COMESA hiccups
Many obstacles still stand in the way of smooth trade relations between Egypt and its East African partners. Sherine Nasr investigates
As a member of the COMESA (Common Market for East and South Africa), Egypt has always sought to strengthen its trade relations with its partners in COMESA. While agreements have broadly outlined steps towards increasing trade among the member states, many hurdles still have to be cleared.
"There is much we can do together to move towards deeper trade relations," said Mary Odinga, the Kenyan ambassador to Egypt.
Kenya represents the main COMESA trading partner for Egypt. Despite ongoing customs-related and other difficulties, the value of Egyptian exports to Kenya jumped from $4 million in 1998 to $58 million last year, with steel, cement, ceramics and food products comprising the leading exports.
After being sworn in only a few weeks ago, Odinga's first action was to meet with Egyptian exporters to discuss means of realising greater bilateral trade.
"Despite the great potential, there are a dozen problem we have to deal with in our daily work," said Hatem Hussein, an exporter to East Africa. He added that the lack of internal coordination among Egyptian authorities combined with poor communication between Egyptian and Kenyan authorities is perhaps the biggest problem exporters have to face.
Hussein explained that one problem has to do with the signature on the certificate of origin which has to be submitted and ratified by the authorities in the importing country. There is a standard signature that is inserted in the authorised signature book of all the COMESA countries. "Sometimes the officials who are in charge of issuing these certificates in Egypt do not write the proper signature. As a result, the customs department in the import country do not ratify the signature and refuse to let the containers into the country," explained Hussein.
The delay in issuing a second certificate takes at least a week, during which time the exporter is compelled to pay extra fees for the container's storage. "This is one simple example of how negligent attitudes can cause a considerable waste of time and money," Hussein commented.
The banking system is also highly problematic. "All financial dealings between Egypt and Kenya have to be done through a mediator bank in London or the US because Egyptian banks do not ratify the letters of credit issued by Kenyan banks," said Hussein. Prestigious banks such as Citibank and Barclays' have recently opened branches in Kenya, and exporters would save time and money if Egyptian banks would deal directly with them.
Last year, exporters of sugar to Kenya faced a real problem when the Kenyan government, without a previous alert, decided to allocate a certain quota estimated at 200,000 of Egyptian sugar to Kenya.
"The quota was complete while more Egyptian sugar was already on its way to Kenya," said Hussein who added that up to this moment, Egyptian sugar is still kept in the ports in Egypt and Kenya and exporters are paying fees for the cargoes.
More ridiculous is the fact that Kenyan importers did not know about the decision. "We have to cancel the banking credits for some 70,000 tons of sugar which have not been exported last year. We also paid for the bags in which these huge quantities were supposed to be packed," said Hussein.
Later this month, the quota will open again. According to Hussein, the quota for Egypt has not been clearly defined. He argues that the Kenyan authorities' lack of transparency means Kenyan importers are hesitant to make big deals. "In the meantime, 30,000 tons of sugar cane have already been manufactured but we are not sure whether they will be exported or not," he said.
Despite these glitches, the growth of Kenyan-Egyptian trade encouraged two Egyptian private sector companies to open permanent warehouses in Nairobi in 1999 as a step towards increasing Egyptian exports there.
"Nevertheless, we have to admit that we are facing a serious marketing problem in these markets," commented Mustafa El- Ahwal, member of the Egyptian Businessmen Association (EBA). He suggested that many Egyptian exporters entered the market looking to sell what they had instead of catering to Kenyan demands.
According to Tanzanian Ambassador to Egypt Kassim Mwawado, Egyptian businessmen have done little in terms of consumer research in East Africa. "More important is the fact that many Egyptian products are too expensive for the African consumer to buy due to the exaggerated fees and taxes. Egypt should be more careful to provide the right commodity and to address the right consumer," he said.
Conscious of the need to adopt a proper marketing policy to address African markets, the Ministry of Foreign Trade recently commissioned two foreign companies to conduct the necessary studies and propose solutions.
There is more good news for Egyptian exporters looking to penetrate the East African markets. Technotrade SAE, a private sector inspection company, has just made an agreement with the Commercial International Bank (CIB) to help finance trade deals with almost all COMESA countries. "The amount of the guarantee is decided according to the degree of risk in the import country. The money is reimbursed after the deal is completed and the exporter has already taken his money," said Albert Farag Youssef, the chairman of Technotrade SAE.
The company is responsible for providing Egyptian exporters with the technical information they may need to enter these markets. "We advise exporters on what could be exported and to what country. We are also doing what the exporter should do on his behalf to save him the time and the money," said Youssef, explaining that each of the COMESA members has different required standards and specifications. "The company has already opened branches in Egyptian ports which can be commissioned to carry out cargo analyses and issue the necessary documents and certificates that will be approved and accepted by each of the import countries," added Youssef.
