Predicting the economic outcome of trading contracts is difficult, no one can know with certainty about

the future economic outcomes of the East African Community. There might be a predictive believe that
an individual will be 1000 shillings better off with in the community or 400 shillings better off under the
current political zoning well both beliefs are certainly wrong.

History has left allot of evidential data for us about past economics of the different political zones
(Kenya, Tanzania, South Sudan, Uganda, Burundi, Rwanda, and more) most of which is useful in thinking
about the future. But all this evidence is about particular political zones operations alone. There is no
information about the East African Community working together as a single unit. For the current
information we have about the community it is difficulty to relate effects to their causes most especially
where politics is involved.

Most economic change in society is driven by forces which are never related to governments or where
little influence is from governments. Though credit is always passed on to governments for events that
their policies did not shape or blaming external factors when their policies are the real cause of poor
outcomes.

East African Community will come with allot of unfamiliar developments which will be different from the
usual way of doing things. These might be changes in business relationships and working practices. If the
discrepancy between the current normal way of doing business and the new way of doing business is
bigger, the more difficulty it will be to predict the future outcome. Pain or Pressure are the fundamentals
of building culture and the more painful it will seem the harder it will be for the idea to be adopted. And
the simpler and almost similar to the current way of doing business it will seem the more pleasing it will
be and the cycle of habit forming will continue until the culture will grow. One wise man told me if you
put a frog in hot water the frog will run out, but if you put a frog in cold water and slowly boil the water
you will cook the frog.

For the East African community to attain the desired growth there is one evidenced force which is the
free flow of capital. It can be predicted that low cost capital will flow across the community due an
integrated capital market. The cost of capital is not conducive for investment due high interest rates
around the community. Unemployment in every society is reduced by investments, the East African
integration with a single unit of value across will bring together a wide group of investors and potential
investors.

What needs to be thought of is how the current debts for different zones will be handled after the
integration each political zone will come with its own obligations and contracts signed by and for
individual political zones the biggest question is if the community is to inherit the contracts and
obligations how will they be handled? Any decision taken by individual zones might affect public spend
as a move to control the debt this might bring with it serious economic consequences.

The integrated East Africa will be in position to influence economic growth by providing high quality
public services and lower taxes. Although this would not be the only economic objective that an
integrated East Africa is likely to pursue. Introducing policies to reduce income inequality is also an
important part of the integration objectives. Reductions in inequality are mostly supported from a social
justice perspective although also those seeking to promote economic growth could support it.
Low productivity will hold back growth which is some time a result of income inequality. When the East
African Community policies over taxation and benefits get implemented the income gap might be
bridged. But even when the policies to bridge the inequality gap get implemented, the biggest share of
the pre-tax income will be taken by the intelligent investor, captains of industries, entrepreneurs, and
educated persons.

The Biggest question before the integration is which currency system would the community use? the
issue of currency system is not about the economic notes and coins that people will be holding in their
pockets. It is the economic policy options, the interest rates at which people will borrow money and our
capacity to deal with economic crises. It is highly certain that after the integration the current zonal
currency systems would come to an end. Then the relevant authority will have to design a new currency
system where the central banks of the different political zones will either be integrated or dissolved to
form a single East African currency system authority. This will require a very massive mental preparation
of the citizens of East Africa.

This monitory union will involve the use of a single currency unit and sharing a central bank. Even though
this single monitory union will lead to tradeoffs, but using the same currency reduces the cost of cross
border trade. This also means investment capital will freely move across the region due to a single unit
of value.

Using a single interest rate will be appropriate if the economic cycles of the different political zones are
not the same. But if the wages and prices are flexible, and capital and labor can move freely. Flexible
markets will be able to correct for differences in unemployment between political zones. Political zones
which share risks through a common tax system, common fiscal policy or a common welfare state will
also find it less costly to keep a common interest rate even if the economic cycles are different.

When the East African community issues its own currency, it will be able to control a unified interest rate
which provides the greatest amount of policy flexibility. The more flexibly the East Africa community can
respond to shocks the greater the stability of the economy. Trade costs will come down in an integrated
East Africa. As a lot of trade border costs and forex exchange costs will not be applicable in the single
currency unit operation

It is the choice of those at the top to choose whether East Africa needs a single unit of value or not. But
the rates by which notes change hands are born in board rooms and passed on to the markets,
entrepreneurs, traders and investors will decide whether or not they stay stable.

As Africa sets its foot print in a new direction, our youths and kid should know that the world does not
owe us, we should not live by begging. The only Africa will be prosperous is through productive activities.
We can feed the world if we truly try.

Setabi Kisambiza

setabi@zoho.com