The Egyptian president, Hosni Mubarak, and Uganda’s Prime Minister, Apolo Nsibambi, held final discussions on the grant at State House in Cairo on Monday.

News of the grant was contained in a statement issued by the Prime Minister’s office.

Nsibambi is in Egypt at the invitation of his counterpart, Dr. Ahmed Nazif. The statement, however, did not state the areas where the dams and wells will be constructed.

During the talks between the Ugandan and Egyptian delegations, Nazif said Egypt is committed to consolidating its relationship with Uganda by promoting bilateral investment and trade.

“Egypt has a strong investment base. I urge you to facilitate our investors in Uganda,” Nazif said.

He pointed out the need for African governments to embrace the private sector, saying it plays a big role in the development of the continent.

Nsibambi applauded the Egyptian government for its support, especially in agriculture, water management, health, fisheries and human resource development.

“We need to work together to exploit the boundless opportunities in trade and investment,” the premier said.

Nsibambi urged the Nile Basin countries to reach a compromise on how to utilise the water resources of the Nile.

Other Nile Basin countries have complained about Egypt’s domination over the Nile.

Nsibambi was accompanied by the water minister, Maria Mutagamba, the regional cooperation state minister, Isaac Musumba, and finance state minister Fred Omach.

Joyce Namutebi

New Vision, 12 January 2010

Inflows of foreign direct investment (FDI) almost tripled from $692m in 2002 to $1,763m in 2007. During this time, Uganda and Tanzania have consistently attracted the highest inflows.

This analysis is contained in a study report commissioned by the EAC Secretariat titled: “An evaluation of the implementation and impact of the East African Community Customs Union.” The study released last Friday looks at the three states of Uganda, Kenya and Tanzania because the other two states of Rwanda and Burundi only joined the union in July 2009.

The customs union came into force in January 2005. The arrangement was that during this transitional time, Uganda and Tanzania would maintain internal tariffs on selected imports from Kenya to be removed gradually in five years because of Kenya’s superior manufacturing sector.

A fully fledged customs union starts in two months time on January 2010.

An analysis of the growth of exports for the three countries before and after the commencement of the union contained in the research adds credence to the argument about the benefits of the union and dispels the myths of integration.

Uganda’s exports to the region for instance grew significantly in the years before 2003-2004 but especially after the launch of the Customs Union in 2005. Exports rose from $144.8m in 2005 to $274.8m in 2007 growing at an annual average of 16% (or $43.3m).

A customs union opens up intra-regional trade in goods, basing on mutually beneficial trade agreements among the partner states. Therefore goods originating from one partner state to another will circulate freely without incurring any duties. This in turn spurs business efficiencies that allow for greater trade growth.

The impact of a fully fledged customs union in the EAC is that territorial customs borders will shift to the borders between EAC and third countries and goods entering the union shall be subjected to customs control.

What is evident is that despite general fears across partner states outside Kenya previously that the elimination of internal tariffs would lead to reductions in revenue, there has been an upward trend in revenue collections.

The demystification of these fears has been through partner countries having to reorganise their tax administrations, simplify tax laws, improve staff competences and apply more relevant technological innovations like the online service at the Uganda Revenue Authority.

It also means that the realities of an open market where the unsophisticated, less skilled pit themselves against the very best has its rewards. This is by re-adjusting to the shocking realities that you either catch up or close shop.

For Uganda still, while exports have been growing, they have not been even.

“Over the years, the main export destinations have been Kenya and Rwanda. Even then, exports to Rwanda have been declining and started to grow in 2002. This means there was a lot of dependence on the Kenyan market as the export destination,” says the report compiled by three consultants from the region.

The study notes a significant improvement for Uganda in the trend after the launch of the customs union in 2005.

“While Kenya is still in the lead, starting with 2006, there was a sharp increase of exports to all the four countries,” reads the report.

The impact of the union on Kenya reveals that the value of import duties increased from $274m in 2001 to $408.8m in 2006. Although this growth in revenue is attributed to several factors like improved tax administration, electronic tax registers as well as increased trading activities. There was also increased trading activities with the rest of the world following the tariff reductions initially averaging 35% for Kenya, says the report.

During 2007, Kenya’s total exports to the partner states were 22% while imports from them stood at a mere 1%.

This perhaps highlights the disparity in the ability of the rest of EAC to export to Kenya.

Uganda is still the largest destination for Kenya’s exports.

In Tanzania, actual total tax revenue earnings continued rising at a much higher average rate of 35.9% per annum from 2005/06 to 2007/08 compared to the average growth rate of only 23.3% attained between 2003/04 and 2004/05.

“For the three years from 2005/2006 to 2007/08 revenue from import duties grew annually at an average rate of 61.9%.”

Despite this impressive impact of the union, some huge structural challenges need to be overcome before the fully fledged union takes shape in January.

Margaret Chemengich, a consultant who, in a research study, analysed the transitional EAC customs union to a fully fledged customs union advised that wider involvement and empowerment of the private sector and other beneficiaries should be undertaken in order to strengthen and lengthen production and supply chains.

A whole set of bottlenecks including a poor business climate, inadequate trade facilitation, tax disharmony, lack of awareness and national sovereignty issues stand in the way of a fully fledged customs union.

“For instance, Tanzania is also in the Southern Africa Development Cooperation (SADC). You cannot belong to two customs unions,” said Evarist Mugisha, another Kampala consultant who partly put up the report.

There is also a general lack of harmony in some very basic administrative issues that can be sorted out by mere instructions and compliance.

For instance, travelers to Tanzania via Arusha are asked for yellow fever immunisation cards. This is not the same case in Dar-es-Salaam which is in the same country. The rest of the other four EAC countries do not ask for these cards.

Meanwhile, a general failure to harmonize tax regimes across East Africa has hampered the smooth operations of businesses and slowed the integration of the East African Community (EAC), a research study indicates.

The study, commissioned by the EAC secretariat, says although the customs union was launched in 2005, the main taxes affecting the business community have all not been harmonized. These taxes include value added tax (VAT), withholding tax and excise duty.

“These disparities in the tax regimes result into distortions and have a negative impact on cross border business activities,” says the report titled: “An evaluation of the implementation and impact of the East African Community Customs Union” released Friday at the EAC secretariat in Arusha, Tanzania. The most notable disparity in the tax regimes is highlighted in the structures of VAT. While Uganda charges 18%, Kenya charges 16% while in Tanzania it is at 20%.

Uganda’s tax charges are in some cases not specific, a situation dubbed ad valorem which means the tax chargeable is a percentage of the value or price of the product. Kenya on the other had charges specific taxes.

Still the report point out that Uganda imposes excise duty on cement while Kenya and Tanzania do not. Also, Uganda offers tax incentives to investors and sections of businesses while Kenya and Tanzania do not.

In turn, partner states have been denied the benefits of smooth tax administration which result into higher tax revenue.

“In particular (these disparities increase the cost of compliance, affect the decisions by investors with regard to where to invest and where to source finance,” reads the report compiled by three consultants in the region.

But a Uganda Revenue Authority (URA) commissioner, Richard Kamajugo, said there are already discussions on harmonization.

“The debate is should Kenya increase her VAT figures or should Uganda, Rwanda and Tanzania come down? The withholding tax at 6% is tagged to levels of compliance. It is a penalty for non compliance,” said Kamajugo.

Businesses interviewed across the region during the research also complained about the slow process of claiming duty draw back or tax returns, a process that remains quite cumbersome and unnecessarily long.

“This has the impact of tying up working capital and affecting cash flow. Provisions on duty draw back for instance do not indicate a period within which a refund can be received,’ says the report. Duty draw back is a refund on raw materials used on the goods locally made for export. Overall, the commencement of the union and the implementation of the zero rates of tariffs has had a negligible effect on revenue losses according to the report.

Inflows of foreign direct investment (FDI) almost tripled from $692m in 2002 to $1,763m in 2007. During this time, Uganda and Tanzania have consistently attracted the highest inflows.

This analysis is contained in a study report commissioned by the EAC Secretariat titled: “An evaluation of the implementation and impact of the East African Community Customs Union.” The study released last Friday looks at the three states of Uganda, Kenya and Tanzania because the other two states of Rwanda and Burundi only joined the union in July 2009.

The customs union came into force in January 2005. The arrangement was that during this transitional time, Uganda and Tanzania would maintain internal tariffs on selected imports from Kenya to be removed gradually in five years because of Kenya’s superior manufacturing sector.

A fully fledged customs union starts in two months time on January 2010.

An analysis of the growth of exports for the three countries before and after the commencement of the union contained in the research adds credence to the argument about the benefits of the union and dispels the myths of integration.

Uganda’s exports to the region for instance grew significantly in the years before 2003-2004 but especially after the launch of the Customs Union in 2005. Exports rose from $144.8m in 2005 to $274.8m in 2007 growing at an annual average of 16% (or $43.3m).

A customs union opens up intra-regional trade in goods, basing on mutually beneficial trade agreements among the partner states. Therefore goods originating from one partner state to another will circulate freely without incurring any duties. This in turn spurs business efficiencies that allow for greater trade growth.

The impact of a fully fledged customs union in the EAC is that territorial customs borders will shift to the borders between EAC and third countries and goods entering the union shall be subjected to customs control.

What is evident is that despite general fears across partner states outside Kenya previously that the elimination of internal tariffs would lead to reductions in revenue, there has been an upward trend in revenue collections.

The demystification of these fears has been through partner countries having to reorganise their tax administrations, simplify tax laws, improve staff competences and apply more relevant technological innovations like the online service at the Uganda Revenue Authority.

It also means that the realities of an open market where the unsophisticated, less skilled pit themselves against the very best has its rewards. This is by re-adjusting to the shocking realities that you either catch up or close shop.

For Uganda still, while exports have been growing, they have not been even.

“Over the years, the main export destinations have been Kenya and Rwanda. Even then, exports to Rwanda have been declining and started to grow in 2002. This means there was a lot of dependence on the Kenyan market as the export destination,” says the report compiled by three consultants from the region.

The study notes a significant improvement for Uganda in the trend after the launch of the customs union in 2005.

“While Kenya is still in the lead, starting with 2006, there was a sharp increase of exports to all the four countries,” reads the report.

The impact of the union on Kenya reveals that the value of import duties increased from $274m in 2001 to $408.8m in 2006. Although this growth in revenue is attributed to several factors like improved tax administration, electronic tax registers as well as increased trading activities. There was also increased trading activities with the rest of the world following the tariff reductions initially averaging 35% for Kenya, says the report.

During 2007, Kenya’s total exports to the partner states were 22% while imports from them stood at a mere 1%.

This perhaps highlights the disparity in the ability of the rest of EAC to export to Kenya.

Uganda is still the largest destination for Kenya’s exports.

In Tanzania, actual total tax revenue earnings continued rising at a much higher average rate of 35.9% per annum from 2005/06 to 2007/08 compared to the average growth rate of only 23.3% attained between 2003/04 and 2004/05.

“For the three years from 2005/2006 to 2007/08 revenue from import duties grew annually at an average rate of 61.9%.”

Despite this impressive impact of the union, some huge structural challenges need to be overcome before the fully fledged union takes shape in January.

Margaret Chemengich, a consultant who, in a research study, analysed the transitional EAC customs union to a fully fledged customs union advised that wider involvement and empowerment of the private sector and other beneficiaries should be undertaken in order to strengthen and lengthen production and supply chains.

A whole set of bottlenecks including a poor business climate, inadequate trade facilitation, tax disharmony, lack of awareness and national sovereignty issues stand in the way of a fully fledged customs union.

“For instance, Tanzania is also in the Southern Africa Development Cooperation (SADC). You cannot belong to two customs unions,” said Evarist Mugisha, another Kampala consultant who partly put up the report.

There is also a general lack of harmony in some very basic administrative issues that can be sorted out by mere instructions and compliance.

For instance, travelers to Tanzania via Arusha are asked for yellow fever immunisation cards. This is not the same case in Dar-es-Salaam which is in the same country. The rest of the other four EAC countries do not ask for these cards.

Meanwhile, a general failure to harmonize tax regimes across East Africa has hampered the smooth operations of businesses and slowed the integration of the East African Community (EAC), a research study indicates.

The study, commissioned by the EAC secretariat, says although the customs union was launched in 2005, the main taxes affecting the business community have all not been harmonized. These taxes include value added tax (VAT), withholding tax and excise duty.

“These disparities in the tax regimes result into distortions and have a negative impact on cross border business activities,” says the report titled: “An evaluation of the implementation and impact of the East African Community Customs Union” released Friday at the EAC secretariat in Arusha, Tanzania. The most notable disparity in the tax regimes is highlighted in the structures of VAT. While Uganda charges 18%, Kenya charges 16% while in Tanzania it is at 20%.

Uganda’s tax charges are in some cases not specific, a situation dubbed ad valorem which means the tax chargeable is a percentage of the value or price of the product. Kenya on the other had charges specific taxes.

Still the report point out that Uganda imposes excise duty on cement while Kenya and Tanzania do not. Also, Uganda offers tax incentives to investors and sections of businesses while Kenya and Tanzania do not.

In turn, partner states have been denied the benefits of smooth tax administration which result into higher tax revenue.

“In particular (these disparities increase the cost of compliance, affect the decisions by investors with regard to where to invest and where to source finance,” reads the report compiled by three consultants in the region.

But a Uganda Revenue Authority (URA) commissioner, Richard Kamajugo, said there are already discussions on harmonization.

“The debate is should Kenya increase her VAT figures or should Uganda, Rwanda and Tanzania come down? The withholding tax at 6% is tagged to levels of compliance. It is a penalty for non compliance,” said Kamajugo.

Businesses interviewed across the region during the research also complained about the slow process of claiming duty draw back or tax returns, a process that remains quite cumbersome and unnecessarily long.

“This has the impact of tying up working capital and affecting cash flow. Provisions on duty draw back for instance do not indicate a period within which a refund can be received,’ says the report. Duty draw back is a refund on raw materials used on the goods locally made for export. Overall, the commencement of the union and the implementation of the zero rates of tariffs has had a negligible effect on revenue losses according to the report.

David Mugabe, 4 November 2009

East-African Experience
Big agribusiness has become increasingly prominent in East Africa in recent years, with the establishment of a number of large-scale plantations (and many more such developments being planned and negotiated with the region’s governments). This has been linked to the promotion of biofuel production in East Africa and elsewhere in sub-Saharan Africa.

Investment Hurdles
As well as increasing revenues from agricultural production–a key sector in East African economies–agribusiness is seen as a potential tool for increasing overall agricultural productivity. It is expected to promote better practice, improve inputs and create a more efficient infrastructure linking the rural sector more effectively into global markets. However, big agribusiness faces several key challenges in establishing itself as a significant contributor to African growth and development, and its long-term future is far from assured.

Infrastructure: Transport infrastructure in East Africa, especially that linking the member countries of the East African Community, remains weak, and significant investment will be required to support a large increase in export-oriented agriculture. Tanzania’s ports are already overloaded and subject to long delays; Uganda’s links to coastal ports are reliant on a single rail line through Kenya.

Political Realities: Protests against high food prices in 2008 have targeted the use of land for biofuels rather than food–some demonstrators in Kenya had to be disbursed by police with tear gas. Such resentment has the potential to feed into bouts of economic nationalism, as occurred in Tanzania during the 2005 election campaign and at the peak of the food price boom.

Politicians accused foreign companies of excessive profiteering and proposed legislation that would increase taxes and royalties on foreign investors. While nothing came of the rhetoric, such tensions are present throughout the region, and politicians have shown themselves only too willing to manipulate popular demands.

Economic conditions: Perhaps the greatest challenge large-scale agribusiness faces is the current economic climate. East Africa has been relatively insulated from the global economic shocks so far, but the crisis may result in a fall in donor assistance, which is critical for rolling out a second green revolution. Credit is already difficult to access for the agricultural sector in East Africa, and this is likely to worsen in the short term.

Much as agriculture is the primary source of income for rural residents and it is the dominant force in the economy, little has been committed to change lives in the rural area. It is disheartening that the biggest portion of population is involved in agriculture and is the poorest.

Rural Uganda is home to 86% of the country’s 31 million people and this is what feeds the country out of their rudimentary food production efforts. Because many of them lead a hand to mouth lifestyle, there is little for sale and therefore, their incomes are the lowest.

It is worse for the northern region which has been at war for the last two decades. Poverty levels are highest in the north compared to the rest of the country and because able bodied people have been in camps, living on handouts, the fertile lands of the north have not been ploughed to generate food for the population.

However, there are efforts being undertaken by non-governmental organisations in partnership with agro-processors that are helping people in Lango sub-region begin to pick up their lives.

As peace returns to the region, people are finding the opportunity by establishing gardens; for food and income generation.

According to Susan Corning, the chief of party LEAD [Livelihood Enterprises for Agricultural Development] project, The United States Agency for International Development (USAID) has committed US$35 million for the next five years to promote enterprises in the agricultural sector to improve rural growth.

“We are concentrating on the whole value chain of staple crops, increasing productivity, competitiveness and trade capacity. We are targeting 600,000 households by the end of 2013 and our emphasis is on smallholder producers in partnership with agro input dealers and agro-processors,” Corning said.

USAID hopes that through the Livelihood Enterprises for Agricultural Development (LEAD) project, incomes will be guaranteed and raised, there will be no more hunger and agriculture will no longer be a preserve for the wretched of the earth but a commercially viable engagement.

To guarantee income generation amongst the people of Lango sub-region and other surrounding areas of the North, East and parts of Mid-western Uganda, the USAID funded project has partnered with agro-input dealers and processors like Mukwano Group of Industries for organic sunseed oil production.

In the last four years of the project, sunflower seed producted in partnership with Mukwano Gorup, has increased from 5,000 tonnes to 40,000 tonnes. This is projected to increase to 50,000 tonnes in the next 12 months. In monetary terms, the farm gate price of a kilogramme of dry sunflower seed offered by Mukwano Group is UShs450 (US$0.2).

One contract farmer, Margaret Dekops Okeng, four years ago, was one of the poor of Agwata, Dokolo district. But she exchanged two cows for six acres of land where she started growing sunflower.

“I bought four kilogrammes of improved sunflower seed at UShs10,500 (about US$5) from Mukwano. The improved seed matures in 90 days and takes two weeks to completely dry. In the end, I got three tonnes (3,000 kgs). Each kilogramme was bought at UShs450. I am now a proud owner of an iron-roofed brick house. We eat well and I send my children to good schools,” Okeng testified.

It is hoped that Okeng’s life story will resonate and be duplicated in the districts of Masindi, Oyam, Lira, Apach, Kaberamaido, Amolatar, Amuru, Pader, Kitgum and Dokolo itself.

But it can only be possible with constant training of the farmers through farmer field schools methodology, training them in basic scientific agricultural pre-planting and planting practices, post harvest management and storage.

Ms. Dorcus Adul, the LEAD Field Officer based in Lira says they do not work in isolation: they work with partner agencies and companies whose vision is to improve lives of the people.

“Our people are now experiencing a difference in their lives. They can see increase in their farm produce because they are planting the right seeds at the right time and in the right way. We have encouraged them to form farmer groups because the same time used to train one farmer now cuts across hundreds of them. Those who embraced our initiative give testimony and by example, they are bringing their friends on board,”

“We have extended our hand to agro-input dealers and we want each farmer to experience the change that will make everyone believe that agriculture can really improve lives,” Adul said.

Indeed one Moses Oundo, a social worker who went to work in the region with a child-focused agency has been integrated among the Langi people, speaks fluent Luo and now grows sunflower. He is one white collar job person who has gone to the land and he is not looking back.

Reaffirmed by the World summit of the food brought together in 1996 by FAO (United Nations for the food and agriculture), the right to food safety consists, for each individual to have, constantly the “physical and economic access to a sufficient, healthy and nutritive food making it possible to satisfy [his] energy needs and sufficient food preferences to carry out a healthy and active life”.

The goal of this “Initiative of Aquila on food safety” is to increase the investments in order to increase the agricultural production in the developing countries, as explained by the countries present in Italy. For this last day of the summit, dedicated to matters such as the assistance to the poor countries and the hunger relief in the world, the G8 leaders and the emerging nations had invited representatives from Algeria, Angola, Egypt, Ethiopia, Libya, Nigeria, Senegal, South Africa and a delegation of the African Union.

“The combined effect of long time underinvestment in agriculture and food safety, the evolution of prices and the economic crisis produced an aggravation of hunger and poverty in developing countries (…) the number of people suffering from hunger and poverty exceeds the billion today”, write the leaders brought together in Aquila, who committed themselves to “ensuring sustainable development of agriculture while providing an adequate emergency food aid”.

“We (…) remain deeply worried by world food safety, the impact of the financial and economic crisis and last year’s blaze of food prices, which hits the least capable countries to face the amplification of hunger and poverty”, they add. “If the prices of basic foodstuffs dropped since their level record of 2008, they remain historically high and unstable”, they underline, whereas the blaze of prices set off last year hunger riots in several countries.

The President of the International Fund for Agricultural Development (IFAD), Kanayo Kwanze saluted this initiative, estimating that it was “a major swing for food aid, which consists in the fact of giving a drug to a child who is already sick, towards the assistance to the countries so that they set up the good policies in order to produce food”.

They promised to make the $25 billion increase “together with other donors,” adding that the development assistance committee of the Organization of Economic Cooperation and Development has estimated that “the combined commitments of G8 and other donors would increase overall ODA (official development assistance) by around $50 billion a year by 2010 compared to 2004.”

In the G8’s declaration, leaders said agriculture and food security should be placed “at the core of the international  agenda.”

Although the crisis caused by rising food costs had abated somewhat, food prices remained high compared to historical levels. As a result, the leader’s said, the number of people suffering from hunger had increased by 100 million up to one billion “and could significantly worsen as the global economic crisis unfolds.” Climate change could aggravate the situation.

The G8 said that since January 2008 it had spent more than $13 billion on food aid, nutrition, social protection and agriculture. It committed to promoting increased investment in agriculture, without naming figures.

Addressing newsmen Tuesday in Abuja in partnership with the United Movement of Small Scale Farmers, the Interim Country Director, Oxfam GB in Nigeria, Ayodeji Ajayeoba said that “under-investment and bad policies by African governments and international donors have exacerbated chronic poverty and hunger for tens of millions of Africans. 60% of all Africans live in rural agricultural areas, while the urban poor are also increasingly facing food crisis and malnutrition”.

While praising AU for making agriculture the summit’s theme, Oxfam said local communities must have a greater say in shaping policies that affect their lives if real change was to occur. It urged African governments to meet their commitments at the 2003 AU Summit in Maputo, Mozambique to allocate a minimum of 10 percent of national budgets to agriculture and more for rural development.

According to Ajayeoba, only seven African countries including Nigeria have met the Maputo target while others “are averaging only about 4.5%”
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A summary of a 56-page Oxfam report presented at the briefing by Prof. Gbalagabe Ayoola blamed complacency by public authorities in developing countries to investment in agriculture.”This complacency has hampered farmers’ ability to cope with price volatility, climatic and economic shocks, or to pull themselves out of poverty. Yet rich countries did not neglect their own agricultural sectors. Respectively, USA and EU invested annually an average of $17,765 and $7,615 per farm from 1986 to 2007.” The report made various recommendations including budget-supported agriculture complemented by funding from civil society groups and research tailored to the conditions of specific locations, building of rural infrastructure, education and healthcare for impact on productivity.

It also recommended support for low external input technologies, empowerment of farmers and communities, treating people as key resource to development, strengthening labour rights and investment in women’s needs.

UMSSF spokesman, Josiah Mahwash urged the federal government to avail 60 percent of its intervention fund to small scale farmers because of their substantial population ,instead of 20 percent.”A minimum of 60% should be accessed by agro-producers while 40% should go to agro-processors.”

Special adviser to the governor on resource development, Alhaji Musa Nashuni who gave the hint during the official commissioning of the Batsari fertilizer blending plant revealed that the soil-guided fertilizer will be produced by the four fertilizer plants established by the state.

Engineer Nashuni who identified some irrigation site for the pilot testing noted that his department intends to involve experts and other stakeholders in the farming industry for the testing of products and selection of locations for the project.

The move would, according to him, discard blanket application of fertilizer, ensure use of desired chemical quantities that is amenable to the soil type, while the project would be replicated in all parts of the state.

The four fertilizer blending plants established in Batsari, Mai’adua, Safana and Bakori local government are expected to provide 40,000 metric tonnes of both chemical and organic fertilizer to provide jobs and meet the fertilizer requirement of the state.

Governor, Ibrahim Shema who commissioned the projects valued at N117m ordered for the procurement of N100million worth of fertilizer from the four factories. The fertilizer, would according to him be packaged in five to 25 kilogram weights to enable local farmers stock over a period of time.