Mpesa Security Risk

According to the Ministry of Finance a technology disaster affecting Mpesa mobile transfer systems is now classified as a potential threat to the Kenyan economy (classified as a fiscal risk) causing loss of revenue- excise and corporate tax by firms running the systems. Mpesa represents a form of branch-less banking which was facilitated through a "special" license from regulators, despite concerns by regulators about non-branch banking in the interface between technology and the banking sector. This adds to the current state of financial insecurity.  Safaricom has apparently put in place several security systems to guard against such threats of disruption which could impact the Kenyan economy.

M-pesa plays a critical role in the Kenyan economy, a contribution that stands at a GDP of over 40%. For instance some Sh 2.8 trillion was transacted through mobile money last year, making it a crucial source of excise tax revenue for the government.  Other materials on Mpesa can be found on this site.

BRICS Bank now operational

The New Development Bank BRICS (NDB BRICS), formerly referred to as the BRICS Development Bank is now operational. The Bank is a multilateral development bank founded by the BRICS states (Brazil, Russia, India, China and South Africa) as an alternative to the existing US-dominated World Bank and International Monetary Fund. The Bank is set up to foster greater financial and development cooperation among the five emerging markets. Unlike the World Bank, which assigns votes based on capital share, in the New Development Bank each participant country will be assigned one vote, and none of the countries will have veto power.

The five big emerging market economies (BRICS) have strengthened co-operation with a constant goal in mind: to challenge the West’s grip on the Bretton Woods institutions by creating their own monetary fund and development bank.

They chafe at their under-representation at the IMF; the voting rights of China, the world’s second-largest economy, are not even a quarter of those of the US. An IMF reform that would slightly correct the imbalance has been languishing for three years. A battle seems to have a foregone conclusion because of the composition of the IMF executive board, which names the managing director. It is dominated by Europeans and Americans.

The BRICS Bank shall in its role mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development.

To fulfill its purpose, the Bank shall support public or private projects through loans, guarantees, equity participation and other financial instruments. It shall also cooperate with international organizations and other financial entities, and provide technical assistance for projects to be supported by the Bank.

Even though the bank has 5 founding members, the Bank shall be open to members of the United Nations, in accordance with the provisions of the Articles of Agreement of the New Development Bank and shall be open to borrowing and non-borrowing members.

To fulfill its purpose, the Bank is authorized to exercise the following functions:

(i) to utilize resources at its disposal to support infrastructure and sustainable development projects, public or private, in the BRICS and other emerging market economies and developing countries, through the provision of loans, guarantees, equity participation and other financial instruments;

(ii) to cooperate as the Bank may deem appropriate, within its mandate, with international organizations, as well as national entities whether public or private, in particular with international financial institutions and national development banks; 

(iii) to provide technical assistance for the preparation and implementation of infrastructure and sustainable development projects to be supported by the Bank; 

(iv) to support infrastructure and sustainable development projects involving more than one country; 

(v) to establish, or be entrusted with the administration, of Special Funds which are designed to serve its purpose. 

The Bank has its headquarters in Shanghai.China and the Bank may establish offices necessary for the performance of its functions and as such the first regional office is in Johannesburg, SA.

The Bank shall have a Board of Governors, a Board of Directors, a President, Vice-Presidents as decided by the Board of Governors, and such other officers and staff as may be considered necessary. With India providing the bank’s president, the bank’s four vice-president’s come from each of the other Brics member countries (Brazil, Russia China and SA). SA’s vice-president is Leslie Maasdorp, who, as chief financial officer, will be responsible for treasury and portfolio management as well as the finance, budgeting and accounting functions.

The Bank in its operations may provide financing in the local currency of the country in which the operation takes place. 

The Bank shall possess full international personality and enjoy wide immunities.

Mobile Money Biggest Bank by Deposits

Customers’ cash deposits held by mobile phone companies in Kenya hit KSh226 billion as of December, making the telecoms firm Safaricom's MPESA money transfer service, Kenya’s biggest bank in terms of deposits.

The total deposits held in mobile money subscriber accounts by the country’s four mobile firms Safaricom, Airtel, Yu and Orange increased by 10 per cent between October and December, according to a report released by the communications regulator the Communications Authority of Kenya.

The amount surpassed the cash held by Kenya’s biggest commercial bank Kenya Commercial Bank, as measured by clients’ money whose total deposit is about Sh223 billion for its local operations.

“The mobile money transfer service continued to record tremendous growth during the period and the number of mobile money transfer subscribers grew by 9.4 per cent to 21.1 million up from 19.3 million recorded in the previous period.

Though the CCK report did not break down the amount held by each telecommunications firm, Safaricom’s M-Pesa is by far the biggest holder for the bulk of the deposits.

See full post here.

World Bank Unveils Portal On Diaspora Remittances to Africa

This transparency is important.

Send Money Africa provides data on the cost of sending and receiving relatively small amounts of money from selected countries worldwide to a number of African countries, as well as within the African continent. The objective of the database is to increase transparency in the market and provide migrants with complete and reliable information on all the components of the transaction. Send Money Africa allows the users to compare the costs applied by several providers to send and receive money from 15 major sending countries to 27 African receiving countries, for a total of 50 "country corridors".

See country corridors here.

Kenya: Safaricom’s M-Pesa goes global with Western Union

Safaricom, Kenya’s biggest mobile operator, has announced a deal with Western Union, the international money transfer company, to enable its M-Pesa mobile money service subscribers to receive direct cash transfers from Western Union agents worldwide.

Consumers can now send money directly to the mobile ‘wallets’ of Safaricom M-PESA subscribers in Kenya from 45 countries and territories,” explains Karen Jordaan, East and Southern Africa Director at Western Union.

The service taps into Africa’s huge remittances flows, which the World Bank estimates to have totalled $40bn in 2010. 

See full piece here and related posts here.

Kenya To Establish the Nairobi International Financial Centre

Kenya hopes to position itself as a financial services hub similar to other financial hubs in the world e.g. London, New York, Dublin, Mauritius and Johannesburg.

Towards this end, finance minister Hon. Uhuru Kenyatta has launched a committee that will guide the establishment of the Nairobi International Financial Centre (NIFC), whose key task will be integrate the domestic financial sector to others in the region and globally. The committee will come up with proposals on the preferred type, financial implications, funding options and an implementation plan for the centre. The Steering Committee for Nairobi International Financial Centre was gazette is now operational.

The term “international financial centre” (NFIC) is often used interchangeably with “tax haven” or “secrecy jurisdiction,” although the latter terms have more negative connotations. Scholars generally label as “tax havens” those territories that offer favourable tax regimes and bank secrecy laws designed to attract foreign investors.

An International Financial Center is part of Kenya's Vision 030 and the Vision pointed to Mauritius and the Seychelles as potential models for the Kenyan IFC. It is envisioned that the NIFC may grant tax incentives, including a maximum 10-year tax holiday, along with VAT and customs exemptions.

It is envisioned that the NIFC may grant tax incentives, including a maximum 10-year tax holiday, along with VAT and customs exemptions.  However the international Financial Center will transform the economy, but observers warn it could contribute to illicit financial flows, inequality and a lack of transparency.

Meanwhile, in the regional context the World Bank has provided funding for the development of the  EAC Financial Sector Development & Regionalization Project and Financial Services is one of the 7 trade in services sectors to be liberalized under the EAC Common Market Protocol on the Free Movement of Services.

Setting up of the NIFC along with legal and institutional reforms are some of the projects envisioned for the financial sector under the country’s economic blueprint — vision 2030 — along with banking sector consolidation, pension reform and increasing diaspora remittances. 

The NIFC would also have a separate legal and judicial framework that would attract companies to set up shop.

See related story here.

EAC Financial Services and Double Taxation Avoidance Treaty

The 9 year EAC Financial Sector Development & Regionalization Project, funded by the World Bank is a welcome development.   A strong regional financial sector is needed to underpin an effective common market and build a single financial services market for the region.  The development of a regional financial services sector, will also benefit the establishment of a monetary union and single currency.  In addition, the EAC region stands to gain by trading on a regional stock exchange, i.e a single East African Stock Exchange and furthermore, the harmonization of the financial services sector will play a key role in unlocking the removal of barriers for the free movement of capital across the EAC region- as provided for by the Common Market Protocol. 

In related news, the EAC region has apparently not implemented the Treaty on Avoidance of Double Taxation. The Double Taxation Treaty would allow income generated in any of the five member states to be taxed only once but lack of implementation has given national revenue bodies the legitimacy to maintain the status quo with revenue authorities making double claims for revenue earned in each individual country.

Agency Banking- Reaching the Unbanked

The agent bank offers the same services as a real bank —cash deposits and withdrawal, disbursement and repayment of loans, payment of salaries, pension, transfer of funds, and issuance of mini-bank statements, among others.

The agent also facilitates new account opening, credit and debit card application, cheque book request and collection and is linked to Equity Bank’s systems electronically, eliminating the need for the commercial bank to have a branch in Ruaka to do business.

This is being replicated across the country, especially in rural areas, with Equity Bank saying that already 1,000 banking agents have started operating.

The Central Bank has licensed four banks, including Equity, to carry out agent banking business and approved 8,809 specific agents since last year.

Should the remaining over 7,000 agents roll out their services as expected early in the year, then this would deeply boost penetration of banking services in the country even as banks eliminate costs on physical branch expansion in areas with low volumes.

Agents may be able to play a role in a broad range of services, including account opening, cash-in and cash-out services (including cash disbursement of bank-approved loans and repayment collection), payment and transfer services (including international remittances and person-to-person domestic transfers), and perhaps even credit underwriting.

A major obstacle to financial inclusion is cost—not only the cost incurred by banks in servicing low value accounts and extending banking infrastructure to un-derserved, low-income areas, but also the cost incurred by poor customers (in terms of time and expense) in reaching bank branches. Achieving financial inclusion therefore requires innovative business models that dramatically reduce costs for everyone and thus pave the way to profitable extension of financial services to the world’s poor.

Fragility of African Stock Exchanges

Reuters Africa

One of the biggest obstacles to investing in African stock markets is the paucity of listed companies and the limited number of shares traded on them. So the prospect of two fairly major delistings is not a particularly comfortable one for African exchanges at a time they are trying to encourage more companies to list and to capitalise on the growing investor appetite for Africa.

Bharti Airtel is delisting its Lusaka-listed Celtel Zambia unit – the second biggest company by market capitalization on the Zambian stock exchange – following a mandatory offer to buy out minority shareholders.

Meanwhile, Greek Coke bottler Coca-Cola Hellenic – the world’s second biggest Coke bottler – plans to buy out the Nigerian Bottling Company and turn it into a wholly-owned subsidiary in a $126 million deal. It already owned two-thirds of the shares.

In neither case is there a suggestion the parent company will not be planning to pump in more investment – quite the opposite in fact as Africa is increasingly seen as a place to get above average returns and with excellent growth prospects.  But taking the companies off the stock exchanges removes the chance for other investors to get that direct exposure to the African opportunities.

There was a chance South African retailer Massmart could disappear from the bourse too after WalMart announced a buyout plan, but the U.S. giant now intends to keep the Johannesburg listing – so Massmart investors can keep their participation in the expected growth it sees in Africa.

Overall it hasn’t been a bad year for African stock exchange listings given that we’ve seen Nigeria’s Dangote Cement – the biggest firm in sub-Saharan Africa outside South Africa – float its shares in a listing which valued it at $14 billion at the time (now nearer $12 billion).  That said, the free float – the proportion of shares held by investors likely to trade – is only just over 5 percent.

African stock exchanges certainly have their work cut out to encourage more companies to see them as the best place for raising finance. Questions have long been raised over whether Africa needs so many small national exchanges and whether it might not be to everyone’s advantage to have listings on fewer, bigger markets.

See previous post here.

Kenya's MPESA to Spearhead Seamless Mobile Financial Transfers in the Continent

Michael Joseph, the immediate former CEO of Safaricom, has been tapped to spearhead the expansion of M-Pesa to other African countries as part of a plan to have a seamless mobile money transfer service on the continent.  M-Pesa is already successful in Kenya, and is now also available in Tanzania, Afghanistan, South Africa, while a pilot service is on in India.

But Vodafone is looking at spreading the services to other African countries such as DR Congo, Lesotho, and Mozambique with the aim of linking the market.  This will see mobile phone consumers send and receive money across borders in a move that will pile pressure on traditional money transfer service operators such as Western Union and Money Gram who have lost market share in the local market.

“M-Pesa is the most successful mobile money transfer service in the world and with Michael is a sure bet to drive its regional expansion having been behind its growth in Kenya,” said a senior executive at Safaricom who sought anonymity because he is not the firm’s spokesperson. “The rollout of the service in the new territories will not automatically enable registered Kenyan subscribers to send or receive money.

“But there is a plan to link them to these markets in coming years,” said the source. At present, Safaricom subscribers can receive money from the UK directly to their mobile phones in transactions carried out in partnership with Western Union and Vodafone. Mr Joseph retired from Safaricom in November after serving for 11 years and passed the leadership mantle to Bob Collymore.  He sits on the board of Safaricom and Johannesburg-based Vodacom, which is owned 65 per cent by the Vodafone Group — which has operations in five countries including South Africa, Tanzania, DR Congo, Lesotho and Mozambique.

It was under him that Safaricom rose to become East Africa’s largest and most successful firm in terms of earnings, and a market leader in Kenya’s mobile telephony market with a 76 per cent stake.  By 2005, Safaricom’s grip on the Kenyan mobile market had been cemented and in 2007 the company launched its mobile money transfer service M-Pesa — an innovation whose implementation was credited to Mr Joseph’s courage and which paid off handsomely winning over more than 13.5 million subscribers by September 2010.

Transactions worth Sh596.8 billion have gone through M-Pesa since its inception.  The service accounted for 11 per cent of Safaricom’s revenues or Sh5.2 billion in the six months to September this year up from Sh930 million in the same period in 2008.  Safaricom has used M-Pesa as a value added service, successfully using it to defend and attract subscribers from rival networks.

The service has driven a revolution of sorts in Kenya’s financial services where it is being used for payment of utility bills, dividend, goods at retail shops and banking services such as ATM withdrawals, deposits and cash transfers.  It is this market position that Vodafone seeks to replicate in five African countries served by Vodacom, especially DR Congo, Lesotho and Mozambique. Mr Joseph’s brief will be to shepherd the rollout of the product in the three countries and to shore up its performance in Tanzania and South Africa where the mobile money transfer service is yet to penetrate the market.

Low cost

The service was launched in South Africa in September and Tanzania in April 2008.  Nearly half (47 per cent) of all money transfers in Kenya now take place through the mobile phone, according to a survey by Financial Sector Deepening, a research firm that conducted the survey for the Central Bank of Kenya.

This has seen traditional money transfer service operators lose their grip on the market as more Kenyans turn to mobile phone-based platforms.  Popularity of the service is mainly hinged on the low cost of transaction, safety, and speed. Mr Joseph succeeded Mr Grieves-Cook who had served as the KTB chairman for two consecutive terms since his first appointment in November 2004.  Under his chairmanship, KTB managed to put up aggressive marketing campaigns targeting domestic and international tourists.

In addition, the organisation partnered with international travel and leisure groups as well as the media and airlines to build a strong image for Kenya as a niche tourist destination.

Nation Media

SA Services Firms Making Inroads into the Kenyan Market

South African firms have in the last 2 years increased investments into Kenya, hoping to be second time lucky in a market that previously proved difficult to penetrate and effectively buried a number of corporate SA giants.  The major difference this time round is that SA investors have changed their strategy, in favour of mergers and acquisitions while doing away with the setting up of new establishments. 

Previously South African firms appeared to concentrate their investments in the retail distribution services sector- mostly consumer goods through home grown giants such as MetroCash and Carry, Shoprite, Wool Worths etc. Recently however, investments have cut across nearly all sectors including banking, capital markets and ICT.

In the ICT sector, SA service providers entering the Kenyan market include MTN Business, which acquired UUNet Kenya (to become MTN Business Kenya) and Telkom South Africa (with a SA Government shareholding of 39.8%) and which has gained a strong local presence through a series of direct and indirect acquisitions of local firms such as a local satellite data transmission services company, Afsat Communications and Internet Service Provider Africa Online in a series of complex transactions that also involved other companies.

In financial services, Nedbank one of South Africa’s largest banks, entered Kenya through the Eco bank-Ned bank alliance where their customers can use any or both of the banks’ services without any changes in shareholding structure. The alliance is the largest banking network in Africa, with more than 1000 branches in 33 countries since Ecobank, has a presence in more African countries than any other bank in the world.  The alliance offers clients a 'One Bank' experience across Africa and the arrangement enables Nedbank, which had operations in only five African countries, to extend its footprint to the 29 countries where Ecobank has operations without moving in directly. ingenious.

Interestingly Ecobank Transnational International (ETI), is a public limited liability company which was established as a bank holding company in 1985 under a private sector initiative spearheaded by the Federation of West African Chambers of Commerce and Industry with the support of ECOWAS. In the early 1980’s the banking industry in West Africa was dominated by foreign and state-owned banks as there were hardly any commercial banks in West Africa owned and managed by the African private sector. Ecobank was founded with the objective of filling this vacuum and today its the leading African bank with offices in 29 countries and consisting of 746 branches. 

The Future of African Remittances

Did you know that the remittance service landscape in Africa is dominated by two international money transfer operators that control in excess of 60 percent of the remittance access points across Africa? In addition, because of exclusivity agreements between international money transfer operators and their mainly commercial bank partners, other types of institutions are largely excluded from the market due to regulations that limit non-financial institutions from playing a meaningful role in remittance services markets in most African countries.

International remittance flows to sub-Saharan Africa currently exceed 30 billion dollars annually, while on a global basis, remittances are estimated to have exceeded $315 billion in 2009. In SSA, they affect as many as 25 million recipient households, and have the potential to significantly reduce poverty and stimulate growth. Over the past decade, remittances have evolved from a miscellaneous trade accounting item into a widely recognized flow of foreign financing that often exceeds FDI and ODA to many African countries.

Recognizing the impact that remittances have on development, policy makers and development partners in many other regions have invested substantially in measures to leverage their potential. Worldwide, remittances are now better tracked, transaction costs have declined, and recipients are being integrated into the financial system, giving them more productive options to use their money, thereby leveraging development impact for the communities where they live.

Unfortunately, much of this progress in remittances has not yet reached Africa. However this is slowly changing especially in light of a useful World Bank initiative in collaboration with national central banks of Kenya, Ethiopia, Uganda- to address the Future of African Remittances (FAR).

For instance, the cost of sending remittances to Africa still exceeds 10-15 percent for many countries and reaches 20-25 percent for remittances sent within Africa, which are of growing importance given migration patterns. Reducing transaction costs by only 5 percentage points could increase total resources available to the recipient households by as much as US$ 1.5 billion per year.

In addition, only 20 percent of African households have access to formal financial services and remittances are often relegated to informal transmission channels, which are less secure and even more costly. Promoting product innovation and improving payment services tailored to the needs of the recipient households (especially in rural areas) offers a win-win solution. Households can use remittances as an asset to access formal financial services and benefit from safer and cheaper remittance transfers, while banks and other financial institutions can mobilize a higher share of the remittances to fund private sector investment.

The Future of African Remittances Program aims at strengthening the market for remittance transfers through the following efforts:

• • Technical assistance for regulatory reform targeting the remittance services market
• • Technology development incentives for products linking remittances to financial products (housing, insurance, savings and investments), with a focus on mobile software applications
• • Knowledge exchange with advanced remittance markets in Asia and Latin America
• • Training for regulators on best practices for regulating remittance markets and fostering innovation
• • Financial literacy and encouragement programs for first and last mile remittance product uptake

In combination with rapid innovations in mobile technology in Africa, remittances present a unique opportunity to expand access to finance and lift thousands of communities out of poverty.

More information on the African Remittances Program can be obtained here. 

US and India on Partnering with Africa

Recent discussion by the Carnegie Endowment for International Peace on how India and the US could partner with Africa to foster its development. This is relevant because foreign investors interested in Africa are facing similar risks and opportunities to those they faced when investing in India. African countries could therefore learn from India’s successful economic reforms in service and industrial sectors which helped it achieve an impressive growth rate for several years. 

Some useful ideas from this discussion include:

India can contribute to Africa’s development by sharing its experiences in mobilizing human capital and social policy innovation, such as the ongoing large-scale rural employment program launched in India in 2006. In fiscal year 2009/10 alone, it provided employment to 52.5 million rural households. India can help Africa produce high tech yet low cost goods that are within the purchasing power of the African people.

India’s Green Revolution transformed the country from a food deficit nation into a food self-sufficient country. The introduction of high-yielding varieties of seeds, increased use of fertilizers, and improved irrigation helped to increase agricultural productivity in India, leading to self-sufficiency in food grains. It also helped India to effectively address famines. This revolution is similar to what happened in China.

Foreign investors need to diversify from energy investment in Africa and investment needs be increased in non-energy sectors as well.

The US government and the private sector could consider public-private partnerships in order to reduce investment risks while making investments in Africa. This could also be done by developing tax incentives and credits for US investors in Africa (see previous post on this here).

On financing, U.S. banks are risk-averse and less willing to finance businesses in Africa, which creates a financing problem for U.S. businesses interested in doing business in Africa. However, European banks have been more forthcoming in financing investment in Africa. A possible proposed solution in this regard could be increased support from the Overseas Private Investment  Corporation (OPIC) in the US.

EAC Common Market: A Historic Launch

1st July 2010 marks the commencement of the operationalisation of the East African Community (EAC) Common Market, following the completion of the ratification of the Protocol on the Common Market, a complex process towards transforming the region into a Common Market. Below is an excerpt of a recent speech by The EAC Secretary General, AMB. Juma V. Mwapachu on the occassion of the launch (emphasis added):

"A New Milestone

In this context, it is important that the citizens of the East African Community Partner States and the economic players in the EAC region have a clear understanding of what the 1st of July holds and portends. 

Yes, the date is a historic one and is deservedly celebratory. Achieving successful negotiations leading up to the adoption of the Common Market Protocol, its approval by EAC Heads of State and its ratification in record time is a milestone for the EAC. No other Regional Economic Community in Africa has achieved such milestone. 

It is a milestone that epitomises strong political will and firm commitment by all the EAC stakeholders in deepening and widening integration. Yet what we have achieved so far is only the basic legal framework that outlines what needs to be done and implemented for the Common Market to make meaning and have impact in transforming the lives of the East African Community citizens. 

Hard Work Begins

Thus, 1st July 2010 for the EAC Common Market, means entry of the critical phase when the Partner States, which, pursuant to the Treaty establishing the EAC are the principal implementers of EAC programmes, must begin to determine how the four freedoms encapsulated in the Common Market Protocol should resolutely be put into effect. It also marks the beginning of serious work at the EAC executive organ level, notably the Council of Ministers, in determining what regional-based interventions can and should be undertaken to speed up the process of getting the four freedoms to take force, mainly through a legislative process. 

It is important to note though that the EAC region has, in the past decade, seen a number of policy and legal measures being effected at Partner States’ level that are within the ambit of the Common Market Protocol. These measures will understandably make life easier in getting a fuller and quick implementation of the Common Market Protocol provisions. A number of examples can be adduced, particularly in the field of services, an area which, in other Economic Community regions, including the European Union, have posed serious challenges at the implementation level.

Some Common Market Freedoms Already in Place

Examples in this regard span a wide range of services: banking and finance (including insurance and brokerage); distribution (retail in particular); transport and logistics; telecoms (notably mobile telephony); air transport; tourism (hotels and lodges, tour operators); education (primary, secondary and tertiary); energy; professional services (accounting and auditing, management consultancy and other knowledge services); ICT (plus broadband internet); media (print, radio and TV); and music. In other words, the EAC economies have seen significant cross-border services intensify, benefitting from bold economic liberalisation policies and measures effected in all the five EAC Partner States. 

Immediate Challenges in Services Sector

The entry of the Common Market Protocol will thus provide a fillip and impetus to an already thriving cross-border services industry. The impetus will largely lie in creating the empowering conditions at the level of the Partner States for the services sector to be scaled up and made more robust and buoyant. A few examples can be mentioned first, the case of air transport which is yet to be fully liberalised within the framework of the Yamoussoukro Decision. The EAC region needs not only a “free skies” agreement but also deeper liberalisation of air transport operations to bring down costs of passenger and cargo transportation which are currently too high. 

Second, the securities market is yet to be “regionalised” and the capital account is yet to be sufficiently liberalised by Tanzania to enable Tanzanians participate outside the present framework of cross-listing of market shares at national level. Removal of restrictions on capital flows should serve as a catalyst for capital market development and the provision of long term and risk capital most needed to spur economic development. At the EAC level, there are definitive programmes on-going towards the promotion of a regional capital markets regime and institutions. 

Third, the regulatory framework for cross-border television broadcasting is still stringent; it needs to be further liberalised to promote greater offerings by competing regional networks. Fourth, whilst there is significant cross-border tertiary education access, tuition fees, even in public universities, are yet to be harmonised in spite of decisions having been taken at the EAC level requiring charging of similar fee rates. 

Fourth, the cross-cutting challenge of work permits which underlie the effectiveness of the services sector needs to be frontally addressed. You cannot realise the full benefits of free movement of professionals under the services sector when labour market policies and laws stand in the way of such freedom. A starting point in leveraging this freedom could be to eliminate the requirement of work permits for citizens of EAC Partner States who have professional qualifications and who seek to set up their own businesses in fields such as law, medicine, engineering, accounting and auditing, architecture etc. 

Making Free Movement of Labour Work

Turning to the aspect of free movement of labour, a key freedom in promoting human capacity in the EAC region for social and economic transformation, it is important that the EAC Partner States quickly work out the modalities for enabling such freedom to take effect. An initial word of appreciation to Rwanda and Kenya is deserved for leading the elimination of work permits, at a bilateral level, between them. In the case of Rwanda, the elimination of work permits is extended to all citizens of EAC Partner States. An important element in the process of elimination of work permits, wholly or partially, is the conclusion of the Mutual Recognition of Academic and Professional Qualifications. 

The EAC, through its institution, the Inter-University Council of East Africa, has reached an advanced stage in setting up a mechanism through quality assurance that will form the basis for determining such mutual recognition. A related issue is mutual recognition of accreditation of higher education institutions which would remove the regulatory requirement of tertiary education institutions moving across borders applying for fresh accreditation. It should also be mentioned that the EAC is working towards the harmonisation of social security benefits in order to support the free movement of labour. EAC Partner States are already at advanced negotiating stage in this area.

Free Movement of Persons

It is notable that to most ordinary citizens of the EAC Partner States the 1st of July infers the free movement of persons in the region from this date. This is one issue that the Partner States will have to offer elaborate explanations. Suffice to state that citizens of the EAC region have enjoyed free movement across their borders for years. 

The national passports and the East African passport travel documents are accepted and respected at border points without a visa requirement and six months’ stay each time of entry is offered without hassle. This free movement will be further facilitated when all the five Partner States introduce Third Generation (Machine Readable) identity cards. Only Rwanda has such an ID in use. Kenya is about to introduce one in July this year. Tanzania and Uganda are in the process of introducing such IDs as well. Burundi will follow. 

Conclusion

The EAC Common Market is finally here. It ushers in a higher level of integration beyond trade in goods which the Customs Union caters for, with positive impact on the economies of the Partner States as reflected by growing intra-regional trade in the past five years. The broad economic space which the services sector will unleash will trigger the expansion of economic activities and jobs in the region. 

Cross-border capital movements will also spur the growth of industrialisation driven by an expanding and more productive agricultural sector. East Africans have every right to be proud of the stage of integration the EAC has reached. But it is upon them to exploit all available opportunities to make the Common Market work for them and for the better livelihoods of all citizens of the EAC. We can do it; let us together make it happen".

EAC Secretariat

Arusha, Tanzania