Consolidating regional growth

Competition law regime can accelerate economic growth in East Africa

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Kenya, more than the rest of the countries in the EAC bloc, is fast emerging as the preferred investment destination for multinational companies. The regional market is the target of foreign firms from the European Union, China, US and even within the continent for the investment opportunities it offers in various sectors following the establishment of the EAC Common Market in 2010.

The EAC common market is attractive to investors as it currently has over 153 million consumers. Recently, the EU has been negotiating a bilateral agreement – the Economic Partnership Agreements (EPAs) – with the EAC that could greatly impact the region’s market structure. Local firms stand to lose to foreign firms with greater capacity under the agreement in several sectors including agriculture, retail, horticulture, fisheries, textile and clothing, if adequate safeguards are not established locally.

This brings to light the need to enhance a competitive regional economy within the EAC through the implementation of a regional competition law regime. A competitive market protects consumers and SMEs from unfair business practices. It translates to more choice, better quality and lower priced products for consumers, and easier market access for new firms. Moreover, ensuring a competitive market involves enforcing measures to curb abuse of dominance, market sharing, and concentrated mergers and acquisitions by firms with substantial market share. The most effective way to achieve this would be for the EAC member states to enforce regional competition legislation and encourage the enactment of national competition laws, as well as establish independent competition agencies.

The EAC Competition Act, 2006, has already been ratified by member states, and national competition legislation enacted in all member countries except Burundi and Uganda. Prior to this competition legislation, price-fixing, poor quality products/services, and market sharing were rampant in the EAC region, owing to increased cross-border trade. The most affected sectors across the region are telecommunications, transport, insurance, beverages, banking and energy.

To prevent further distortion of competition in the common market, member countries are making efforts to establish a regional competition authority that will have mandate over the regional market in comparison to national competition agencies. Once established, the EAC competition authority will check cross-border anti-competition practices, and harmonise national competition regimes of the member states under the EAC competition regime.

Although the EAC Competition Regulations were adopted in 2010, there has been slow progress in the establishment of the EAC Competition Authority. Several challenges have contributed to this.

To begin with, there has been inadequate funding from member states to enable the authority to start its operations and function effectively across the region. Secondly, there are legislative conflicts between national and EAC competition regimes, leading to disharmony and posing enforcement hurdles. Similarly, amendments to the EAC competition legislation that would bring regional harmony have been delayed by national governments. In addition, the economies of the EAC member countries are at different levels of development, and there is still a quest for protectionism by the governments of some of the EAC member states – some economies are heavily regulated. More importantly, there has been a lack of political will, and vested interest by the governments of some member states, who have shown reluctance to be supervised at the regional level on national economic matters such as national procurement law and industrial policy.

Furthermore, some member states are yet to enact competition legislation – examples are Burundi and Uganda. Another major challenge is that the interface between sector regulators and national competition authorities has not been properly established. As a result, in most of the EAC countries, there has been poor cooperation and jurisdictional feuds between sector regulators and competition authorities. Consequently, the competitive culture in these economies has been perceived as being low, and consumers have suffered welfare losses due to unchecked anti-competitive practises.

There is need for capacity building at the national and regional level in support of the EAC competition regime. This will involve training personnel on competition law and policy and its enforcement, funding regional and national competition agencies, and increasing advocacy on the benefits of a competitive market to all stakeholders.

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