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Friday, January 26, 2018 

Can a Ugandan head COMESA?

KAMPALA, UGANDA- After Asia, the Common Market for Eastern and Southern Africa (COMESA) is the largest destination of Uganda’s exports and second largest origin of imports into Uganda.

In fact, it is a trading block where there is a positive balance of payment. In 2016/17, Uganda imported goods worth USD804m to the COMESA region and in return exported goods worth USD1.24bn over the same period. This positive balance of payment position indicates the significance of the region to Uganda.

Next year, the regional grouping will appoint a new Secretary General, through a competitive process.

This is after the expiry of the tenure of the current chief executive Sindiso Ndema Ngwenya, a Zimbabwean economist.

With 19 countries, a geographical size of 11.6 million square kilometers, a combined gross domestic product (GDP) of USD755 billion and a population of 520 million, COMESA makes up a third of Africa.

It is the largest regional economic body in Africa. What is more is that it has enormous potential, for instance, USD 82.4 billion in unutilized intra-COMESA trade opportunities.

What does COMESA mean to Uganda?

Uganda, in 2012, ratified the COMESA Free Trade Area treaty majorly to help the private sector get access to the wider export market for their goods and services, as well as lowering taxes on tradable goods.

Uganda’s exports to the COMESA Free Trade Area Member Countries are not subjected to import taxes by the importing countries, and this is seen as a major boost to Uganda’s exports. However, according to Silver Ojakol, the Commissioner for External Trade at the Ministry of Trade, Industry and Cooperatives, Uganda’s biggest export trade partners in the entire COMESA region remain Kenya, South Sudan, Rwanda and the Democratic Republic of Congo. 

Ugandan companies that have managed to penetrate the wider COMESA market have had an increase in their exports to COMESA by 50%. Similarly, producer competitiveness increased since intermediate inputs imported from COMESA Free Trade Area Members, on which a 4% import duty was levied, are not subject to import duties.

How Uganda has benefitted from COMESA?

Since Uganda belongs to two major trading blocs, the East African Community (EAC) and COMESA, it has not fully utilized the benefits of COMESA free trade area since major efforts have been put on the integration of the EAC bloc. It’s trading within the COMESA region has been at a decline apart from trade with Rwanda and Kenya, who are both EAC and COMESA trading partners.

Lawrence Othieno of the Economic Policy Research Centre says the ratio of Uganda’s trade flow to COMESA has declined over the years, from 71.2% of the total exports to the world in 2003 to lower than 37.6% in recent years.

“The drop in Uganda’s trade flow to the COMESA could partly be attributed to the poor physical infrastructural network within the region, which adds greatly to the costs of transporting goods and the slow implementation of the member states’ commitments to completely eliminate tariff and nontariff barriers,” says Othieno.

Othieno says although there has been much progress in trade liberalization within the EAC and COMESA, a range of reforms still need to be addressed, especially nontrade measures hindering full exploitation of the trade potential within these blocs.

Does a Ugandan have a chance?

According to Francis Mangeni, the Director of Trade and Customs at the COMESA Secretariat, anyone who has the gravitas and political influence across the region, sound analytics, courage, fair play, prudence, and complex problem-solving skills qualifies to become the new Secretary-General from among all the 19-member states.

“A person possessing this sort of capital is usually a former Head of Government, Minister or CEO who is savvy in intergovernmental evidence-based policy making and demonstrable development practice,” said Mangeni.

He says such a person will find an organization that has a robust trade framework that promotes transparency, predictability, and planning.

 “Naturally though, as with many institutions, he or she will find challenges to mop up, especially low ownership by the countries, personnel and recruitment management, financial stewardship and resource mobilization,” says Mangeni.

He will find an organization with policy and regulatory frameworks in areas of industrialization, surface and air transport, energy, agriculture, information technology, and communication technology.

Depending on his or her level of ambition, he or she might wish to position COMESA as a base in a technology and finance-driven global economy.

What is COMESA?

COMESA was formed in December 1994, replacing a Preferential Trade Area which had existed since 1981.

Focusing on trade and investment, COMESA established the first free trade area in Africa on 31 October 2000 and has pioneered several trade facilitation instruments.

They include regional road standards for vehicle dimensions and axle loads, road user charges, carriers' license and transit freedom that create a regional transportation market.

Others are the automated system for customs data, the single administrative customs documentation, regional transit bond system, regional third-party motor insurance, and flexible rules of origin, which have facilitated trade and reduced the cost of doing business.

Its system of resolving trade disputes is very successful. The 204 trade disputes reported since 2008 have been resolved except five currently outstanding.

Mangeni says a number of COMESA trade and investment institutions have performed beyond expectation, becoming continental or global, such as its Trade and Development Bank, the African Trade Insurance Agency, the Reinsurance Company, and the Leather Institute; as well as a regional competition Commission (being only the second in the world after the European Competition Commission) and a business council.

COMESA also has a regional court of justice, which has produced important jurisprudence on regional trade in a free trade area, clarifying the rules.

He says it will be appropriate to vision COMESA as a technology and financial base in a single market, and align this goal with the globally sustainable development goals to be achieved over the next 12 or so years by 2030.

 “Lack of sustainable adequate resources has hobbled the organization. Contributions from member states under a formula have not yielded enough, leaving a huge gap for donor dependence,” notes Mangeni.

He says COMESA institutions have been financially successful and could be given the opportunity to chip in through contributing a percentage of their revenues.

This will, however, require mobilizing these institutions to this effort. Other innovative sources of revenue could include establishing a regional e-market with a small charge on transactions. An equivalent of a COMESA e-bay or Amazon or Alibaba would revolutionize trade and resource mobilization in the region, while also greatly supporting SMEs to reach a global market.

Mangeni says the new Secretary General will need to decisively address perennial challenges that choke the organization, arising from waning ownership by member states that explains the low implementation of key programs and donor dependence, as well as acrimonious recruitment and financial management squabbles that have characterized a number of high-level meetings.

By Paul Tentena, Friday, January 26th, 2018