariat (2002a).
54
Judicial aspects The laws in all partner States protect property
rights and facilitate the acquisition and disposal of
Judicial aspects of the Community lie within the property, including intellectual property. However,
mandate of the East African Court of Justice intellectual property rights are not rigorously
(EACJ). This is an international court with responsi- enforced in the EAC. Each country is also a member
bility for ensuring the correct interpretation and of the International Centre for the Settlement
application of Community law and its compliance of Investment Disputes and the World Bank’s
with the treaty. The Court is made up of six judges Multilateral Investment Guarantee Agency (MIGA).
(two from each member State) and a registrar.
Investment framework
The Court was inaugurated in November 2003 and
is now partially operational. Its operations are, how- The EAC partner States have their own institutions
ever, ad hoc until it is determined by the Council of and regulatory mechanisms for dealing with foreign
Ministers that there is enough business to make it investment. The general policy trend has been
fully operational. Among the key jurisdiction areas towards privatization and liberalization. Each country
are disputes on the interpretation and application of has its own requirements with respect to such mat-
the Treaty and disputes arising out of an arbitration ters as company registration and incorporation pro-
clause contained in a commercial contract or agree- cedures, permits and licences, property acquisition,
ment in which the parties have conferred jurisdic- access to capital and land, ownership and manage-
tion on the Court. Proceedings can be instituted by ment control, and exit procedures. A restrictive regu-
a partner State, by the Secretary General, or by legal latory and administrative regime in the partner States
and natural persons resident in a partner State. has, however, been cited as a constraint on attracting
Executions of Court judgements that impose a investment (EAC Secretariat, 2003a). Among other
pecuniary obligation on a person are governed by things, the EAC Industrial Development Strategy
rules of civil procedure in the State in which the exe- (2000) proposes that a sufficient number of expatri-
cution is to take place. In the absence of a pecu- ates should be allowed to work for foreign compa-
niary obligation, the partner States and the Council nies without bureaucratic hindrance. An EAC Model
must implement a judgement without delay. Investment Code was drafted in 2002. It is not
intended to be a binding legal instrument but rather
Administrative aspects a model whose features the EAC member States
may incorporate into their national laws. The code
The administrative aspects are the responsibility of includes sections dealing with establishment of an
the EAC Secretariat, which is the executive arm of enterprise, the creation of a regional investment pro-
the Community. Its key offices are the Secretary motion agency, and the establishment, operations
General, the two Deputy Secretaries General and and incentives of Special Economic Zones.
the Counsel (the principal legal adviser) to the
Community. The functions of the Secretariat At the national level, the member States are in
include initiating, receiving and submitting recom- the process of simplifying procedures to facilitate
mendations to the Council; forwarding bills to the foreign investment. They have also undertaken to
Assembly through the Co-ordination Committee; promote cooperation in the development of sci-
initiating studies and research; and implementing ence and technology, among other ways through
and monitoring programmes that contribute to the harmonization of policies on the commercial-
achieving Community objectives. The Secretariat is ization of technologies and the promotion and
also the custodian of Community property. protection of intellectual property rights.

Protection of person and property Table IV.1 provides a snapshot of the business cli-
mate in the EAC. Starting a business is generally less
Each EAC partner State offers guarantees to inves- expensive and less time-consuming in the EAC than
tors as provided for in its constitution, its investment in sub-Saharan Africa as a whole, as are registering
laws and agreements to which it is party (see the property and enforcing contracts. Hiring and firing
guides to Kenya, Tanzania and Uganda in the list of workers is easiest in Uganda, which, on the whole,
sources consulted at the end of this guide). offers the most business-friendly environment.
 55

T A B L E I V .1. D O I N G B U S I N E S S I N T H E E A C

ECONOMY CHARACTERISTICS (2003)

SSAa OECD
VARIABLE KENYA TANZANIA UGANDA AVERAGE AVERAGE

GNI per capita

(at PPP)b 1,020 610 1,440 1,770 26,000
Informal economy (% GNI, 2003) 34.3 58.3 43.1 42.3 16.8
Population (millions) 31.9 34.9 25.3 19.5 41.5

STARTING A BUSINESS (2004)

The challenges of launching a business in East Africa are shown below through four measures: procedures required to establish
a business, the associated time and cost, and the minimum capital requirement.

INDICATOR KENYA TANZANIA UGANDA SSA AVERAGE OECD AVERAGE

Number of procedures 12 13 17 11 6
Time (days) 47 35 36 63 25
Cost (% of income per capita) 53.4 186.9 131.3 225.2 8.0
Minimum capitalc (% of income per capita) 0.0c 6.8 0.0 254.1 44.1

HIRING AND FIRING WORKERS (2004)

The first three indices cover the availability of part-time and fixed-term contracts, working time requirements, minimum wage
laws, and minimum conditions of employment. The overall Rigidity of Employment Index is an average of these three indices.
Higher values represent greater rigidity in all indices.

INDICATOR KENYA TANZANIA UGANDA SSA AVERAGE OECD AVERAGE

Difficulty of Hiring Index 22 56 0 53.2 26.2

Rigidity of Hours Index 20 80 20 64.2 50.0
Difficulty of Firing Index 30 60 0 50.6 26.8
Rigidity of Employment Index 24 65 7 56.0 34.4
Firing costs (weeks of wages) 47 38 12 59.5 40.4

REGISTERING PROPERTY (2004)

The ease with which businesses can secure rights to property is measured below, using the following indicators: the number of procedures
necessary to transfer a property title from the seller to the buyer, the time required, and the costs as a percentage of the property's value.

INDICATOR KENYA TANZANIA UGANDA SSA AVERAGE OECD AVERAGE

Number of procedures 7 12 8 6 4
Time (days) 39 61 48 114 34
Cost (% of property per capita) 4.0 12.6 5.5 13.2 4.9

ENFORCING CONTRACTS (2004)

The ease or difficulty of enforcing commercial contracts in East Africa is measured below, using three indicators: the number
of procedures counted from the moment the plaintiff files a lawsuit until actual payment, the associated time, and the cost
(in court and attorney fees) expressed as a percentage of debt value.

INDICATOR KENYA TANZANIA UGANDA SSA AVERAGE OECD AVERAGE

Number of procedures 25 21 15 35 19
Time (days) 360 242 209 434 229
Cost (% of debt) 41.3 35.3 22.3 43.0 10.8

CLOSING A BUSINESS (2004)

The time and cost required to resolve bankruptcies is shown below. Costs include court costs as well as the fees of insolvency
practitioners, lawyers, accountants, etc. The Recovery Rate measures the efficiency of foreclosure or bankruptcy procedures,
expressed in terms of how many cents on the dollar claimants recover from the insolvent firm.

INDICATOR KENYA TANZANIA UGANDA SSA AVERAGE OECD AVERAGE

Time (years) 4.5 3.0 2.1 3.6 1.7

Cost (% of estate) 18 23 38 20.5 6.8
Recovery rate (cents on the dollar) 14.7 21.3 35.5 17.1 72.1

Source: Adapted from the World Bank (2004a).

a "SSA" is "sub-Saharan Africa".
b "GNI" is "gross national income", while "PPP" is "purchasing power parity".
c The minimum capital requirement for foreign investors in Kenya is now $500,000
but an amendment submitted to parliament in June 2005 reduces it to $100,000.
56
Investment protection and related matters ment of Foreign Arbitral Awards, the International
Centre for the Settlement of Investment Disputes
Investment in each EAC member State is guaran- (ICSID), and the Multilateral Investment Guarantee
teed against nationalization and expropriation Agency (MIGA).
under the laws (including the investment code) of
the partner State. Expropriation of private property At the EAC level, Community law establishes vari-
is permitted only when due process is followed and ous means for the settlement of disputes arising
prompt and adequate compensation is offered. either between the partner States or between
Further protection is guaranteed under the various investors and partner States.
bilateral treaties signed by the partner States (table
IV.4). Companies and their products in each country Under the Customs Union protocol, a dispute set-
are given national treatment. Companies investing, tlement mechanism has also been formulated. In
as well as goods produced and traded within the the event of a dispute between partner States, the
Community, will enjoy national treatment under mechanism provides for consultation as the first
the Customs Union Protocol. step, with a view to finding an amicable solution.
The consultation period can be up to 60 days. If
The EAC partner States have also liberalized their the parties still fail to settle the dispute, the matter
foreign-exchange regimes and transfers in freely would be referred to the Dispute Settlement
convertible currencies are allowed with respect to Committee, which establishes a Dispute Settlement
net profits, the repayment of foreign loans, royal- Panel. The panel is to be made up of experts from
ties and fees, the remittance of proceeds (net of both the public and the private sector, who are
taxes and obligations) in the event of sale or liqui- independent persons of high integrity. The panel
dation, and the emoluments and other benefits would submit its report within a period of three
payable to foreign employees. months or, in the case of perishable goods, within
a period of one and a half months. The report is to
Dispute settlement be adopted by the committee within a period of
60 days of its circulation.
EAC partner States have agreed to cooperate in pro-
moting measures that strengthen linkages among If there are concerns about fraud, lack of jurisdic-
business organizations and professional bodies. tion or other illegality with respect to the panel’s
report, any of the parties may refer the matter to
The national laws of the three partner States provide the East African Court of Justice for arbitration.
appropriate procedures for the settlement of dis-
putes through litigation, negotiation or arbitration. In Under Article 32 of the EAC Treaty, the Court of
Kenya, arbitration is governed by the Arbitration Act, Justice also has jurisdiction over disputes arising
under which parties may agree to refer their present from an arbitration clause contained in a commer-
or future disputes to arbitration through an arbitra- cial contract or agreement in which the parties
tion agreement. In Tanzania, the Commercial Court, have conferred jurisdiction on the Court. The Court
the Lands Division of the High Court and the also has jurisdiction over the interpretation and
Industrial Court deal with commercial, land and application of the EAC treaty, and legal and natural
labour disputes respectively. In Uganda, the Invest- persons resident in a partner State may challenge
ment Code permits international arbitration in a the legality of any act or regulation of an EAC
manner mutually agreed by the parties. The Centre institution or a partner State which is allegedly
for Arbitration and Dispute Resolution (CADER) pro- in breach of the EAC Treaty.
vides procedures for the settlement of local disputes.
Requirements and restrictions
Kenya, Tanzania and Uganda are also members of
several international organizations and parties to The main entry requirements and other restrictions
international treaties governing the settlement of affecting foreign investors in the EAC are summa-
disputes between Governments and investors, rized in table IV.2.
through arbitration or negotiation. These include
the Convention on the Recognition and Enforce-
 57

TA B L E I V. 2 . F O R E I G N D I R E C T I N V E ST M E N T I N T H E E AC : E N T RY R E Q U I R E M E N TS A N D R E ST R I C T I O N S

KENYA TANZANIA UGANDA

Minimum capital $500,000 for an investment $300,000 to be eligible for a $100,000 for an investment licence,
certificate, which is required. certificate, which is not required. which is not required. There is a new
An amendment is pending, code pending, which reduces the
which reduces the requirement requirement to $25,000.
to $100,000 and makes the
investment certificate optional.
Restrictions on sectors
Prohibited sectors` Narcotic drugs and Narcotic drugs. Activities relating to national security.
psychotropic substances. Arms and ammunition.

Restricted sectors Firearms and explosives require Sawn timber, veneer, plywood, Activities requiring the ownership of
special licences. wood-based products, and utility land. (Investors can lease land for up
logs as raw material are subject to 99 years or participate in joint
to approval from the Ministry of ventures involving the leasing of land.)
Tourism and Natural Resources.

Restrictions on equity Companies listed on the NSE (75%). Companies listed on the DSE (45%). None.
Fishing activities (49%).
Insurance (66.7 %).
Telecommunication (70%).

Source: UNCTAD.

Trade regime The Act provides for a transitional decentralized

administrative structure for the EAC Customs
Trade and investment are the core instruments Union. Within this decentralized set-up, the day-
for attaining the objectives of the East African to-day operations of customs, including revenue
Community, which include developing policies and collection, will continue to be managed and
programmes aimed at widening and deepening administered by the respective national revenue
cooperation among the partner States. The Treaty authorities. The newly established Directorate of
for the Establishment of the EAC provided for a Customs under the EAC Secretariat will identify
Customs Union, which would aim at the enhance- policy issues and coordinate and monitor customs
ment of trade and investment. and trade-related activities in the EAC.

The EAC trade regime The objectives of the Customs Union include fur-
thering the liberalization of intra-regional trade
The Customs Union Protocol signed in March 2004 in goods; promoting production efficiency in the
came into force upon ratification by the three mem- Community; enhancing domestic, cross-border
ber countries and became effective on 1 January and foreign investment; and promoting economic
2005. The administration of the protocol will be development and industrial diversification. There
governed by the Customs Law of the Community, are two broad areas of cooperation in the Cus-
which had been drafted by a working group at toms Union: (i) customs management and general
the EAC headquarters in Arusha by the end of trade matters; and (ii) establishing and adopting
2004 but has not yet been debated at the EALA. uniform and common trade procedures in the
The East African Legislative Assembly enacted on Community.
16 December 2004, the East African Community
Customs Management Act 2004, which will apply
uniformly in the EAC. This Act will govern the
administration of the Customs Union, including
legal, administrative and operational matters.
58
The Customs Union Protocol has spelt out the rules Trade facilitation
and regulations that are to govern trade within
and outside the Community. The partner States Trade facilitation will aim at reducing the volume
have agreed on a three-band Common External and variety of documentation, adopting common
Tariff (CET) of 0%, 10% and 25% for raw materi- standards of documentation and common proce-
als, intermediate goods and finished goods respec- dures for trading within the region, coordinating
tively. The Council may review the CET structure transport activities, collecting and disseminating
and approve measures aimed at remedying any information on trade and trade documentation,
adverse effects that a partner State may experi- and establishing joint training programmes. The
ence as a result of implementing the CET. There partner States have further agreed to cooperate in
are, in addition, a number of sensitive products simplifying, standardizing and harmonizing trade
that are exempt from the CET and may be import- information and documentation so as to facilitate
ed at other specific tariff levels which are higher trade in goods. This will include the establishment
than 25%. These include wheat, rice, maize (not of a customs data bank at the Secretariat. Under
for seed), some cotton clothing, jute bags and Article 7 of the Customs Union Protocol, the har-
5 The basic criterion of origin sugar (see appendix 1 for further details). monized customs documentation is to be specified
is that goods should be wholly in the Customs Law of the Community. The partner
produced in a partner State.
Goods partially produced from
With respect to the Community’s internal tariffs, States have adopted the Harmonized Commodity
materials imported from outside the partner States have adopted transitional provi- Description and Coding System to ensure compa-
partner States or material of
sions on tariff elimination, which is to be achieved rability and reliability of trade information. They
undetermined origin, by a process
of production which effects a within a five-year period from the time of imple- have also agreed to cooperate in the prevention
substantial transformation of the mentation of the Protocol. The provisional struc- and investigation of customs offences within their
materials used (such that the c.i.f.
value of the materials does not ture is asymmetrical, reflecting the fact that territories through the exchange of information
exceed 60% of the total cost of Kenya’s economy is more developed than the and ongoing surveillance, as well as by consulting
materials used in production or
the value added accounts for at economies of its EAC partners. On the implemen- one another on the establishment of common bor-
least 30% of the ex-factory cost tation of the Protocol, goods exported by Tanzania der posts and ensuring that traded goods pass
of the goods or when goods can
be classified in a tariff heading
and Uganda anywhere within the EAC are to be through recognized customs offices and approved
which is different from the one duty-free with immediate effect. Goods flowing routes.
under which they were classified
from Kenya to Tanzania and Uganda are to attract
when imported) also qualify as
originating from a partner State. variable and declining tariffs that would be phased Anti-dumping measures
Cumulative treatment within the out within a period of five years.
Community is allowed.
Dumping is prohibited under the Customs Union
6 Partner States will not impose Goods and products qualifying for the Com- Protocol if it causes or threatens material injury to
on one another’s products any
internal taxation of any kind in
munity’s tariff treatment will have to meet the an established industry, materially retards the
excess of that imposed on domes- rules-of-origin criteria as specified in the Customs establishment of a domestic industry or frustrates
tic products and any repayment of
Union rules of origin,5 which are fairly accommo- the benefits expected from the removal or absence
internal taxation will not exceed
the internal taxation imposed on dating. Identical or similar products of partner of duties and quantitative restrictions between
them (EAC Secretariat, 2004b). States will receive national treatment.6 the partner States. The Community has therefore
7 The regulations describe the developed anti-dumping regulations7 whose pur-
process of determining “dumping” The Customs union also provides for cooperation pose is to ensure that there is uniformity in the
and the injuries caused by dump-
ing as well as the subsequent
in a number of areas, including those described application of anti-dumping measures and to
process of investigation. below. ensure that the process is transparent, account-
able, fair, predictable and consistent with the
provisions of the Customs Union Protocol.
 59
Competition policy and law Standards and measures

Any practice that adversely affects free trade such Under Article 81 of the Treaty Establishing the
as an agreement, an undertaking or a concerted Community, the EAC partner States recognized the
practice the objective or effect of which is the pre- importance of standardization, quality assurance,
vention, restriction or distortion of competition metrology and testing for the promotion of trade
within the Community is prohibited under the and investment and consumer protection, among
Customs Union Protocol. The Community has also other things. They also undertook to evolve and
drafted a Competition Bill (EAC Secretariat, 2004c) apply a common policy for standardization, quality
which is intended, among other things, to en- assurance, and metrology and testing, and to con-
hance the competitiveness of EAC enterprises, cre- clude a protocol on these matters for the goods
ate an environment more conducive to attracting and services produced and traded within the
foreign investment, and bring the Community’s Community. The Sectoral Committee on Standards
competition policy and practice into line with inter- has so far harmonized 493 standards, which have
national best practice. The bill is to be submitted been adopted as EAC standards. A total of 361 of
to the East African Legislative Assembly in 2005. these standards have been gazetted.

Re-export of goods Restrictions and prohibitions

Re-exports are to be exempted from the payment The partner States may introduce or continue to
of import or export duties. However, normal ad- apply restrictions or prohibitions on trade, especial-
ministrative and service charges applicable to the ly where trade affects the application of security
import or export of similar goods, in line with the laws and regulations; control over military equip-
national laws and regulations of the partner States, ment such as arms and ammunitions; the protec-
are allowed. tion of human life; the environment and natural
resources; public safety, health and morality; and
Non-tariff barriers to trade the protection of animals and plants. The restric-
tions are, however, not to be used to restrict the
Under Article 13 of the Customs Union Protocol, free movement of goods within the Community
the EAC partner States agree to remove all existing and a partner State applying such restrictions
non-tariff barriers to trade and not to impose any should first notify the Secretary General of its
new ones. Discussions on non-tariff barriers are intention to do so. The goods to be restricted and
continuing in the EAC Sectoral Committee on prohibited from trade are to be specified in the
Trade, Industry and Investment. The committee is Customs Law of the Community.
expected to recommend a mechanism for identify-
ing and monitoring the removal of such barriers.
60
Main regional issues and initiatives Capital markets

The financial sector and foreign exchange Capital-market development in the three countries
of the Community is at different stages of develop-
At the national level, the partner States have start- ment, with the Nairobi Stock Exchange in particu-
ed on various financial-sector restructuring pro- lar being more developed than the others. In
grammes. At the Community level, they have Article 85 of the EAC treaty, the partner states
undertaken to cooperate in monetary and fiscal agreed to implement a capital development pro-
matters in line with the Community’s approved gramme and create an environment conducive
macroeconomic harmonization programme and to the easy movement of capital within the
convergence framework. The partners will, in par- Community. Specific actions by the partner States
ticular, maintain the convertibility of their currencies include harmonizing capital-market policies on
and harmonize their macroeconomic policies, cross-border listing, admitting foreign portfolio
including specifically those affecting exchange investors and the taxation of capital-market trans-
rates, interest rates and taxation. They will also actions. Other actions will include harmonizing
remove obstacles to the free movement of goods, policies affecting capital markets; promoting coop-
persons, services and capital within the Community. eration among the stock exchange, capital-market
and securities regulators; and promoting the
The partner States have undertaken to harmonize establishment of a regional stock exchange with
their regulatory and legislative frameworks for the trading floors in each of the three partner States.
financial sector, including their banking acts, so as Efforts are to be made to ensure that the national
to harmonize and eventually integrate their finan- authorities adhere to the harmonized stock-trading
cial systems. The integration of the financial sys- system and establish a cross-listing of stocks.
tems could be achieved earlier than expected,
especially if the recommendations of the Feder- Taxation
ation Fast-tracking Committee are followed. The
Committee has proposed that by September 2009 Each partner state has its own corporate, income,
there be a single regional currency. excise and value-added taxes (see table II.10).

The partner States are currently undertaking the Double taxation is one of the key business con-
harmonization of their monetary and fiscal poli- cerns in the region. Under Article 80 of the Treaty,
cies. Pre- and post-budget consultations, the regu- the partner States agree to take measures to avoid
lar sharing of information on budgets and tax double taxation and harmonize and rationalize
proposals, and the reading of budget statements incentives, including those related to taxation, with
on the same day have already been institutional- a view to promoting the Community as a single
ized. Efforts are being made to institutionalize the investment area.
convertibility of EAC currencies.
In 1997, the EAC member States signed a Tripartite
Agreement on the Avoidance of Double Taxation.
However, the agreement is not yet in force, as it
has not been ratified by Uganda. The agreement is
to be renegotiated in 2005.

Tables IV.3 and IV.4 list the tax and investment

treaties signed by the partner States.
 61

T A B L E I V. 3 . D O U B L E T A X A T I O N T R E A T I E S
SIGNED BY EAC COUNTRIES

KENYA TANZANIA UGANDA

Austria •
Bangladesh •
Belgium •
Canada • •
China •
Denmark • • •
Finland •
Germany •
Greece •
India • •
Indonesia •
Ireland •
Italy • •
Kenya • •
Japan •
Netherlands • •
Norway •
South Africa •
Sweden •
Tanzania • •
Uganda • •
United Kingdom • •
Zambia • •

Source: UNCTAD.

T A B L E I V. 4 . B I L A T E R A L I N V E S T M E N T T R E A T I E S
S I G N E D BY E AC CO U N T R I E S

KENYA TANZANIA UGANDA

Denmark •
Egypt •
Finland •
France •
Germany • • •
India •
Italy • •
Netherlands • • •
Norway •
South Africa •
Sweden •
Switzerland • •
Uganda •
United Kingdom • •
Zambia •

Source: UNCTAD.
62
Infrastructure With respect to inland water transport and port
facilities, the three partners signed a waterway
8 Articles 89–101 of the treaty
The EAC partner States have agreed to cooperate transport agreement in 1998. Other infrastructure
establishing the EAC.
in the area of infrastructure and the associated ser- plans and projects include a Digital Transmission
vices,8 in particular to develop common policies (or Project in telecommunication, a postal automation
harmonize existing ones) with respect to roads, project and a five-year meteorological develop-
railways, civil aviation, ports, postal services, ment plan.
telecommunications, meteorological services and
energy supply. Regional cooperation in the development of the
energy sector is also being undertaken. Activities
To promote regional trade and investment, five to be undertaken in this area include further inter-
major regional road corridors have been identified grid connections, the joint development of energy
for development and rehabilitation under the East projects and the undertaking of joint regional
African Road Network Project (EARNP) – see figure research. An Energy Power Master Plan for the
IV.1. The network measures 15,273 km and com- region has also been developed.
prises 8,361 km of main routes and 6,912 km of
feeder routes. Currently, only about 43% of the Human resources
network is paved. These corridors will connect the
three partner States, their areas of production and The entry into force of the Customs Union Protocol
markets, and other transport nodes including in January 2005 is a step towards creating the free
ports, railway stations and airports. movement of labour, capital and entrepreneurship
among the three partner States. The EAC Fast-
The region should also benefit from the NEPAD tracking Committee has proposed that a high-level
infrastructure development programme, funded by task force be formed in 2005, with the mandate to
the African Development Bank and covering trans- negotiate the establishment of free labour move-
port, energy, ICT, and water and sanitation. Priority ment. The negotiations will also consider the pos-
is to be given to projects dependent on regional sibility of both EAC and non-EAC citizens residing
cooperation and joint action between countries. in any of the partner States acquiring citizenship in
Implementation is expected to start soon. their country of residence.

In the rail sub-sector, there are plans for the For the efficient implementation of the free move-
rehabilitation of the Mombasa–Malaba–Kampala ment of labour, the partner States will also need to
railway, under the European Union’s Regional harmonize their labour laws and policies, institute
Indicative Programme for the East African region. national identity cards and harmonize social security
An additional rail line between Musoma–Arusha systems. This is an important issue, given that there
and the port of Tanga to serve Southern Uganda are some critical labour gaps in various countries.
and Northern Tanzania, is also planned under the Achieving free labour movement within the Com-
East African Cooperation Rail Network (EACRN). munity could face difficulties if a partner State fears
Rehabilitating and expanding the railway network that it will jeopardize its national employment
offer investment opportunities. efforts. Several efforts have, however, been initiated
with respect to labour and employment in the
The Partner states are harmonizing civil aviation region. For example, the East African Business
regulations in the region, to facilitate inter alia the Council (EABC) has set up a working group on
establishment of a regional safety oversight labour and employment to discuss issues related to
agency; the establishment of a Search and Rescue the free movement of labour and services. Also, a
(SAR) coordination center; the sharing/pooling of joint project by the EAC, the EU and the Inter-
personnel, particularly in the area of licensing air- national Labour Organization (ILO) has been initiat-
worthiness inspectors. The Tripartite Search and ed to address issues related to labour migration.
Rescue Agreement was ratified in November 2004
and the Secretariat is developing its implementa-
tion framework.
 63
Figure IV.1. East African road network project (including proposed additional road links)

1. Mombasa–Malaba–Katuna Corridor
2. Dar es Salaam–Dodoma–Isaka–Mutukula–Masaka Corridor
3. Biharamulo–Mwanza–Musoma–Sirari–Lodwar–Lokichogio Corridor
4. Nyakanazi–Kasulu-Sumbawanga–Tunduma Corridor
5. Tunduma–Iringa–Dodoma–Arusha–Namanga–Moyale Corridor
6. Sections/links connecting with East African neighbours

Source: Adapted from the East African Community Secretariat (2003b).

64
Other issues Different rules of origin in COMESA and SADC
complicate the application of the EAC’s rules of ori-
Multiple trading bloc memberships gin. COMESA has proposed a four-band Common
External Tariff (CET) of 0% on capital goods, 5%
The three EAC partner States participate in various on raw materials, 15% on intermediate goods and
regional integration initiatives, including the Inter- 30% on finished goods, while the EAC has agreed
governmental Agency for Development (IGAD), on a three-band CET structure of 0%, 10% and
the Organization of the African Union (AU), the 25% for raw materials, semi-finished goods and
Cross-Border Initiative (CBI) and, as mentioned in finished goods respectively. SADC is in the process
chapter I, COMESA and SADC. Table IV.5 shows of developing a CET. Different CETs in different
the membership of the three countries in these trading blocs to which individual EAC partner
regional initiatives. States belong will complicate the administration of
the EAC’s CET, which requires the three countries
All of the above initiatives, although they have to follow a common external trade policy. The
somewhat different emphases, have the common ongoing negotiations on economic partnership
objective of enhancing economic cooperation agreements (EPAs) between the EU and various
and regional integration in Africa. (See section on regional groupings in African, Caribbean and
market size and access in chapter I for further Pacific States (APC) are likely to further complicate
information.) the EAC Customs Union. The negotiations will pro-
vide the timetable for the progressive liberalization
The multiple memberships have both benefits and and removal of barriers to trade between the EU
costs. The benefits follow from the provisions of and the various regional groupings in accordance
the various initiatives regarding trade and develop- with WTO rules. Problems arise because Tanzania
ment opportunities, while the costs are associated has decided to join SADC for its EPA negotiation
with complying with the different requirements of with the EU, whereas Kenya and Uganda will
different regional trade initiatives (such as the dif- negotiate with a group of 14 other East and
ferent tariff structures, preferences and customs Southern African countries (ESA countries), which
procedures) and participating in a great many are mainly members of COMESA. Discussions are
meetings. Being members of the AU, for instance, currently under way on the possibility of Tanzania
will help the partner States benefit from the New joining COMESA, so that the three partner States
Partnership for African Development (NEPAD) pro- can belong to the same regional trading bloc.
grammes, such as the infrastructural development
programmes. Investors in the EAC will also have
market access to other trading blocs to which the
EAC partner States belong.

TA B L E I V. 5 . M E M B E R S H I P O F E A C PA R T N E R S TAT E S
I N O T H E R R E G I O N A L I N T E G R AT I O N I N I T I AT I V E S

REGIONAL INITIATIVE/
COUNTRY MEMBERSHIP

Kenya Tanzania Uganda

CBI Yes Yes Yes

COMESA Yes No Yes
IGAD Yes No Yes
AU Yes Yes Yes
SADC No Yes No

Source: UNCTAD.
 65
Natural resources and the environment Regional peace and security

The EAC partner States have agreed to cooperate Compared with their neighbours, EAC countries
in joint management and sustainable utilization of have been fairly peaceful and secure, although
natural resources within the Community and have there are security issues in the three countries
already signed an MOU to that effect. They have (see box I.2).
further agreed to implement joint projects to pro-
mote the sustainable utilization of the region’s The EAC partner States agree that peace and secu-
resources. Lake Victoria and its surrounding basin rity are prerequisites for social and economic devel-
have been declared an area of economic interest opment and have therefore agreed to establish
and a regional growth zone. The Lake Victoria common foreign and security policies to strength-
Development Authority has been established to en the security of the Community. They reviewed
coordinate intervention programmes on the lake. their cooperation in the area of defence in 2001.
Currently, these programmes include harmonizing They have set up a Defence Liaison Office at the
environmental policies, the management and con- Secretariat and are currently implementing inter-
servation of aquatic resources, the control and regional training programmes, information ex-
eradication of water hyacinths, and the develop- changes and joint exercises.
ment of infrastructure in the lake region.

Tourism and wildlife management

EAC partner States have agreed to cooperate in

the area of tourism and wildlife management. In
particular, they have agreed to establish a common
code of conduct for private and public tour opera-
tors, to standardize hotel classification and to har-
monize professional standards. They have also
agreed to develop a common and coordinated
policy for the conservation and sustainable utiliza-
tion of wildlife and tourist sites in the Community.
Standard Chartered was the first international bank to return to
Tanzania when the financial sector was liberalized in 1993. Since then,
we have become the largest bank in terms of our loan portfolio. The
stable political environment, combined with strong macroeconomic
growth, has created tremendous opportunities for local entrepreneurs –
and for us, as over 75% of our lending now goes to local companies. In
2004, we grew our business by 25% and we expect to see double-digit
growth in the future.

Hemen Shah, CEO and Managing Director, Standard Chartered Bank Tanzania Ltd

Tourism has long been an important industry in Kenya and has success-
fully capitalized on the country’s assets – not only the natural ones like
the beaches, the wildlife and the weather, but also the great human
asset of an excellent workforce. However, much potential still remains
for investors to exploit. For example, neither Lake Victoria nor the Rift
Valley has received anything like the attention it deserves. The Serena
group has a very positive view of its own future and would be delight-
ed to see more investors join us.

Mahmud Jan Mohamed, Managing Director, Serena Hotels (East Africa)

Private-sector perceptions

V
This chapter summarizes the results of consulta-
tions with the private sector in Kenya, Tanzania
and Uganda. The consultations were carried out
General observations

When participants in the consultations were asked

67

through a number of meetings and workshops, to identify the most attractive features of the EAC
held mainly in October 2004 and May 2005. as an investment location, the following were
Something like 75 investors (both foreign and mentioned most frequently: political stability, the
domestic) participated in the various discussions. location and the climate. Stability was particularly
The summary presented below should be regarded important to foreign investors. The location was
as no more than indicative of private-sector opin- important to all investors. (When investors speak
ion in the East African Community. of location in the EAC context, they have in mind
such things as the 2,000-km coastline, Nairobi’s
status as an East African air-traffic hub and
Tanzania’s sharing of its borders with eight other
countries.) As to the climate, it is the temperate
highland climate that is so appealing for investors
in both agriculture and tourism. In addition, there
are specific attractions in the individual countries:
the skilled and enterprising workforce in Kenya,
the enormous natural resources of Tanzania and
the business-friendly regime in Uganda.

When asked to identify matters that most needed

the attention of EAC Governments, investors put
infrastructure (in particular transport) at the top.
Red tape and corruption came next. Within indi-
vidual countries, there were differences. For exam-
ple, training was particularly an issue in Tanzania,
while security was an issue in Kenya and power
supply in Uganda. The cost of doing business was
another issue that came up in all three countries.

In all three countries, investors were reasonably

satisfied with the way the Government dealt with
business. In particular, it was widely agreed that
recent years had seen much progress in this area.
Asked what specific improvements they would like
to see, investors in all three countries felt that
streamlining bureaucracy and changing the
bureaucratic mindset ought to be among the
Government’s priorities. In both Kenya and
Tanzania, foreign investors felt that they faced spe-
cial difficulties. In Kenya, this was a matter of a
lack of clarity, a lack of access and too many
licences. In Tanzania, it was a matter of slow
approvals, the tax regime and a lingering remnant
of hostility to foreign investment.
68
Specific points Human resources

The political and economic climate There is a good deal of variation among the three
EAC partner States when it comes to human
On the whole, investors felt that the EAC countries resources. In Kenya, foreign investors regard the
offered a stable and predictable environment. All country’s workforce as its greatest asset. What dis-
three Governments were, at least in principle, satisfaction there is centres on the industrial courts.
open to listening to the private sector and address- In Tanzania, human resources top the list of
ing its concerns. The liberalization of the foreign- investor concerns. Skills are thought to be inade-
exchange regime was widely welcomed. Low quate and training unsatisfactory. In Uganda, the
inflation and steady growth were appreciated, workforce was seen as being trainable and moti-
although there were concerns over the growth vated. Opinion was divided on the question of the
rate in Kenya, which continued significantly to trail shortage of skilled employees. Foreign companies,
its neighbours’. Insecurity arising from problematic in particular, said that they had difficulties recruit-
borders was a concern in the EAC generally and ing sufficient numbers of skilled employees, espe-
insecurity arising from urban crime particularly cially for technical and managerial positions.
a concern in Kenya. Reforms in a wide range of
fields were under way in all three countries, Taxation
although the pace was often far slower than
investors would have preferred. The level of taxation is not generally thought to be
an issue in the EAC. There has been much tax har-
Infrastructure monization in the Community and tax rates are
now very similar and quite reasonable. There is,
This is the area of concern for all investors, however, a good deal of concern over tax adminis-
whether foreign or domestic. In all three countries, tration. Investors are unhappy, for example, with
there had been significant improvement in the the extent of the delays in VAT refunds in Kenya.
telecommunication infrastructure – although this In Tanzania, there is concern over the regulation
was almost entirely a function of the advent of that requires taxpayers to remit a substantial part
mobile telephony. Fixed-line connections contin- of the tax assessed even if they are appealing
ued to be inadequate and expensive. There had against the tax assessment. In all three countries,
been improvements as well in air transport, both in foreign investors complain of petty harassment,
airports and in airline connections, the latter partic- deriving they feel from the revenue authorities’
ularly in Kenya, where Nairobi was now a signifi- efforts to meet tax collection targets by focusing
cant air-transport hub and Kenya Airways a on a few prominent taxpayers. (In one country, an
remarkable success story. Electric power continued investor said that the Government looked upon
to be a problem everywhere. In Uganda, investors foreign investors as chickens to be plucked.) The
were very concerned about the frequent outages. absence of double taxation treaties in the region is
Road and rail transport were perhaps in the worst another point of concern. (A double taxation
shape. The inadequacy of the railways put greater treaty was actually signed by the EAC partner
pressure on roads and aggravated the problems States in 1997, but it has yet to be ratified by
caused by poor maintenance. The inefficiencies of Uganda.)
the port at Mombasa in Kenya were a matter of
considerable concern, particularly to investors in
landlocked Uganda. As to the precise nature of the
concerns regarding infrastructure, quality and cost
were the main issues in Kenya, while in Tanzania
it was reliability.
 69
Red-tape and corruption Concluding remarks

Corruption is an issue flagged by investors in all All in all, investors saw the East African Community
three countries. In Kenya, it is perhaps the biggest as an area of great potential. The obstacles in the
concern, in part because there have been instances way of realizing this potential (poor infrastructure
of corruption on a truly spectacular scale. In above all) were being removed, albeit slowly. The
Tanzania and Uganda, it appeared to be petty cor- strengths of the EAC – political and economic sta-
ruption that most concerned investors. A number bility, the wide use of English and broadly pro-
of steps have been taken by the three Gov- business policies – were real and not often fully
ernments to control and reduce corruption. In appreciated. In this regard, it is noteworthy that
Kenya, for example, a significant part of the judi- foreign investors in particular regard the Gov-
cial hierarchy has been dismissed for having ernments of the three countries as having done a
engaged in corrupt practices. There are also persis- far from satisfactory job of marketing their coun-
tent concerns about bureaucratic delays, which tries. A number of investors mentioned this as
may derive simply from administrative weakness. something that needs focused government atten-
Nevertheless, most investors agree that these tion. The natural resources of the Community were
issues are now openly discussed and that there regarded as very substantial, particularly in the
have been discernible improvements, even if not areas of agriculture, tourism and mining. If they
enough of them. were not as fully exploited as they might be, this
was in part due to the inadequacies of marketing.
Other issues

Under this heading, investors were asked about a

range of issues that might be contributing to an
unsatisfactory business environment. Monopolies
and market dominance was one of these issues –
and turned out not to be a significant concern,
although some investors did express unhappiness
over the poor service provided and high charges
levied by monopolies like Telkom Kenya. There
was also no great concern over conflicts of interest
created by regulatory bodies that also competed in
the market. Government intervention in manage-
ment was basically unknown and there were no
difficulties about foreign exchange. Investment
protection was again not an issue in any of the
three countries. Ownership and property were not
big issues either, although intellectual property
continues to be a matter of concern, particularly to
foreign investors. Legislation dealing with intellec-
tual property was less of an issue than the enforce-
ment of intellectual property rights. Land was a
concern in all three countries, as access to land
was often difficult, both because of land legislation
and because of the lack of clarity in titles.
 71

Appendix 1
Sensitive products in the EAC trade regime

Heading HS code/ Unit of

no. tariff no. Description quantity Rate

04.01 Milk and cream, not concentrated nor containing added sugar or other sweetening matter
0401.10.00 Of a fat content, by weight not Kg 60%
exceeding 1%
0402.20.00 Of a fat content, by weight exceeding 1% Kg 60%
but not exceeding 6%
0401.30.00 Of a fat content, by weight exceeding 6% Kg 60%

04.02 Milk and cream, concentrated or containing added sugar or other sweetening matter
0402.10.00 In powder, granules or other solid forms, of a Kg 60%
fat content, exceeding or not exceeding 1.5%.
- Not containing added sugar or other
sweetening matter
0402.21.10 Specially prepared for infants Kg 60%
0402.21.90 Other Kg 60%
0402.29.10 Specially prepared for infants Kg 60%
0402.29.90 Other Kg 60%
0402.91.10 Specially prepared for infants Kg 60%
0402.91.90 Other Kg 60%
0402.99.10 Specially prepared for infants Kg 60%
0402.99.90 Other Kg 60%

1 A mixture of growing grains, 10.01 Wheat and meslin1

such as oats and barley, or the
product milled from it. 1001.90.20 Hard wheat Kg 35
1001.90.90 Other Kg 35

10.05 Maize corn

1005.90.00 Other (not seed) Kg 50

10.06 1006.10.00 Rice in the husk (paddy or rough) Kg 75% or $200 per
MT, whichever
is higher
1006.20.00 Husked (brown) rice Kg 75% or $200 per
MT, whichever
is higher
1006.30.00 Semi-milled or wholly milled rice, whether Kg 75% or $200 per
or not polished or glazed MT, whichever
is higher
1006.40.00 Broken rice Kg 75% or $200 per
MT, whichever
is higher
72
Heading HS code/ Unit of
no. tariff no. Description quantity Rate

17.01 Cane or beet sugar and chemically pure sucrose, in solid form
1701.11.10 Cane sugar – Jaggery Kg 35%
1701.11.90 Other cane sugar Kg 100% or $200
per MT,
whichever
is higher
1702.12.10 Beet sugar – Jaggery Kg 35%
Other beet sugar Kg 100% or $200
per MT,
whichever is
higher
1702.91.00 Other beet sugar containing added flavouring Kg 100% or
or colouring matter $200 per MT,
whichever
is higher
1702.99.10 Sugar for industrial use Kg 100% or
$200 per MT,
whichever
is higher
1702.99.90 Other Kg 100% or
$200 per MT,
whichever
is higher

24.02 Cigars, cheroots, cigarillos and cigarettes, tobacco or of tobacco substitutes

2402.20.10 Of length not exceeding 72 mm in length, mil 35%
including the filter tip
2402.20.90 Other mil 35%

24.03 Other manufactured tobacco and manufactured tobacco substitutes; homogenized or

reconstituted tobacco, tobacco extracts and essences
2403.10.00 Smoking tobacco, whether or not containing Kg 35%
tobacco substitutes

25.23 Portland cement, aluminous cement, slag cement, supersulphate cement and similar
hydraulic cement, whether or not coloured or in the form of clinkers
2 Rates are to be reduced
2523.29.00 Other Portland cement (not white, Kg 55%2
from 55% to 35% over a period
of four years at an annual rate whether or not artificially coloured)
of 5%.

3 Rates are to be reviewed within 52.08 Woven fabrics of cotton containing 5% or more by weight of cotton, weighing not
three years. (Khanga, et al. are more than 200g/m2
types of fabrics common in East
Africa.) 5208.51.10 Khanga, Kikoi and Kitenge Kg 50%3
5210.51.10 Khanga, Kikoi and Kitenge Kg 50%
 73
Heading HS code/ Unit of
no. tariff no. Description quantity Rate

52.11 Woven fabrics of cotton, containing less than 85% by weight of cotton, mixed mainly or
solely with man-made fibres, weighing more than 200g/m2
5211.51.10 Khanga, Kikoi and Kitenge Kg 50%

52.12 Other woven fabrics

5212.15.10 Khanga, Kikoi and Kitenge Kg 50%
5212.25.10 Khanga, Kikoi and Kitenge Kg 50%

55.13 Woven fabrics of synthetic stable fibres, containing less than 85% by weight of such
fibres, mixed mainly or solely with cotton, of weight not exceeding 170g/m2
5213.41.10 Khanga, Kikoi and Kitenge Kg 50%

55.14 Woven fabrics of synthetic stable fibres, containing less than 85% by weight of such
fibres, mixed mainly or solely with cotton, of a weight exceeding 170g/m2
5214.41.10 Khanga, Kikoi and Kitenge Kg 50%

62.11 Track suits, ski suits and swimwear, other garments

6211.42.10 Khanga, Kikoi and Kitenge Unit 50%
6211.43.10 Khanga, Kikoi and Kitenge Unit 50%
6211.49.10 Khanga, Kikoi and Kitenge Unit 50%

63.02 Bed linen, table linen, toilet linen and kitchen linen
6302.21.00 Of cotton Kg 50%
6302.31.00 Of cotton Kg 50%
6302.51.00 Of cotton Kg 50%
6302.91.00 Of cotton Kg 50%

63.05 Sacks and bags, of a kind used for the packaging of goods
6305.10.00 Of jute or other textile bast fibres of Kg 45% or 45 cts per
heading 53.03 bag, whichever
is higher

63.09 Worn clothing and worn textile articles; rags Kg $0.75 per kg
6309.00.00 Worn clothing and other worn articles or 50%,
whichever is
higher

85.06 Primary cells and primary batteries

8506.10.00 Manganese dioxide Unit 35%
8506.30.00 Mercuric oxide Unit 35%
8506.40.00 Silver oxide Unit 35%
8506.50.00 Lithium Unit 35%
8506.60.00 Air zinc Unit 35%
8506.80.00 Other primary cells and primary batteries Unit 35%

Source: Adapted from the East African Community Secretariat (2005a).

 Appendix 2
74
Major foreign investors in EAC member countries

This is a sampling of partly or wholly foreign-owned companies in the East African Community, not an exhaustive list.

AGRICULTURE AND RELATED

Name of company Major foreign Business Contact details

ownership
4 The name of the foreign

parent company appears 1. Alltech Biotechnology E.A. Ltd United Animal feed New Rehema House, 5th Floor
in parentheses (e.g. British
(Alltech Biotechnology)4 States additives Rhapta Road, Westlands
American Tobacco plc) under
the name of each company P.O. Box 13995, Nairobi, Kenya
in this list, except when the Tel: 254 20 449 082
parent company’s name is
identical to the name of Fax: 254 20 449 082
the company in the EAC. E-mail:[email protected]

2. Aquarius Systems United Aquatic plant P.O. Box 9179, Kisumu, Kenya
States harvesting Tel: 254 35 21 504
Fax: 254 35 21 504
E-mail:[email protected]
5 Many major transnational

companies have a presence 3. BAT Industries United Tobacco Likoni Road

in more than one EAC
(British American Tobacco Kingdom products P.O. Box 30000, Nairobi, Kenya
country. This is indicated in
a number of cases after the plc – also in Uganda)5 Tel: 254 20 533 555
name of the parent company. Fax: 254 20 531 616
E-mail: [email protected]

4. Goldsmith Seeds United States Floriculture Twin Towers, Mombasa Road

(Goldsmith Seeds, Inc.) P.O. Box 10346, Nairobi, Kenya
Tel: 254 20 553 001
Fax: 254 20 552 015
E-mail:[email protected]

5. Ibero (Uganda) Ltd Germany Coffee 7th Street, Industrial Area

(Neumann Kaffee Gruppe P.O. Box 23139, Kampala, Uganda
– also in Kenya and Tanzania) Tel: 256 41 342 619/21/29
Fax: 256 41 342 646
E-mail: [email protected]

6. James Finlay (Kenya) Ltd United Tea Mara Mara Factory

(James Finlay Ltd) Kingdom P.O. Box 71, Kericho, Kenya
Tel: 254 52 20 155 through 9
Fax: 254 52 32 051
E-mail: [email protected]

7. Unilever Tea Kenya Ltd United Tea growing Kericho Nakuru Road
(Unilever plc – also in Kingdom and processing P.O. Box 20, 200 Kericho, Kenya
Tanzania and Uganda) Tel: 254 52 20 146/30 188
Fax: 254 52 30 347
E-mail: [email protected]
 75
8. Vitacress Kenya Ltd United Kingdom Horticulture Baba Dogo House 4 Gth

(Vitacress Group) and Netherlands P.O. Box 63249-00619,

Nairobi, Kenya
Tel: 254 20 860 650
Fax: 254 20 860 653
E-mail:
[email protected]

MINING, OIL AND GAS

1. Africa Mashariki Goldmines Ltd Canada Gold mining Nyamongo, Tarime

(Placer Dome Inc.) P.O. Box 71579,
Dar es Salaam, Tanzania
Tel: 255 22 266 6330
Fax: 255 22 212 3141
Website: www.placerdome.com

2. BP Tanzania Ltd United Petroleum P.O. Box 9043,

(BP plc) Kingdom products Dar es Salaam, Tanzania
Tel: 255 22 211 126 972
Fax: 255 22 211 127 267
Website: www.bp.com

3. Canmin Resources Ltd Canada Mining of P.O. Box 1417, Kampala, Uganda
(IBI Corporation) vermiculite Tel: 256 41 268 994
Fax: 256 41 268 063
E-mail: [email protected]

4. Geita Goldmine South Africa Gold mining P.O. Box 532, Geita, Tanzania
(AngloGold Ashanti Ltd) Tel: 255 68 50 0702
Fax: 255 68 50 1342
Website: www.anglogold.com

5. Kahama Mining Corporation Ltd Canada Gold mining P.O. Box 1080,
(Barrick Gold Corporation) Dar es Salaam, Tanzania
Tel: 255 22 212 3181
Fax: 255 22 212 3245
E-mail: [email protected]

6. Songas Tanzania Ltd United Gas production P.O. Box 6342,

(CDC Group plc) Kingdom & distribution Dar es Salaam, Tanzania
Tel: 255 22 245 2160
Fax: 255 22 212 4181
E-mail:[email protected]

7. Total Uganda Ltd France Sale & distribution 8th Street Industrial Area
(Total Group) of petroleum P.O. Box 3079, Kampala, Uganda
products Tel: 256 41 23 131/2/3
Fax: 256 41 231 338
E-mail:
[email protected]
76
8. Williamson Diamond Mines South Africa Diamond mining Po Bwadui Shinyanga
(De Beers Group) Dar es Salaam, Tanzania
Tel: 255 22 24 1332
Fax: 255 22 2671/2965
Website: www.debeersgroup.com

MANUFACTURING

1. ABB Electric Company Switzerland Manufacturing of P.O. Box 3658,

electrical goods Dar es Salaam, Tanzania
Tel: 255 22 212 9497/9499
Website: www.abb.com

2. Aluminium Africa Ltd Bermuda Manufacturers of P.O. Box 2070,

(managed by Comcraft – also corrugated iron Dar es Salaam, Tanzania
in Kenya and Uganda) sheets, and other Tel: 255 22 286 4017
building materials Fax: 255 22 286 4690
E-mail: [email protected]

3. Atlas Copco Kenya Ltd Sweden Industrial North Rd. Airport, Emabakasi
(Atlas Copco AB) equipment P.O. Box 40090-00100
Nairobi, Kenya
Tel: 254 20 825 267
Fax: 254 20 825 472
E-mail:
[email protected]

4. BASF Germany Chemicals and Outering Road

(BASF AG) plastics P.O. Box 00100-30467,
Nairobi, Kenya
Tel : 254 20 530 774
Fax: 254 20 534 727
E-mail: [email protected]

5. Bata Shoe Company (Kenya) Ltd Canada Footwear P.O. Box 23, Limuru 00217, Kenya
(Bata Shoe Company – also Tel: 254 66 716 20/71 205-6
in Uganda) Fax: 254 66 71 145/71 047
E-mail: [email protected]

6. Bayer East Africa Germany Pharmaceutical Outerring Road

(Bayer AG) P.O. Box 30321-00100,
Nairobi, Kenya
Tel: 254 20 860 667
Fax: 254 20 803 341
E-mail:[email protected]

7. Bestfoods Kenya Ltd United Food Off Outer Ring Road

(Unilever Bestfoods Solution) Kingdom manufacturing P.O. Box 41045, Nairobi, Kenya
and Netherlands Tel: 254 20 802 653/861 534
Fax: 254 20 860 080
E-mail:
[email protected]
 77
8. CarTrack Kenya Ltd United Vehicle security Kenya Road, Upper Hill
(Lojak Corporation) States equipment P.O. Box 79448, Nairobi, Kenya
Tel: 254 20 712 780
Fax: 254 20 713 010
E-mail: [email protected]

9. Century Bottling Company United Manufacture Namanve Ind. Area

(The Coca-Cola Company States of soft drinks P.O. Box 3990, Kampala, Uganda
– also in Kenya and Tanzania) Tel: 256 41 221 445/222 691
Fax: 256 41 221 145/221 448
E-mail: [email protected]

10. Colgate Palmolive (EA) Ltd United Oral and Mogadishu Road
(Colgate-Palmolive Company States household P.O. Box 30264-00100 GPO
– also in Tanzania and Uganda) care products Nairobi, Kenya
Tel: 254 20 534 044
Fax: 254 20 651 417
E-mail:
[email protected]

11. De la Rue Ltd United Currency and Noordin Rd, off Thika Rd, Ruaraka
(De la Rue plc) Kingdom security printing P.O. Box 38622-00623
Nairobi, Kenya
Tel: 254 20 860 086
Fax: 254 20 860 787
E-mail:
[email protected]

12. East African Breweries Ltd United Manufacturing P.O. Box 30161 00100,
(Diageo plc – also in Kingdom alcoholic & Nairobi, Kenya
` Tanzania and Uganda) non-alcoholic Tel: 254 20 802 701
beverages Fax: 254 20 802 054
E-mail: [email protected]
Website: www.eabl.com

13. Eli Lilly (Suisse) SA United Pharmaceutical Chiromo Crt.

(Eli Lilly and Company) States P.O. Box 41556-00100,
Nairobi, Kenya
Tel: 254 20 3 747 088/747 054
Fax: 254 20 3 747 070
E-mail: [email protected]

14. General Motors East Africa United Motor vehicle Mombasa/Enterprise Rd.
(General Motors Corporation) States assembling P.O. Box 30527, Nairobi, Kenya
Tel: 254 20 534 141/556 588
Fax: 254 20 542 543/254 20 534 858
E-mail: [email protected]

15. Henkel Kenya Ltd Germany Chemicals Enterprise Road

(Henkel KgaA) P.O. Box 42510 GPO, Nairobi, Kenya
Tel: 254 20 223 344/556 037
Fax: 254 20 545 527/254 20 552 090
E-mail: [email protected]
78
16. Kilombero Sugar Company Ltd South Africa Manufacturing P.O. Box 50, Kidatu, Tanzania
(Illovo Sugar Ltd) sugar Tel: 255 23 262-6011
Fax: 255 23 262-6188
Website: www.illovosugar.com

17. Matsushita Electric Co. (E.A) Ltd Japan Manufacturers Nyerere Road,
(Matsushita Electric of dry batteries P.O. Box 2470, Dar es Salaam,
Industrial Co., Ltd) Tanzania
Tel: 255 22 211 0272
E-mail: [email protected]
Website: www.industrial.panasonic.com

18. Mitsubishi Motors Japan Vehicle International Hse, Mama Ngina St.
(Mitsubishi Corporation) manufacturing P.O. Box 48738-00100,
Nairobi, Kenya
Tel: 254 20 219 068/228 225
Fax: 254 20 245 409
E-mail: [email protected]

19. Nestlé Foods Kenya Ltd Switzerland Food products Pate Rd, Ind. Area,
(Nestlé S.A.) P.O. Box 30265 GPO, Nairobi, Kenya
Tel: 254 20 532 569/70
Fax: 254 20 532 291
E-mail: [email protected]

20. Phenix Logistics Ltd Japanese Textile Plot 100-2, 5th Street, Industrial Area
(Yamato International Inc.) P.O. Box 4378, Kampala, Uganda
Tel: 256 41 344 479
Fax: 256 41 344 162
E-mail: [email protected]

21. Procter and Gamble EA Ltd United States Food products Old Embakasi Rd, off Mombasa Rd.
(The Procter and Gamble P.O. Box 30454-00100, Nairobi, Kenya
Company) Tel: 254 20 823 108
Fax: 254 20 823 107
E-mail: [email protected]

22. Siemens Ltd Germany Telecommunication Nairobi Business Park, 1st Flr.
(Siemens AG) equipment Block A, Ngong Rd.
P.O. Box 50867-00200,
Nairobi, Kenya
Tel: 254 20 723 717
Fax: 254 20 726 128
E-mail: [email protected]

23. Tanzania Breweries Ltd South Africa Manufacturing P.O. Box 9013, Dar es Salaam,
(Sabmiller plc) of beers and Tanzania
spirits Tel: 255 22 182 779
Fax: 255 22 181 457
Website: www.sabmiller.com
 79
23. Tanzania Cigarette Japan Cigarette P.O. Box 40114,
Company Ltd manufacturing Dar es Salaam, Tanzania
(Japan Tobacco International) Tel: 255 22 286 150/9
Fax: 255 22 286 5210
Website: www.jti.com

24. Tetra Pack Germany Packaging Enterprise Rd/Likoni Rd,

(Tetra Pak Beteiligungs GmbH) materials Nairobi, Kenya
Tel: 254 20 534 300
Fax: 254 20 532 639
E-mail: [email protected]

SERVICES
FINANCIAL

1. African Banking Corporation Botswana Banking 1st Floor, Barclays House

(ABC Holdings Limited) P.O. Box 31, Dar es Salaam, Tanzania
Tel: 255 22 211 1990
E-mail: [email protected]
Website:
www.africambankingcorp.com

2. Allied Bank International (U) Ltd Belgium Banking 45 Jinja Road

(Banque Belgolaise) P.O. Box 2750, Kampala, Uganda
Tel: 256 41 250 821/3
Fax: 256 41 230 439
E-mail:
[email protected]
or [email protected]

2. Bank of Malaysia (T) Ltd Malaysia Banking P.O. Box 9362,

Dar es Salaam, Tanzania
Tel: 255 22 213 4989
Fax: 255 22 213 4286
E-mail:
[email protected]

3. Barclays Bank United Banking Barclays Plaza, Loita St.

(Barclays Bank – also Kingdom P.O. Box 30120-00100, Nairobi, Kenya
in Tanzania) Tel: 254 20 332 230/313 405
Fax: 254 20 331 396
E-mail:
[email protected]

4. Citibank United Banking Centre Court Building

(Citigroup Inc. – also States Plot 4, Ternan Avenue
in Kenya and Tanzania) P.O. Box 7505, Kampala, Uganda
Tel: 256 41340 945/9
Fax: 256 41 340 624
E-mail: [email protected]
80
6. Old Mutual Life Assurance United Insurance Old Mutual Bldg,
(Old Mutual plc) Kingdom Corner of Mara Hospital Rd.
P.O. Box 30059-00100, Nairobi, Kenya
Tel: 254 20 2 728 881
Fax: 254 20 272 2415
E-mail: [email protected]

7. Stanbic Bank (Uganda) South Africa Banking Crested Towers

(Standard Bank Group P.O. Box 7131, Kampala, Uganda
Limited – also in Kenya Tel: 256 31 224 111
and Tanzania) Website: www.stanbic.com

8. Standard Chartered Bank United Banking Plot 5, Speke Road,

(Uganda) Kingdom Standchart Building
(Standard Chartered plc – P.O. Box 7111, Kampala, Uganda
also in Kenya and Tanzania) Tel: 256 41 258 211/258 217
Fax: 256 41 231 473/342 875
E-mail:
[email protected]

TOURISM AND TRANSPORT

1. Abercrombie & Kent Ltd United Tour operations Bruce House, Standard Street
Kingdom Nairobi, Kenya
Tel: 254 20 334 955/228 700
Fax: 254 20 213 072
E-mail:
[email protected]

2. ASB Holdings Switzerland Hotel P.O. Box 88

(Kempinski Hotel, S.A.) development Dubai, United Arab Emirates
Fax: 9 714 355 1199/8151
E-mail: [email protected]

3. Coastal Travels Ltd Italy Wildlife camps P.O. Box 3052,

Dar es Salaam, Tanzania
Tel: 255 22 211 2731/7953
E-mail: [email protected]

4. Conservation Corporation South Africa Lodges and P.O. Box 751, Arusha, Tanzania
Tanzania Ltd tented camps Tel: 255 27 254 8078
(Conservation Corporation Africa) Fax: 255 27 254 8268
Website: www.ccafrica.com

5. Holiday Inn (T) Ltd United Hotel Garden Avenue

(InterContinental Hotels Kingdom P.O. Box 80022,
Group plc – also in Kenya) Dar es Salaam, Tanzania
Tel: 255 22 213 7575
Fax: 255 22 213 9070
E-mail: [email protected]
 81
6. KLM Royal Dutch Airline France Air transport Loita Street
(Air France – KLM) P.O. Box 49239, Nairobi, Kenya
Tel: 254 20 229 291/226 050
Fax: 254 20 320 747 17
E-mail: [email protected]

7. Lonrho Hotels United Hotel Harry Thuku Road

(Norfolk Hotel et al. Kingdom management P.O. Box 58581-00100,
– John Holt Group Ltd) Nairobi, Kenya
Tel: 254 20 216 949/216 682
Fax: 254 20 216 896
E-mail: [email protected]

8. Madhvani Lodge United Safari lodge Pan Africa House,

Kingdom Shop 9 Ground Floor
Kimathi Avenue
P.O. Box 22827, Kampala, Uganda
Tel: 256 41 260 260/1
Fax: 256 41 260 262

9. Pollmann’s Tours and Safaris Germany and Tour operations Pollmann’s Hse, Mombasa Rd.
(Partly TUI Group) Mauritius P.O. Box 84198-80100,
Mombasa, Kenya
Tel: 254 20 822 226/544 374
Fax: 254 20 228 935
E-mail: [email protected]

10. Private Safaris Switzerland Tour operations Twinstar Bldg, Mombasa Road
(Kuoni Travel Ltd) P.O. Box 45205-00100,
Nairobi, Kenya
Tel: 254 20 554 150/533 998
Fax: 254 20 533 854
E-mail: [email protected]

11. Tourism Promotion Switzerland Hotels & lodges Kenyatta Ave/Nyerere Rd.
Services (T) Ltd P.O. Box 46302 GPO,
(Serena Hotels, Aga Nairobi, Kenya
Khan Group – also in Tel: 254 20 2 725 111/ 2 842 000
Tanzania and Uganda) Fax: 254 20 2 725 184
E-mail: [email protected]

12. Somak Tours and Travel United Tour operations Somak Hse, Mombasa Rd.
(Somak Travel Ltd) Kingdom P.O. Box 48495-00200,
Nairobi, Kenya
Tel: 254 20 535 508/535 509
Fax: 254 20 535 172
E-mail: [email protected]
82
13. Tan Russ Investment (T) Ltd Switzerland Hotel P.O. Box 791
(Royal Palm Hotel – Mövenpick Dar es Salaam, Tanzania
Hotels & Resorts) Tel: 255 22 211 2416
E-mail: [email protected]

BUSINESS SUPPORT

1. Cargill Kenya Ltd United States Tea warehousing, Dar es Salaam Road
(Cargill, Inc. – also in handling, P.O. Box 90403, Mombasa, Kenya
Tanzania and Uganda) storage, Tel: 254 11 225 701/5
blending, etc. Fax: 254 11 314 013/225 284
6 Non-equity forms E-mail: [email protected]
(licensing, franchising) are
common in certain types
of services, for example 2. Deloitte & Touche Switzerland 6 Auditing Ring Road, Westlands
accounting and consulting.
The country of ownership (Deloitte Touche Tohmatsu) and consulting P.O. Box 40092, Nairobi, Kenya
here is thus the country
where the firm with which Tel: 254 20 441 344/05/12
the EAC firm has a Fax: 254 20 448 966
licensing/franchising
agreement is located. E-mail: [email protected]

3. DHL Worldwide Express Germany Courier services Nyerere Road

(Deutsche Post AG – also Dar es Salaam, Tanzania
in Kenya and Uganda) Tel: 255 22 286 1000
Fax: 25 22 286 2703
Website: www.dhl.com

4. Ernst & Young East Africa United Auditing and Kenya-Re Towers
(Ernst & Young Global – also Kingdom6 consulting Off Ragati road
in Tanzania) P.O. Box 44286, Nairobi, Kenya
Tel: 254 20 271 5300
Fax: 254 20 271 6271

5. KPMG Kenya Switzerland6 Auditing and Lonhro Hse, 16th Flr, Standard St.
(KPMG International – also consulting P.O. Box 40612 GPO
in Tanzania and Uganda) Nairobi, Kenya
Tel: 254 20 222 862
Fax: 254 20 215 695
E-mail: [email protected]

6. Maersk Sealand K Ltd Denmark Shipping Hse, Mama Ngina St.

(A.P. Möller Gruppen) International P.O. Box 43986 GPO
Nairobi, Kenya
Tel: 254 20 314 435/220 056
Fax: 254 20 220 086

7. PricewaterhouseCoopers United Auditing and Communications House, Floor 10

(PricewaterhouseCoopers States6 consulting Plot 1, Colville Street
International – also in P.O. Box 882, Kampala, Uganda
Kenya and Tanzania) Tel: 256 41 236 018
Fax: 256 41 230 153
E-mail:
[email protected]
 83
8. Tanzania International Philippines Container Container Terminal Building
Container Terminal terminal Dar es Salaam Port
(International Container services P.O. Box 13412,
Terminal Services, Inc.) Dar es Salaam, Tanzania
Tel: 255 22 211 0371
E-mail: [email protected]
Website: www.ictsi.com

9. United Parcel Service (UPS) United Courier North Road, Embakasi

(United Parcel Service, Inc.) States services P.O. Box 46586, Nairobi, Kenya
Tel: 254 20 820 804
Fax: 254 20 823 124
E-mail: [email protected]

INFRASTRUCTURE

1. Celtel Kenya Netherlands Telecommunication Parkside Tws, Mombasa Road

(Celtel International P.O. Box 73146-00200 City Square
B.V. – also in Tanzania Nairobi, Kenya
and Uganda) Tel: 254 20 69 010 000
Fax: 254 20 69 011 114
E-mail: [email protected]

2. MIC Tanzania Limited Luxembourg Telecommunication P.O. Box 2929,

(Millicom International Dar es Salaam, Tanzania
Cellular S.A.) Tel: 255 22 123 456/306
Fax: 255 22 123 014
E-mail: [email protected]

3. MTN (Uganda) Ltd South Africa Telecommunication UDB Tower

22 Hannington Road
P.O. Box 24624, Kampala, Uganda
Tel: 256 41 212 333
Fax: 256 41 212 056
E-mail: [email protected]

4. Safaricom United Telecommunication Safaricom Hse, Waiyaki Way

(Partly Vodafone Group plc) Kingdom P.O. Box 46350 GPO
Nairobi, Kenya
Tel: 254 20 427 3224
Fax: 254 20 444 5419
E-mail:
[email protected]

5. Vodacom Tanzania Ltd South Africa Telecommunication PPF Toser

(Vodacom Group PTY Ltd) P.O. Box 2369,
Dar es Salaam, Tanzania
Tel: 255 22 266 6127/6684
Website: www.vodacom.co.tz
84
CONSTRUCTION AND OTHER

1. Eskom Enterprises Africa South Africa Power generation P.O. Box 28802, Kampala, Uganda
(Eskom Enterprises (Pty) Ltd) Tel: 256 41 233 833
Mobile: 256 77 516 466
E-mail: [email protected]

2. Konoike Construction Company Japan Construction P.O. Box 31224,

(Otori Holdings Co, Ltd) Dar es Salaam, Tanzania
Tel: 255 22 270 0308
Fax: 255 22 270 0306/5489
E-mail: [email protected]

3. Murray & Roberts South Africa Construction P.O. Box 394,

Construction (T) Ltd Dar es Salaam, Tanzania
(Murray & Roberts Tel: 255 22 266 6962
Holdings Ltd) Fax: 255 22 266 7163
E-mail: [email protected]
Website: www.murrom.com

MISCELLANEOUS

1. ACTIS United Kingdom Diversified equity Norfolk Towers 1st Floor,

(Actis Capital LLP) investor in Kijabe Street
emerging markets P.O. Box 43233-00100,
Nairobi, Kenya
Tel : 254 20 219 952
Fax: 254 20 219 744
E-mail: [email protected]

2. Oxford University Press EA United Publishing ABC Place Waiyaki Way

Kingdom P.O. Box 72532 City Square
Nairobi, Kenya
Tel: 254 20 4 440 555
Fax: 254 20 4 443 972
E-mail: [email protected]

3. SGS Kenya Ltd Switzerland Inspection Rank Xerox Hse

(SGS S.A.) certification firm P.O. Box 72118, Westlands
Nairobi, Kenya
Tel: 254 20 3 751 811
Fax: 254 20 3 741 468
E-mail: [email protected]

4. Sumitomo Corporation Japan Trading I&M Bldg, 4th Flr, Ngong Rd.
P.O. Box 41097-00100,
Nairobi, Kenya
Tel: 254 20 2 717 000/4
Fax: 254 20 2 710 374
E-mail:
[email protected]
Source: UNCTAD, based on information from various sources.
 Appendix 3
85
SOURCES OF FURTHER INFORMATION

Regional

East African Community Secretariat

AICC, Ngorongoro Wing
P.O. Box 2617, Arusha, Tanzania
Tel: 255 27 250 4253/8
Fax: 255 27 250 4255
E-mail: [email protected]
Website: www.eac.int

Country investment agencies

7 The IPC is expected to turn into Investment Promotion Centre7 Uganda Investment Authority
the Kenya Investment Authority
National Bank Building, 8th Floor Plot 28, Kampala road
some time in 2005.
Harambee Avenue, P.O. Box 55704 P.O. Box 7418, Kampala, Uganda
Nairobi, City Square, 00200, Kenya Tel: 256 41 251 562/5, 251 41 234 109
Tel: 254 20 221 401-4 Fax: 256 41 342 903
Fax: 254 20 243 862 E-mail: [email protected]
Websites: www.investmentkenya.com Website: www.ugandainvest.com
www.ipckenya.org

Tanzania Investment Centre

Shaaban Robert Street
P.O. Box 938, Dar es Salaam, Tanzania
Tel: 255 22 211 6328/211 3365
Fax: 255 22 211 8253
E-mail: [email protected]
Website: www.tic.co.tz

OTHER PUBLIC INSTITUTIONS

Regional

East African Community Lake Victoria Fisheries

Organization Secretariat
P.O. Box 1625, Jinja, Uganda
Tel. 256 043 120 205/6
Fax 256 043 130 123
E-mail: [email protected]
Website: www.lvfo.org
86
Kenya

East African Development Bank

Resident Manager
Rahimtulla Tower, 2nd Floor
P.O. Box 47685, Nairobi
Tel: 254 20 340 642/340 656
Fax: 254 20 273 1590
E-mail: [email protected]
Telex: 22689 EADEVBANK

Attorney General’s Chambers Ministry of Agriculture

State Law Office Kilimo Hse, Cathedral Road, Nairobi
P.O. Box 40112, Nairobi Tel: 254 20 271 8870
Tel: 254 20 227 461 Fax: 254 20 272 0586
Website: www.agriculture.go.ke
Commissioner of Customs & Excise
Forodha Hse, Nairobi Ministry of Energy
Tel: 254 20 271 5540 Nyayo House, Nairobi
Fax: 254 20 271 8417 Tel: 254 20 330 048
Website: www.energy.go.ke
Commissioner of Lands
Lands Department Ministry of Environment & Natural Resources
Ardhi House, Ngong Road, Nairobi Maji Hse, Ngong Road
Tel: 254 20 271 8050 Nairobi
Tel: 254 20 271 6103
Commissioner of Value Added Tax Website: www.environment.go.ke
Times Towers
Haile Selassie Avenue, Nairobi Ministry of Finance
Tel: 254 20 224 275 Treasury Building, Nairobi
Tel: 254 20 338 111
Export Processing Zones Authority (EPZA) Website: www.treasury.go.ke
P.O. Box 50563-00200, Nairobi
Tel: 254 20 271 2801/6 Ministry of Lands & Housing
Fax: 254 20 271 3704 Ardhi House, Ngong Road, Nairobi
E-mail. [email protected] Tel: 254 20 271 8050
[email protected] Website:www.lands.go.ke
Website: www.epzakenya.com
Ministry of Planning & National Development
Kenya Bureau of Standards Treasury Building, Nairobi
P.O. Box 54974, Nairobi Tel: 254 20 338 111
Tel: 254 20 502 210-2 Website: www.planning.go.ke
Fax: 254 2503 293
E-mail: [email protected] Ministry of Roads & Public Works
Website: www.kebs.org Ministry of Works Building, Nairobi
Tel: 254 20 272 3101/88
Kenya Revenue Authority Website: www.publicworks.go.ke
Times Towers
Haile Selassie Avenue, Nairobi Ministry of Trade & Industry
Tel: 254 20 310 900/315 553 Teleposta Towers, Nairobi
Tel: 254 20 315 001-7
Website: www.tradeandindustry.go.ke
 87
Nairobi City Council Tana & Athi River Development Authority
City Hall P.O. Box 47309-00100, Nairobi
City Hall Way, Nairobi Tel: 254 20 535 834/5
Tel: 254 20 224 2 82 Fax: 254 20 535 832/3
Fax: 254 20 218 291/214 780 E-mail: [email protected]

Principal Immigration Officer Telkom Kenya Ltd

Immigration Department Telposta Towers, Kenyatta Avenue
Nyayo House, Nairobi Nairobi
Tel: 254 20 333 531 Tel: 254 20 323 2000
Fax: 254 20 243 338
Registrar of Companies E-mail: [email protected]
Sheria House Website: www.telkom.co.ke
Harambee Avenue, Nairobi
Tel: 254 20 227 461

Tanzania

East African Development Bank

Resident Manager
NSSF Waterfront House, 7th Floor
P.O. Box 9401, Dar es Salaam
Tel: 255 22 211 3195/211 6981
Fax: 255 22 211 3197
E-mail: [email protected]
Telex: 41175 EADEVBANK

Bank of Tanzania Business Registration and Licensing Agency

Mirambo Street Cooperative Building, Lumumba Street
P.O. Box 2939, Dar es Salaam P.O. Box 9393, Dar es Salaam
Tel: 255 22 211 1061-4/211 6682 Tel: 255 22 218 0141/218 0130
Fax: 255 22 211 6719 Fax: 255 22 218 0371
E-mail: [email protected] E-mail: [email protected]
Website: www.bot-tz.org
Capital Markets and Securities Authority
Board of External Trade PPF Tower, Ohio Street/Garden Avenue
Trade Fair Grounds, Kilwa Road P.O. Box 75713, Dar es Salaam
P.O. Box 5402, Dar es Salaam Tel: 255 22 211 3903
Tel: 255 22 285 1759/285 1706 Fax: 255 22 2113846
Fax: 255 22 285 1705/211 27527 E-mail: [email protected]
E-mail: [email protected]
Website: www.bet.co.tz Immigration Services Department
Ministry of Home Affairs
Ghana Avenue/Ohio Street
P.O. Box 512, Dar es Salaam
Tel: 255 22 211 8636
Fax: 255 22 211 1090
E-mail: [email protected]
88
National Bureau of Statistics Tanzania Harbours Authority
Kivukoni Front P.O. Box 9184, Dar es Salaam
P.O. Box 796, Dar es Salaam Tel: 255 22 211 0401-9/117 816
Tel: 255 22 212 2722-3/211 2352 Fax: 255 22 211 3938/211 3432
Fax: 255 22 213 0852 E-mail: [email protected]
Website: www.bandari.com
Presidential Parastatal Sector Reform Commission
Sukari House, Ohio Street Tanzania Petroleum Development Corporation
P.O. Box 9252, Dar es Salaam Cooperative Building, Lumumba Street
Tel: 255 22 211 7988-9/211 3065 P.O. Box 2774, Dar es Salaam
Fax: 255 22 212 2870 Tel: 255 22 218 1395/218 0045-6
E-mail: [email protected] Fax: 255 22 218 0047
Website: www.psrctz.com E-mail: [email protected]
Website: www.bot-tz.org
Tanzania Bureau of Standards
Ubungo, Morogoro Road Tanzania Revenue Authority
P.O. Box 9524, Dar es Salaam Sokione Street
Tel: 255 22 245 0298/245 0735 P.O. Box 11491, Dar es Salaam
Fax: 255 22 245 0959 Tel: 255 22 211 9591-4
E-mail: [email protected] Fax: 255 22 211 9595
E-mail: [email protected]
Tanzania Civil Aviation Authority
IPS Building, Samora Avenue Tanzania Roads Agency
P.O. Box 2819, Dar es Salaam P.O. Box 11364, Dar es Salaam
Tel: 255 22 211 5079-80 Tel: 255 22 212 5914-5
Fax: 255 22 211 8905 Fax: 255 22 212 4359
E-mail: [email protected]
Website: www.aviationauthority.org Tanzania Tourist Board
IPS Building, Samora Avenue/Azikiwe Street
Tanzania Communication Commission P.O. Box 2485, Dar es Salaam
Ali Hassan Mwinyi Road Tel: 255 22 211 1244-5
P.O. Box 474, Dar es Salaam Fax: 255 22 211 6420
Tel: 255 22 211 8947-52 E-mail: [email protected]
Fax: 255 22 211 6664 Website: www.tanzania-web.com
E-mail: [email protected]
Website: www.tcc-go.tz
 89
Uganda

East African Development Bank

4 Nile Avenue
P.O. Box 7128, Kampala
Tel: 256 41 230 021/5
Fax: 256 41 259 763
E-mail: [email protected]
Telex: 61074 EADEVBANK
Website: www.eadb.org

Capital Markets Authority (CMA) Uganda Securities Exchange (USE)

76/78 William Street East African Development Bank Building
Bank of Uganda Building Kampala
P.O. Box 24565, Kampala Tel: 256 41 342 818
Tel: 256 41 342 788 Fax: 256 41 342 841
Fax: 256 41 342 803 E-mail: [email protected]
E-mail: [email protected]
Uganda Tourist Board (UTB)
Uganda Export Promotion Board (UEPB) IPS Building, 14 Parliament Avenue
5th Floor Conrad Plaza P.O. Box 7211, Kampala
Entebbe Road, Kampala Tel: 256 41 242 196/7
E-mail: [email protected] Fax: 256 41 242 188

Uganda National Bureau of Standards (UNBS)

Plot M127 Nakawa Industrial Area
P.O. Box 6329, Kampala
Tel: 256 41 222 367/9

PRIVATE SECTOR ASSOCIATIONS

Regional

Eastern Africa Association (EAA) East African Business Council (EABC)

Jubilee Place, 5th Floor AICC, Ngorongoro Wing,
Mama Ngina Street P.O. Box 2617, Arusha
P.O. Box 41272-00100, Nairobi Tanzania
Tel: 254 20 340 341/214 898 Tel: 255 27 250 9997
Fax: 254 20 340 341 Fax: 255 27 250 9997
E-mail: [email protected] E-mail: eabc-online.com
Website: www.eaa-lon.co.uk
90
NATIONAL

Kenya

Federation of Kenya Employers Kenya Fish Processors & Exporters Association

Head Office (AFIPEK)
Waajiri House P.O. Box 345 00600, Nairobi
Argwings Kodhek Road Tel: 254 20 444 0858
P.O. Box 48311, Nairobi E-mail: [email protected]
Tel: 254 20 272 1929
Fax: 254 20 272 1990 Kenya Private Sector Alliance (KEPSA)
E-mail: [email protected] P.O. Box 3556-00100, Nairobi
Tel: 254 20 273 0371/2
Flower Council Fax: 254 20 273 0374
P.O. Box 56325 00200, Nairobi E-mail: [email protected]
Tel: 254 020 560 612, 576 597
E-mail: [email protected] National Economic and Social Council
Ministry of Planning and National Development
Fresh Produce Exporters Association of Kenya Treasury Building
(FPEAK) Harambee Avenue
P.O. Box 40312, Nairobi P.O. Box 30007, Nairobi
Tel: 254 20 445 1488, 445 1489 Tel: 254 20 338 111
E-mail: [email protected] Fax: 254 20 218 475
Web: www.fpeak.org Website: www.planning.go.ke

Kenya Association of Manufacturers Port Management Association of Eastern &

Peponi Road, Westlands Southern Africa
P.O. Box 30225-00100, Nairobi Archbishop Makarios Road, Mombasa
Tel: 254 20 374 6005/7 Fax: 254 20 228 344
Fax: 254 20 374 6028/30 E-mail: [email protected]
E-mail: [email protected]
Website: www.kenyamanufacturers.org
 91
Tanzania

Association of Tanzania Employers Tanzania Exporters Association (TANEXA)

AMI Building 5th Floor, Pamba House
Samora Avenue Garden Avenue
P.O. Box 2971, Dar es Salaam P.O. Box 12493, Dar es Salaam
Tel: 255 22 211 0940 Tel: 255 741 564 955
Fax: 255 22 211 9434 Fax: 255 22 211 272 752/4
E-mail: [email protected] E-mail: [email protected]

Confederation of Tanzania Industries (CTI) Tanzania National Business Council (TNBC)

9th Floor, NIC Investment House Ghana Avenue
Samora Avenue P.O. Box 3478, Dar es Salaam
P.O. Box 71783, Dar es Salaam Tel: 255 22 212 2985/6
Tel: 255 22 211 4954/212 3802 255 744 781 078
255 22 213 0327 Fax: 255 22 212 9433
Fax: 255 22 211 5414 E-mail: [email protected]
E-mail: [email protected]
[email protected] Tanzania Private Sector Foundation (TPSF)
Website: www.cti.co.tz Tel: 255 22 213 9681
Fax: 255 22 213 9644
E-mail: [email protected]

Uganda

Agribusiness Development Centre (ADC) Development Finance Company of Uganda (DFCU)

Plot 18 Prince Charles Drive, Kololo Rwenzori House
P.O. Box 7007, Kampala P.O. Box 2767, Kampala
Tel: 256 41 255 482/3, 256 41 255 468/9 Tel: 256 41 256 126, 256 41 232 212
Fax: 256 41 250 360 256 41 244 059
E-mail: [email protected] Fax: 256 41 259 435
[email protected] Telex: 61196
Cable: DEVFINANCE
Danida Private Sector Development Programme
Royal Danish Embassy Federation of Uganda Employers (FUE)
P.O. Box 11243, Kampala Management Training and
Tel: 256 41 256 687, 256 41 250 938 Advisory Campus Nakawa
256 41 250 926, 256 41 256 783 P.O. Box 3820, Kampala
Fax: 256 41 254 976 Tel: 256 41 220 201, 256 41 220 389
E-mail: [email protected] Fax: 256 41 221 257

Institute of Certified Public Accountants

of Uganda (ICPAU)
P.O. Box 12464, Kampala
Tel: 256 41 540 125/6
92
Presidential Investors Round Table Uganda Flower Exporters’ Association
Secretariat Nile Hotel
Uganda Investment Authority P.O. Box 30848, Kampala
Plot 28, Kampala Road Tel: 256 41 258 080
P.O. Box 7418, Kampala Fax: 256 41 257 824
Tel: 256 41 251 562/5, 251 41 234 109
Fax: 256 41 342 903 Uganda Grain Traders Ltd (UGTL)
E-mail: [email protected] Plot M193/194, Nakawa Industrial Area
P.O. Box 7341, Kampala
Private Sector Foundation of Uganda (PSFU) Tel: 256 41 220 932/27
Plot 43, Nakasero Road Fax: 256 41 220 926
P.O. Box 7683, Kampala E-mail: [email protected]
Tel: 256 41 230 956, 342 163
Fax: 256 41 259 109 Uganda Importers and Exporters Association
E-mail: [email protected] (UGIETA)
P.O. Box 23579, Kampala
Security Commodities Exchange Tel: 256 41 347 398
Brokers & Dealers Association
P.O. Box 8109, Kampala Uganda Manufacturers Association (UMA)
Tel: 256 41 285 967, 235 395 Lugogo Show Grounds
Fax: 256 41 258 539 P.O. Box 6966, Kampala
Tel: 256 41 221 034/220 698
Uganda Coffee Trade Foundation (UCTF) Fax: 256 41 220 285
Plot 35 Jinja Road
P.O. Box 21679, Kampala Uganda National Chamber of
Tel: 256 41 343 678 Commerce and Industry (UNCCI)
Fax: 256 41 343 692 Jumbo Plaza, Parliament Avenue
Tel: 256 41 503 036
Uganda Commercial Farmers Association Fax: 256 41 230 310/503 036
P.O. Box 1367, Kampala E-mail: [email protected]
Tel: 256 41 344 393
 Appendix 4
93

List of public holidays (2005)

Date Holiday Kenya Tanzania Uganda

1 January New Year’s Day • • •
12 January Zanzibar Revolution Day •
26 January NRM anniversary Day •
1 February Eid el Hajj* • • •
8 March Women’s Day •
25 March Good Friday* • • •
28 March Easter Monday* • • •
26 April Union (between Tanganyika
and Zanzibar) Day •
1 May Labour Day • • •
1 June Madaraka Day •
3 June Martyrs’ Day •
9 June Heroes’ Day •
7 July Birth of TANU, the ruling
party at independence •
8 August Peasants’ Day •
9 October Independence Day •
10 October Moi Day •
14 October Nyerere Day •
20 October Kenyatta Day •
14 November Eid el Fitr* • • •
9 December Independence Day •
12 December Jamhuri Day •
25 December Christmas Day • • •
26 December Boxing Day • •

Source: UNCTAD.

* The actual date depends on the sighting of the moon.

 Appendix 5
94
Protocols and other tripartite instruments of the EAC

No Instrument Subject/area of Date Purpose Status

co-operation concluded

1. Agreement for the Monetary and financial 28.04.1997 To provide for Kenya and Tanzania
Avoidance of Double co-operation the avoidance have ratified the
Taxation and the of double agreement but,
Prevention of Fiscal taxation. with the coming
Evasion with respect to into force of the
Taxes on Income EAC Customs Union,
it is being revised.

2. Protocol on Decision- Meetings of the Council 21.04.2001 To provide for Not ratified.
Making by the Council (Article 15 (4)) a procedure for
of Ministers decision-making
by the Council.

3. Protocol on Combating Regional peace 13.01.2001 To provide for a Tanzania and Kenya
Drug Trafficking in the and security regional mechanism have ratified
East African region (Article 124 (5, e)) and institutional the protocol.
framework for
combating illicit drug
supply, demand and
related corruption in
the Partner States.

4. Protocol on Standardization, 15.01.2001 To provide for a Protocol is in force

Standardization, quality assurance, regional mechanism since the date of
Quality Assurance, metrology and testing on standardization, signature.
Metrology and Testing (Article 81 (4)) quality assurance,
metrology and testing
for goods and services
produced and traded
in the EAC.

5. Tripartite Agreement Co-operation in 29.11.2001 Promotion and Tanzania and Kenya

on Road Transport infrastructure and facilitation of have ratified the
services (Roads and international road agreement.
Road Transport transport in the
(Article 90)) region.

6. Tripartite Agreement Co-operation in 30.11.2002 Facilitation of interstate Tanzania and Kenya

on Inland Waterway infrastructure and inland waterways have ratified the
Transport services (Inland transport. agreement.
Waterways Transport
(Article 94))
 95
7. Protocol on the Establishment of the 13.09.2002 To provide for Not yet ratified.
Establishment of the Organs and Institutions the establishment,
Inter-University Council of the Community objectives, functions
for East Africa (Inter-University Council and modus operandi
(Article 9)) of the Inter-University
Council.

8. Search and Rescue Co-operation in 13.09.2003 To provide for interstate Tanzania and Kenya
Agreement infrastructure and search and rescue have ratified the
services (security) services. agreement.

9. Protocol for the Management of Natural 29.11.2003 To provide for a Uganda has ratified
Sustainable Development Resources (Article 114) co-ordinated system the protocol.
of Lake Victoria Basin for the sustainable
development of
Lake Victoria Basin
as an economic
growth zone.

10. Protocol on the Trade liberalization 02.03.2004 To provide for the The three Partner
Establishment of the and development establishment of the States have ratified
East African Community (Article 75(7)) EAC Customs Union. the protocol.
Customs Union

Source: UNCTAD, based on communication from the East African Community Secretariat, July 2005.
 Appendix 6
96
PRIVATIZATION

Selected public enterprises not yet privatized

Sector Country Name of the company

Agriculture and Tanzania National Food Corporation (State farms for wheat, rice and maize)
agro-processing Uganda Dairy Corporation Ltd
Uganda Kinyara Sugar Works Ltd
Uganda Uganda Seeds Ltd
Banking and finance Kenya Kenya Commercial Bank Ltd
Kenya National Industrial Credit Ltd
Tanzania National Micro-finance Bank
Uganda Housing Finance Company of Uganda
Uganda National Social Security Fund
Uganda Post Bank Uganda Ltd
Uganda Uganda Development Bank
Hotel Tanzania Embassy Hotel
Tanzania Hotel Seventy Seven
Insurance services Kenya Kenya Reinsurance Corporation
Tanzania National Insurance Corporation
Uganda National Insurance Corporation (privatization quite advanced)
ITC Kenya Telkom Kenya Ltd
Mining Uganda Kilembe Mines Ltd
Uganda Uganda Development Corporation (Lake Katwe Project)
Petroleum refining Tanzania TIPPER Ltd
Postal services Uganda Uganda Posts Ltd
Power supply Kenya Kenya Electricity Generating Company Ltd (KenGen)
Kenya Kenya Power & Lighting Company Ltd
Tanzania Tanzania Electric Company (TANESCO)
Printing and publishing Uganda New Vision Printing & Publishing Corporation
Real estate Kenya Housing Finance Company of Kenya Ltd
Uganda National Housing & Construction Corporation
Sports complex Uganda Mandela National Stadium
Transport Kenya Kenya Airport Authority
Kenya Kenya Ports Authority
Kenya Kenya Railways Corporation
Kenya Mombasa-Nairobi North Corridor Road
Tanzania National Shipping Company (and its subsidiaries)
Tanzania Shirika la Usafiri Dar es Salaam
Tanzania Tanzania Harbours Authority: Rest of ports activities,
grain terminal, non-core assets
Tanzania Tanzania Zambia Railway Authority
Uganda Uganda Railways Corporation
Water & sewerage Uganda National Water & Sewerage Corporation
 Appendix 7
97
Major laws and regulations affecting foreign investment

(a) Investment

Kenya

Name Area
The Constitution of Kenya (1992) Sec. 75 of the Constitution provides a guarantee
against expropriation without due process

Investment Disputes Convention (1967) Law giving legal sanction to the Convention on the
settlement of investment disputes between States
and nationals of other States (also covered by the
Kenya Investment Act 2004)

The Kenya Investment Promotion Act (2004) Investment (see Institutional framework in Chapter IV)

Tanzania

Name Area
The Tanzania investment Act 1987 Specifies conditions for investors and related matters

Export Processing Zones Act No. 11 of 2002 Provides for the establishment, development and
management of EPZs

The Capital Markets and Securities Act, Provides for the establishment of a Capital Markets
1994 (No. 5 of 1994) and Securities Authority (CMSA)

The Mining Act. 1998 (No. 5 of 1998) Provides incentives and specifies conditions for
investing in mineral exploration, extraction and
processing in Tanzania

Uganda

Name Area
Investment Code Act (Cap 92) Law governing investment
Laws of Uganda 2000

(b) Trade, taxation, finance, insurance and audit

Kenya

Name Area
Income Tax Act (1989) Law governing taxation of income

Value Added Tax Act (1989) Law imposing value-added tax

Customs & Excise Act (1984) Law on import and export duties

Stamp Duty Act (1982) Law imposing stamp duty on transfers, leases
and security financing documents, among others
98
Banking Act (1991) Law governing banking and
other financial institutions.

Insurance Act (1988) Law governing insurance

Trade Licensing Act (1990) Law governing the licensing of trades

Companies Act (1978) Law governing the incorporation of businesses

Accountants Act (1984) Law governing accounting

Standards Act (Cap. 363) Law governing the standardization of commodities

and codes of practice

Tanzania

Name Area
Business Licensing Act (No. 25 of 1972) Business licensing

Banking and Financial Institutions Act 1991 Harmonizes the operations of financial institutions
(No. 12 of 1991) in Tanzania to foster sound banking and regularize
credit operations

Customs Tariff (amendment) act (No. 1 of 1976) Import duties on goods

The Income Tax Act 2004 Provides for the assessment and collection
of income tax

Value Added Tax Act 1997 (No. 24 of 1997)

Uganda

Name Area
Companies Act (Cap 110) Law governing registration and operation
Laws of Uganda 2000 of companies

Income Tax Act (Cap 340) Laws of Uganda 2000 Law governing taxation

Exchange Control Act (Cap171) Laws of Uganda 2000 Law

governing foreign exchange

Financial Institutions Act (Cap 54) Law governing financial institutions

Laws of Uganda 2000

Insurance Act (Cap 213) Laws of Uganda 2000 Law governing Insurance
 99
(c) Labour, immigration and citizenship

Kenya

Name Area
Employment Act (1984) Law governing employment and labour-related
issues, including labour disputes

Regulation of Wages & Conditions Regulates employment conditions and sets

of Employment Act (1989) minimum wages

Trade Disputes Act (1991) Regulates the handling of trade disputes, especially
with regard to collective bargaining agreements

Immigration Act (1984) Law governing immigration and the issue

of entry permits

Kenya Citizenship Act (1988) Issue of citizenship

Aliens Restriction Act (1985) Enables restrictions to be imposed on aliens, and

makes the provisions necessary for giving effect
to such restrictions

Tanzania

Name Area
Trade union Act No. 10 of 1998 Collective bargaining and related matters

Immigration Act 1995 (No. 7 of 1995) Control of immigration and matters connected
with immigration

Uganda

Name Area
Immigration Act (Cap 63) Law governing immigration
Laws of Uganda 2000

Uganda Citizenship Act (Cap 65) Law governing citizenship

Laws of Uganda 2000

Uganda Citizenship and Immigration Law governing citizenship and laws

Control Act (Cap 66) of Uganda immigration
100
(d) The environment, forestry, construction and land

Kenya

Name Area
Environmental Management Regulates matters relating to the management
& Coordination Act (1999) and conservation of the environment

Forests Act (1992) Law governing forestry management, including

monitoring and regulatory compliance

Water Act, Wildlife (Conservation and Laws governing environment-related issues

Management) Act, Fisheries Act (1972)

Housing Act (1990) Law providing for loans and grants for the
construction of dwellings

Land Acquisition Act (1983) Repeats constitutional guarantee against

the expropriation of immovable property

Registered Land Act (1989) Main substantive laws on immovable property,

Indian Transfer of Property Act (1882) regulating the procedures for the acquisition of,
Registration of Titles Act (1982) and dealings in, immovable property
Government Lands Act (1984)
Land Control Act (1987)
The Physical Planning Act (1996)
Registration of Documents Act (1980)

Tanzania

The Land Act 1999 (No. 4 of 1999) Provides the basic law in relation to land,
non-village land management, dispute settlement
and related matters

Village Land Act 1999 (No. 5 of 1999) Provides for the management and administration
of land in villages

Uganda

The National Environment Act (Cap 153) Law governing environmental protection and
Laws of Uganda 2000 natural resources

The Land Act 1998 Law governing ownership of land

Registration of Titles Act (Cap 230) Law governing registration of land

Laws of Uganda 2000
 101
(e) Trademarks

Kenya

Trade Marks Act (1982) Law governing trademark protection and regulation
related to unfair business competition

Tanzania

The Trade and Service Marks Act 1986 Provides for the registration and protection
of trade and service marks and related matters

The Patents Act 1987 Invention, innovation and acquisition of technology

through the granting and regulation of patents,
utility certificates and innovation certificates

The Copyright and Neighbouring Rights Act 1999 Provides for the protection of copyright and related
rights in literary and artistic works, folklore and
related matters

Uganda

Trademarks Act (Cap 217) Law governing trademark protection

Laws of Uganda 2000
Protection and regulation related to
unfair business competition
102
Sources consulted 8

8 This guide draws substantially African Growth and Opportunity Act (2004). www.agoa.gov/index.html.
on UNCTAD's country guides to Alusala N. (2004). “African standby force: East Africa moves on”. African Security Review, vol. 13, no. 2.
Kenya, Tanzania and Uganda.
Bagenda P. M. (2003). Penetrating State and Business Organised Crime in Southern Africa.
More complete lists of sources
can be found at the end of Institute for Security Studies, Monograph No. 86, September 2003.
those three publications. East African Business Council (2005). A Study on Non-Tariff Barriers & Development of a Business Climate Index.
East African Community Secretariat (1999). www.eac.int/treaty.htm.
——- (2000a). East African Community Development Strategy 2001-2005, East African Community Secretariat, Arusha.
——- (2000b). East African Industrial Sector Development Strategy, East African Community Secretariat, Arusha.
——- (2001). East African Community Development Strategy, East African Community Secretariat, Arusha.
——- (2002a). Important Aspects of the Treaty for the Establishment of the East African Community,
http://tanzania.fes-international.de/doc/regional-eac-treaty-aspects-en.pdf.
——- (2002b). The Treaty for the Establishment of the East African Community,
East African Community Secretariat, Arusha.
——- (2002c). East African Community Statistics. East African Community Secretariat, Arusha.
——- (2003a). East African Private Sector Development Strategy, East African Community Secretariat, Arusha.
——- (2003b). East African Community Road Network Project.
——- (2004a). Competition Bill.
——- (2004b). Protocol on the Establishment of the East African Community Customs Union,
East African Community Secretariat, Arusha.
——- (2004c). Report of the Committee on Fast Tracking East African Federation,
East African Community Secretariat, Arusha.
——- (2004d). www.eac.int/customs_U_implications&benefits_table.htm.
——- (2005a). EAC Customs Union Common External Tariff. East African Community Secretariat, Arusha.
——- (2005b). Third Extraordinary Summit of Heads of State of the East African Community: Joint Communiqué,
www.eac.int/news_2005_05_Third_Extra_Ord_Summit.htm.
Government of Kenya & Government of Uganda (2004). Pre-qualification Procedure & Criteria
for the Joint Concessioning of Kenya Railways & Uganda Railways, 1 September 2004.
Government of Uganda (2004). Uganda Government Public Enterprise Reform and Divestiture Program,
www.perds.go.ug/index.html.
Institute for Security Studies (undated). Kenya – Security Information, www.iss.org.za/AF/profiles/Kenya/SecInfo.html.
International Telecommunication Union (2002). World Telecommunication Development Report 2002,
www.itu.int/ITUD/ict/publications/wtdr_02/index.html.
Kenya Airways (2004). www.Kenya-airways.com.
KPMG (2004). Tax Data Card: East Africa, 2004–2005.
Office of the United States Trade Representative (2004). www.ustr.gov.
Republic of Kenya (2003). Economic Recovery Strategy for Wealth and Employment Creation,
Government Printer, Nairobi, Kenya.
——- (2004). Economic Survey. Government Printer, Nairobi.
Shinn D. (2004). “Fighting terrorism in East Africa and the Horn”, Foreign Service Journal, September 2004.
Tiller M. (1997). A first for Africa: the privatization of Kenya Airways, Economic perspectives, United States
Information Agency (USIA), Electronic Journals, vol. 2, no. 1, January 1997.
UNCTAD (2003). An investment guide to Cambodia (Geneva and New York: United Nations).
——- (2004a). An investment guide to Ethiopia (Geneva and New York: United Nations).
——- (2004b). An investment Guide to Uganda (Geneva and New York: United Nations).
——- (2005a). An investment Guide to Kenya (Geneva and New York: United Nations).
——- (2005b). An investment Guide to Tanzania (Geneva and New York: United Nations).
——- (2005c). Investment Policy Review: Kenya (forthcoming) (Geneva and New York: United Nations).
UNDP (2004). Human Development Report, 2004.
World Bank (2004a). Doing Business in 2005, http://rru.worldbank.org/DoingBusiness.
——- (2004b). Investment climate assessment, Improving enterprise performance and growth in Tanzania,
November 2004.
——- (2004c). Project Appraisal Document on a Proposed Credit in the Amount of SDR 81.6 million (US$122 million
equivalent) to the United Republic of Tanzania for the Central Transport Corridor Project. 31 March 2004.
——- (2004d). Project Information Document, East African Community – Transport Facilitation Project,
23 August 2004.
——- (2004e). World Development Indicators, 2004, www. publications.worldbank.org/WDI.
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Printed in Switzerland – GE.05-51667– August 2005 – 6,000. Design by Nelson Vigneault, 2005.