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It’s high time we think regionallyBy Vicent Obiro Orute The Business landscape in East Africa will never be the same again following the signing of the protocol establishing the East African Customs Union in Arusha on March 2 this year. In the long term, the customs union will level the playing ground by harmonizing taxes on foreign imports and cross border duties between Kenya, Uganda, and Tanzania. In the short-term companies will have to re-think their business strategies in order to remain in business and stay afloat. What this means is that the people of East Africa will now start to think regionally rather than nationally. Competition is going to be very stiff and companies will now start to pay attention to efficiency, quality of their products, distribution networks, and aggressive marketing of their products. Market forces are now going to hold sway on companies’ survival because the East Africa’s 90 million consumers will enjoy a wider choice. The previous trend when governments used to provide some kind of protection will die out very soon. A major advantage of integration is that it opens up business opportunities and saves through economies of scale. When you produce more in a larger market, you end up paring down your production costs to a minimum. This is what East African business leaders should start paying attention to. It is better to be part of a growing enterprise than being swallowed up. Consolidation of similar businesses is going to be a common occurrence in East Africa in the near future. This is simply because consumers will feel the benefits accruing from lower prices and a steady improvement in their standard of living. Another factor of vital importance on the survival of the companies will depend on the simple promise i.e. it is best to do what you can at the lowest price possible. What I mean here is that companies should specialize in order to stay afloat. East African business leaders can no longer operate like the Jack of all trades. But also what East African business leaders ought to understand is that business always thrives on sustained demand. That is what the customs Union is going to force all of us to learn and very quickly. A phase Commonly mentioned when creation of Wealth is discussed in the US is "government should get out of the way and let businessman get on with their work" or put it differently; government should not stand in the way of businessmen" In essence this phase is representative of the common view held by many people that governments more often than not tend to be more of a hindrance than facilitators of business activities. And a simple reason behind all this is the idea that when government tries to do what should be left to "the free market or private Sector" then things tend to go amiss or awry. Here in East Africa we can elaborate on this by taking the example of employment, because it is often yoked with the creation of wealth. There seems to be a consensus that governments have to "preserve" jobs for their locals, and to prevent any business entrepreneur from employing foreigners. A sensible thing to do as it may seem, this viewpoint is actually naïve and self-defeating. The fact that government tend to preserve Jobs for Locals can be explained in a number of ways. First, the argument against employing foreign expatriates, it is widely claimed that for every expatriate employed, three to five locals of equal skill and ability could be employed. Second, it is also claimed that no international company worth its salt can actually send out to a small country in Africa the cream of its management staff. That the fellows you see around are actually third–rate losers who have been exiled from Head Office where the real action is. So if countries in EA are intent on encouraging new foreign investment into the Region, they should not worry themselves about how many foreign expatriates the new foreign Investor wishes to bring in. They should instead allow free mobility of labor by making work permits freely available or do away with them completely. This should be done in the conviction that a few years down the line, the operations of the free market would have caught up with the new Investor and most of those Initial two-year working permits would not be renewed, for purely on commercial grounds or reasons. Better still, many of these highly paid expatriate senior managers, reluctant to return to face ferocious competition in their own home countries, and alive to the many safe and profitable investment opportunities in E A, will likely start their own businesses right here. As a result, that initial investment which brought a team of expatriate managers into the region will spawn several other new businesses, all of which will create new employment opportunities the locals had been craving for years without success. Sooner but not later, East Africans will have to face up to the fact that there is little our governments can achieve by way of encouraging new foreign investment into the region, if we continue to keep a tight grip on work permits and only issue them grudgingly to a selective few. In my humble way of thinking, a sensible thing for us to do is to fling our doors wide open to skilled foreigners, content in the knowledge that cheaper labor within the Region will in due course replace these expatriates. Attempts by our governments to intervene in the labor market and to exercise close regulations is well intentioned, but we may not be very good at getting things done and this may represent a wrong solution to the problem. The best that our governments can do is to get out of the way of businessmen, and allow the operations of the free market to solve the problem in its own way.
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