Published on July 29, 2019
After five years, the East Africa Trade and Investment Hub (the Hub), a USAID project, is coming to a close. This is an expected end as USAID projects typically run for five years.
Since the USAID Hub began in 2014, we have been fortunate to work with dedicated entrepreneurs, private sector organizations, governments and development partners. Together, we have supported eastern Africa’s private sector to access and leverage economic opportunities in this dynamic region. These efforts have provided businesses with the enabling environment and tools they need to take their businesses to the next level – and the results speak for themselves.
To date, the USAID Hub facilitated 75 financial transactions, mobilizing $173.6 million in new private sector investment and finance to eastern African firms. These funds allow businesses to expand their operations and improve services.
USAID Hub-supported countries’ exports under the African Growth and Opportunity Act (AGOA) expanded by 38 percent during the project and are projected to top $1 billion in FY19 (October 2018-September 2019). These exports drive economic growth, providing people with jobs and incomes that build resiliency. USAID Hub-supported firms achieved $599.9 million in exports under AGOA, which contributed to the creation of 46,769 new jobs.
In addition to supporting international trade, the USAID Hub also encouraged intra-regional trade, specifically in staple foods. The USAID Hub facilitated trade commitments for 1.95 million MT of staple foods valued at $675.5 million and 27,957 livestock valued at $7.2 million. With the private sector moving grain from surplus to deficit regions, traders are contributing to the region’s food security and building its capacity to address food insecurity without relying on international assistance.
Finally, East African governments achieved 36 reforms with USAID Hub technical support that strengthen trade and investment-enabling environments and provide a foundation for continued economic development. The Hub also supported governments to develop or update eight AGOA strategies and actions plans which can be found on AGOA.info.
With technical activities ending, this will be the USAID Hub’s final newsletter. We encourage you to visit our website, www.eatradehub.org, to read about our past activities and lessons learned. We will also be available to put you in touch with USAID and our partners.
We are pleased to have served as a resource for public and private sector actors supporting eastern Africa's journey to self-reliance and hope that our project’s lessons will continue to contribute to the region’s development.
Published on July 17, 2019
To date, the USAID East Africa Trade and Investment Hub has directly supported nearly $600 million in exports to the U.S. under AGOA, facilitated $171.4 million in new private sector investment and contributed to the creation of over 46,700 jobs. The USAID Hub accomplished this by promoting two-way trade with the U.S., providing targeted investment facilitation, supporting adherence to intra-regional and international trade agreements and standards, and removing barriers to regional trade in staple foods. To see more of the USAID Hub's highlights, read the project's factsheet here.
Published on July 17, 2019
Earlier this month, stakeholders recommended that the East African Standards Committee (EASC) approve the ICT monitoring tool developed by the USAID Hub to measure EAC Partner States’ compliance with commitments under different technical barriers to trade (TBT) legal instruments. The regional validation workshop, held in collaboration with EAC Secretariat, took place in Arusha, Tanzania from July 3-5, 2019. The 18 participants also agreed that National Enquiry Points and National Notification Authority officials from the EAC Partner States should further test the tool and provide feedback for the tool’s finalization.
The USAID Hub and the EAC Secretariat are working together to create an ICT monitoring tool that will measure EAC Partner States’ implementation of regional and international legal agreements. During the experts meeting to draft the 3rd Regional TBT Workplan 2017/18 in October 2017, it was observed that EAC Partner States varied in their level of implementing and administrating the TBT Agreement and other regional legal instruments. There were also differences in the countries’ responses to notifications and trade concerns raised by other members. It was against this background that the Partner States agreed to develop an ICT tool to monitor the development, notification and implementation of standards, technical regulations and conformity assessment procedures. The tool will identify compliance gaps, allowing stakeholders to pinpoint areas for improvement and focused efforts.
The tool’s development was originally approved at an EASC meeting in April 2018. Following the EASC’s approval of the tool, as recommended during the meeting held this month, it will be handed over to the EAC Secretariat. While it does not include sanitary and phytosanitary (SPS) measures, it is intended to serve as a model for the SPS Agreement as well which will enhance the EAC’s compliance with the U.S.-EAC Cooperation Agreement, WTO TBT Agreement and EAC Standardization, Quality Assurance, Metrology and Testing (SQMT) Protocol/Act.
Published on July 11, 2019
Regional stakeholders discussed harmonized de minimis thresholds for EAC Partner States at a regional validation workshop for a USAID Hub report on July 8 in Nairobi, Kenya. The report is intended to facilitate the determination of appropriate de minimis threshold across the EAC Partner States that balances the need for expanded e-commerce and business efficiencies versus government revenue generation and risk management. The 19 participants, drawn from Kenya, Uganda, Tanzania and Rwanda, made several recommendations which will be incorporated into the final draft.
De minimis thresholds denote the minimum value for imported goods at which no duties and taxes are applied. Parcels that fall below the threshold can travel across borders without duty or taxes being collected and they have simpler customs declarations. While EAC Partner States had previously agreed to a de minimis threshold of $150 in principle, only Uganda has agreed to use this threshold at the national level and is working on the legal reforms to support it.
Varying thresholds in the region adversely affect cross border trade. Traders, particularly those dealing with low-value shipments, experience high customs duties, hidden costs and long transit times. The different thresholds also inhibit the potential of e-commerce where low-value parcels feature prominently. Consumers and U.S. businesses are deterred from making online purchases when they are compelled to absorb extra customs costs.
McKinsey predicts that by 2025 retail e-commerce in Africa could account for 10 percent of all retail sales, or $75 billion in annual revenue. Removing complex and costly customs procedures while increasing the de minimis threshold for import duty exemptions could help East Africa attract global e-commerce players to the region. This would give East African consumers access to a greater range of products and allow U.S. businesses to operate in a dynamic, growing market. EAC Partner States could also benefit from greater and more efficient trade and the resources saved through simplified customs procedures. Customs officials could redirect their efforts to enforce duties on higher value imports.
The Hub’s report incorporates international best practices, data analysis and stakeholder feedback to provide balanced recommendations. Once finalized, its findings are expected to inform discussions on de minimis at the next EAC Committee on Customs meeting in November 2019.
Published on July 10, 2019
The USAID East Africa Trade and Investment Hub contributes to increased intra-regional trade of staple foods within the EAC by improving the access to, availability of and utilization of African-grown commodities through regionally integrated markets. Women dominate the EAC’s cross-border trade in staple foods, yet most operate informally and face many challenges. To achieve greater intra-regional trade and improve the livelihoods of women traders, interventions must therefore address women’s participation in informal trade. Through two grants, one to the Agricultural Market Development Trust (AGMARK) and one to the Agribusiness Focused Partnership (AGRIFOP), the USAID Hub trained 391 women cross-border traders on trade regulations, business management and entrepreneurship. This effort led to improved policy advocacy and increased formal trade in the form of trade commitments for 17,509 metric tons (MT) of staple foods valued at $5,651,285, laying a foundation for future trade. To learn more, read the USAID Hub's Women Cross-Border Traders Compendium.
Published on July 01, 2019
Rules of origin – the criteria needed to determine the nationality of a product – could make or break the African Continental Free Trade Area (AfCFTA) that entered into force in May, says a new UNCTAD report. The Economic Development in Africa Report 2019 notes that rules of origin could be a game changer for the continent as long as they are simple, transparent, business friendly and predictable.
"The AfCFTA is a landmark achievement in the continent’s history of regional integration and is expected to generate significant gains. But it is the rules of origin that will determine whether preferential trade liberalization under the AfCFTA can be a game changer for Africa’s industrialization," UNCTAD Secretary-General Mukhisa Kituyi said.
Currently intra-African trade is a mere 15%, compared to around 47% in America, 61% in Asia and 67% in Europe, according to UNCTAD data for 2015 to 2017, but the AfCFTA could radically change that.
If the agreement is fully implemented, the gross domestic product of most African countries could increase by 1% to 3% once all tariffs are eliminated, according to UNCTAD estimates.
Published on July 01, 2019
On June 25, the USAID Hub and the Nairobi Securities Exchange (NSE) held a validation workshop for a feasibility study on listing a maize futures contract at the NSE. The study, validated by 35 stakeholders, found the listing to be feasible and confirmed that there is an appetite for such a listing at the NSE. Now, with the study’s recommendations, the NSE has the option to proceed with pursuing the listing. The NSE has invested heavily to prepare the market to manage derivatives contracts and is due to launch financial derivatives contracts trading on July 4, 2019. Investments made in strengthening the NSE’s institutional, human capital and trading infrastructure will enable the market to add agricultural derivatives trading with relative ease.
A maize futures contract would allow traders to purchase maize at a set price for a specific date in the future. There are several benefits to this, including:
- Efficient price discovery and risk management;
- Transparent trade through an electronic trading platform;
- Guaranteed transactions through the derivatives clearing structure;
- Guaranteed procurement through approved storage operators; and
- Funding for producers who hedge their price risk, which encourages sustainable production.
Farmers and consumers stand to gain from stabilized maize prices. In the current boom and bust cycle, farmers lose money when the price of maize drops. Yet consumers lose when the price rises and pushes up costs for staple foods like ugali. Having a more predictable price would contribute to farmers’ and consumers’ resiliency, allowing families to better plan around incomes and expenses.
While commodity exchanges are not new, commodity derivatives have yet to enter the EAC. The NSE has successfully completed a trial of select stock and index derivatives, demonstrating that it has the capacity to serve as a pilot in the region. Challenges to listing remain, however, as detailed in the Hub-supported study.
Published on June 24, 2019
Regional traders made 113 trade commitments for 454,532 metric tons (MT) of commodities valued at $196,478,900 at the fifth – and largest – B2B forum hosted by the USAID Hub in partnership with the USAID Southern Africa Trade and Investment Hub and Eastern Africa Grain Council (EAGC). Of these deals, 105,394 MT valued at $96,789,300 were staple foods (maize, mixed beans, rice, sorghum and green grams). Other traded commodities included pigeon peas, sesame seeds and sunflower seeds. To date, Hub-sponsored B2B forums have facilitated regional trade commitments for over 1.93 million MT of grains and pulses.
The forum took place on June 19 in Dar es Salaam, Tanzania, where there is a surplus of grain. It brought together 127 participants from nine countries across Eastern and Southern Africa, providing a platform to move staple foods to deficit areas for food insecurity alleviation. Andy Karas, the Mission Director from USAID/Tanzania participated in the forum, as did Godfrey Malekano from Tanzania Merchantile Exchange and Prof. Damian Gabagambi from the National Development Corporation. Other participating organizations included TradeMark East Africa, the Clinton Foundation and Aga Khan Foundation. Financial institutions such as First National Bank, National Microfinance bank, Commercial Bank of Africa (CBA) and Maendeleo Bank were also represented.
Food insecurity remains a significant challenge in Eastern and Southern Africa. Millions of people require emergency food assistance and many more are food insecure. Measures to stop trade exasperate the effects of climate change and political instability on people’s ability to secure sufficient food. Despite these challenges, the two regions have the potential to feed themselves and achieve food security within a generation.
The B2Bs seek to increase the access, availability and utilization of staple foods across the regions by bringing together actors who don’t traditionally do business with one another. This creates an opportunity to address impediments to trade and improve the flow of staple foods from areas with excess production to those in need. Ultimately, this provides a sustainable, private sector-led alternative to emergency food assistance and advances countries’ journeys to self-reliance.
To learn more about the Hub’s B2Bs, read our compendium here.
Published on June 20, 2019
USAID trade and investment programs, like the USAID East Africa Trade and Investment Hub, mobilize new investors and private capital to under-served sectors and geographies, and they support investment closure. For instance, the USAID Hub provides investment facilitation services – due diligence, market intelligence, and regulatory know-how – that can speed up a transaction and prevent investor frustration. The investment closures then serve as positive examples for other investors who may need a nudge to enter the East Africa market. The Hub then steps aside and lets the private sector take over. USAID's support helps U.S. and international companies broaden their markets and it helps East African companies access the capital they need for sustained, economically impactful growth -- driving job creation and enhancing access to and quality of services for local communities.
Driving Investment in East Africa looks at four case studies that illustrate what these funds can achieve.
Read or watch to learn more.
Published on June 17, 2019
The USAID Hub provided technical support at a training on AGOA organized by Kenya’s Ministry of Industry, Trade and Cooperatives, which raised early career trade officers’ understanding of the trade preference program. One of the 54 participants remarked, "The most valuable things I learned from the workshop were what AGOA really is and how I can build the capacity of others in my office and in the counties."
Mr. Peter Njoroge, Director, External Trade in the State Department for Trade officially opened the workshop on June 13 on behalf of the Principal Secretary, Dr. Chris Kiptoo. He set the stage for the next two days by highlighting the importance of the U.S. as a trade partner for Kenya and the need to make full use of AGOA benefits.
The training’s 14 modules covered areas that would build participants’ capacity to help the country fully leverage its duty-free access to the U.S. market for almost 7,000 tariff lines. Topics included an overview of AGOA, an assessment of the U.S. market, Kenya’s National AGOA Strategy, the delivery of trade promotion technical support services, the export processing zones scheme, U.S. sanitary and phytosanitary requirements, the Food Safety Modernization Act and customs and logistics processes for exporters to the U.S. under AGOA. These sessions were complemented by lessons shared by successful AGOA exporters, NewWide Garments EPZ and Jungle Macs EPZ Ltd., and a discussion on likely scenarios following the end of AGOA in 2025.
The USAID Hub’s Director of Trade Promotion and AGOA and Market Linkages Specialist led workshop sessions and shared USAID Hub resources, including the Kenya AGOA 101 primer and U.S. end market reports for select sectors. The USAID Hub’s Deputy Chief of Party encouraged participants to use and share the materials to effectively implement the Kenyan National AGOA Strategy, 2018-2023, supporting Kenya to meet its goal to double exports to the U.S. by 2023.
To learn more about AGOA and Kenya’s strategies to maximize exports, please see materials on the USAID Hub’s website, including the Kenya National AGOA Strategy, 2018-2023, the Kenya AGOA 101 and the end market reports for coffee, tea, textiles and apparel, home décor and fashion accessories, and cut flowers.