UNITED NATIONS

AFRICAN INSTITÜTE FOR EC.ONOHIC ECONOMIC COHHISSION

FOn AFUICA

2 6 OCT.1984

THE EAST AFRICAN CmlHUNITY:

ITS COLLAPSE AND POSSIBILITIES FOn ITS UEVIVAL

The Thesis

by

Basil Fo HTEI

submitted in partial fulfillment of the requirements for the

Degree of Master: of Arts in Economie Development and Planning
in the African Institute for Economie Development and Planning,
bas be en read and approved by the Commi ttee'o

:. . ·, 20 August 1984
Da t e •••••• • •• • •• • ••• • • ••••

Chairman~.
• .• 0 ~~-..l {
Committee 1·!emb er_ ' o .o
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Member oeooo

b er
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 ABSTRACT

It is widely believed that the integration of markets of

different countries 'vill lead to an accelerated economie develop-

ment of the countries concerned · in -view of .the . ;r_~ _sul ting, b.etter
--··~ ·--- .

resource utilization and the economies of scale. Bela Balassa, a

proponent of this idea, difines economie integration as the con-

tinuous process of removing discriminations amongst economies.

Kenya, Uganda and Tanzania for many-·year.s atiempted · to remove

discrimina-ti~n~ · am-ongs :t ·-the ir economies. - 'l'he efforts culniinated in

the East African Community. The Community, however, thrived only

very briefly, 1967-1977.

The objective of this thesis is to analyse the causes of the

collapse of the East African Community and the possibilities for

its revival. In the course of the study it was found out that in-

equitable distribution of gains, benefi ts and costs between I~enya

on the one hand and Uganda and Tanzania on the other was one of the

major reasons for the collapse of the EAC~ It is contended in this

study that economie integration in spite of the experience of the

East African Community can be of great benefit to small countries of

Africa and especially East Africao

The EAC cannot be revived as it used to be that is, 'vi th the same

composition. It 'vill have to be integrated in the Preferential Trade

Area where its experiences could be most useful in drawing up a fair

compensation scheme, common industrial planning and a common agricul-

tural policy.
 ACKNO\vLEDG EMENT S

I ac kno\vledge \vith thanks the permission of the Government

of Tanzania to attend the two ":"yea~ M!isters__ ~~g~-~~ course in

-
Economie Development and Planning at . the United Nations African

Ins t itute for Economie Development and Planning (I.D.E.P . ) in

Dakar, Senegal. I am also most grateful to the United Nations

Development Programme (u.t-r~n.P.) for its sponsorship.

I am ·dëeply -±ndebted to my Supervi-sor, Dr • .Akinola Ao Ovosekun

whose close supervision made the successful completion of this

study possible.

I also acknowledge vith thanks the assistance of the post-

graduate Co-ordinator, Dr. Philip Quarcoo, and the assistance of

Dr • Maktar· Diouf at the very beginning of this study especially

in defining the scope of the study. Mention should also be made

of Dr. E.ssam Montasser, the Director of IDEP, for his \tords of

encour;:~;gement and Yaya Diakite for the fatherly advice which he

freely gave to me during my stay in Dakar.

Lastly, but not the least, I am grateful to all persons,

especially the staff at the IDEP whose co-operation contributed

to the completion of this thèsis. Needless to say that I am

responsible for all mistakes, omissions and other shortcomings

contained herein.

Dakar, July 19~1.

(ii)
 CONTENTS

Page ..

INTRODUCTION eeoooe·••••oeoeeoeeeooeeeo••••••••••••••••••••• 1
·--
CHAPTER I THE CONCEPT OF ECONOMIC INTEGRATION AND
THE EAST . AFRICAN SETTING, •.• • • •• • • ••• ,. • • • •. 3

1.1. The Concept of Economie Integrationo •••••••••••• 3

1.2. Integration Sçhe~~s·•••••••••••••••••••••••••••• 4:

1.~. The East African Setting, • , • , • •-•,,, •·•, o,,,,,,.,. 7

CHAPTER II THE EVOLUTION OF CO-OPERATION AND

INTEGRATION IN EAST AFRICA, , •• , , •••• o,.,. o.. 16

The Role of Britain, • • • • • • • • • • • • • • • • • • • 0 0 ••••••• 16

2.2. Common Currency, •o•••••••••••••••••••••o•••••••• 17
The Common Services,, •••••••••••••••o••••••••••• 18
Revenues, Finances and Expenditure of the
Common Services, ................................ 23
Hanagement of the Common Services,,,,, •••••••••• 25

2. 2 ,t!. The !dea of Federation•••••••••••~•••o•••••••••• 27

Intra-Community Trade in East Africa,,,,,,,,,,,, 27

2.3.1. Imported Goods,, ~••••••••••••••••••••••••••••••• 27

Locally produced Goods••••••••••••••••••o••••••• 30

ClUWTER III: THE EAST AFRICAN COMMUNITY.,,.o•••••o•••••••••• 37

3.1. Background ••••••••• 0 •••••••••••• 0 •••••••••••••
37
3.2. Objectives and Structure of the EAC.•••••••••••• 38

The Common Market••••••••••••••••••••••••••••••• 43

Corrective Measures, •••• 0 ••••••••••••••••••••••
CHAPTER IV: THE COLLAPSE OF THE EAST AFRICAN
COHMUNITY AND THE POSSIBILITIES
FOR ITS REVIV AL. • ••.• •-• •·• • • .... •, • ·-···-····---·-·
• • • • • • • .• .• 5.8

Collapse •••••••••••••••.••••••••o•••••••oo$ 58
Remote Causes of Collapse •••••• o••••••••••• 59
4:. 3. The Collapse and the Theory of
Integration ••• ~.~ ••• ~···~··~···•··~~~•••••• 62
4:.~ •. ·Possibili-ties of Reviving the East
African Community. •••••••••••••••••••••••••• 63
The Size of an Economie Integration
Scheme•••••••••••••••••••••••••••••••••••••• 65
4:.6. New Attempts towards Integration. ••••••••••• 65

4:.7. Potential Areas of Co-operation••••••••••••• 72

5. Recommendations • •• • •• •. •• •. • ••••• • •• • • • • • • • • 711::

C 0 N C LU S I 0 N. •••••••••••••••••••••••••o••••••••••• 75

(iv)
 LIST OF TABLES

- 1. East Africa Basic Statistics, 1979••••••••••• 8

2. East Africa Net Transfers, -1956-63 _~ ~~-! ~!·•••• 28
3. East Africa Net Transfera âs percentage of
Net Importa •••••••••••••••••••••• 29
4:. East Africa Direction of Domestically pro-
duced exporta in value for
1955, - 1"959 ·a·n d 1963 •.• • • • .... • • • • • • • 31
5. East .Africa 1 -Direction of Domestically pro~

duced exporta, in percentage,

for 1955, 1959 and 1963 •••••••••~ 32
6. East Africa Intra-State Trade Balance •••••••• 36
7. Intra-Communi ty Trade Balance in Mantl';factured
Goods, 1967-1976 •••••••••••••••• 4:6
s. Intra-Community. Trade, Selected Years ••••••••••••••• 4:7
9. Uganda and Tanzania: Transfer Tax Collection,
1970/71 - 1972/73 ••••••••••••••• 50
10. East African Development Bank: Disbursement of Funds,
1970, 1971, and 1973. • • • • • • • • • • • •. 52
11. EAC Corporations: Operating Accounts, 1973 and 1974: • . 55

12. Chronology of events leading to the Collapse of

the EAC •••••••••••••••••••••••••• 58

13. East Africa Distribution of Intra-Community

Trade, Selected Years ••• o.,•~••oooo - 61

14:. Selected Countries of the PTA: Level of Industriali-

sation and Direction of Merchan-
dise Exports, 1979-o••••• • • •. • •• • • • . 67
15. Member Countries of SADCC: Population Densities and
Income per capita, 1979••••••••o•• 70

16. ~fember Countries of SADCC, Sectoral Distrüution

of Gross Domestic Product, 1978 ••• 70
'

LIST OF CHARTS

·-- ... · ·-~ · - · ··-~- .

1. East Africa Communi ty Trade Fl,ow, 1955-1963 ••• •• ••• 35

2. East African Community: Institutional Structure•••••• 40

(vi)
 INTRODUCTION

The East African Community (EAC) made up of Kenya, Uganda

- and Tanzania came into being in December 1967. Under the arrange-

ment the East African Common Market became. an. :_:i,.J:!t~gral part of the
·~··· ~·-·-- - .

Community. The aims of the Community included the strengthening

and the regulation of the industrial, commercial and other rela-

tions of member States, the establishment of common cust'oms and

excise tariffs and the abo"liti.o n of __ :!;rade restric:t_~on among others.

However -t he EAC soo~_ :ré!n i._nto problems and collapsed ultimately in

1977. While it lasted the EAC provided tremendous benefits to

member countries 0

But the EAC need not have disintegrated. The purpose of this

thesis is to analyse, inter alia, the problems which the' EAC en-

countered, the relevance of EAC and the possibilities of reviving

it for the mutual benefit of all concerned.

Analysis will focus on co-operation efforts.of member States

in the period before 1961, that is 1917-1960 and in the period 1961-

1977o The attempts made at fostering co-operation since 1977 will

also be discussed.

The methodology of the study will include a time series analysis

of the broad economie and social conditions of member States in an

evolutionary settingo Also a cross-section analysis of member States

for the year 1979 will be given an in-depth analysis. This will be

followed by an "exhaustive" discussion of the structure of the EAC,

its collapse and other attempts made at fostering co-operation since

1977o
 - 2 -

The thesis is divided into four chapters. Chapters one

reviews the concept of integration and the social, economie

and political aspects of member States d~r.~ng the colonial

-- - ~-- .. -~----------- - .
period and after independance. Chapter two outlines the evo-

lution of integration scheme in East Africa. In chapter three

a discussion of the structure of the Community, the problems

it was supposed to solve and the corrective measures under the

- --
Treaty of- East A:fr.i_c_~D: Co-operation. Chapter four outlines the

collapse and i ts causative factors as 1·rell as the attempts made

since the collapse at fostering co-operation. The chapter con-

eludes the study with sorne policy recommendations.

 - 3 -

CHAPTER 1
1 - ~ .• - '

THE CONCEPT OF ECONOMie INTEGRATION

AND THE EAST AFRICAN SETTING.

1 • 1 • Tffi-;; CONCEPT OF ECONmnc INTEGRAT ION

Economie integration has been o:f con s id~rable_ interest to

many countric_s all ovex: the ,.,rorld irrespective- o.:t .VÀ.~.-.t-. !J._e: th:<:_Y are

dev e loped or dev eloping. The inclination of countries towards

integ ration derives from the belief that large groupings are capable

of s olvinG their problems more easily than if such problems were to

be s olved. ind.ivi d.ually . Givlng · hi~ treatise on _~~is issue, Bela

- 1}
Ba l assn - , defin-es int egration in two ways_ - a s a proces_s and as a

state of affairs . As a process int egration is defined as corn-

prisin g ncasur cs that entail the suppression of sorne form of dis-

crimi natiou , f or in s tance, the removal of trade barriers. As a

statc of af~a irs integration is d efin ed as the absence of various

forms or discr iminations between national economies. Balassa_

identifi e s f ivc su ccessive stages of economie integration. These

are : free tra d. e area, customs union, common market, economie union

and comple te or total integration. Each of these stages is dis-

cussed Lrie!ly bclow:

(1 ) Frcc Trade area - tariffs and othcr quantitative measures

in trade betwe en member countries are
abolishcd but these countries do not
maintain a cornmon external tariff.

(.2) C<.u:; t oms Union - in addition to ma intaining all the condi-

tions which pertainto a free trade area
the rnember countries maintain a common
external tariff.

1.) Se c Dalns<l, B. The Theory of Economie Integration, Illinois,

1961, p.1-2.
 - 1..1: -

(3) Common Market - is a higher form of a Customs Union in

that in addition -to the· requirements of
a Customs Union the Common Market allow s
free movement of the factors of production
especially capital and labour.

(1..1:) Economie Union - refers to all the above -arid.~·-Tn addition,

to i t 'i nvol ves the harmonization of econo-
mie poli ci es'.

(5) Total Economie Integration - in this last stage thore is a

- unificati~n 9f soctal, _ ~onetary and fiscal
policies of member -sta-tes. Supra-national
authorities are a common phenomenon and
their decisions are binding.

A common aspiration of participating countries in integration

schemes is that increased trade él;mongs·t them ,.,ould accelerate the

realisation of their overall objective of social and economie develop-

ment. In view of this there have been many attempts of countries to

integrate their markets and economies. A few examples along this

line would suffice for our present purpose.-1/

1.2. Integration Scheme

In Europe there is the European Economie Community (EEC)~

Socialist Europe and Soviet Russia constitute· countries of Nutual

Economie Assistance (CMEA or CO}illCON). In Latin America there is

the Latin American Free Trade Area (LAFTA). Africa has witnessed

many attempts at economie integration. In West Africa, for instance,

there is the Economie Community for Hest African States (ECOHAS); in

Central Africa there exists the Central African Customs and Economie

1./ The list of integration schemes is quite lung hence I have mentioned
just a fe,.,...
 - 5 -

Union {UDEAC). In Southern Africa there is the Southern African

Customs Union (SACU) and in Eastern and Southern African two at-

tempts a t integration are currently being made namely the

Preferrcntinl Trad e Area (PTA) and the Southern African Development

Co-ordi nat i on Conference (SÀDCC) o How.e vcr the schemes referrE!d to

a bov e arc quite varied in terms of th e ir degree of integration.

Co nn-trics enter into integration schemes in the belief that

the l)enc fits l! Oulù he greater __than the costs for each member of the

union. In the event of any member country co~iidering that the

co sts of :::-cmnining in the scheme, be it a Customs Union or a Common

Market, ure grcnt cr than the benefits accruable to her that particu-

lar memb cr country could decide to withdraw her membership. However

there i s n o ~rcdcte rmined special and balanced kit of costs a~d

benefi t s <.'llich i s made available to countries wishing to solve their

problems tllroue:;h integration. Kallncrt1/ contends that:

"the balance of benefits and costs of regional

integration in a particular case will depend
oa the circumstances of the situation, geo-
~rnp hical location, access to devcloped
courrtry markets as well as on policies
.:1pplie d 0 11

In general many small African countries are interested in inte-

grat:ion in o:n1e::.· that the disadvantage of having small markets may

be surmounted . Thus economie growth and development in those countries

mny be nc~icvcd through integration - induceù economies of scale in-

oludin G reducec1 co s ts of production in each count,r y. Moreover

1f Sc e ICnlmcrt , F. Economie Intcn;ration nmong Developing Countries,

OECD s e ries , 1969, p.16.
 - 6 -

emplojment potentiàlities in those countri~s under integration

are boosted in view of the enhanced economie activities of the

group as a whole, Having regard to this great expectations and

the fact that there -has been no standard set of benefits and costa

accruable from integration it may be necessary i~--~h-~·:c-:follows to

highlight a few integration schemes in Africa.

UDEAC has been in existence since the year 1910.1/ Its

member countries - Gabon, - Cha-d; Cent.ral Afri.can :a~:p11blic (CAR) and

Congo · under th.e _so ~~ l_l~d_ French Equatori~l Afx~fca - operated

common services such as posts and telegraph, railway and river

transport and customs. ln UDEAC ,. Chad and Central African Republic

were accused by the other members in the group of having a dis-

proportionately larger share of customs revenue. In the wake of

these disagreements the Union collapsed in the year . 1966, the year

Cameroon be came a member. UDEAC however resusci·tated in 1969 under

a new set of regulations. hven so industrial : co-ordination ,.,as

difficult to ac4ieve and · in addition the issue of revenue sharing

continued to pose intractable problem~.

In West Africa ECO\VAS seems to have made little progress. The

.French speaking member countries of ECO\YAS do not seem to be happy

wi th the membership of Nigeria largely be cause of her over,vhelming

size (market) and industrial capacity. But these French speaking

member countries of ECOWA::> seem to be ·more comfortable ,vith them-

selves within their own sub-grouping (CEAO).

1/ See Kahnert, Fo Ibid, p.59.

 - 7 -

Countries in East, Central and Southern _ ~rica have made a

number of attempts at integration. The Central African Federation

encompassing Zimbabwe, Zambia and Malawi did not survive because

of the wide disparities in the levels of development of the member

countries; for the same reason the East African Community collapsed

despite co-operation efforts spanning sorne six decades. However .

the Customs Union of Botswana, Lesotho and Swaziland (B1S) and South

Africa continues to thriv:e.

1.3. THE EAST .Alt'RICAN SETTING

The three countries which are normally viewed as constituting

East Africa - Kenya, Uganda and Tanzania - are in many respects

different from one another. In terms of size Tanzania is the

largest (Y~5,000 km 2') followed by Kenya (583,000 km 2 ) and Uganda

(2~1,000 kiD 2 ) in that order. In what follows an analysis of these

three countries is pursued beginning w·i th Kenya.

Kenya - As at 1979 Kenya had a population of 15.3 million; non-

Africans cons ti tuted only 19'o of the total population.

·y The Growth

Rate of Gross Domestic Product (GDP) of Kenya averaged 6.25% in

the period 1960-1979. In the last decade of this period the indus-

trial sector recorded the highest rate of growth averaging 10.2~b

compared with 5.~ and 5.8 per cent for agriculture and services,

respectively (see tabl~ 1).

1J See '!'he World Bank, Accelerated Development in Sub-Saharan

Africa, Washington DC., 1981 p.1~3.
 - 8 -

Table 1

EAST AFRICA

Basic Statistics

KÊNYA

Are a '000 km2 583 241 94:5

Population (millions) 15.3 12.8 18.0
Density (persons km 2) 26.2 6lJ: 19.0
'
GNP per capita (us $) _[_ 380 290 250
Per Capita Annual Growth (%) 1
2.7 · -- - o. 2 ·-
2.3
Adul t Li te r ac-y 4:5 n.a. 66
Food Production Index 1977-79 92 90 94:
1967-69 = 100
GDP: Growth Rate (%)
1960-1970 6.0 5~· 9 6.0
'70-'79 6.5 - Ool.l: 4:o9
Agriculture '70-79 5.4: n.a. 4: ...9
Industry '71-79 10.2 7.9 1.9
Services '71-79 5.8 0.1 5'.-9
GDP: Sectoral Distribution (%)
Agriculture '60 38 52 57
'79 34: 55 54:
Industry '60 18 13 11
'79 21 7 13
Services '60 4:0 35 32
'79 4:5 38 33
GDP: Average Annual Growth Rates
in Consumption and Investment (%)
Public '60- 70
1
10.0 5.9
'70-'79 9.0 1.3
Priva te '60-'70 4:.6 5.6 5.2
'70-'79 6.9 1.1 6.0 *

* Includes public consumption as %of GDP or as an

average annual growth rmte where applicable.
 - 9 -
(Table 1 continued)

TANZANI A
KENYA
" UGANDA
Investment 1
60- 1 70 7.0 9o8 9.8
1
70- 1 79 1.2 - 13o1 )oO
·~- -·· · -~ -
GDP: Demand Analysis (%)
Public 60
1 11 9 9
1
79 20 16
Priva te 1
60 72 75 72
*
1
79 65 -9.6 76
-Investment 60
1
20 11 14:
-
'79 22 q 21
Gross
Domestic
Savings '60 17 16 19
'79 15 q 8

Exports
(Goods and
Services as
a ojo of GDP) 1 60 31 26 31
'79 26 4: 14:

Re source ·
Balance 1
60 3 5 5
1
79 7 - 13

*Includes public consumption as ojo of

GDP or as an average annual growth rate
where applicable.

Source: World Bank, Accelerated ~ Development in

Sub-Saharan Africa, 1'/ashington p.c. 1981.
 - 10 -

In terms of sectoral breakdo'vn of the GDP agriculture accounted

for an average of 38 per cent of GDP in the 1960-70 period. The

correspondin~ figures for industry and services were 18 and 40

per cent, respective1y. In the period 1970-79 the share of agri-

·~- - -----··
cul ture in GDP 1~as 31.~; per · cent as compared Hi th 21 and -i1Y per ·-- -

cent for industry and services respectively.

At 10 per cent in the period 1960-70 the average annual

gro,.,rth rate of public consump:tion fell to 9 per cent in the sub-

se quent decade (1970-1979). Ho\vever the average- annual growth

rate of p rivute consumption rose from 4.6 per cent in 1960-70 to

6.9 per cent in the period 1970-79. Investment recorded an

average annual growth rate of 7 per cent in 1960-70 compared \VÏ th

an average annual growth rate of 1.2 per cent recorded for the

period 1970-'79.

As u proportion of GDP public consumption accounted for 11 per

cent in the year 1960. The share, however, rose to 20 per cent in

the yea r J979. Private consumption absorbed 72 per cent of GDP in

1960 and 65 per cent in 1979. At 20 per cent in 1960 the share of

gross cloneGtic investment in GDP rose to 22 per cent in 1979. Gross

domestic s<-:.vings amountecl to 17 per cent of GDP in 1960 as against

15 per cent in 1979. Experts including services contributed 26 per

cent of GDP in 1979 compared with 31 per cent in 1960. Capital in-

flow a.ccoc:.nteü for 7 per cent of GDP in 1979 as against 3 per cent

in 1960.

Most of the working population is engaged in agriculture. In

1960 agriculture provided employment for 86 per cent of the total

labour f orce. The corresponding figure for 1979 was 78 per cent.
 - 11 -

In 197 9 indu s try and services -accounted _for : 10 and 12 per cent

of labour ·.:o r ee , rcspectively. Th e growth rate of employment

in th e de cade of the ?Os was 2.8 per cent compared with 2.7 per

cent in t~c decade of the 60s~ .

Th e ra tio o~ doctors to the population and the distribution

of social amenities may be indicative of improvements in social

conditions. In 1960 Kenya had one doctor per ten thousand people.

As at 1975 sev cnteen per c~nt of - the populatio~ ~ad access to safe

drinldng uate1~ . -The distribution of social amenities 1 however,

s eems ·to have be en ske,~ed he av ily in favour of the urban are as )J

UGanda - Uganda had a population of 12.8 million by the 197~

estimatcs. Slle is a lo,.,r-income developing country wi th a GNP per

capit u cstimated in 1979 at US $290. In the 1960 decade the Gross

Domest ic P~oduct of Uganda g~èw ~y an ~verage of 5.9 per cent.

Howevcr in the s ubsequent decade of the 70s Uganda recorded a

negative n.nnual growth rate ·or -O.l.~: per cent. Regarding sectoral

growth rates thore was no information for agriculture but industry

and services gre ,, , on the average, in the decade of the '70s by

-7.9 and 0.1 pcr cent, respectively. Vith respect to the composi-

tion of G'!lP, ag riculture, inclustry and se rvices accounted for an

1.) Lar .::.; c ::;-~ concent r a tion of thcse service s are in the two
bi c ci~ ia s - Nairobi a nd Mombasa. Fiv e other towns
incl llc:o ~-: üa-:mu, Nakuru, Eldoret, Nanyuki. and Kitale.
 - 12 -

average of 52, 15 and 35 per cent, respectively in the decade

of the 6os. The corresponding figures for those sectors in the

70s were 55, 7 and 38 percent (see Table 1).

Publl.ic conswnption recorded an average annual gro1vth rates

of 5.9 per cent of GDP in the 60s. But this ratio dèClined to

1.3 per cent in the 70s. The corresponding figures for private

consumption in those decades were 5.6 and 1.1 per cent. The

investment component of the Gross Domestic Product recorded ,

average annual growth rates of 9. 8 and -1:3-.1 _per cent in the

decades of the 60s and 70s respectively. In 1960 pulJlic conswnp-

tion accounted for 96 per cent of GDP )J Investment and Gross

Domestic Savings as shares of GDP accounted for 11 and 16 per

cent in 1960. The corresponding figures for 1979 were ~ and ~

per cent. Exports of goods and services as a proportion of GDP

were 26 and ~ per cent in 1960 and 1979 respectively. There was

no growth recorded in capital inflow for 1979 although in 1960

such growth was estimated at 5 per cent.

Of the total labour force in 1960 agriculture, industry and

services respectively absorbed ~, ~ and 7 per cent. The

1.f The source of this data did not provide a breakdo\m of public
and private consumption for this particular year.
 - 13 -

corresponding figures for 1979 were 83, 6 and 11 per cent. Hith

respect to social services~ available statistics indicate ' that

there was one doctor for every 14,000 inhabitants in 1960. This

ratio however worsened to one doctor per 27,600 in 1977..!{ · In

this latter year only 35 per cent of the popuiati-oii .. lia-d·· a-c cess :t .o .

safe drinking water. As in the case of Kenya the distribution of

social amenities remained skewed in favour of the urb&n areas'.

Tanzani~- With a population of -1 8 millio~_ by "the : 1979 - esti­

mates Tanzania is the -most populated of the · three countries consti-

tuting East Africa. However witll a per capi ta GNP of US r~ 250 esti-

mated in 1979 it was the poorest.Y Tanzania achieved a growtll rate

averaging 6 per cent in the 1960 decade. This rate decelerated to

4.9 per cent in the 70s. Sectoral growth rates for the decade of

tlle 70s were hardly impressive. \'/hile agriculture and industry

achieved an average growth rate of l.t "9 and 1. 9 per cent in that decade,

services recorded an:· :average growth rate of 5o9 per cent,. 1/ith

respect to the sectoral composition of GDP the position compared

favourably with that of Uganda. In the 1960 decade agriculture,

industry and services absorhed, on the average, 57, 11 and )2 per cent

of GDP. The corresponding figures for the decade of the 70s for those

sectors were 54, 13, 33 per cent.

1} The source could not provide a statistic for the year 1979. The
sharp drop in the number of doctors in relation to population may
be attributed to doctors leaving Uganda especially after the Idi
Amin's Coup of '71.

y Tanzania is one of the least developed countries in the \1/orld.

 Statistics on Public Consumption for the __ 6Qs and the 70s were

unavuil ab lo. Ho\/ever Private Consumption as a component of GDP

rec ordeQ nverage:annua l growth · rates of 5~2 and 6.0 per cent res-

pectively. Public consumption, private ~onsumption, Investment

and Gross Domestic Savings accounted for 9, 72, 1~, aùd 19 per cent

of GDP of Tnnznnia in 1960. The corresponding figures for 1979

were 16, 7G, 21 und 8 per ceni. As u proportion of GDP exports of

goods anù s ervices absorbed 31 and 1q per cent in 1960 and 1979,

respectively. A positive -_growth rai~ (5~) - ~as . recorded for capital

inflo w in Tanzunin in 1960. The position however for 1979 was nega-

tive at -13 per cent.

Be t wee n 1960 and 1979, agriculture us the largest source of em-

ployme nt ha s yio lded grounds to industry and services. In 1960

agriculture, industry and services accounted for 89, ~ and 7 per

cent of tot~ l employment. The corresponùing figures for those

sectors in 197 9 were 83, 6 ~nd 11 per cent. Regarding social services

th e ratio of ùoctor to thousand · population improved from 1:18 in

1960 to 1 :17 in 1977. However in 1977 only 39 per cent of the popula-

tion hnd nccess to safe drinking \·t ater. Although the skewness in the

distribution of social amenities in favour of urban areas was marked

in the p~c -i~dependence era this has now changed and distribution is

now more or lens even as between urban and rural oreas.

Polit ical Iùcologies

Renyn , Uc;nnda and Tanzania were under British colonial rule up

to th e time of independ~nce :i.n the 1960's. Kenya after .attaining

i ,n dcpc nclcncc s tatu s in 1963 op t ed :for a cap:i.talist approach to

 - 15 -

devclopment ~
1) Ug;anda f ollowed ·the same optîon· of. development

as dicl IC en~r.:-t , nfter independence in 1962. In 1971, however,

Ugancla nttemptcd to pursue a socialist approach to development

but this e:.Zfort soon fizzled away in the . wake. _o:f___ (!. _ Ç~.':l~ d'Etat

which 1:n s s Œccess fully carried out under the leadership of Idi
(") 1
. .!:J' Iùi /im in re-introduced the capi talist approach wi th a
Am 1n.

nationé'.li s·~ic l)lend.J./ Howevcr, post inclepenclence Tanzania

clropped t he capiti!!J.ist appro-ach to __ dcve;Lopm.~nt ~n 1967 by em-

braci nc; the soc.~a li s t a lternative as dctailcd . fn the Arusha

Decl aration of 1967.'1../

1.) The :::.:-tnc u : :; Sc ss ional Paper N° 10 of 1965 officiated this

po l ie~ - . Sce Gerzcl, Cherry . Th e Politics of Independant
Kcny.:-t ~.96 ~1-GS .
East African P~ll)li s hing House, Nairobi,
1970 l) c.JÜ o
2:) Th e of f icinl document on this is 'The Common Man Charter'.
J.l P1·o perty bclonging to Asians were confiscated and passed
to i n di;;;cncous people.
if All -~~le r:w j or mcans of production Herc nationalised.
 - 16 -

CHAPTER II

THE EVOLUTION OF ECONOMIC CO-OPERATION

AND INTEGRATION IN EAST AFRICA. ·

·-·-·-·----·----
2.1. the fiole of Britain.

Britain considered it more convenient to co-ordinat·e common service

for her t,vo dependencies, Kenya and Uganda, than to maintain

separate services for thelll. ·-.ln ;fu:r:!;b.,era,nce .of t _4_is policy, the

railway_ from ~ o~bas_~ . ~8:.~ _extended in 1902 to Kisumu which was then
part of Uganda.11 In 1905 an East Africân Currency Board was set
up for the purpose of issuing currency for use in the two countries.
Postal and Customs Unions were created in 1911 and 1917 respec-
tively, to cater for the needs of Kenya and Uganda.

Soon after \Vorld \var 1 Tanganyika be came a mandated terri tory

under the British Government~ By that Mandate Agreement Britain was
empowered to:

11
incorporate the territory into a customs fiscal and
administrative union or a federation with adjacent
territories under Britain's administration, pro-
vided mensures adopted to this end did not infringe
upon the provisions of the mandate."Y

The porder bet,veen Kenya and Uganda '"as . moved westwards

to provide fertile land {'Jiasin Gishu) for European
Settlement. See Ingridi Doimi di Delupis, The East
AJrican Community and Common
1
Market, London,' 1970, p.19.

g} Ibid'•
q,
- 17 -

Consequently the Common Services were extended and made avail-

able and applicable to Tanganyika.

2.2. Common Currency (1919·1966)

An East African Currency Board wae established in · i905 for · the

sole purpose of issuing currency for use in the three countries.

Situated in London the Board issued an East African Currency - the

shilling - from 1919 to 1966. The shilling was freely convertible

to the British pound sterling (t) at ·a fixe_d ~.ex'?hange rate (one S:.

sterling to .se·v~~teen ~Ëast Airican shillings) and was backed by

hundred per cent reserves maintained by the Exchequer in London.

The implications of this currency alignment for the management of

the economies of the colonies are listed as follow:

(a) Trade and other financial transactions among the

three countries were carried on smoothly without
foreign exchange problem;1/

(b) Trade betl'l'een the three countries and Bri tain

continued unhindered;

(c) Maintaining a fixed exchange rate of the shilling

vis-a-vis the ~ sterling reduced the risks of
financial institutions especially British banks
against exchange rate fluctuations; and

(d) Development efforts of these colonies were even

further hindered by their inability to finance budget
deficits through currency issue.

1/ The Eas't .African Shilling was also in use in Somalia, Aden

and Zanzibar.
 - 18 -

In 1966, soon after the independance of Tanganyika (1961)

Uganda (1962) and Kenya (196:;), it became 11

necessary" for each

country to maintain her own currency. Thus 1966 marked the end

of the Honetary Union which had existed between t .he .:!:-ll!"~e

countries and Britain. The adoption of separate currencies in

1966 did not bring to an end the close monetary relations existing

among the three countries. In the year 1966 all the three cur-

rencies were exchanging at par -against each other. Moreover, there

lvere no ex change__ commissions or limi ts of amounts transf erable

from one country to another. Until 1970 the value of the three

currencies lvas pegged to the United States dollar but thereafter

the shilling became pegged to a basket of currencies. After 1977

each country pursued an independant monetary policy. Consequently

exchange rates between the three countries differed · substantially

and any trade which continued to flow betlveen the three countries

was either done on barter basis or paid for in a convertible

currency.

2.2.1. The Common Services

The services which Britain found expedient to co-ordinate in

the three countries are enumerated broadly as follow:-

(a) Communications and Transport;

(b) Customs and Excise; ·

(c) Social Services;

 19
.·
'( d) Research and Scientific Services;.

(e) Economie Services; and

(f) Defence and other services.

(a) Communications and Transport (Seli finanëing·--servi-ces).

Posts and Telecommunications - Kenya and Uganda formed a

postal union in 1911 with Tanganyika joining in 19~0.

Like the Railways and. Har:t>ours the East African Posta

and Telecommunications · financed i ts --own· expendi ture
• -- · - ·· - -- 1 -

''li th · revenue derived from operations beginning January 1,

1949. Earlier on development expenditure for auch

services were financed by contributions from the three

governments in addition to grants from Britain. Posts
and Telecommunications had its headquarters in Nairobi;
there were three branch offices in Nairobi, Kampala and

Dar-es-Salaam.

Raihrays and Harbours - The railways in Kenya and Uganda were

built by the British 0 1/ In Tanganyika, however, such

rail way !ines were buil t by -the Germans • After World

\var I these two systems of railw·ay were · managed by two

1f The Mombasa-Nairobi railway line was started in 1896 and

ended in Nairobi in 1901. In 1902 the railway was ex-
-tended to Kisumu.
 - 20 -

different administrations until 19~~ ~hen they were

amalgamated under one management - · The East Atrican
Raih1ays and Harbours • In order to · opera te smoothly
a joint common tariff ' for all the three countries was

adopted in 1950. The Railways and Harbours financëd

their costs with rèvenue from their- own operations .
The headquarters of the Railways was in Nairobi and

the headquarter~ of the Harbours in Mombasa - both

in Kenya.

Civil Aviation - The Directorate of Civil Aviation came into

existence in . 19~9 under the auspices of the Commissioner

for Transport in the East African High èommission.l/

The department was supplied with technical services,
such as air radio, by Posts and Telecommunications on
contractual basis. The department continued ~o offer

services to the threè countries until the mid-1970 1 s

\vhen separate departments were created for each country
under the Ministries of Transport. However, the East

African Airways which stàrted operation in 19~6 continued

to offer intra-country as well as internationàl flights
up to 1977 when it collapsed. The headquarters of the
East Afrl.can Airways was in Nairobi with terminais in
Entebbe and Dar-es-Salaam.

1J The East Africari High Commission \vas the Authority which

co-ordinated the administration of the Common Services
àfter the Governors' Conference.
 - 21 -

(b) Customs Union - Kenya and Uganda became members of the Customs

Union in 1917 while Tanganyika joined in 1923. Similarly

income tax wàs introduced in Kenya in 1937. Three years

later the încome tax was extended to Uganda and Tanganyika.

--
Customs and Excise were managed by one department tnrough-

out Kenya, Uganda and Tanzania.

Income Tax administration was managed by another de-

partment in all -of tb,_e three countries. Tariffs and tax

stru~tures were however, set by one cen~~al Authority.1f

IIowever, each country was allowed to determine its own

rates this was especially so with persona! allowances.

Tax rates on persona! income, company profits, customs and

excise duties were the same throughout Kenya, Uganda and

Tanzani~. Whenever the necessity to re~ise ta~ arose the

three governments consulted one another and agreed on the

changes'.Y

(c) Social Services- Refugee administratio~a Publishers Bureau to

fight illiteracy, and an Inter-Territorial Language Commit-

tee 'vere some of the social services which were administered

on a subregional basis.JI

1/ The East .African Legislative Assembly (LEGCO) which existed be-

~ween 1949-1961.

Such changes were normally announced simultaneously during the

Budget presentations in June of that particular year.

East Africa bas more than 170 indigenous languages and Tanzania
with more than 120 alone. Swahili and English later became
official langua~es.
~ 1_ '
- 22 -

( d) Resear.ch and Scientific Services - CQ:-ordination in research

and scientific services on a subregional basis existed

since the 1920 1 s. However, research was limited .in

these years (1920-39)

.
. -t;o _meteorology
- . .. . . ... - -
- .~
and agricult~ral
·-··

services1• In 1939 a Central Organization on vererinary

research was established. After World War II numerous

research organisations came into existence in areas auch

as agriculture a~4. !orestry, the control of tse-tse fly

and sleeping sickness (trypanosonifasis), the provision

of fresh water and in marine fisheries, industrial re-

search, statistics, desert locust survey, medicine and

hygiene, filariasis, medical survey, relapsing fever,

malaria, viruses, leprosy, geological and topographical

survey.

(e) Economie Services - During the Colonial period a Production and

Supply Council; later the Department of Economie Co-

ordination, was charged with the responsibility of co-

ordinating among the three countries priees of 'grains of

strategie importance as well as priees for importa.

Other economie services were the Industrial Council res-

ponsiple for industrial licensing; an East African Office

in London which linked East Africa with Britain and a

tourist association.

(f) Def en'ce - In the ar.e a of def en ce an East African Naval Force

existed between 19~9-1962.

 23

2.2.2. Reyenues, Finance and Expend~ture of the Çommon Services.

Customs and Excise Duties, Income Tax and Levies contributed

the bulk of the revenue accruing · to the · 'Governments of Kenya,

Uganda and Tanzania. Revenue arising fro~ ~ustoms and excise Harbours
~ -. -- --- . ··--- --- -
duties was paid to the country of final destination that is the

consuming state·. As with goods imported but transferred to another

country such custom duty was transferred to the country of final

destination 0 Similarly excise .duties

- ---
-~
charged
..
on goods produced

and supposed t _o be consumed in one country, .. b.u t ·which '"ere trans-

duties collected
ferred to another country; exciseLwere paid to the consuming state.

In terms of income tax all income earned was treated as a single

sum and was taken to have been earned in one country.1l Tax collected

from Corporations wi th branches in more than one country · 'ms alloca-

ted in reference to where the income was earned.~

Finances of the Common Services during the pre-indèpendence era

arose 'from hvo sources • The ·· self financing common services that is,

the Railways and Harbours •. ' post and Telecommunications and the Air-

ways paid for their expensës from rèvenue derived from operations.

All the other services which operated on a subregional basis were

An exception were the employees of the East African Common

Services Organization (EACSO). The rate applicable ,.,as that
prevailing in the country of res~dence.

~ There was no incentive for companies to submit different re-

turns. Declarations were taken as authentic.
 - 21:1: -

funded through contributions from the three governments, grants

from the United Kingdom and g~ants from other countries or from
some organizations.ll

Following recommendations of .the Raisman

. ·-
Commission of
.... . -·
- ~- -
~961-

62, a pool . of funds - the Distributable Pool - operated as

follmv:-

(1) Beginning 1961 Kenya, Uganda and Tanzania each

\vere allocated nine.ty-fou:r: per cent of customs
and excise revenue originating from· -ea~h country;

(2) Sixty per cent of the revenue derived from income

tnx on manufacturing companies profits and
financial institutions in each country.~

The proceeds from the withheld revenue that is six per cent of

customs and excise revenue and forty per cent of income tax on

manufacturing and finance companies composed the Distributable

Pool of Funds. Net of collecting charges, fifty per cent of the

funds in this pool \vas used to finance the non-self containing

services. The balance of the revenue was shared amongst the three

countries equally.

lJ Ethiopia, Aden and Somalia participated in financing desert

locust survey.

~ Studied the various ways of financing the Common Services

and the new form of the East African High Commission.
 - 25 -

2.2.3. Hanagement of the Common Services.

The Authori ty \'lhich mimaged the Common Services from 1900 1 s

to 1970 1 s \vas not the same for all of -the 11 përiods". In this ·

section the evolutiQn o:f Authority and its configuratiônin the

management of Common Services is discussed.

The Gove'r nors 1 Conference - was a congregation of the

Governors of British colonies in Eastern Africa.

Such a Confer-e nce waa . an annual event and the first

of i ts kind w-as convened in 1926. .Present were the

Governors of Kenya, Uganda, Tanganyika, Malawi,

Northern Rhodesia (Zambia) and a representative from

Zanzibar. A Joint Economie Council whose purpose

vas mainly to.become a channel through which the

Governors could liase with the governments, was

established as a resul t of this conference. A per-

manent secretariat was similarly created to cater for

research services. In th~se Annual Conferences, the

Governors of the èountries in Eas~·ern Africa dis-

cussed matters relating to the co-ordination of ad-

ministration and developmentf/

The Governors of Uganda and Tanganyika had. obj ected to

Uganda 1 s and Tanganyika 1 s participation in a Customs
Union \'lith Ke~ya in 1905 and' 1923 respectively.
 - 26 -

The East hfrican High Commission (EAHC) - For the -purpose of

legalisin~ the Governors'.:. Conference · and fôr smooth co-ordina-

tion of the services the Gôvernors Conference in 19~5 came up

with three major suggestions:- -

(i) that East African Legislative Assembly be formed;

(ii) that East African High Commission with legal statua

replace the Governor 1 s Conference; and

(iii) that the Legislative Assenibly pass biÏl's pertaining

to - commerce,- road -transport, mining, communi.cation
and collective marketing 0

These suggestions were acceptable to the British Government and

so the EAHC took over from the Governors 1 - Conference in 19~9.

As with the Governors' Conference the East African High

Commission 'vas composed of the Governors of Kenya, Uganda and

Tanganyika'. Although the EAHC was extremely- powerful in its de-

cisions, such decisions could be vetoed by the British Govern-

ment 0 The responsibilities of the High Commission was to manage

the services ,.,hich 'vere common among the · East African countries

in addition to their overall responsibilities.

The East African Common Services Organization (EACSO) 1961-1966.

Tanganyika achieved independance status in 1961. In view of

this the EAIIC ,.,ho se Authori ty was composed of the three Governors

gave 1my to the EACSO wi th the President of Tanganyika on the

Board of the Authority. The EACSO inherited .most of the services
 - 27 -

and duties of the EAHc.ll

2.2.4. The Idea of Federation

The British Government in 1919 - was empowered. bY-.. i!.~_e Mandate

Agreement to incorporate Tanganyika into a federation with Kenya
and Uganda:. The British :Parliamentary Committees which continued

to come to East Africa for the purpose of evaluating the possibi-

li ti es of clos er · co-operation: or f~<!eration a~~~g;_ the three

·--.-

British ·dependen.ci~~ _;t.~_ ~11st _A frica, found out· that the three

countries \vere not ready " for federation.l/ However the Governors 1

Conference meeting in 1945 recommended that in the event of

federation becoming necessary then Kenya, Uganda and Tanganyika

should form one grouping 8 In pre-independence era the idea of
federation was of interest to the British Government, the Kenyan

Settlers and the leaders of the political movements of East Africa

(PADŒCA}.gj At independence the idea of federation was abandoned.

2.3Q Intra-Country Trade in East Africa

2.3~1. Imported Goods -Kenya, Uganda and Tanzania traded in

two types of goods - imported goods and locally

1/ The Ormsby ·-Gore {192q,) and the Hilton-Young of 1928-29.

The leaders ' of political movements in Ke~ya, Uganda and
Tanganyika promi13ed in 1957 to form a federation after
independence.
 - 28 -

produced goods. A swn.mary of trade in imported goods is

given in Table · 2 and 3 below slio\ving total value of net-

transfers . in thé region {East Africa) as a whole and

secondly net transfera for e~ch country as a per cent of

net importa. -- .... -. -·

Table 2

EAST AFRICA
NET · TRANSFERS
. 195.6-1963 .

Year .J.: Million

1956 14.7
i957 15·;9
i958 16' ~1

1959 17.3
1960 19~9

1961 19.7
1962 21:.7
1963 22.7

Source: See following pageo

 - 29 -

Table 3

EAST Ali'RICA

NET TRANSFERS AS PERCENTAGE -OF NET IMfORTS

--- -'· _,. -- . . , .. .. 19-56- 19'6"3.- ------- .

-·
•
.. - -· --

L Year
- . . ..
KENYA
- ·-·· ---
UG.ANDA TANZANIA

1956 - 17o7
. + ~2o~ + 8o0
1957 - l8o2 + 39.0
--
+-- 12.0
--

l95tr
.... - .. - - 21~0 - + lt1~6 + 1~. 7 .

1959 - 22~0 + 43.8 + 12.8

1960 - 22.1 + 4~~6 + 21.9

1961 - 22o3 + ltl.l.1 + 20~3

1962 - 23.8 + 4.6.0 + 2~.~

1963 - 23.6 + ~1o1 + 24..7

..

Source: Tables .2, 3, Nd_eglva, Ph:j,Jip The Common

Market and Development in East Africa,
East African Publishing Hoase, Nairobi,
1968, p.32.

Net transfera represent goods imported from the rest of the

world and destined for use in the importing country but which .were
eventually exported to a partner countryo Table 2 and 3 above
show that overall trade in net transfera was pregressively in-

creasing over the period 1956-1963 and, secondly, Kenya had the
largest volume of imported goods which were destined for resale
to either Uganda or Tanzania. Transfer trade in Uganda was quite
 - 30 -
' ·,

significant in the period under reference. Purchases of manufactured

goods which had been imported for use in èither Kenya or Tanzania

amounted to no less than forty percent of total · imports·. Tanznnia's

trade in net transfera was, howeve~not as much in volume as that of

Uganda. Importa of such goods increased more than threè - times-.. - -

8% to 2~.7% of total importa over the period.

Several explanatory factors could be given for the above trade

pattern: first, Nairobi was the centre for agricultural, industrial

and commercial interests for the whole of East Africa such that im-

ported goods tended to concentrate in or around Nairobi.

Secondly, Nairobi and Mombasa are near to Uganda and Arusha/Moshi in

North-Eastern Tanzania than Dar-es-Salaam.1/ Buyers from Uganda or

North East Tanzania would consider Nairobi as their first priority

for goods 'vhich were not available in thei'r localities. Thirdly,

the development of the Mombasa port enabled importera to consider

Mombasa as their port of landing for their imported goods.

2.3.2. Trade in Locally produced goods - As point~d out in Chapter I

the économies of Kenya, Uganda and Tanzania are heavily dependent on

_agriculture auch that the highest portion of trade of these East African

countries is with the rest of the world. Table ~ below indicates, in

1/ The distance from Dar-es-Salaam to Moshi/Arusha is six times

more compared to the distance from Moshi/Arusha to Mombasa.
 31

Table 4

EAST AFRICA

DIRECTION OF DOMESTICAI.LX PBODPCEP EF.~H:TS

.......... _.
(i955, "19$9 •irid ·t963) -

in ~·ooos
...------
..
Year 1955 1959 1963
-. ..
.KENYA Total 31,702 45,.603
. -
63,623
...
È!J2orts outside the
Common ~Iarket 25,667 33,306 43,832

E!J!orts to the
Common Market 6,035 12,297 19,791

UGANDA Total 49,781 47,:l19 39,716

Ex~orts_outsid!i! the
Common M:arket 41,902 42,091 51,475
'

Ex!!orts to the
Common Market 7,879 5,228 8,241

TANGANYIKA Total 37,889 47,861 66,976

. ,E!!!orts outside the
Common Market 36,188 IJ:5,287 63,553
11
Exports to the
j 1,701 2,571J: 3,423
j Common Market
i 1

Source: Ndegwa, Ibid., p.40.

 - 32 -

Table 5

EAST AFRICA

Dl}~~CT ION OF DOMESTICALLY PRODUCED KXPORTS

( 1955, 19~9 and 1963)
·in percentages.

Year 1 1955 1
59 1 '63 1

KENYA: Total Experts 100 100 100

Exp 9 rt out s ide · . -
Common J.l' larket -
-· -·-
·- 80.9 73.0 68.9
-· --
~-

·- -·
-·.
~Exno::.·t t o Conunon - ~1ar ket 19~ 0 26o9 31.1

UG.l\ND A; Tot a l ]~;~n orts 100 100 100

ort out s ide
}~XI>
Comraon HarJ~c-t 811.1 88.9 86.2

·· üomriHin Harket 15.8 11.0 13.8

TANG A-
T_o tal Exp ert s 100 100 100
NYIKA'
F.::p 0 :;:t ~3 outside
95.5 9 1.~:.6 94.9
Comnon Harkct

E:;:p o:;_· ts t o Common Mark et '1.4 5.3 5.1

;

Sou~cc : Worked out by me from t able four.

 - 33 -

in value terms, the direction of exporta for Kenya, Uganda

and Tanzania in the years 1955, 1959 and 1963~ Trade in locally

produced goods is very significant in relation to total country

trade especially for Uganda and Tanganyika.

Table four may be summarized as :Îollow: .

For Kenya the importance of trade in locally produced goods

within the common market is evident. The reason for this is that

from the very beginning (early coloniai period) agricultural as

well as industrial development was- greater in Kenya than \vas the

case in Uganda or Tanzania. On this issue Rweyemamu commented

thus:

"During the Colonial period a partially interlinked

institutional structure of private trading interests
grew up which has shaped the export enclave of the
country. Its East African base was Nairobi, Kenya,
where in conjuction with settlers it was able to
pressure the colonial administration to adopt
policies conducive to its continued growth."JJ

-Tanganyika' s extremely low exporta to the Common Market is not \VÏ thout

reasono Except for skeleted services by air and water through

Lake Victoria, there is little communication between Uganda and

Tanzania.g/ Secondly, the Immigrant population in Tanganyika was

1/ See Rweyemamu, J.F. Underdevelopment and Inàustrialization in

Tanzania, Nairo~~~ 197~, p.32o
gj The Mombasa railway gave Uganda access to the sea. Formally
ivory was being carried on head for mil~to Dar-es-Salaam.
 - 3l.l -

relatively very small comparëd with such a- population in Kenya.

Despite the size of this immigrant population in Tanganyika the

plantation owner~ specializ~d in the productiono! a few export

crops - ·sisal and coffee- - in .c.o ntrâst to · Ke-nya .,{her.e. :the .: ~~igrant
population engaged in both domestic as well as export crops•.
Ndegw·a (1965) commented that:

11
Tanganyika doe~ n?t have so far any single major

:Î.ndustry which depends on the East --Airican: Market

as a ~~ol-~ ~ ;,1J -

In relation to Kenya, . ~Tanganyika' s po si ti on as far as agricul-

ture and industry were concerned was very weak. Kenya 1 s exporta to

Uganda and Tanganyika were mainly industrial manufactures or pro-

cessed agricultural products especially food, beverages and tobacco.

The following flow chart indicates the nature and direction of

auch trade.

!/ Location of industries favoured Nairobi and Hombasa.

 - 35 -

CHART I

EAST AFRICA; Community Trade Flo\v

. · -.~ · ~- . ... ,_, ·--~ ..

1955 - 1963

UGANDA: Sugar, tea,

confectionery,
animal feeds.

Food, beverages, ]}
manufactures, cement,
~l
bicycle tyres and TANZANIA:
KENYA:
tiles, window frames, Meat, glué,
~ / onions, tobacco,
\'1~ oil seeds, nuts,
copra and raw
--~:::::::::::::::::::=::::::=:::::....!~·- cotton 0
 - 36 -

Kenya has been dominant in the Common Market in terms . of sales

of indutrial manufactures of processed goods. Uganda solq a few
processed agricultural commodities. Tanganyika's position in the

1950's and 1960 1 s w~s not encouraging ' at all.ll She exported meat,
glue, oninns, tobacco, oil seeds, nuts; copra"i:Lnd··-raw-· cotton :to the
Common Ivlarket. In return Tanzania bought manufactured :: goods and
industrially processed foods. Table Six below sumarizes the balance

of intra-State trade between · 1967-1973.

- · Table 6

EAST AF1UCA
JNTR..A-STATE . ïB.ADE BALANCE

i967 - 1973
Millions of Shillings.

Year .IŒNYA UGANDA TANZANIA

1967 238 - 59 - 17ti

1!J68 273 - 72 - 201
1~6~ 309 - 106 - 203
1970 321 - 105 - 216
1971 383 - 210 - 173
1972 36ti - 155 - 213
1973 503 - 311 - 191

Source: IDEP, Mimeo, R/011-78 p.5.

jJ Tanganyika united with Zanzibar in 19611: to form the United

Republic of Tanzania. Tanzania and _Tanganyika in this text
are used synonimouslyo
' .
.f 1' ~· '•
- 37 -

THE EAST AFRICAN COMMUNITY

3.1 o BACKGROUND
. . ·~

The low level of industrial development of Uganda and Tanzania

as compared to that of Kenya became a source of concern to the

former soon after the attainment of political independance. The

year .1961:1: was very important\ to .·ithe . t~ree . coun"t_~i__es . in East Africa
especialiy for -Uganda .and Tanzania. These two countries mounted

pressures on Kenya for formula which could f:avour the location of

industries in- the less industrially developed member States. The

effort ~ persuading Kenya to accept this formula culminated in what

. 1'
has been referred to as the Kampala Agreement of 196~.~

The Kampala Agreement sought to correct the industrial im-

balance which existed between the three countries. A number of
methods, listed below were proposed in the Agreement to redress this

imbalanoe:

(1) Firms which were already operating in Kenya, were to

locate their new plants in •ither Uganda or Tanzania;

(2) Industrial licencing was to be used to favour the less

industrialised partners;

1f Tanzani,a ini tiated the move to correct the imbalance.

 - 38 -

(:;) Member countries in the free market--wh.;ich found them-

selves in trade (intra community) deficit were allo,ved
to increase their exporta to the country with trade
surplus, and

(4) .L'lember countries in trade deficit may use---traQ.e re•

strictions including quotas and other non-quantitative
measures against the member country in favourable trade
balance.

.
Although Uganda and- Tanz~nia ratified the Kampala Agreement,

lienya _ ~id not. The Kampala Agreement thus - broke down. Negotiations

along this line among Kenya, Uganda and Tanzania, whièh continued un-

abated between 1965-19b6, eventually resu!ted in the signing of a

Treaty for East African Co-operation. Under that Treaty an Economie

Community and a Common .Harket were established.

:;.2. Objectives and Structure of the EAC

Ob.ject1:ves: The East African Community was created to achieve

accelerated economie development for the member States. In pursuance

of this objective the EAC proposed among others:

1. the establishment of a customs union tariff and a

common excise tariff;

2. the abolition of trade restrictions between Partner States;

3• the adoption of a long term agricultural policy;

4. the establishment of a Development Bank;

5. co-ordination _of industrial policy; and

6o decentralization of the headquarters of The Common Services.
 - 39 -

Structure

The Authority - The organizational Structure of the EAC is given

in Chart II. · The EAC had as its overriding Authority the

East Afrièan Authority. The Authority was composed of

three Heads of States who ' together constituted the princi-

pal executives of the Community. In case a member of the

Authority was:

"unable to -attend a me~ting of the_. A,uthority and it

--
i -s not . convenient to postp_one the meeting, he shall,

after consultation with the other members of the

Authority, appoint a person holding office as a

Minister of his Government to represent him at such

meeting only" .li

The principal functions of the Authority included the exercise

of general direction and control of the Community affairs.

In addition, the Authority was responsible for overall per-

formance of the Community. In the pursuance of its functions

the Authority ,,m s assisted by the Councils and the East

African Ministers.

1J See Treaty for East African Comm~~ity, Government Printer,

Nairobi, 1967, p.29
 CHART II

EAST -AFRICAN CO}~fiJNITY: INSTITUTIONAL STRUCTURE

co-ïity

East African Authority

East AfricaniMinietere
1 Legislltive Common Court of Indus trial.
Staff Assembly harket .Appeal Court
Tribunal
Secre~ary AudiJor Deputy East Afrlcan Ministers
General General
Public Accounts
1 Committee ·
Secret.ariat
l
Economie coJon Communi- Finance Research
Consulta- }farket cations and Social
tive
1 .1

1 \
1
---,
Harbours Airways

Source: EACSO, Treaty for East African Co-operation, Nairobi, 1967. ~

0
1
 - 4:1 -

The Councils - The Councils were five in number - Common Market,

Finance, Communications and Transport, Economie Consultative

and Planning, and Research and Social Services. Each Council

consisted of three East African Ministers plus nine other

members. Of this nine each- State was t .o . nom_inate three.

. ·-···-·····-- -
The

functions of the Councils were directly linked to the nature

of these Councils.

The East African :t-finisters ~- Each member country nominated one

Minister who would be appointed by the Au~hority as an East

African Minister. They were responsible to the Authority and

their duties and functions, as a group or singly, depended on

the Authority itself. If so desired each member country ap-

pointed a deputy to assist the East African Ministers.

Legislative Assembly - . Membership included the three East African

Hinisters, the Deputy Minister, twenty-seven appointed members

(nine from eash State), the Chairman of the Assembly, the

Secretary-General and the CounseL to the Community. The Assembly

had powers to enact bills which became law after they \Vere as-

sented to by the Authority. As a necessity the bills ha d to

carry the following words of enactment:

"Enacted by the President of the United Republic of

Tanzaniaj the President of th~ Sovereign State of
Uganda and -the President of the Republic of Kenya
on behalf of the East African Community, with the
., 1 •

advice and consent of _the_East· A;frican Legislative

Assembly."1/

Staff of the Community - General Staff - Consisted of all persona

lvorking for t h e ..Comm-unity

.
_ ~ ~c ~pt_ the following:-
.. - ·- -·. - -·.
·-··.-- ......_.._,,., ..

(a) All persons holùing political posts;

(b) Employees of the East .c\frican Development Bank;

(c) Employees of the Transport and Communications Cor-

porations; · -and _ . .

(d) Membe rs of the Councils and Tr 1bunals.

All the members of staff performeù r outine functions in the

three offices to which they were assigned: the off i ce of t h e

Secretary-General; that of the Counsel to the C~mmunity and

its Secretariat; and the Auditor General's office.

The Tribunals - They were three in all - the Court of Appeal of East

· Africa, the . East African Industrial Court and the Common Market

Tribunal. The Court of Appeal of East Africa heard appeals from

the highest courts of the individual member countries. The

Industrial Court dealt with labour disputes involving the em-

ployees of the Commnnity, the Corpo~ations and the Common Services.

Before the Treaty came into force, holvever, employees of the

EACSO were subject to national labour courts in the three coun-

tries. The Common Market Tribunal dealt with disputes pertaining

exclusiv(dy to the Cornmon Market.

1) See .Ingridi Doimi di Delupis, The East African Community and

Common Market,
___,... London,- 1970, p.67.
.
. '
- l:i3 -

The Corporations The s -e ·existed as institut ions of the Communi ty

and were four in number- East African· Railways (EAR) East

African Harbours (EAH-) East African Airways (EAA) and East

African Posta and Telecommunications (P & T) C9.rporations.1/

The Corporations conducted business pure-iy :._ on_:- commercial : pa~is

as stipulated in their bills of enactment. Each Corporation

was headed by a Director-General who was responsible to a Board

of Directors. The Transport and Communications Council bad over-

all responsibility for- the .smooth. running of. __tge~e Corporations.

).). The Common Market

Before the EAC came into being the Common Market existed in

East Africa. However, it was not function~ng properly. The

Treaty for East African Co-operation sought to correct this

shortcoming.

(i) External Trade

(a) Common Customs tariff - Hember States agreed to establish a

common customs tariff against all goods imported into East

Africa. Deviations were, ho\vever, allowed in the tariff:

structure if the interested Partner State reached agreement

to that effect with the other two member States of the

customs union.

Before the Treaty was signed the three countries bad agreed
to separate . the EAR & H into EAR and EAH.
 (b) ~rotection of East African Trade - The member countries agreed to

avoid importation of goods from non.:..East African countries when

such goods were produced in East Africa. In the event that

barter agreement resulted into trade diversion from goods pro-

duced in another Parner Stateto goods impo-rted -unde.r the barter

agreement, the Partner State into which the goods were imported

was supposed to take effective measures to counteract such

diversion in trade.

(i~ Intra-Community Trade

(a) Principles - Kenya, Uganda and Tanzania agreed to have unrestric-

ted trade amongst themselves. Goods imported from non-member

countries were sold anywhere in the Community but any customs

duties collected were paid to the Consuming State.l/ There

were no tariffs or quantitative restrictions on goods produced

locally. Excise duties collected on goods produced locally were

also paid to the Consuming member State. Hmvever, there were

two exceptions to the principle of free trade as far as intra-

Community trade was concerned. First, goods thought to endanger

human, animal or plant life were banned. Similarly, goods which

constituted security risk (arms and ammunition) or goods -

In case the goods were delivered in a . container other than

the original one only 70% of the customs duty collected was
paid to the consuming State.
 - l.i5

which threatened the stability- of thë:· economies (gold, silver

and precious stones) were not to be given free access within

the 6ommunity. Restrictions were also imposed on trade in

· agricul tural produce especially. s.taple. _:fQQ9-~- ~nd basic .export

~···-·--- . .
crops)J

Discrimination practices, however, were not allowed within

the Community~ Such practices included one channel marketing,

discriminatory purchases. or taxation -and dumliï"ng.~

(b.) Trade - Trade imbalance existed at the time of independence

and it continued un-redressed during the advent of the EAC.

Kenya continued to enjoy a favourable trade balance in intra-

East African trade whereas Uganda and Tanzania did not (see

tables 7 and a).

Kenya maintained subsidies · for food crops.

One channel marketing means absence of institutional
competition, discriminatory pu~chase means failure to
practice "the most favoured Nation" clause, and dumping
means selling goods at a lower priee, in a neighbouring
State, than the pre~ailing priee in producing country.
 ~6

Table 7

INTRA-COMMUNITY TRADE BALANCE

IN MANUFACTURED GOODS
1967 ' -' · -1976 ·-

1967 = 100
Trade Balance.

- KENYA -- UGANDA T~ZANIA

Year - --.
--.
-·.
-
1967
--
+ "100 - 100 -
- 100
1968 + 115 - 116 - 123
1969 + 129 - 177 - 113
1970 + 13~ - 177 - 120
1971 + 161 - 350 - 96
1972 + 15~ - 258 - 1:1.9
1973 + 211 - 520 - 106
197~ + 300 - 821 - 122
1975 + 380 - 769 - 153
1976 + 3~0 - 858 - 16~
1 1

N.B. + sign means a positive trade balance.

- sign m~ans a deficit.

Source: Adapted from The World Bank, Horld Development

Report, washington n.c. Vol. 10, N° 11, 1982.

Based on a simple index and taking the trade balance for the

year 19671= 100 for each country the trade gap betlveen Uganda and

Tanzania as against Kenya has been widening over the period under

reference. The index for Kenya increased by 2~0 in that decade.

Uganda's index increased by 758 and Tanzania'~ ' went up by 6l.l: for
 - 1.17 -

for the period. Between 1967-1976 Kenya continued to be a net

exporter while Uganda and Tanzania -J.-ncreasingly became more de-

pendent on the Common Market for their i:mports.

Table 8

INTRA-COMMUNITY TRADE

Selected -Years

Exports as % of Total Imports as 9~ of Total

Exports Imports

·s ::
Year
KENYA UGANDA
1

TANZANIA
1
--
KENYA UGANDA
-
TANZANIA

1967 )0.8 16.1 !.~: oG 1).) 27.lf. 17QO

1970 28.9 12.0 8.2 10.1 2LJ:.6 1.'.~:· . 7
197l 28.7 LJ:.8 6.6 5o8 39o8 9o8
1976 19.3 0.5 6.3 ).2 41*. 6 12.6
.
Source: _The World Bank/I~ Jti.!lance and Development,
Quarterly Publication, Vol 0 16, N°o4,
Dec. 1979.

Kenya's trade balance with the Community members rose from

6
shillin-g s 238 million in 1967 to shillings · -808 million in. 1977 re-
· flecting an increase of nearly 2lJ:O per ·cent in the period. Kenya' s
exports to the Communi ty as, a ratio of total exports recor-ded a

sharp drop in 1976~ A similar position existed for Ugandan and

Tanzanian exports to the Community in that year.

 - 4:8 -

Uganda was heavily dependent on Kenran importa between 1967-1976.

Imports from the Community as a proportion of total imports for

Uganda rose from 27.4: to 4:4:.6 per cent in 1967 to 1976 renpectively.

Although Tanzania's imports from· the Community as a proportion of

total importsi showed a declining trend 17.0 to 12~6- per ·cent --for. 1967

and 1976 respectively; Kenya' s position ·had ,.,rorséned - 13·.3 to 3.2

per cent. Kenya depended more on the Common Market for her · exports

and less for her .imports. Uganda relied heavily on importa from

the Common Market - 4:4:.6 pe~ ce~t of h~r -.tp_taY imports ·- ( 1976)
against exporta of 0.5 per cent (1976). - There was not ·much change

regarding Tanzania 1 s trade with the Community in the period.1/

3.4:. Corrective Measures

The trade and other imbalances ,.,hich existed between Uganda and

Tanzania against Kenya needed rectification. The Treaty for East

African Co-operation contained measures (effective · 1967) ,.,hi ch were

designed to redress these imbalances. Such measures centred around:

The Transfer tax, the East African Development Bank, Fiscal measures,

Industrial licensing and Decentralization of the headquarters of the

Corporationso

1} Coffee and tea are major East African exports to third countrieso
The priee boom of 1976/77 resulted into a drop in the ratio of
exporta to the Communitj" as a percentage of total exports.
 - lJ:9 -

The Transfer Tax - was a tariff imposed on _ go~ds imvorted from Kenya

by Uganda and 'l'anzania. The tax lvas such that:

~a state which has a trade deficit with the other Partner

States may impose transfer tax on manufactured goods
originating from · the two other States •··· . 'l'he value . of the
. ... ..
-~ -.

goods, however, must not exceed the amount of the trade

deficit in trade in manufactured goods between the State
which is imposing the transfer tax and the State of origin
of the goods concerned" •.Y

Three conditions governed the . transfer ~~x, -namely:

(a) 'l'he fax ·could only · be imposed · on goods '"hich -the importing
country could manufacture or could reasonably be expected
to manufacture within a period of three months afte~ the
imposition of such a tax;

(b) 'J:he protected home industry must have a capa.ci ty of not

less than fifteen per cent of domestic consumption of
that particular commodity;

(c) Such a tax would be allowed to operate for a period of

eight years and cease after fifteen years.

The Transfer tax had minimal effect on _trade imbalance. The de-

pendence of Uganda and Tanzania on importa from Kenya cont1nued to

be significant between 1967 and 1Y76 (see table 9 above)o

1J It was expected that after 8-15 years a ~izeable industrial develop-

ment by Uganda and Tanzania would have been reached. See Article 20
of the Treaty for East African Co-operationo
 - 50 -

Revenue arising from the Transfer tax were expected to be used

for promoting industrial development in the countries imposing the

transfer tax. The amount of revenue raised during the period (see

table Y below) were _neither sufficient nor used for the p~rposes in-

tended.1f Therefore the Transfer Tax failed .tô achieve· the .p.u rpose

for which it was imposed 0

Table 9

UGANDA AND TANZANIA

-TRANSFER TAX COLLECTION
1970/71-1972/73.

in Million Shs.
-
1970/71 1971/72 1972/73
Country 1

UGANDA 7.6 7.1 6.9

TANZANIA 10.6 8.9 8.6

Source: Kwan, Kim s. and others Papers on the Politien!

Economy of Tanzania, Nairobi, 1979, p.185o

The East African Development Bank (EADB) - The Bank was set up

in 1967 with three main objectives:

1) Transfer tax revenue disappeared in Treasury coffers. Revenue

figures for the other years were unavailable for the study.
 - 51 -

(a) to provide financial and techniéal assistance in

order to enhance industrial development of the
member States;

(b) to give priority to -industrial nev~lQp~ent in relative-

- ····--····--
ly less industrialised member States, and

(c) to finance projects geared towards making economies of

the member States complementary in the industrial field.

The Bank was equipped wi th an ip.ye§;!;:m~nt :for.mula_designed to me et

these three . obj~~ti._y~~·- _Out of the total _ investTble ~unds in any

period of five years Uganda and Tanzania were to receive 38.75 per

cent each and the balance of 22o50 per cent were to go to Kenya.

The EADB started with an equity capital of 240 million shillings.

Kenya, Uganda and Tanzania were to be the majority share-holders of

the Bank ( wi th 51 per cent). Al though the Bank was empo\vered to

borrow, in addition to welcoming other shareholders, the Bank's

initial capital was insufficient for supporting large industrial

projectsall However, in the life of the Community the ~ADB did

not adhere strictly tb the provisioœ of i ts enabling act - - See

Table 10 •.Y

Proje.cts able to produce for the combined markets of Kenya,

Uganda and Tanzania in terms of intermediate or final _pro-
ducts.
Figures for the other years were not available for the study.
 - 52 -

Table 10

EAST A.F.tt.ICAN DEVEi.OP:t-ŒNT BANK

_DISBURSEMENT OF FUNDS

·As at Dec, 31
1970, 1971 and 1973.

ln Percentages
-·

lm ill.i . .. -- llll -

Approved Disbursed Approved D!sbursed Approved Disbursed

KENYA ~0 53 39 ~1 22 36
UGANDA 18 35 17 2~ l.~:O 20
'l'ANZANIA ~2 12 l.l:l.l: 35 38 l.l:l.l:

Total 100 100 1oo 100 100 100

Il
m/= 76 21.2 ~Oo~ 58.1 210.3 90.2

Source: Kim, Kwan S, Ibid, p.186.

Kenya received more funds than its alloted share of 22Q50 per cent.

For the years 1970 and 1971 ~0 per cent and 39 per cent of the investible
1
funds of the EADB \vere to go to Kenyae For the year 1973 the figure

representing Kenyan approved projects \vas 22 per cent. For the three

years the figures for Uganda and Tanzania were 18, 17 and ~0 per cent

and ~2, ~~ and 38 per cent, respectively. Actual disbursement in all

the three years favoured Kenya. Out of the total funds disbursed

Kenya received 53, ~1 and 36 per cent 1970, 1971 and 1973 respectively.
 - 53 -

Uganda received 35, 2~ and 20 per cent while Tanzania received

12, 35 and ~~ per cent. Thus the EADB as a corrective measure

was a failure.

Fiscal M.easures - Before the creation- of the. _E;AC there was a unifor-
·-- - ·-- -- ----·

mi ty in taxation in East A:fric·a. This uniformi ty in taxation

continued until 1973; thereafter each country adopted its own

fiscal policy.ll

Industrial Licensing - Regulations for establishing industries existed

before 1967. The EAC agreed to continue with them. · ]'or such

purposes there was the East African Industrial Licensing Board

whose purpose was to regulate the siting of industrial projects

as well as determine the economie viability of such projects.

The resulta of lndustrial Licensing were hardly commendable since

investment decisions were always left to investors. Kenya

continued to attract more investments between 1967-1976 than did

Uganda and Tanzania.

Decentralization of the headguarters of the Corporations and the

headguarters of the Community.

Before 1967 Uganda and 'l'anzania felt that Kenya was .benefitting

more from the Communi ty and the Common Market. As lvi th the

1J ln view of the different approaches to development member countries

differed in fiscal policies.
 - 5~ -

Community headquarters of the Transport and Communications

Corporations were located in Kenya, In the Treaty for East

African Co-operation, therefore, Kenya, Uganda and ïunzania

agreed to decentralize the headquarters of the- institutions,

The newly created li:ADB and the lieaâ.quart-ers of - P-· &·· T ,.,erè__ t~ _

be located in Uganda, The headquarters of EAA and E.AR were to

remain in Kenya. The East African Harbours and the headquarters .

of the EAC were to move to Tanzania. The decision to decentra-

lize was implemented.~

1'

'l'he Corporations: Qperating Accounts and Transfer of Funds.

Table 11 summarizes the resulta of operations of the four

EAC Corporations in the year 1973 and 197~~ The net result

(revenue - expenditure) for all the Corporations \'/as positive

in each country, The EAA in Kenya made an operational loss of

- 105.~5 and ~ 78o32 million shillings in 1973 and 197~ respec-

tively. EAH operations and P & T services in Uganda ended up in

!osses with EAH losing - 0.66 and - Oo56 million shillings and

P & '1.' losing - 6~.37 and -127.12 million shillings. EAII in

Tanzania suffered operational losses of - 38.50 and - 31.~3

million shillings for 1973 and 197~, As the years 1973 and 197~
were very crucial to the continued existence of EAC Corporations

it is necessary in what follows to give an analysis of each country's

complaints concerning each Corporation,

1J Some influential personali ti es in Kenya were unhappy \'/Ï th this de-

cision, Likewise Kenya continued to offer vital services of the
p & T in Nairobi in addition to appointing a Deputy-Director for
Harbours Services in Kenya contrary to the Agreement 0
 - 55 -

Table 11

EAC CORPORATIONS:
OPERATING ACCOUNTS
for 1973 and 1974:

Ivlillion Shillings.
EAA EAH E.AR p &T 'l'otal
KENYA 1Y73 -105.4:5 53.21 35.55 150.93 13L.~:.01

1974: - 78.32 173.37 29.07 141.82 265.94:

UG.ANDA 1973 100.26 - -o.66 5;3.95 -64.37 89.18

-
- 1974: 1~~·8? - 0.56 38.58 -127~12 l.~:5.75

TANZANIA 1973 115o08 -38.50 1UU.68 82.09 259.3 5

1974: 1j2. :.u -31.4:3 116.89 90.56 318.1±6

Totals 1973 109o89 1lJ:.15 189e85 168.65 l.~:82 0 5lJ:

197lJ: 208.74: 1lJ:1.38 18lJ:. 54 105.26 639.92

N.B. Headquarter costs are included where they

are located.

Source: CODESRIA, Africa Development, VolQlJ:,

N°. 2/3, 1979, pQ19.

The EAA - In accordance wi th the 1'reaty of East African Co-operation

all moneys earned and received by the four Corporations in each
country were to be transferred to the country where the headquarters

of that particular Corporation 'vas si ted. In respect of the EAA

Uganda and Tanzania transferred all revenue to ~airobi except re-

venue to operate the terminais at Entebbe and Dar-es-Salaam:. The

headquàrters at Nairobi had losses for the years 1973 and 1974
 - )6 -

(see table 11). Kenya, as _a r _esul t of the . los ses in the EAA,

claimed that the !osses which the EAA made in the respective

years were due to:

(1) Tanzania'sJ size and -

(2) the fact that plane-lo~ds in Tanzania were not full.

Similarly Tanzania was discontented with the operational !osses

at the headquarters of the EAA. Tanzania contended that there

..
was gross mismanagement on the part of -the _EAA headquarters and
- 1}
tha t Kenya was no t interested in the jointly owned EAA. rn:

view of the differences, Uganda and Tanzania stopped remitting

revenues due to the EAA headquarters from 197~.

EAH -As the headquarters of the EAH was ..:transferred to Dar-es-

Salaam, Kenya appointed a Deputy-Director General whose duties

and function included the responsibility of managing Harbour

Services. lienya, from 1974, did not remit revenues arising from

harbour services to Dar-es-Salaam. For the years 1973 and

197~ Uganda and Tanzania 'vere in deficits as far as Harbours

operations were concerned. In 197~ Kenya had an excess of re-

venue over expendi ture from the Rarbours Corporation three times

(173.37 million Shillings) the excess in 1973.

1t was rumoured that there \·Fere ifluential people in Kenya \vho

wanted to ground the EAA and start their own private airline.
' . - 57 -

E.AR -The Raibvays · Corporation ha<! an excess o:L:t"e_v enue over expendi-

ture in all the three countries in 1973 and 197~. The excess

of revenue over expenditure realised in Tanzania exceeded the

sum total of ~uëh excess in K~n~~ ~nd Ugànda in the respective

years. The railways in Kenya, however, faced stiff competitfon

1'
from road transport.ll in view of such competition the member

States, especially Tanzania, vere dissatisfied vith the per-

formance of the Railways__ C()rporation in Kenya. As 'vith the

A~rways, Uganda and Tanzania . did not remi't·- the revenue arising

from railway operations in their countries to the headquarters

in Nairobi from 197~.

P & T - Although the headquarters of Posts and Telecommunications

Corporation were moved to Kampala the External Telecommunica-

tions Company remained in Nairobi. In the years 1973 and

197~ Kenya and Tanzania had an excess of revenue over expenditure

while Uganda 1 s deficit ( -127.12 million shillings} in 197~

vas twice the figure in 1973. Uganda was disenchanted with

Kenya as far as P & T Corporation was concerned. Tender issues,

awards and subsequent purchases for projects and other opera-

tions of the p & T Corporation continued to be taken in Nairobi 0

Neither did Kenya nor Tanzania, as from 197~, remit revenues

arising from P & T operations to Ugandao A transfer of funds

1
crisis had prevail in the EAC Corporation So

11 See Hazlewood, A. TheEconomy of Kenya- The Kenyatta Era,

Oxford University Press, London, 1979. p.95~98Q
 - 58 -

CHAPTER IV

THE COLLAPSE OF THE EAST AFRICAN C0~~1UNITY

AND THE POSSIBILl'l'lES · POR lTS REVIVAL

J,j, .1. COLLAPSE

There is no particular date for the collapse of the EAC.

A catalogue of events which took place between 1973 and 1977

culminated in the demise - of the - EAÇ. These evjmts are summa-

rized in table -12.__

Table 12'o

CHRONOLOGY OF EV~NTS LEADING TO

THE COLL~SE OF EAC. ·

l!.'vent

1973 Restrictions on inter-State transfer of

funds gave rise to liquidity problems in
the EAC Corporations;

1976 (i) A Committee appointed in 1~75 to revie\'1 the

Treaty for East African Co-operation ndjourned
without renching consensus;

(ii) EAC workers in the General Fu;nd Services except

those in Arusha returned to their respective
countries;

(iii) Uganda and Tnnzania EAA \vorkers in Kenya were

sent home;
 - 5Y -

1977 (i) Headquarters of the ~AH, EAR, and p & T were

disbanded;

(ii) Kenya and Tanzania set up autonomous harbour

services;

(iii) Kenya established her own raihmy system;

(iv) Hember countries to the EAC failed to agree on

a Common Budget to finance the General Fund
Services;

(v) h.enya announced withdrawal from EAC and took

over all EAC assets located in I~ enya;

(vi) Kenya set up her own national airline, and

(vii) Tanzania closed its border with Kenya.

q.2. Remote Causes of the Collapse

a) Ideological differences - Kenya, Uganda and Tanz~nia adopted

different approaches to development - bence different

ideologies. Kenya and Uganda opted for the capitalist

approach to development while Tanzania ·chose socialism.

b) Po,ver conf erred on the EAC' s Authoti:by. - The re was no clause

in the Treaty to safeguard the continued functioning of the

EAC in case the Authority failed to rneet. From 1971 the

EAC encountered operational problems as the Authority failed

to meet because of the differe·nces betwoen Nyerere and

Id l.• A- •
.tlllll.ll.
1.1 1Uso the 'l'reaty did not define in sufficient

1.) Obote, former President of Uganda, bad tal.cen .a sylmu in Tanzania.

 - 60 -

details the powers, functions and responsibilities of

the EAC Authority.

(c) Unegual development - The EAC was plaqued by problems arising

from different lev~ls of development, -industri~ l and trade

imbalances and the inability to agree on a fair distribution

of costs and benefits. 1'he various Commissions (ltoyal 1947,

Haisman 1961 and Philips 1966) found out that the Common

1'1arket in East Afrièa led -to . more rapid _gr.·o1·1 th in the sub-

region -than~ould haye been achieved had each of the East

African Governments pursued the same economie policies

separately; in the decades of the 1960's and 1970 1 s (see

table 1) Kenya had the fastest rate of economie growth com-

pared to Uganda and Tanzania 0

(d) Unegual sharing of Benefits and Costs:

(i) Industry - Proliferation of industries in Kenya before and

during the EAC was dissatifying to the other member countries

of the Union. The three countries agreed in 1967 to share

the benefits and costs equally in pursuance of an accelerated

and harmonious economie development. lnspite of these cor-

rective measures the distribution of industries Hhich was

agreed upon as one way of sharing the benefits of the com-

bined markets was 4ifficult to achievee

(ii) Trade Imbalance - 'l 'he character of intra-Communi ty trade was

~irtuaily determined by the level of economie development of

the member States. We note that Kenya's exports to the

 - 61 -

Communi ty were of indus trial· origin as·· against Uganda 1 s and

Tanzania' s which \vere agricul tura! exports·. K.enya remained

a net exporter wi thin the Common r:.1.a rket - \·r hile Uganda and

1'anzania experienced· chro:i::dc - dafïcits·• -- H-easur .e.~ . to c-orrect

the trade imbalance were not successfu~.

Table 13o

EAST AF.H.lCA

DISTRIBUTION OF INTH.A COillillNI TY TRADl!:

(Selected Years)

as percentages.
Year l!JCP OR'l'S IHPOHTS

KENYA UGANDA TANZANIA IŒ.t-.TYA UliANDA TANZANIA

1967 61.4: 29.2 9o4: 31.5 :;6.3 32.2

1970 61.8 23.7 14:.5 31~lJ: 35.7 32.9

1973 79.5 7.5 13.0 25.2 1.~:2~ 8 32.0

1776 83.1 1.0 - 15e9 16.9 l.~:0.2 42~ 9

Source: See Eken, Sena the "Break-up of 'J.'he :ë!AC, 11 Finance

and Development, Quarterly, Vol • . 16, ~.q, Dec. 1~7~.

(e) Loss of Revenue - The adoption of a Common external tariff, Common

excise tariff and free intra-Community trade resulted in the
loss of revenue to the three governments involved. In these
circumstances it was not possible for any of the governments

wishing to use a more progressive fiscal policy for the pur-

pose of financing development needs t o adopt higher _tariff

rateso
 - 62 -

4: • 3. The Collapse of EAC and the i 'heory of Economie Integration

In vie1v of our understanding of the 1'heory of Economie

Integration the collapse of the J!:AC was not a surprise. The

adoption of conunon external · turiffs, common -. exci§_~ _ tari-f fs and

the removal of barriers in intra-Community trade in East Africa

was no more than an integration of markets · 1vhich were more or

less similar. Competition and complementarity amongst the

economies is a basic requirement for the suceess of the inte-

gration schemejgroupingo fhe East African experience under-

scores this necessity. ~ach country produced and traded more

with third countries than with the other member States of the

Community. All the three countries were exportera of agricul-

tural raw materials to the industrialiseù countries. The

removal of trade barriers between such countries, therèfore,

would have little effect on intra-community trade unless the

economies produce to complement each other. The East African

case indicates that at different levels of development free

trade between Kenya, Uganda and Tanzania aggravated the existing

disparities among member countries of the Union.

The corrective measures which were introduced within the

East African Common Market, especially the Transfer tax, were

contrary to the general principles of the underlying economie

integration theory. The correctivemeasures demonstrated the

need for developing countries \vishing to solve their economie

problems through .market integration to adopt adjustments measures

aimed at co-ordinating industrial development and economie plan-

ning.
 - 6) -

ossibilities of rev1'v1·n th e E'as t Af r1can

· Communit •

The possibilities of reviving the EAC as it was formally

cons ti tuted are very remote. Ugauù.a a:..1d. Tanzania are still

intere sted :tn correcting their . imbal.ances . i:Q._ ;i.J:J,~!J..~~:r:";r_ and :trade

with Kenya through an adequate compensation scheme and through

co-ordination in industrial plauniu~ a:!.lcl :2a:c·monization of agri-

cultural and social policies.

Compensation_......_. _, ~. -:. - Economie Community f.o_:r West African States

has proposed a compensation scheme - for the distribution of

benefits espec~ally to the members of the union who might

end up with losses as a result of liberalization of trade

amongst the member countries,1/ The Fund for co-operation,

compensation and development is subscribed to by }lember

States and private enterprises; contributions from bilateral

and m~ltilateral international assistances sources are also

important. The Fund is to be used for the purposes of

financing projects in Member States, and to pay compensation

to Member States which may have suffered losses due to loca-

tion of Community projects, enterprises or the liberaliza-

tion of trad~. These resources will also be used to

guarantee foreign investments and to promote the development

of projects in the less developed Hember States,Y The basic

1f The defini ti on of losses should remain 'vi th the country invol ved for,
generally, the countries of the Union will remain silent on the general
bene fi ts. See Africa Economie Digest, Vol', 5, N° 27, 6-12 July 1984: p. 5.

2} See the Treaty of the Economie Community of .11est African .States (ECO\\'AS)
Article 50-52.
 - 64: -

principles behind the Fund- are more -or less similar to the

intentions which were contained in the corrective measures

which the EAC introduced. However, the EAC lacked any f .orm

of compensation scheme. - Revi::val. o_f ___ ~~~ Community d~pends

·--· -··-··-····-·· . ...
critically on a comprehensive compensation scheme such as is
proposed for ECO\VAS. 11

Collective planning in Industry - Co-ordinated planning especialiy

in industry is a necessary pre-concl:!._ticin ·if the new EAC or

any other intègration scheme is ~o be successful. This con-

certed approach will minimize competition and ensure comple-

mentarity. It will also allay :the fears of less industrialised

Member States by introducing sorne mensure of fairness in the

spatial distribution of industrial projects.

Common Agricultural Policy - The countries of East Africa are en-

dowed with more or less similar soil types and climate. As

there are minor differences in the nature and character of

both food and cash crops for export in East Africa co-ordina-

tion in agricultural policies is vital for the new EAC. A

common agricultural policy should aim at solving the prob-

lem of the drought and self-sufficiency in food-production.

Common Services, Transport and Communications - Economie, social

and scientific services which were provided by the EAC is

crucial for the ressurection of the EAC. The experience

which Kenya, Uganda and Tanzania have had after the collapse

of EAC is sufficient to convince the Hember countries that

11 rt should be noted that compensation schemes vary with the type of

integration and that those schemes are a result of consensus amongst
t he member s -tates. ECOWAS is still in i ts early .integration stages
and its compensation scheme is yet to be elaborated and implemented.
 - 65 -

a ne,.,.. Communi ty will rely :Q.eavily- on-, __and bene fit tremen-

dously from efficient co~non services especially in the

areas of Transport and Communications.

~. 5. Size of an Economie Integration Scheme-

The size of an Economie Integration Scheme is of particular

relevance. Hembership to the EAC was limited to three countries

though Ethiopia and Zambia applicd to join. Perhaps if the EAC

had not collapsed its membership would have grown with time.

A general trend of integration schemes on the African Conti-

nent is large membership. This is evident in such schemes as

ECO\VAS (ll.l,) PTA (1~) and SADCC (9). The benefits from enlarged

membership in economie integration schemes are twofold, large

membership .p rovides a larger market and secondly, disintegration : m~y

be -less likely to result from the displeasure of one or two Member

States.

Two attempts towards co-operation and integration are current-

ly taking place in Eastern and Southern African countries - the

Preferential Trade Area (PTA) and the Bouthern African Develop-

ment Co-ordination Conference (SADCC)o1/ Both the PTA and SADCC

11 Eighteen countries have shown inter est in- .;Ohe PTA: Comoro, Djibouti,
Ethiopia Kenya Mala:,vi, Mauritius, Somalia, Uganda, Zambia, Lesotho,
Swaziland, Jl...ngoia, Botswana, J.ialagasy, üozambique, Seychelles,
Tanzania and Zimbabwe.
 - 66 -

are in their early stages of formation! In 1982 the Treaty to

establish a Preferential Trade Area was formally signed by nine

countries - Comoro, Djibouti, Ethiopia, Uganda and Zambia'.1/

The objective oi the PTA is to increase trade amongst the

member countries. However, there are numerous divergences

amongst the countries of the sub-region necessitating in addi-

tion, co-operation in agriculture, industry, transport and

communications • .

In term~ o:f __ag?;iculture, the countries produce a varied

number of commodities the bulk of which is for export to de-

veloped countries. These export products include coffee, tobacco,

tea, sugar, cotton, sisal, pyrethrum, and beef. Food crops

produced in these countries vary greatly in terms of type and

total output. A fe'v of the food crops are wo:tth mentioning;

they include maize, wheat, millet, sorghum, sugar, bananas and

beef. Considering the different potentials of each country,

the foreign exchange needs and the demand for food in each and

all the countries put together, the necessity for co-ordination

in production and consumption is quite obvious.

Member countries of the PTA have attained different levels

of industrialisation (see table14 ·).

1} In 198l.J: the member countries had reached fourteen, the ne'"

members being Rwanda, Lesotho, Slvaziland, Zambia and Zimbabwe.
See Afi·ica Economie Digest July 6, 1984:.
 - 67 -

Table ilJ,

SELECTED COUNTRIES OF THE PTA

LEVEL OF INDUSTRIALISATION AND DIRECTION

OF MERCHANDISE EXPORTS

Lev el of Industrialisation Direction of Marchandise Exports

GDP at Current Percentage as percenta~e of total

priees Share of merchandise E2œorts to
(us $) -Industr:r Indus trial Sub-Saharan
in GDP Countries Africa

Ethiopia 3530 15 72 4
Kenya 5280 21 63 21
Madagascar 2810 20 67 4
Mauritius 916 28 95 4
Mozambique 2360 16 43 4
Somali a 1030 11 18 1
Tanzania 4130 1) 57 1.1:

Zimbabwe 3640 39 no a. n.a.

Source: Adopted from The World Bank, Accelerated Development in

Sub-Saharan Africa, Washington DoC., 1979.

Zimbab,ve follo1ved by Mauritius and Kenya, have the highest proportion

of industrial contribution to Gross Domestic Product with 39, 28 and

21 per cent, respectively. Somalia is the least industrialised with

11 per cent of ber GDP originating from the industrial sectoro It

may be noted, however, that exports from these countries are destined

for the industrialised count'ries. Mauritius exports 95 per cent of her

merchandise to the industrialised countries.

 - 68 -

Ethiopia and Madagascar follow with 72 and 67 per cent, respective-

ly. Exporta from the eight countries to the countries of Africa

South of the Sahara (South Africa not included) is negligeable corn-

pared to exports to the industrialised count.r.i~s • . ~-~~!.a is :the

only country which has a high proportion (21 per cent) of her
1/
total merchandise exports destined to Sub-Saharan African countries.~

Transport and Communications within the countries (all which

have shown interest) of the PTA are relative~y under-developed.

rhe countries of Southern Africa are more linked to South Africa

than they are to one another or to the north 0 Comoro, Mauritius,

Djibouti, Rwanda, Lesotho and Angola have less in common in terms

of transport and communications. Co-operation in Transport and

commnnications is, therefore, necessary amongs·t the countries of

the PTA as a pre-requisite for raising the low-level of trade

amongst themselV'cs.Y

Member States of the Southern African Development Co-ordination

Conference are Angola, Botswana, Lesotho, Hala\vi, Mozambique,

Swaziland, Tanzania, Zambia and Zimbabwe.~ The prime objective

of SADCC is to reduce the heavy dependence of such economies on the

Republic of South Africa.

!Y SADCC members want to achieve this objec-
tive through regional integration 0

1} Zimbabwe has greater potential of exporting industrial manufactures

than Kenya.
Y The research encountered difficulties in getting access to docu-
ments pertaining to the performance of . the PTA since 1982.
'jj As at 1981j, Lesotho, Malawi, Swaziland, Zambia and Zimbabwe are
both members of PTA and SADCCo
flj Tanzania and Angola do not have much depend ence on South .Africa'.
 - 69 -

Tables 15 and 16 show population densi ti es, - p"er capi ta income and

sectoral contribution to Gross Domestic Product in SADCC member

countries in 1979. Malawi and Lesotho bad the hi~hesi ' concentra­

tions of population '(1.4:9.0, ·1.4:310)· and Botswana.-had .tl.Ht__least- (1.3)

-· - ' ····-·
in 1979. Botswana had the highest per capita income (US $720) in
that year. .Countries with low per capita incomes in that year

were Hala'vi (US $200) followed by Mozambique (US $250) and Tanzania

(us $26o).

The agricultural sector in Tanzania contributed 51.4: per cent

of the GDP in 1978. In Zimbabwe the same sector contributed only

12 per cent of GDP. The industrial sector \vas most important in

terms of its contribution to GDP in Zambia, Zimbabwe, and Botswanao

The sector contributed 1.4:1, 39 and 30 per cent of GDP for the three

countries, respectively. Industrial contribution as a share of GDP

was low in Tanzania and Lesotho (13 and 15 per cent respectively).

The service sector in the nine economies constituted a significant

share of GDP except in Tanzania, Mozambique, Halmvi and Angola ,.,he re

the agricultural sector was dominant. The service sector provided

1.4:9 per cent of GDP in each of the following countries - Zimbabwe,

Lesotho and Botswana.

Other general characteristics pertaining to individual member

countries are of interest. Angola which is 72 times the physical

size of Swaziland is very much endowed with natural resources - oil,

iron, diamonds, copper, lead, zinc, gold, phosphates, bauxite and

uranium are the major mineralso Coffee is the chief agricultural

export crop. Botswana and Zambia have more or less similar

 - 70 -

Table 15

MEMBER COUNTRIES QI!' SADCC :-

POPULATION DENSITIES AND INCOI>:.Œ
PER CAPITA ·
1979 • ..

Pers·ons Eer Per CaEita income

Iiln
2 us$
ANGOLA 5~5 l.tl.i:O
BOTS\vANA 1.3 .,_720 ·-

LESO'rHO l.t3.3 3l.i:O

ll'lALAWI l.t9.0 200
MOZA}IDIQUE 13.0 250
SWAZILAND 29.0 650
TANZANIA 19.0 260
ZAMBIA 7.l.t 500
ZIMBABWE 18 l.i:70

Source: The World Bank, Accelerated Deyelopmcnt in

Sub-Saharan Africa, Washington PoCo 1981.

Table ï6,

~Œ&.œER COUNTRIES OF SADCC .

SEC'l'ORAL Dl§1.B.JJ3UTION Q,F_ GHOSS DOHESTIC PRODUCT
1.21.§. *
as pccentages.
!griculture Industrr Services
ANGOLA 1.~:8 23 29
BOTSWANA 21 )0 1~9
LESOTHO 3,6 15 1.~:9

1>1AL.AWI 1.~:3 20 37
HOZAMBIQUE l.~:ll 16 l.i:O
SWAZILAND n.a n.A n.a
TANZANIA 5l.i: 13 33
Z.AMBIA 15 . l.i:1 lj)J:

ZIMBABWE 12 ;;9 1..~:9

*
1979 figures were not available.
Source: lbid.
 - 71 -

characteristics in terms of mineralÏ and agricultural resource endmt-

ments. Zambia's mineral resources include copper, chrome and cobalt

while the major mineral : resources of Bots\vana are diamonds, gold,

copper, nickel and coai. In Zambia agricultural exporta are really

negligeable since copper alone provides 90 per cent of the total

foreign exchange. Botswana's chief export commodity is beef.

2
Swaziland (17,000 km ) and Lesotho (30,000 km 2 ) are the smallest

countries in SADCC. Both countiies are l~ndlocked ~ng are wholly

enclosed ,.,ri thin the · Republic. of South Africa 0 They are mainly de-

pendent on agriculture and their industries are mainly based on pro-

cessing of agricul tural products. Like Bots1·rana, Lesotho and

Swaziland are highly dependent on the Republic of South Africa for

trade and employment.

Malawi, Mozambique and Tanzania are typically agricultural in

nature 0 Unlike Tanzania and especially Halavli, Mozambique has ex-

tensive mineral resources such as coal~ iron, bauxite, tttanium,

gold, asbestos, copper, phosphates and natural gas. Hydro-electric

po,,rer in Hozambique is little exploited. Tanzania, however, is one

of the largest and most populous countries in SADCC. She is the only

member of the defunct East African Community Hhich is not n signa-tory

to the PTA.

Zimbab11e has the biggest and the most modern and cohesive econo-

mies in SADCC. In Africa South of the Sahara it is second only to

the Republic of South Africa in industrial output. Agriculture providcs

 72

50 perccent of foreign exchange and of paid employment.

Similarly mining accounts for about 7 per cent of GDP and

provides ~0 per cent of forejgn _ ~xchange.

~.7. Potential Areas of Co-operation in the PTA and SADCC

Five years after the collapse of the EAC the former membe~

either joined the PTA or SADCC. The differences ,·between

the aims of PTA and the -aims of_ SADCC are n~g!igeable.

PTA member ·-countr_ies _ aim at establi~}!ing a free trade area

amongst themselves with co-ordination in policies in agricul-

~' industry, transport and communications1• SADCC member

countries however, aim at promoting sub-regional trade through

production planning as a way of lessening their heavy dependence

on the Republic of South Africa. Areas of immediate interest ~

include agriculture, industry, transport and communications and

energ~. SADCC member countries put more emphasis on integra-

tion:.

Countries of East Africa continue to sho'v great interest

in co-operation and integrationo Possible areas of co-operation

include:

(a) Agriculture - Although co-ordination in agricultural poli-

cies and agricul tural planning 'vas lacking

in the EAC such policies and agricultural

planning are worth pursuing in the PTA and

SADCC.
 - 73 -

(b) Iildustry- The fateful Kampala Agreement_and the continued

reluctance by Kenya to tolerate sorne industriali-

sation in Uganda and Tanzania provides a useful

expérience for members of the PTA or SADCC or an

enlarged EAC.

(c) Transport and Communications -The common services which catered .

for the three countries of the EAC may only be revived

if the differences · which were manifested i.n the EAC

a re- resolvedo

(d) Energy - Energy potentials in the sub-region may be exploited

for use by the 'vhole of East African market 0 Co-

operation with neighbours that is members of PTA

and SADCC will be of significance in the mobilisa-

tion of resources needed for exploration.

(e) Tourism - Tourism continues to be a centre of a ·ttraction even

after the collapse of the EAC. Positive co-operation

in this field may lead to increase in traffic and

foreign exchange earnings.1f

(f) Trade - Trade among member States is a potential engine of de-

velopment especially 'vhere the countries share common

borders. However, intra-Community trade without an

adequate compensatio~ scheme - ~ill give rise to major

conflict.
 - 74: -

5. RECOMMENDATIONS

The possibilities of reviying the East African Community

becomes meaningful only when a comprehensive compensation

1 -
scheme to correct for imbalances in · trad·e, . spatia-l ··· distril5~1- ..

tion of industries, gains, benefits and costs is mutually agreed

upon and implemented by the participating countries of the Union.

Additionally, in view of present events especially the founding

of PTA and SADCC and in view of ·the strong inclination that

integration schemes -with large membership have a greater poten-

tial for ·success than integration s·ahemes with smaller member-

ship, the EAC cannot (and should not) be revived as formerly con-

stituted. It should be absorbed into one of the existing sub-

regional groupings preferably the PTA vrhere its experiences of

many years are bound to play a positive role.

 - 75 -

CONCLUSION

The objective of this thesis was to analyse the problems

leading to the collapse of the East African Community, and the

possibilities for the Community's revival. A chron~foiièal analy-

sis of co-operation and integration among the member States of the

East African Community covered the period 1917-1977o

It was found out in the c-ourse __q_f this_ s_tudr _:that the East

African Community__ en_ç9u_n:t;e:red Illany problem~ duririg the brief period

of its existence. The most serious of these problems were ideolo-

gical differences among the Member States, uneven levels of develop-

ment and inequitable distribution of gains, benefits and costso

The last mentioned was the single most important factor which led

to the collapse of the Community.

The capitalist approach to development adopted by Kenya and

Uganda \vas antagonistic to the declared socialism in Tanzania. The

contradictions underlying these two approaches to development re-

sulted in the three countries having divergent views on goals and

strn·tegy for accomplishing the objectives of the Community 0 Inciden-

tally Tanzania' s official embrace of socialism \vas in the same year

the Treaty for East African co-operation was ratified by the three

Heads of States. Also the different levels of development of the

Member States especially the level of industrialisation and the in-

equitable distribution of gains, benefits and costs amongst the

Member States negated the overall objectives of the Treaty for East

African co-operation.
 - 76 -

Corrective measures introduced by the Treaty through the

Transfer Tax, the East African Development Bank, Industrial

Licensing and the Deeentralization of the Corporations' head-

quart ers failed to achieve the ir objectives. De spi te- t -he existe:t;Lce
of the Transfer Tax Kenya continued to enjoy a favourable trade

balance in intra-Communi ty trade \'Thile Uganda and Tanzania ex-

perienced gro,ving deficits • Nei ther 'vas the East African Develop-

ment Bank nor Industrial Licensing able to ac~elër.ate industrial

development in Uganda and -Tanzania 0 Against stipulations in its

statutes the Bank invested more of its resources in Kenya than in

Uganda and Tanzania. Also Industrial Licensing did not induce

investors to locate their industries in less industrialised Uganda

and Tanzania. Implementation of the decentralization of the head-

quartera of the Community's Corporations left Kenya, Uganda and

Tanzania dissatisfied.

The benefits which the Community brought to the three countries,

although in varying magnitudes, were crucial for the development of

the sub-region and for each country individually. However, in view

problems
of the underly1ngLresulting from the concentration of industrial

development in Kenya, inequitable distribution of gains, benefits and

costs, and the different approaches to development, the Collapse of

the East African Community was inevitable.

The possibilities of reviving the East African Community becomes

meaningful only \vhen a comprehensive compensation scheme is mutually

agreed upon and implemented by the participating countries of the

 - 77 -

Union~ Reviving the Community will require common industrial

policies and co-ordinated agricultural policies 0 Additionally,

in view of the existence of the PTA and SADCC and in vimv of the

strong inclination that integration schemes with large membership

·- -·····-- .
have a greater potential for success than integration achemes· with
smaller membership, the EAC should not be revived as formerly

constituted. It should be absorbed into one of these ne\v schemes

preferably the PTA where its rich e~~eriences are bound to play
a positive role 0
 - 78 -

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 - 79 -

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' /

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JOURNALS, PAMPHLETS AND OTlillR

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1. ALLEN, P.R. "Cyclical Imbalances in a Monetary Union",

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2. CHIBUZO, S.A.O. "The Nigerian Indigenization Policy:

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3. CQX, T.S. "External Aid and Eas-t . 4frican Integration",

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~±. Dl.AHOND, P.A. "Effective Protection of the East African

Transfer Taxes", East African Economie Re-
~' Vol ~' N° 2, Dec. 1968.

5. EKEN, s. "The Break-up of the East African Community",

Finance and Development, Quarterly, Vol 16,
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6. ELKAN, Do "Measuring the Impact of Economie Integration

among Developing Countries", Journal of Common
Market Studies, Vol 11±, N° 8, 1975.

7. ETIENNE, H. "Community Integration", Journal of Common

Market Studies, Vol XVIII, N° 1±, June 1980.

8. GREEN, R. "East African Economie Integration: Benefits,

Costs, Priorities", mimeo, Uganda International
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9. HAZLE\VOOD, A. "The End of the East African Community: \"!hat

are the Lessons for Regional Integration
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11. HELLEINER, G.Ko "Transfer . Taxes, Tariffs and the

East African Common Harket 11 , ~
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12. HILL, c. "Regional Cg-operation in Southern Jlfrica",

Journal of the Royaf A:frrc·an ·Aff airs,
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13. LOFCHIE, :t-1. {"Joint author), "Food Deficits and Agricul tural
Polieies", Journal of Modern Studios,
Vol 20, N° 1, March 1982 0

1~. ORGANIZATION Lagos Plàn · of Action, · ·Manual, International

OF .AFRICAN Institute for Labour ·Studies, Geneva, 1981.
UNITYo

15. PELKMANS, J. "Economie Theories of Integration Re-visited",

Journal of Common Market Studies, Vol XVIII,
No ~, June 1980.

16. ROBSON, P. "The Re-shaping of the East .Afriean Co-

operation," ,Journal of Common Market
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17o ROTCHILD, Do "The Politieal Implications of the Treaty",
Journal of Common Market Studies, Vol 3,
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18. WIONCZEK, MoS• "Economie Integration and Regional Distribu-

tion of Industrial Activities", East African
Review, Vol 2, N° 1, 1966.