Tanzania intent on hosting EAC central bank amid objections

EAC Heads of State at the recent ordinary summit in Arusha. Presidents from left: Samia Suluhu Hassan, Uhuru Kenyatta and Yoweri Museveni. PHOTO | STATE HOUSE 

Summary

  • The EAC is facing one of its biggest tests yet as member states fight over hosting the regional monetary institute

Nairobi/Arusha. As the East African Community focuses on deepening integration through working closely with various stakeholders, specifically the private sector as elaborated recently at the 22nd Summit of the Heads of State in Arusha, another bone of contention has erupted, this time one that involves all partner states.

Establishment of the East African Monetary Institute (EAMI) is an idea supported by all member states. However, where to host it is proving to be a real test that’s threatening the bloc’s unity.

The Tanzanian government has reiterated its commitment to hosting the EAMI which will later transform into the region’s central bank. This comes after an extensive verification exercise selected Tanzania as the preferred host country – a decision that is being vehemently objected to by Kenya and Uganda, with Rwanda and Burundi not particularly on board with the idea either.

As initially reported by our sister newspaper, The EastAfrican, EAC partner states have failed to agree on which country should host the monetary institute which is seen as a step towards implementing a single currency regime.

Selection of Tanzania as the host nation for the region’s monetary institute came after EAC partner states submitting their pitches to host the institute.

Refusal by member countries to acknowledge the East African Community Council’s decision is making the process becomes a herculean task, with Tanzania cautioning against a repeat of the verification process.

“The EAC spent resources on a verification conducted by professionals and therefore the outcome should be respected to avoid a duplication, which overburdens taxpayers,” the Tanzanian government through its EAC representative is quoted saying.

But the EAMI has become a hot potato, with member states jostling to host it, angling to avail themselves of the massive potential to attract foreign capital and become the region’s financial hub.

One of the issues brought to light is Kenya and Uganda’s questioning of the objectivity of the verification exercise. During the 42nd Council of Ministers meeting in Arusha two weeks ago, disagreements prompted the suspension of discussion on the selection of the EAMI host.

According to a businessman based in Arusha, the EAC monetary institute saga is laying bare the mistrust inherent within the bloc. “The EAC Central Bank clash is making it apparent that EAC partner states do not trust each other,” he said, further adding, “The contention must have been influenced by the big business players in the region, such as banks and other major commercial enterprises.”

The verification process to select the suitable host country was carried out in March this year and it ranked Tanzania most suitable, with a score of 86.3 percent, followed by Uganda (82.42 percent) and Burundi (78.1 percent). Kenya was the least qualified with 77.35 percent. The other partners did not express interest.

However, those that bid for the post and didn’t get selected are dissatisfied with the report and intend to take their concerns to “higher level”.

Particularly, Uganda wants the EAC Council to formally determine the headquarters of organs and institutions of the EAC such as East African Legislative Assembly, East African Court of Justice, and East African Community Competition Authority, which are “temporarily” hosted by the Secretariat in Arusha.

“The organs and institutions of the community differ in size and weight, and this should be taken into account in determining the hosting of these institutions,” said Uganda.

Apart from Uganda’s remarks, Kenya rejected the report and argued that the evaluation criteria were not universally interpreted by members of the committee and so they arrived at the wrong conclusions.

“There was a clear bias against Kenya, which was awarded lesser marks than other partner states. There is [a] need for a weighted formula to aid the determination of hosting of institutions. Hosts of the organs and institutions of the community which are not yet [determined] should be done simultaneously,” Kenya protested.

Burundi, the other country apart from the three founding members of the bloc to show interest in hosting the EAMI called for further consultations and equity, adding that the Secretariat should establish the number of institutions hosted by each partner state to guide equity.

Rwanda also advocated further consultations, saying the formula should be based on equitable distribution of institutions among partner states.

According to Kigali, some institutions are highly specialised and require certain conditions that may not be present in all partner states.

“It is important for the Council to establish the suitability of a location for hosting specific institutions of the Community,” said Rwanda in its submissions to the Council.

South Sudan, a fairly new member state in the bloc said the Council called for more consultations and consensus, taking into account that some partner states do not even host a single EAC institution.

“The principle of equity should be applied when deciding on the hosting of EAMI,” said Juba. “The Secretariat should identify the organs and institutions of the Community that are temporarily hosted in Arusha in order for them to be properly hosted by the Council.”

Tanzania, which won the verification process to host the EAMI defended the results. “The process was not flawed. All partner states participated, agreed on the outcomes and signed the Verification Report, which does not contain any divergent views,” Dodoma submitted.

Among the considerations were the potential economic benefits of the EAMI to the people of East Africa, comparative advantages (availability of qualified personnel to kick-start the EAMI and the availability of social services to staff), economies of scale, taking into account efficiency and cost-effectiveness, security, infrastructure considerations and possibility for future expansion.

The Council agreed to further consultations on the matter and is expected to make a decision during the 43rd meeting. The ministers will also consider the distribution of organs and institutions that are not yet headquartered. The Council directed the Secretariat to submit to the partner states a comprehensive analysis of the distribution of institutions before the meeting.

As the back and forth on selecting the host country for the EAMI continues, the EAC is way behind schedule in setting up relevant institutions to support a single currency. The EAMI was supposed to be up and running in 2015.