Retail and wholesale businesses across the East African Community (EAC) are facing significant challenges due to inconsistent regional laws and bureaucratic barriers that are undermining the sector’s growth and operational efficiency. This sector, crucial for economic development and employment, is experiencing growing pains exacerbated by the lack of harmonization in regional regulations and the impacts of devolution in Kenya.
The Retail Trade Association of Kenya (RETRAK) has highlighted these concerns, citing that the current regulatory framework creates substantial hurdles for cross-border trade within the EAC. According to RETRAK CEO Wambui Mbarire, the distribution networks face numerous internal barriers, including levies and fees imposed before goods even reach Kenya’s borders. “Regional traders are now being confronted with multiple taxes while traversing counties in Kenya, being forced to pay identical charges and levies in each of these counties,” Mbarire explained. This problem has severe financial implications, as the wholesale and retail trade sector contributes significantly to Kenya’s GDP and job creation.
Since the introduction of the Devolution Act in 2010, which aimed to decentralize power and bring services closer to the people, the retail sector has faced increased complexities. While devolution was intended to foster local development through enhanced legislative and policy frameworks, it has inadvertently introduced new barriers to trade. The fragmented regulatory environment has led to a proliferation of local taxes and fees, creating non-tariff barriers (NTBs) that complicate intra-regional trade.
The challenges faced by the sector were underscored when Tanzania raised a formal complaint with the EAC last year. The complaint was centered on Kenya’s non-compliance with its EAC obligations, particularly regarding the levies imposed by various Kenyan counties. This situation has intensified discussions among EAC stakeholders about the need for reforms to address these barriers and streamline the trade process within the region.
At a recent stakeholder meeting in Nairobi, various participants, including representatives from wholesale trade services, retailers, franchising sectors, public and private organizations, and e-commerce platforms, discussed the pressing issues. Elizabeth Miguda, Deputy Director and Head of Regional Trade at Kenya’s State Department of Trade, highlighted the fragmented regulatory obligations and the lack of a cohesive framework as major concerns. She also pointed out the sector’s struggles with anti-competitive practices, insufficient business and management skills, and the challenge of keeping up with the digital transformation in distribution channels.
Other challenges include weak connections with local suppliers, high investor exit rates, and inadequate industry-specific skills. Despite these hurdles, Miguda noted that liberalizing the retail sector could open up significant opportunities for expanding into new EAC markets. Streamlining the distribution process could improve resource allocation, reduce risks, lower costs, and enhance product quality. This would benefit consumers with a broader range of products at competitive prices, thus boosting the sector’s overall efficiency.
The conference facilitated valuable knowledge exchange among countries with successful reforms and foreign entities with advanced distribution practices. Topics of discussion included inventory management, skill enhancement, and local supplier integration. Addressing these issues is critical for fostering a more efficient and competitive retail sector in the EAC, which remains a key pillar of economic development and employment across the region.
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