TOWARDS AN EAST AFRICAN FEDERATION:

Debate, Rationale and Declaration of June 1963

After forty years of rejecting the federation, East African began demanding for it for several reasons.  First articulated by J.G. Kiano (later Minister for Commerce in Kenya) in September 1959; the reasons were three fold. First, the European settler influence, which was strong in Kenya, would have extended throughout Uganda and Tanganyika thus complicating the struggle for independence in those territories. Secondly, that the decision on when and if a federation was to take place was solely the business and responsibility of the African people and not of the white or the colonial office. The third and perhaps the most important reason for a federation as stated in the June 1963 Declaration, was not only for the purposes of unity but a means of remedying the trade and industrial imbalances through economic planning under one federal government in East Africa.  The Declaration stated:

…..Thus the  value of working together  has been adequately demonstrated  in the East African Common Services Organization and in the Common Market. But the scope of further joint action remains wide.

Economic planning, the maximum utilization of manpower and our other resources, the establishment of a central bank and common defence programme, and foreign and diplomatic representation, are areas in which we need to work together. Such an approach would provide greater co-ordination and savings in scare capital, facilities fro training and manpower. What is more, we would  have a total of more than 25 million people-a formidable  force and a vast  market to influence economic development at home, attract a greater investment and enhance our prestige and influence abroad……”

Accordingly, the Declaration set   end of 1963 as a time when the federation would have been achieved, A timetable was published and a Working Party established to prepare a framework of a draft constitution of the East African Federation. The Working Party was to report back to a full conference of East African Governments that would sit in August 1963.

The Declaration gave rise to a spate of debates in the respective national assemblies of the three states. 

In Uganda, as early as July 1963, reservations about the Motion supporting the federation were made. Indeed the Prime Minister of Uganda Milton Obote in October 1963 said,

 “ there are still points which Uganda believes must be settled before-and not after- the East African Federation is formed and which could explain why it ( the federation) will not come into being this year…..

Tanzania reacted to the prolonged talks over the Federation. During early 1964, Tanzania’s Minister of External affairs Oscar Kambona stated:

….. When we became independent in 1961 we acquiesced in a continuation  of the existing arrangements for the common market-not because we believed that they were fair and equitable, but because we were prepared to treat  them as  an interim measure leading to eventual federation. If federation was to be postponed indefinitely, however, we could not continue to ignore the disadvantages to Tanganyika inherent  in that common market…..

On March 17, 1964, Tanganyika’s Minister for Development Planning Nsilo Swai at a secret conference on the coordination of economic planning that sat at Entebbe, stated that his country was suffering economically for prolonged talks over the federation and proposed:

“ To equalize the disadvantages of indefinite talking about federation by limiting trade with Kenya and Uganda through such devices as tariffs and import quotas.”

Mwalimu Julius Nyerere President of Tanzania told the Central Legislative Assembly in August 1965:

“….. Let  me stress again that Tanzania understands the economic problem of her neighbours and deeply regrets any temporary complication which her need creates. We have tried to avoid it. Although our problem was clear to us long before our independence, we took no action until 1964 because we hoped the matter could be dealt with   in the framework for an East African Federation. For a time we were willing and able to accept the status quo, and all its disadvantage to us, as a necessary price to pay for East African unity. But in the absence of any progress or any hope of any early federation, we had no alternative but to seek actively for an equalization of the advantages and disadvantages of the common market. Only when our efforts failed to bring practical agreement on an East African basis did we, reluctantly, take steps on our own…

The Nairobi Summit

Alarmed by the statements of the two Tanzanian Ministers Kambona and Swai, Kenya convened a meeting of Heads of Government in Nairobi (The Nairobi Summit) on April 10, 1964 to forge ways to end the existing trade imbalances and thereby facilitate progress towards political federation. In a Communiqué issued at the end of the Summit,  the Tanganyika delegation made an assurance that they had no intention of withdrawing from the East African Common Market. The Conference also agreed to set up an Emergency Committee to examine certain problems relating to trade relations within the   3 countries.  The sentiments of the delegates especially the Kenyans were not disclosed at the Communiqué but were to be revealed in the Minutes of the Conference.

Jomo Kenyatta (then Prime Minister of Kenya and Chair of the Summit in his opening remarks stated,

“… This meeting  has been called to discuss the Tanganyika Governments’s decision  to leave the East African Common Market  and Currency. Here in Kenya we are alarmed at the prospect  of implementing this decision. On balance, we have accepted that Kenya gains most from the market. We do not , however, admit  that our gains are made at the expense  of the other partners. Our examination shows that Kenya is rapidly losing its hare of these gains, oddly enough to Tanganyika. Besides, there are other advantages arising form East African Common Services and Raisman arrangements…

If it proves impossible to establish a Federation, we consider that the Common Market should be preserved for yet another year. We have just become independent, we have problems of unemployment….

I should like to command  to you these thoughts. I hope prosperity will say that this meeting saved the Common Market; that the Common Market begot the Federation.

Dr. Julius Nyerere had this to say:

“ ….. Chairman, you stated  in your opening remarks, that Tanganyika had decided to leave the Common Market. I wish to correct  that statement. Tanganyika has made proposals to modify  certain structural relationships and the problems posed by this are easy and simple: they  do not involve withdrawal.

We have, however,  inherited advantages and disadvantages in the Common Market. No one can be blamed or congratulated for these disadvantages and advantages inherent in the Common Market.

All the people who have studied the Common Market  say it is  very useful thing for East Africa. East Africa has gained industries, investments and an infrastructure as a result of the Common Market. Indeed, East Africa would not  have been as attractive to investors overseas without it. If you break the Common Market, there is no doubt  that East Africans would suffer.

There is however a paradox here. What is good for  the whole should be good  for the part. This is not true in economics. It is possible for the Common Market to serve East Africa as a whole without serving the component parts. There must be deliberate actions to redress the imbalances which may arise……….

The aim behind the establishment of the Common Market was that it should serve Kenya. Let me make it clear, however, that I am not blaming Kenya: it is the rulers of East Africa at the time who planned deliberately that Kenya should be the center of economic activity. They, at first wanted a federation; they could not get it, so they established the Common Market to serve their interests.

Now, there are certain rules which determine accumulation of investment and one of them is indicated in a passage in the Bible which says, (He who has more will be given and he who has not even that which he has will be taken away form him). In so saying, Jesus was referring to facts of life. Kenya has developed more than Uganda and Tanganyika: the result is that we have only a legal common market, while in fact , it is Tanganyika which is the Common Market for all. Uganda and Kenya sell to Tanganyika more than Tanganyika sells to either of them and, therefore, Tanganyika is the Common Market of Kenya and Uganda. As such, it will be some time before we can have a true Common Market of the three East African countries…..

One-way of meeting Tanganyika’s problem is to have some form of tariff protection. Another possible way might be to agree to limit the amount of goods which one country buys from another. Up to now, Tanganyika had not pressed this solution because it would be painful to Kenya who would have no market for her goods. Another method is that we could aim at reducing the trade imbalance gradually with a view to eliminating it in a given period….”

Dr. Apollo Milton Obote ( Prime Minister of Uganda)  noted:

…… At the end  of the (Entebbe)  meeting, the Tanganyika Delegation  submitted a paper which was read to the meeting. We  in Uganda took the paper as meaning  that Tanganyika was going  to walkout of  the Common Market, and I think  from the information available to me and now confirmed by what we have said  in the meeting we had this morning, that Kenya felt  that paper indicated that Tanganyika was desirous of leaving the Common Market….

..I think we cannot  now take the point  of view  of the Tanganyika Delegation at the Uganda meeting. I think we .can now take the point  of view as expressed  by the President this morning…….”

However, the above economic and political bickering and tensions that characterized the East African co-operation   was linked to the Chinese arms controversy   of May 1965. On May 15, a convoy of trucks traveling from Tanzania to Uganda was seized at Kisii in Kenya near the common Tanzania, Uganda and Kenya border. The convoy upon examination was found to be carrying 75 tons of Chinese arms and the 47 men accompanying the trucks, turned out to be Uganda army personnel and some civilian drivers. On May 21, Uganda and Tanzania threatened a complete break up of the East African Common Market unless Kenya released both the arms and personnel and facilitated their transit. The episode was amicably closed.

The Kampala Agreement 1964

The recommendations made by the Emergency Committee set up after the Nairobi Summit of April 1964, were approved and ratified by the Presidents of the 3 East African countries, in Kampala in May 1964. This gave birth to an agreement, which was later modified in Mbale in Uganda in January 1965, and became known as the Kampala Agreement.  The Emergency Committee had been set up to address the inter-territorial trade imbalances and comprised of the Ministers of Finance and of Commerce and Industry of the three countries. The Committee presented its report to the three heads of state as mandated, on May 23, 1964, in Nairobi.  

The Agreement proposed 6 ways of redressing trade imbalances between the 3 East African countries:

a)      Increased production in a deficit country by firms which operated in two or more countries

b)      Partial re-allocation of some existing major industries in Kenya to Uganda and Tanzania through establishment of “ branch ” factories

c)      The allocation of selected major new industries to the three countries

d)      The application of a quota system to exports from a more industrially advanced Partner state

e)      Increased sales from one country   in deficit to a country in surplus

f)       Early agreement within the East African Common Market on a system of inducements and allocation of industry in order to secure the equitable distribution of industrial development as between the three countries.

With regard to measure a), immediate action was taken. The Ministers of Commerce asked 4 East African countries namely East African Tobacco Company Limited, Bata Shoe Company Limited, Eat African Breweries Limited and British Standard Portland Cement

(Bamburi), which were operating in all the three states, to increase production of their products in the two deficit states of Tanzania and Uganda. All the four agreed. It was anticipated that  if production was to increase as planned, it would reduce Tanzania’s and Uganda’s overall levels of imbalance with Kenya by about 25% in favour of each state and Tanzania’s imbalance with Uganda by about 1%.

With regard to measure b), immediate allocation  of the following major industries was made for exclusive development in a partner state;

Industry                                                 Allocatee

*Motor vehicle Assembly and Manufacture:

 Land Rovers, exclusive to                                                     Tanzania

 Lorry and trucks, not exclusive                                              Tanzania

* Bicycle Manufacture, exclusive to                                         Uganda

* Electric Light Bulbs, exclusive to                                         Kenya

*Radio Assembly and Manufacture, exclusive                                  Tanzania

*Nitrogenous Fertilizers, exclusive to                                         Uganda

* Motor vehicle Tyres and tubes, exclusive                                  Tanzania

As regards measure c), it was agreed that at, the earliest opportunity, a system of quota restrictions on inter-territorial imports from a surplus country could be imposed by a deficit country if the deficit country had existing productive capacity. Some rules were made to regulate the operation of this measure. No comment was made to measure (d).

On measure e), it was agreed that future allocation of new industries and differential incentives to industry would be referred to a Committee of Industrial experts.

Kenya’s conditionalities under the Agreement

The acceptance of the Committee’s recommendations by Kenya and by implication the Kampala Agreement was subject to the following conditions that:

a)      The East African Common Market would continue

b)      The Common Services would continue

c)      In particular, there would continue to be a common currency

d)      All parties recognized the value of association in a Common Market in fostering the economic development of the whole area

e)      All parties agreed that the Common Market could only survive if the benefits of economic development were fairly shared among them.

Some of the suggested measures were applied immediately.  For instance Tanzania applied for the quota system soon after signing although it in the hurry to implement, omitted to submit the matter to the Quota Committee. Vehicle assembling or other manufacturing activities required long periods of planning and preparatory activities, as a result of which   no measure was actually effected.

The Kampala Agreement was the first serious step taken to address the causes of inequitable industrial development in the East African Common Market. The core thrust of the Kampala Agreement cut across the existing regime of free trade in the Common Market.  The Agreement was intended to institutionalize free trade in those goods agreed to by the Partner states to be produced on an East African basis and to restrict to quotas inter-state trade in goods produced severally by each state. The Agreement introduced the classification of “East African goods” and “ national goods” which later led to the introduction of a Transfer tax in the EAC. In so doing the Agreement attempted to introduce an industrial strategy for East Africa for the first time. Unfortunately, Kenya never ratified the Agreement and never gave the reasons for her refusal. In effect, the Agreement died before the ink was dry. The partner states especially Tanzania, saw the failure of the Kampala Agreement in infancy as the death nail of the proposed Federation of East Africa.