Africa Business Economy 

Economic Union, as Key to Shared Prosperity

Amidst recent global uncertainties, swinging between gloom and euphoria- booming stock market and apprehensions of trade war- East Africa’s conspicuous economic performance cannot be missed out. Between 2012 -2017, the region recorded an annual average growth of more than 6%, high above the global average.

The region is also witnessing several cross border partnerships. There is a growing realisation among the members of the region that only through joint efforts and regional integration, they can tap the opportunities of an expanded market and a economic growth.  Ethiopia, Sudan, Kenya and Djibouti are working towards a true economic union through joint investments and ownerships of the region’s ports, roads, energy, industrial zones, railways and aviation projects.

One of the most dynamic areas that has evoked Partnerships is Port development.  Land locked Ethiopia is negotiating Port agreements with its neighbours to diversify its Sea access points and reduce its over reliance on Djibouti Port. It is  negotiating some shareholding of Kenya’s Lamu Port to set up a logistics facility after  entering into a similar agreement with the Djibouti port of Doraleh. Sudan and Ethiopia have also entered into an agreement to develop and manage Port of Sudan jointly. Additionally, Ethiopia bought a 19% stake in Somaliland’s Port of Berbera in March 2018.

The region is also witnessing new partnerships and collaborations in the aviation sector. Kenyan and Ethiopian Airlines have agreed to offer unrestricted marketing to each other in their respective countries. Negotiations with other Airlines  on joint ventures are also on. Kenya Airways is exploring how it can join hands with South African Airways on aircraft repairs and route joint ventures.  Kenya Airways has recently signed an MOU with Djibouti Airlines to support it in capacity building and maintenance services.

On the Energy sector, Ethiopia has agreed to supply Kenya annually 400 MW of hydro power on completion of Grand Ethiopian Renaissance Dam while Kenya and Djibouti are exploring possibilities of joint ventures in the geothermal space.

These developments are largely attributable to a visible strengthening of government institutions leading to better state action and policy. While these collective efforts to establish better economic infrastructure is commendable, one cannot overlook  the  daunting challenges  faced by the region. These include low per capita income, climate change, rapidly growing population, fast rate of urbanisation, unemployment etc.  The soaring public expenditure has started to strain the budgets, of some countries. For instance, Kenya’s public debt has risen to almost 60% of GDP. Unless these challenges are tackled, East Africa may not be able to enjoy the rewards of these Partnerships.

 

This Article first appeared on TrendsAfrica

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