In a notable economic shift, Rwanda has redirected its trade focus towards the Common Market for Eastern and Southern Africa (COMESA), achieving significant trade growth while facing barriers in the East African Community (EAC). Rwanda’s trade with COMESA partners rose by an impressive 8.2 percent in the year leading to December 2023, surpassing growth rates seen by other EAC member states. This increase, driven by a surge in exports and imports within the COMESA bloc, saw Rwanda surpass the Democratic Republic of Congo (DRC) to become the sixth-largest trading partner in the region. Rwanda’s merchandise trade under the COMESA preferential trade agreement reached $1.8 billion, up from $1.69 billion in 2022.

This shift comes as Rwandan traders express frustrations over various non-tariff barriers within the EAC, such as unpredictable road tolls and documentation requirements, which have hindered seamless trade within the bloc. Rwanda’s export growth of 8.9 percent, which reached $982 million, contrasts sharply with the decline in trade volumes experienced by some other regional economies, notably the DRC, whose trade dropped substantially to $544 million.

Barriers to Trade in the East African Community

While Rwanda’s trade with COMESA has increased, Rwandan traders report considerable challenges within the EAC that are hampering regional commerce. The EAC, designed as a common market to foster free movement of goods, services, and people, has yet to realize this goal fully due to restrictive policies implemented by individual member states.

One key issue raised by Rwandan traders is the inconsistency in road tolls applied across the region. For example, Rwandan transporters using the Mombasa-Taita Taveta and Central Corridor routes through Tanzania often face arbitrary charges and additional certification requirements. According to Abdoul Ndarubogoye, president of the Long Distance Truckers Association in Rwanda, these levies add to the cost of transporting goods and make intra-EAC trade less competitive.

Bosco Rusagara, a member of the East African Business Council (EABC), highlighted the lack of enforcement power within the EAC Secretariat, which limits its ability to ensure compliance with the EAC’s free market principles. He emphasized that economic growth in the region could be significantly bolstered if the EAC Secretariat had greater authority to mitigate unfair practices and harmonize trade regulations across member states.

Challenges Facing Intra-EAC Trade and Implications

Despite the EAC’s goal of fostering regional trade through the common market protocol, intra-EAC trade remains low, accounting for less than 15 percent of the region’s total trade. This lackluster performance is often attributed to non-tariff barriers, poor enforcement of policies, and disparities in economic policies among member states. Rwanda’s recent pivot to COMESA highlights the obstacles that continue to limit the EAC’s effectiveness as a trade bloc, with non-tariff barriers presenting substantial impediments.

Analysts note that while the EAC common market was established to promote economic integration, political and economic differences among member states have led to inconsistent implementation of agreed-upon trade policies. For instance, border closures, sporadic security checks, and unpredictable taxation policies are frequent complaints among regional traders, particularly those from smaller economies like Rwanda. As a result, intra-EAC trade has not experienced the robust growth seen in other African trade agreements, such as the African Continental Free Trade Area (AfCFTA), which has sought to create a more integrated African economy.

Comparative Performance: COMESA vs. EAC Trade in East Africa

Rwanda’s success with COMESA stands out as trade in the bloc experienced an overall 1.8 percent decline, bringing the total to $27.8 billion amid global economic challenges, such as rising interest rates, inflation, and currency depreciations across Africa. Within the EAC, only Rwanda and Uganda recorded increases in COMESA trade, with Uganda seeing a modest growth of 1.6 percent, amounting to $1.97 billion, compared to $1.93 billion in the previous year.

Kenya, one of the largest economies in the EAC, saw a slight drop in its trade with COMESA, yet maintained its position as the second-largest trader within the bloc, with a total trade volume of $3.2 billion, trailing only Egypt, which recorded $5.7 billion. Despite Kenya’s overall decline, its substantial trade volume with COMESA underscores the benefits of the agreement for larger economies, while smaller states like Rwanda have leveraged the preferential trade agreement to counterbalance losses in other trade areas.

Implications of COMESA’s Trade Structure on Rwandan Economy

Rwanda’s expanding role within COMESA has provided an alternative economic pathway, allowing the country to mitigate losses associated with its limited trade relations within the EAC. COMESA’s preferential trade structure, which offers lower tariffs and fewer non-tariff barriers than other trade agreements, has been instrumental in fostering Rwandan trade. Rwanda’s exports to COMESA countries largely include agricultural products, minerals, and manufactured goods, which have benefited from easier access and lower costs under the preferential trade terms.

Rwandan economic experts suggest that Rwanda’s reliance on COMESA could signal a strategic shift in the country’s foreign trade policy. With the introduction of the African Continental Free Trade Area (AfCFTA), which aims to reduce intra-African trade barriers, Rwanda may be positioning itself as a regional hub for trade, diversifying its economic partnerships while still engaging with traditional allies in the EAC. This strategy could enhance Rwanda’s economic resilience and strengthen its position within Africa’s rapidly evolving economic landscape.

Strengthening Regional Integration through COMESA and EAC Collaboration

The growth of Rwanda’s trade within COMESA raises questions about the future of regional integration in Africa and the potential for collaboration between COMESA and the EAC. Some policymakers argue that greater alignment between the two trade blocs could help address the shortcomings of the EAC, while also enhancing COMESA’s economic influence in the region. By harmonizing trade policies and reducing non-tariff barriers, the EAC and COMESA could collectively foster a more cohesive trade environment for East African nations.

Moreover, Rwanda’s trade success within COMESA highlights the potential for intra-African trade agreements to complement each other, provided there is sufficient political will and coordination among member states. Joint initiatives between COMESA and the EAC could involve streamlined customs procedures, joint infrastructure projects, and standardized regulations, which would make it easier for traders across both blocs to do business.

Global Economic Context and Future Trade Outlook for Rwanda

Rwanda’s rising trade with COMESA comes at a time of global economic uncertainty, marked by inflation, high interest rates, and fluctuating commodity prices. Despite these challenges, Rwanda’s robust trade performance within COMESA reflects its adaptability and the potential for economic growth through diversified trade partnerships. Economists predict that Rwanda’s trade volumes may continue to grow as the AfCFTA gains traction, providing additional avenues for Rwanda to increase its exports across the African continent.

Looking forward, Rwanda’s government has committed to enhancing its trade infrastructure and reducing logistical costs to support the growth of its export-oriented sectors. By improving transportation networks, expanding access to finance, and promoting investment in high-growth industries such as manufacturing and agribusiness, Rwanda aims to build on its recent trade achievements within COMESA. This strategy is also aligned with Rwanda’s Vision 2050 development plan, which emphasizes regional integration and trade as essential components of the country’s long-term economic prosperity.

In conclusion, Rwanda’s success in the COMESA trade bloc underscores the importance of diversified trade relations for small economies facing regional trade barriers. As Rwanda continues to navigate its challenges within the EAC, its increasing trade with COMESA highlights both the limitations and the opportunities within Africa’s complex trade landscape. Through strategic partnerships, policy reforms, and investments in trade infrastructure, Rwanda is positioning itself to thrive amid the evolving dynamics of regional and continental trade.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

12th November, 2024