INTRODUCTION

To know the challenges and the salient features we need to see how the EAC functioned during that time and how it was structured and what each part did in the development of the EAC.

The following are among the key provisions of the treaty:

a) East African Common Marketb) The Institutions of the Communityc) The East African Development Bankd) The East African Corporationse) The East African Court of Appealf) Other miscellaneous provisions

1. East African Common Market

Article II of the treaty created the provision for this common market and the key issue and provisions were many e.g.

Common customs tariff The Partner States, recognizing that a common external customs tariff is a basic requirement of the Common Market and subject to paragraphs 2 and 3 of this Article, agree to establish and maintain a common customs tariff in respect of all goods imported into the Partner States from foreign countries.

As explained the good will was there to have a common and integrated market which would ensure that the member states would trade easily and have or be considered a large trading block. This tariff would thus enable the community to have a source of revenue.

External trade arrangementsNo Partner State shall enter into arrangements with any foreign country whereunder tariff concessions are available to that Partner State which are not available to the other Partner States.

This was to prevent unfair competition amongst member states and also to have the unity n terms of revenue collection. I can imagine a scenario where revenue is collected unfairly?

No internal tariff on East African goodsExcept as is provided in paragraph 2 of this Article no Partner State shall impose a duty in the nature of a customs duty or import duty in respect of goods which are transferred to that Partner State from one of the other Partner States and originate in the Partner States.

To ensure that member states companies and individuals all benefit from the cooperation, internal tariffs were abolished so that there would be economic development in all states. It would be beneficial for various companies who would now have a bigger market and consumers pay less for their services.

Customs duty on goods used in manufacture Where goods which are imported into a Partner State from a foreign country and in respect of which customs duty is charged and collected in that State (in this Article referred to as "the collecting State") are wholly or in part used in the collecting State in the manufacture of other goods (in this Article referred to as "the manufactured goods"), and the manufactured goods are subsequently transferred to another Partner State (in this Article referred to as "the consuming State"), the collecting State shall pay to the consuming Statethe full amount of the duty collected in the collecting State in respect of the goods imported into the collecting State and used in the manufacture of the manufactured goods sub sequently transferred to the consuming State.

This idea was also to ensure their was economic development in the region as manufacturers would now have a better regulatory framework that would protect them from exploitation by government authorities.

Common excise tariffPartner States agree to establish and maintain a common excise tariff in respect of excisable goods manufactured, processed or produced in the Partner States. For revenue purposes, a Partner State may, in special circumstances and after consultation between the Ministers responsible for public finance in the Partner States, depart from the common excise tariff in respect of the manufacture, processing or production of particular excisable goods in that State.

Under Article 18, where goods which are liable to excise duty in one of the Partner States(collecting state) are transferred to another Partner State (consuming state), the East African Customs and. Excise Department shall collect excise duty and pay it to the consuming State. The rate applicable shall be that in force in the collecting State and where it is higher than that in the Collecting State at this higher rate. In addition, where the rate charged by the consuming state is lower than that in force in the collecting State, the owner or other transferor of goods shall receive from a refund of the difference between those rates of duty. The East African Customs and Excise Department shall, in respect of goods liable to excise duty transferred from the collecting State to the consuming State, pay to the consuming State the amount of the excise duty collected at the rate in force in that State.

2. The Institutions of the Community Article 3 establishes the Institutions of the Community to include the following:

the East African Authority, the East African Legislative Assembly, the East African Ministers,

the Common Market Tribunal, the Councils i.e. the Common Market Council the Communications Council the Finance Council, the Economic Consultative and Planning Council, the Research and Social Council,

and such other corporations, bodies, departments and services as are established or provided for by this Treaty.

The institutions of the community shall be assisted by a central secretariat of officers in the service of the community.

The East African AuthorityArticle 46 establishes the East African Authority which shall be the principal executive authority of the Community. The Authority shall consist of the President of the United Republic of Tanzania, the President of the Sovereign State of Uganda and the President of the Republic of Kenya. If a member of the Authority is unable to attend a meeting of the Authority and it is not convenient to postpone the meeting, he can appoint a person holding office as a Minister of his Government to represent him at such meeting only after consultation with the members of the Authority. Such a person shall have all the powers, duties and responsibilities of the member of the Authority for whom he is acting.

This can be contrasted to the current one which is actually managed or has been coverted to the summit which will run the day to day affairs.

Article 48 provides for the functions of the Authority. The authority shall be responsible for and have the general direction and control of the performance of the executive functions of the Community and it shall be assisted in the performance of its functions by the Councils and the east African ministers.

The East African Legislative AssemblyArticle 56 establishes the East African Legislative Assembly which shall be composed of the three East African Ministers, the three Deputy East African Ministers (if any), twenty-seven appointed members and the Chairman of the Assembly, the Secretary General and the Counsel to the Community. The Chairman of the Assembly shall preside over and take part in the proceedings of the Assembly.

Under Article 57 each Partner State shall appoint nine of the twenty-seven appointed members of the Assembly in accordance with such procedure as each Partner State decides. A person shall be qualified to be appointed a member by a Partner State if he is a citizen of that Partner State and is qualified to be elected a member of its legislature under its electoral laws, and is not an

officer in the service of the Community or a servant of a Corporation or the Bank. If an appointed member of the Assembly is temporarily absent from the territories of the Partner States, or for some other reason is temporarily unable to perform his duties, the Partner State may appoint another person who is qualified to replace him temporarily until the member resumes his duties.

This has been a very serious matter in that, the current EAC has maintained the same assembly and that each member state should have now a ministry dedicated to the EAC. This ministry shall lay down procedures of appointment and so forth.

East African MinistersArticle 49 provides for appointment of East African Ministers and they shall be three in number. Each partner state shall nominate one person who is qualified and the Authority shall appoint the persons so nominated as ministers. A person shall be qualified to be appointed an East African Minister if he is qualified to vote under the national electoral laws of the Partner State nominating him. If a person nominated shall be holding office as a minister, Deputy, Junior or Assistant Minister or a Parliamentary Secretary in the Government of a Partner State, he shall immediately resign from that office and may not thereafter hold such an office while he remains an East African Minister. A minister who is temporarily unable to perform his functions may be replaced temporarily by a person qualified to vote under the national laws of the State nominating him and he shall hold that office until the Actual minister resumes his duties

The same has been stated above about the minister. But it’s important to note that each member by nominating a minister as per current EAC, is different since now it becomes mandatory to have the minister as a portfolio in your government.

The Common Market TribunalArticle 32 establishes the Common Market Tribunal which shall ensure the observance of law and of the terms of this Treaty in the interpretation and application of so much of this Treaty as appertains to the Common Market.

This tribunal was a necessary tool to ensure that the member states in the unfortunate event of a quarrel shall solve the matter amicably and without malice on each partners side.

Establishment of the CouncilsArticle 53 provides that there shall be established as institutions of the Community the following Councils:

the Common Market Council, the Communications Council, the Economic Consultative and Planning Council, the Finance Council and the Research and Social Council.

All this were meant to ensure that the various sectors were well and properly administered without interference of other departments. All these would see that the main areas of progress would be achieved.

3.THE EAST AFRICAN DEVELOPMENT BANKArticle 21 provides for establishment of the East African Development Bank. Annex V1 provides for the charter to the bank. Article 1 of the Annex provides for objectives of the Bank. The objectives of the Bank shall be (a) to provide financial and technical assistance to promote the industrial development of the PartnerStates; (b) to give priority to industrial development in the relatively less industrial developed Partner States, thereby reducing the substantial industrial imbalances between them;(c) to further the aims of the East African Community by financing projects designed to make the economies of the Partner States increasingly complementary in the industrial field;(d) to supplement the activities of the national development agencies of the Partner States by joint financing operations and by the use of such agencies as channels for financing specific projects;(e) to co-operate, within the terms of this Charter, with other institutions and organizations, public or private, national or international, which are interested in the industrial development of the Partner States and (f) to undertake such other activities and provide such other services as may advance the objectives of the Bank.

Under Article 2 of the Annex, membership of the Bank shall be the Partner States and such bodies corporate, enterprises or institutions who with the approval of the Governments of the Partner States become members. Article 3provides that the authorized capital stock of the Bank shall be 400,000.000 units of account and the value of the unit of account shall be 0.124414 grams of line gold. The authorized capital stock of the Bank shall be divided into 4,000 shares having a par value of 100,000 units of account each which shall be available for subscription only by members.

Members shall subscribe to the share of the Bank which shall be paid for in four installments. The first shall be 10 per cent of such amount and the remaining installments shall each be 30 per cent of such amount. The first installment payable by each Partner State shall be paid within 30 days after the coming into force of the Treaty and in the case of original members other than the Partner States, the first installment shall be paid within 30 days of their becoming a member. Article 13 provides for the principles which shall guide the Bank in its operations.

4.) EAST AFRICA CORPORATIONSArticle 70 establishes the East Africa Corporations which include

i. the East African Railways Corporation;ii. the East African Harbours Corporation;

iii. the East African Posts and Telecommunications Corporation; and iv. The East African Airways Corporation.

The Corporations are required by Article 72 to carry out their duties in accordance with commercial principles and to perform its functions in such a manner as to secure that, taking one year with another, its revenue is not less than sufficient to meet its outgoings which are properly chargeable to revenue account, including proper allocations to the general reserve and provision in respect of depreciation of capital assets, pension liabilities and interest and other provision for the repayment of loans and to ensure that, its net operating income is not less than sufficient to secure an annual return on the value of the net fixed assets in operation by the Corporation of such a percent as may be determined by the Authority from time to time.

It is worth noting that these corporations were put in place to ensure that there was efficiency in the administration of the major services in the EAC. As can be seen their was the need of a proper railway network, harbours system and telecommunication. The good will in development was their but the implementation as shall be seen led to its collapse.

5.) COURT OF APPEAL FOR EAST AFRICA Article 80 establishes a Court of Appeal for East Africa. The Court of Appeal for Eastern Africa (established by the East African Common Services Organization Agreements 1961 to 1966) shall be a part of this court. The Court of Appeal for East Africa shall have jurisdiction to hear and determine such appeals from the courts of each Partner State as may be provided for by any law in force in that Partner State.

The court was of a significant effect, it was to act as an appellate court for the member states. The limited number of courts at that time and an introduction of an appellate court which would create binding decisions for all individuals meant that people had a lifeline.

6.) Other Provisions

The East African Tax BoardArticle 88 establishes an advisory body, the East African Tax Board. The Tax Board shall consist of three members appointed one each by the Minister responsible for public finance in each of the Partner States; the Commissioner-General of the East African Income Tax Department; the Commissioner-General of the East African Customs and Excise Department; the three Commissioners of Income Tax in the Partner States: the three Commissioners of Customs and Excise in the Partner States; and a senior officer of the central secretariat of the Community designated by the Secretary General. The three members appointed by the minister responsible for public finance shall hold the office of Chairman in rotation.

This was a key issue in this treaty as the member states had committed themselves to contribution to the EAC fund, only to find out a certain member state not adhering to the laws.

Kenya was involved in hiding its tax revenue and always complained of its high contribution, an issue I find to be genuine. Less tax was being collected and left the other countries dissatisfied hence an eventual collapse.

AuditArticle 89 requires that the public accounts of the Community and of all officers and authorities of the Community shall be audited and reported on by the Auditor-General and for that purpose the Auditor-General and any person authorized by him in that behalf shall have access to all books, records, returns and other documents relating to those accounts.

The Auditor general has a duty to ensure that the tax collected by the East African Income TaxDepartment and the East African Customs and Excise Department has been distributed as required under the Treaty and make a report to that effect. His report shall be submitted to the east African Ministers who shall lay it before the Assembly. The accounts of all Corporations and officers shall also be audited.

Kenya was involved in creative accounting, hiding its revenues and also failing to keep the proper books of account that were needed by the council.

CHALLENGES THAT FACED THE EAC

Ideological differencesBefore independence, the three countries had more or less the same ideology or philosophy under the colonial government. However after independence, they pursued different ideologies. Kenya was developing a free market economy and much of its resources went toward capital improvements. Tanzania, however, was developing a planned socialist economy and much of its resources went toward welfare programs. Each country respectively felt it was bearing an unfair economic burden within the EAC. In 1967, Tanzania passed a declaration converting the country into a socialist state under the “Ujamaa” policy. Every property that people owned became state property and people were required to work for free in exchange for food. This “Ujamaa” policy became hard to reconcile with the Kenyan capitalist mode of production.

The problems between Tanzania and Kenya were intensified by Amin's 1971 and 1972 nationalization of the commercial assets of Uganda's mostly Asian merchants and entrepreneurs. The resulting Asian exodus from Uganda to Tanzania and the subsequent decline in foreign investment exacerbated an already tense situation.

Problems in the SummitThe summit had been established as the highest decision making organ. It met frequently between 1967 and1971. In 1971, Idi Amin overthrew the government of Uganda and took over power. Because of this, MwalimuNyerere of Tanzania refused to sit together with Idi Amin and the summit never met to make decisions for the Community.

The summit was supposed to meet and the principle of rotation was to apply to determine where it was to meet. Jomo Kenyatta complained that he was too old to travel and argued that if they were to meet, the other presidents had to go to his home at Gatundu. This made it difficult for the summit to meet.In addition, in 1971, there was an attempted coup in Kenya to overthrow Kenyatta from power. Arms and ammunitions were found in Kisumu and Kenyatta believed Idi Amin was supporting OgingaOdinga to overthrow him from power. Because of this, Kenyatta and Idi Amin could not meet eye to eye making it difficult for the summit to meet.

Financial difficulties in the customs department

Under the Treaty, the three states were to share the divisible revenue amongst themselves according to the amount that may be ascertained as relating to income accruing in or derived from a partner state.Uganda and Tanzania raised concerns that Kenya was not accounting for the funds raised and collected through the department. Problems of accounting were raised and the mode of sharing revenue was not acceptable to all. Uganda and Tanzania ha proposed equal sharing of revenue but Kenya rejected it arguing most revenue was collected from Kenya and should be shared prorate depending to the state that collected it. In this case, Kenya would get 60%. Uganda and Tanzania rejected this formula and there was no agreeable mode of sharing revenue.

The University of East AfricaThe University of East Africa had been established as one of the institutions of the Community which had been left behind by the colonial government. The Treaty took over and recognized this as one of the institutions. Due to the problems that were facing the Community, it became difficult for students to continue operating between the three countries. When the Ujamaa policy was declared in Tanzania and the Common Mans Charter in Uganda, the Kenyan students could not fit in those economies. They were thus ordered to leave in 1970 and the University collapsed. The three campuses became independent and bore the University of Nairobi, Dares salam and Makerere University,

Uganda’s demand for Eastern Uganda.

In February 1971 General Idi Amin seized power in Uganda in a military coup.. In 1976 Amin claimed that part of Kenya belonged to Uganda before the 1902 British land transfer to the old British East Africa Protectorate. In the intervening years this area had become a focal point of Kenyan farming, transportation, and economic development. Kenya responded to Amin's threats by curtailing the movement of Ugandan goods across its border. Kenya was supported by Israeli government and challenged Uganda to attack Kenya. The fate of the East African Community was uncertain.

Balance of payment problems

The three nations were also facing severe balance of payment problems because of the rising cost of energy and imported and finished goods. Trade throughout much of East Africa declined while nationalistic goals overshadowed economic integration efforts.Following independence, the integrated activities were reconstituted and the High Commission was replaced by the East African Common Services Organization, which many observers thought would lead to a political federation between the three territories. The new organization ran into difficulties because of lack of joint planning and fiscal policy, separate political policies and Kenya's dominant economic position. Kenya made demands to have more seats than Uganda and Tanzania in decision-making organs

Collapse of political goodwill

The Arusha Declaration and the Common Man’s Charter gave rise to a low ebb in the political relationships of the Heads of State of the 3 partner countries. This was quickly accelerated by the overthrow of Milton Obote in 1971 by Idi Amin. In January 1971 Obote on his way from the Commonwealth Conference at Singapore landed in Nairobi and he was informed that he was not the President of Uganda. He requested for military assistance from Kenya and it was declined. He requested political asylum and it was declined. He travelled to Dar es salaam where Nyerere gave him political asylum for the next 8 years. Mwalimu Nyerere on his part stated that he did not recognize Idi Amin as the President of Uganda and as such he could not attend any East African Community meeting with Amin on the table. This statement by Mwalimu Nyerere had serious repercussions to the operations of the community. The executive organ of the community under the treaty was The Authority. The Authority was composed of heads of states and governments; Mwalimu’s statement in effect meant that The Authority would not meet. The practical consequence was that decisions could not be made by the community. At this state each of the 3 countries was not isolated and they could not see eye to eye. Although the quorum for the authority was two heads of state, it was still difficult for the Authority to meet because the Authority was to meet on a rotational principle rotating in all the 3 capitals. Jomo Kenyatta declared that he was too older to travel and anybody who wanted to meet him including The Authority was to go to Gatundu. Nyerere and Amin called

this disrespect of the highest order which was against the principle of sovereign equality of states. These two factors ensured that the authority never met.

The entebbe raid

In 1976 an Air France plane flying from Tel a viv to Paris was hijacked. The Plane landed in Tripoli Libya where the hijackers made a demand that all fundamental Muslim prisoners held in Israel should be released. The Israeli government rejected the demand. There was no further communication from the hijackers and the next thing the plane was at Entebbe. Aboard the plane were over 100 Jewish or Israeli passengers. While in Uganda Idi Amin reinforced the demand of the Hijackers and gave the Israeli Government a 48 hour ultimatum to release the prisoners or one passenger would be killed per hour upon the expiry of the deadline. The Israeli government did not respond. However, unknown to many but only to Jomo Kenyatta and Dr. Njoroge Mungai the Israeli had planned to raid Entebbe and release the hostages. Before the expiry of the ultimatum Israeli Air force had arrived in Nairobi where their planes were painted in civilian colours and they took control of Kenyatta National Hospital. In the wee hours of the night, the Israeli airforce arrived in Uganda and in a split second destroyed the Uganda Airforce and released all hostages except one and they were back in Nairobi where the passengers were treated at Kenyatta Hospital. When the world woke up the next day, all the hostages were back in Israel and Uganda had no airforce and the hostage crisis was over. The Air France plane was left behind and in a fit of anger Idi Amin personally burnt it and the one passenger who had been left behind was also shot dead.

When the events surrounding the Entebbe raid came to light and the role of Kenya became clear, Idi Amin declared that Kenya was not a worthy neighbour and demanded the redrawing of the Kenya/Uganda border to be what it was in 1890. Consequently he demanded Kenya upto Naivasha to be returned to Uganda. Idi Amin was short of declaring war on Kenya and the Israeli government and the US Government decided to bring their troops into Kenya ready for war with Uganda and by extension Libya which had declared support for Uganda. These events accelerated the declining political goodwill amongst the partner states particularly The Authority.

The chepkube affair

During the days when Idi Amin was the president of Uganda there was little economic activities taking place in Uganda. The preoccupation of Amin’s State Research Bureau was to kidnap and kill any opponent to Idi Amin. Murder and lawlessness was the order of the day in Uganda. Everyday reports of abduction and disappearance was common in Uganda. This reached its peak when Archbishop Janaan Luwuum was abducted when giving his Sunday summons never to be seen alive. While this was going on in Uganda, the Kenyans were going on a looting spree at Chepkube. Ugandan Coffee was being smuggled at Chepkube and being exchanged at the rate of 1 sack of sale for one sack of coffee. At the extreme it ended being a gangster affair where Ugandan Coffee would be taken to Kenya and the strongest gang would take it for free. This is what is referred to as the coffee boom in Kenya of 1976 – 77. The Uganda citizenry or people have never forgiven Kenya for looting their coffee and creating wealth in Kenya. The smuggling of Coffee continued until 1978 when one of the first actions of President Moi was to personally close the Chepkube market.

CONCLUSION

Suggested reforms/ideas on what we can learn from the past

In my view, there are at least some lessons that can be adduced from the EAC’s history.

First, that regional integration is a highly complex and sensitive project. Itneeds to deepen and widen on the basis of a building block strategy; slowly, carefully but surely executed.

Second, the decision-making process should be structured in such a way that there is respect for national interests. The partner states must be at the heart of the EAC decision-making structure and process, allowing the principles of consensus and subsidiarity to rule while respecting the imperative of the big picture toinform the depth and speed of integration.

Third, the Council of Ministers, instead of the Summit of Heads of State, should take the lead in the decision-making process while assigning to the Summit the authority over politically sensitive decisions on matters such as the movement from one stage of integration to the next, as well as on the enlargement of the organisation whereby new members apply to accede to the Community.

Fourth, the organisation should be people-centred and market driven. This means that decisions regarding the deepening of integration should directly involve the people through a whole range of multi-stakeholder vehicles. Equally, as ideologies of the left and the right have retreated, with greater focus placed on what works best in the interests of the people’s welfare

and prosperity the private sector should be more closely engaged in determining the direction of the organisation, always mindful of the centrality of win-win outcomes rather than zero-sum approaches to integration.

Fifth, the establishment of fully-fledged EAC social and economic institutions should be more carefully established to ensure their efficacy, cost effectiveness and sustainability.

Sixth, since the ultimate goal of the EAC is a political federation, the institutional framework to support such an objective needs to be put in place. Organs such as the East African Legislative Assembly and the East African Court of Justice should be structured in such a manner and be given such responsibility that they are best able to support the realisation of the ultimate goal of a political federation.

G34/2628/2008

GPR 418: EAST AFRICA COMMUNITY

ASSIGNMENT.

CORDINATOR: PROF. OTIENO ODEK