CRITICAL ANALYSIS OF THE LEGAL AND INSTITUTIONAL ARRANGEMENTS ON THE DEMAND SIDE MANAGEMENT IN THE ELECTRICITY SECTOR IN KENYA AND PROPOSED REFORMS

INTRODUCTION

Demand Side Management (DSM) is the implementation of policies and measures which serve to control, influence and generally reduce electricity demand. DSM aims to improve final electricity-using systems, reduce consumption, while preserving the same level of service and comfort. DSM is a proven method of meeting economic goals in an environmentally sustainable way, and it is also a fast and effective way to address power shortages.

Energy is considered to be one of the infrastructural enablers of the three pillars of Vision 2030 in Kenya. The level and intensity of commercial and industrial energy use is a key indicator of the degree of economic growth and development. A key message of Vision 2030 is that Kenya must generate more energy and increase efficiency in energy consumption. Vision 2030 flagship projects focus on expanding energy infrastructure, increasing electricity generation capacity and diversifying energy sources.

Demand for electricity has shown an upward trend since the year 2004 due to accelerated economic growth. Peak demand increased from 899MW in 2004/05 to 1,194MW in 2010/11, while the number of electricity consumers more than doubled from 735,144 in 2004/05 to 1,753,348 in June 2011. As at 30th June 2011, 28.9 % of the population was connected to electricity compared to only 15% as at 30th June 2004. The peak load is projected to grow to 2,511MW by 2015 and 15,026MW by 2030. To meet this demand, the projected installed capacity should increase gradually to 19,199MW by 2030.

To meet the projected demand, the system expansion over the Vision 2030 period indicates that the total installed capacity will be obtained from geothermal - 26%, nuclear plants - 19%, coal plants - 13%, hydro plants - 5%, thermal plants - 9%, gas turbines - 11%, wind plants - 9%, while imports will provide up to 8%.

Currently the power generation capacity in Kenya is too small to meet demand from the industry and private households. Import of electricity from surrounding countries has eased the situation somewhat, but load shedding is used on a routine basis. For the electricity energy which is available, most of it is being lost through inefficient lighting systems, electricity water heaters and other poor energy management practices.

The reduction in energy demand in Kenya electricity sector has not been met since DSM remains underutilized because there are powerful barriers to customer and utility investment in energy efficiency. In addition to well known barriers such as capital, lack of information about DSM potential and benefits, and prices that do not reflect the full direct and indirect costs of power, Kenya has its unique barriers among them the following;

  Ø  Kenya lacks the legal basis to adopt effective DSM policies. There is no effective government driven programmes on DSM apart from the Demand Management Unit created by Kenya Power in 2009 which is not that effective.

  Ø  Kenya lacks an adequate and stable DSM funding mechanism. International experience shows that public and/or utility funding for DSM is critical to DSM success.

  Ø  Shortage of talented DSM professionals. Talented people play a pivotal role in DSM. They are needed to develop DSM policy, programs and finances, develop technology, launch publicity and conduct surveys. Currently specialised DSM staffs do not exist to implement broad scale DSM programs in Kenya.

  Ø  Unavailability of high quality energy efficient products. The ones sold on the market have quality problems. For example, energy saving CFLs of both good and bad quality are available in the market place and consumers have no way of knowing the difference. Poor quality deprives the consumer of any economic benefit and injures the reputation of energy saving lamps and appliances.

Ø  No incentive mechanisms for energy saving and unwillingness to adopt energy conservation measures such as new technologies under the DSM program by consumers due to low income and house size.

Legal and Institutional Arrangements in the Electricity Sector in Kenya

Sessional Paper No. 4 of 2004 and the Energy Act No.12 of 2006 restructured the electricity sector in a bid to facilitate high level performance. The Policy has enabled increased private sector participation in the development of the sector whilst simultaneously focusing on improved management and delivery of energy services. This was intended to enable the sector address its mission of providing clean, sustainable, affordable, reliable and secure energy services at least cost while protecting the environment. The following are the key actors in the sector:-

1. Ministry of Energy (MoE)

The Ministry is responsible for formulation and articulation of energy policies through which it provides an enabling environment for all stakeholders. Its tasks include national energy planning, training of manpower and mobilization of financial resources. Overlapping mandates has been a big challenge for the Ministry in regulating demand-side management (DSM).

2. Energy Regulatory Commission (ERC)

It was established as an energy sector regulator under section 4 of the Energy Act, 2006, with responsibility for economic and technical regulation of electric power, renewable energy, downstream petroleum sub-sectors and standards that encourage energy efficiency as well as broader promotion of energy efficiency measures, for example, in buildings and for appliances. A new department for renewable energy and energy efficiency was created in the commission in 2010. Its functions also include tariff setting, review, licensing, enforcement, dispute settlement and approval of power purchase and network service contracts.

The functions outlined in section 5 of the Act seem not to have been achieved yet.

3. The Kenya Power & Lighting Company Limited (KPLC)

KPLC is a State Corporation with Government of Kenya shareholding of 50.1% and private shareholding  of 49.9% as at December 2011. It purchases electrical energy in bulk from KenGen and other power producers such as Independent Power Producers (IPPs), Tanzania Electric Supply Company Limited (TANESCO), and Uganda Electricity Transmission Company Limited (UETCL) and carries out transmission, distribution, supply and retail of electric power.

IPPs are private companies which generate power and sell electricity in bulk to KPLC. As at 2011, they accounted for about 26% of the country’s installed capacity and play an important role in bridging the demand gap. By December 2011, the operating IPPs were:- (a) Iberafrica Power (E.A.) Company Limited ;(b) Tsavo Power Company Limited ;(c) Mumias Sugar Company Limited ;(d) Orpower 4 Inc ;(e) Rabai Power Company Limited; and (f) Imenti Tea Factory Company Limited.

The advent of IPPs has had some negative impacts on energy efficiency. By definition, an IPP implies a certain amount of vertical unbundling, which complicates attempts to implement integrated resource planning (IRP)—a key platform for promoting demand-side management (DSM).

The unbundling of the formerly vertically integrated Kenya Power and Lighting Company (KPLC) as per the recommendations under Sessional Paper No. 4 of 2004 establishing Kenya Electricity Transmission Company Limited (KETRACO) to be responsible for the development of the national transmission grid network and also to be in charge of extending the national grid countrywide and building inter-connectors responsible for facilitating regional power trade through its transmission network has not bore fruit to meet DSM. The effect of unbundling is that the separation of generation (KenGen) and distribution (KPLC) segments means that the distribution utility is at liberty to obtain electricity from different sources (IPPs). The general response by distribution utility to increases in electricity demand appears to be seeking additional suppliers of electricity rather than embarking on demand-side energy efficiency programmes. The need for additional electricity generation appears to have in turn encouraged a focus on large-scale thermal IPPs. As a result, opportunities for both energy

efficiency through DSM and distributed generation (offered by renewables such as small hydro, cogeneration and geothermal) have not been fully exploited.

KPLC set up a Demand Side Management (DSM) unit in 2009. This unit has implemented several strategies to reduce consumption, especially at peak times. Strategies include the provision of 1.25 million free compact fluorescent lamps (CFLs) to the population and introduction of a specific tariff for peak hours.  Compact Fluorescent Lamp (CFL) light bulbs provide an energy efficient alternative to traditional Tungsten filament light bulbs. Replacing incandescent bulbs with CFLs decreases energy consumption by 80 percent per bulb, and CFL bulbs last roughly ten times longer. In Kenya there is no detailed data on the current uptake of CFL, but it can be safely assumed that, especially in urban areas, the penetration rates are relatively high already. Incandescent light bulbs may be prominent in rural areas, but the low level of rural electrification limits the potential for large energy savings. This has been contributed by inadequate funding and limited use of renewable energy.

However, there is no motivation for the utility to enhance demand-side energy efficiency as it requires additional investment and could potentially lead to lower revenue levels that can negatively impact profitability.

4. Kenya Electricity Generating Company Limited (KenGen)

KenGen is a State Corporation with GoK shareholding of 70% and private shareholding of 30% as at December 2011. It is responsible for electric power generation and produces the bulk of electricity consumed in the country. The company utilizes various sources to generate electricity ranging from hydropower, thermal (petroleum) and geothermal accounting for 53%, 29% and 14% of installed capacity.

However, the large dependency on hydropower on the supply side which is vulnerable to variations in hydrology and climate change has made KPLC and KenGen to pay little attention to the demand-side management of electricity and they are only concerned with supplying electricity and making profits without much thought to reduction of energy consumption.

5. Rural Electrification Authority (REA)

REA was established under section 66 of the Energy Act as a body corporate with the principal mandate of extending electricity supply to rural areas, managing the rural electrification programme fund, mobilizing resources for rural electrification and promoting the development and use of renewable energy. Section 67 of the Act provides for the functions of REA.

However, most rural areas do not have electricity yet and the programme has not yet met the demand side management since it has failed to promote use of renewable energy sources including but not limited to small hydros, wind, solar, biomass, geothermal, hybrid systems and oil fired components taking into account specific needs of certain areas as per Section 67(d).

Other institutions in the electricity sector include ;-(i)Geothermal Development Company Limited (GDC); and (ii)The Nuclear Electricity Project Committee (NEPC).

Beyond these national bodies there are many international organisations active in supporting the Government of Kenya and other stakeholders in the field of energy efficiency including the International Finance Corporation, AFD and the German International Development Agency (GIZ). The activities of these organisations target different end user groups and energy carriers.

The Kenyan government has introduced regulations that promote conservation and demand management. An example is the Kenya Solar Water Heating Regulations issued by the Ministry of Energy that mandates the installation and use of solar water heating systems for all buildings with a capacity for hot water requirements of more than 100 litres a day. There is amble evidence to show that Solar Water Heaters (SWHs) play a very crucial role in demand side management (DSM) in many countries. SWHs can be used to flatten out the maximum demand curve for any utility. The technology can also be used to cut down the actual demand, and this can have various implications for a country. Depending on the circumstances, this can mean delayed investment in power generation or reduction of the import bill for those countries that import power or fuel.

A second example is the Draft Kenya Energy Management Regulation of 2011 that makes it mandatory for facilities to undergo energy audits and encourages them to implement at least 50 percent of the identified energy efficiency potential. Enforcement of these regulations remains a challenge, although some supportive policies have been launched.

Administrative Reforms

The Kenyan government needs to embark upon comprehensive programmes of broader economic and administrative reforms which will have far reaching impacts directly and indirectly, on the pattern of demand for electricity services in Kenya. There is need for the government to diversify electricity supply and demand management options, as well as the institutional and financing mechanisms to help address the growing gap between supply and demand. At the same time, many other factors gaining prominence need to be accommodated, such as the change in decision-making approaches that stem from the economic reforms and associated political change as witnessed with the enactment of the 2010 Constitution, and more widespread and growing public awareness of environmental and social issues.

There is a need to review the tariff policy in order to minimize consumer subsidies and instead channel public resources to long term infrastructure investments. Therefore, the tariff has to progressively reflect the economic cost of power supply. Subsidies will be applied only in the short term to avoid a tariff shock. The increase in tariff will be managed through demand side management in households, industries and commercial enterprises. This will help consumers to reduce on the quantity of electricity utilized with a net effect of having the final bills nearly equal to what they were previously paying. The policy measures outlined below should be adopted on the tariff:

• The preferential tariff for the industrial consumers should not be applicable in the medium term.

• The tariff will be increased in a stepwise manner to reflect the economic cost of providing electricity services.

• The resultant rise in tariff will be managed through energy conservation measures.

The Kenyan government policies should typically aim to maximize the use of alternative energy resources in the country such as coal, gas, oil, biomass, solar, wind, and hydro with considerations of energy security. However, a proper regulatory framework needs to be put in place to adequately regulate the use of indigenous energy sources to prevent environmental degradation such as pollution and desertification in the long term.

Energy audits should be carried out and use of on-site renewable energy should be encouraged. Energy audits in industries, commercial buildings and institutions which the Ministry has been carrying out should continue both in the short and medium term. Steps should be taken to use the energy audits generated over the last decade in large- and medium-sized commercial and industrial facilities in Kenya to identify concrete low-cost follow-up actions for larger end-users. These end-uses could be supported with access to capital and technical assistance in implementing the required investments. Such an approach is currently successfully implemented by the Regional Technical Assistance Program aimed at providing support for the financing of selected investments in renewable energy and energy efficiency projects, especially in the agricultural and hospitality sectors. AFD and the Kenya Association of Manufacturers implement the program and funds totalling Ksh 3.3 billion are available through CFC Stanbic and Co-op banks. The program not only provides loans but also carries out audits that help commercial end-users identify energy efficiency options.

Demand side efficiency approaches include the use of legislated standards to remove low efficiency equipment such as motors, lighting and appliances from the market, the support of innovative market driven approaches to finance high energy efficiency projects from future savings, and the use of performance-based regulation to encourage utilities to undertake DSM in restructured electricity and gas markets.DSM strategies which can be implemented in the country include;-

(1)Use of Alternative Lighting; replacement of all incandescent lamps by compact fluorescent lamps (CFLSs) both in rural and urban areas. The low investment cost of CFL and further cost reductions can lead to high adoption rates in the short term. In 2030 it is assumed that an adoption rate of 100 percent will be achieved through an intervention to phase out incandescent bulbs, leading to 80 percent lower electricity consumption for lighting versus the reference case by 2030. Energy consumers should be encouraged to switch off lights during the day as a potential strategy.

(2) Peak Load Reduction or Conservation; Peak load “shaving” in the power system thereby minimizing the need for huge investments to meet peak demand, which lasts for only a few hours in a day. This would be applied to all hot water systems. The action is either to switch off hot water systems when not in use or to replace all with solar hot water systems.

(3)Energy Efficient Appliances; Large differences exist in the energy efficiency of electric appliances. Over the past two decades, there have been major improvements in the energy performance of most appliances. In the United States, for example, refrigerators in 2012 use about 60 percent less energy than 20-year old models. In Mexico, refrigerators sold between 1995 and 2000 were estimated to consume 30 percent more electricity than those of the same size sold between 2001 and 2007. In developing countries, energy efficiency of electric appliances is often lower than in developed countries, especially if there is a significant market for second hand inefficient models or if efficient models are not available or significantly more expensive. Second hand, energy inefficient refrigerators from Europe have traditionally been exported in large numbers to Africa.

Current situation in Kenya: Replacing appliances such as refrigerators, air conditioners and televisions in households and commercial facilities with more modern efficient units can lead to substantial energy savings. The high prices of new appliances in Kenya, combined with the large influx of older cheaper second-hand appliances from the EU, mean it often unattractive to purchase new models.

(4)Energy efficiency improvements across industries – Results from energy audits undertaken in different commercial and industrial facilities in Kenya show that with measures of payback times of less than two years, savings in electricity consumption of between 8%(for a tourist resort) and 26 % (for a tea factory) could be achieved through measures such as the use of more efficient pumps and motors. However, it is difficult to encourage SMEs, which form a significant part of Kenya’s commercial and manufacturing sector, to invest in energy efficiency without interventions or support programs. Taking all these factors into consideration, a 15 percent energy efficiency improvement by 2030 is assumed.

 Structural Reforms in the Electricity Sector

Kenya has been working from the former single, vertically integrated state monopoly KPLC in the electricity. Current reforms have created new challenges and are generally seen to contradict/hinder efficiency through regulations especially in cases where distribution utility still enjoys monopoly. For example, requiring a single distribution utility such as KPLC to reduce consumer demand for electricity through energy efficiency is inconsistent with introducing competition as it might appear to affect profitability of the utility due to the reduction in electricity sales. Consequently, this may be viewed as a potential trade-off before enhancing energy efficiency and competition.

 A more open market with private sector participation and competition is needed in order to meet the demand side management. This will require the following reforms;-

  Ø  ensuring that the regulatory framework promotes more efficient use of electricity and enhancement of environmental and social benefits;

   Ø  setting up an autonomous regulator or providing for a clear separation of policy and regulatory functions within government with a transitional programme towards independent regulation;

    Ø  vertical and horizontal restructuring of the state power entity.

Policy and Regulatory Framework in the Electricity Sector

The following legislations and regulations are recommended to support Demand Side Management;-

    Ø  an Energy-Efficiency Act enabling the setting of minimum efficiency standards and codes, with regularly updated regulations to raise the bar of minimum efficiency;

   Ø  power utility regulation through an independent agency or board, which regulates utilities in the public interest, with rules that encourage DSM investment by utilities, and applies a mandated public benefits charge to finance DSM;

    Ø  Strategic Planning process for all new investments in electricity supply and demand, which uses a life cycle approach for assessment of options and full environmental impact; and

    Ø  Regulation would be required to phase out incandescent light bulbs, create a labelling scheme for electrical appliances, and provide standards and codes for the use of solar water heating. The ability of these regulations to be enforced is critical to their success.

CONCLUSION

Energy efficiency in Kenya is generally given a low priority, both at the industrial and domestic level.

Electricity sector reform has not adequately supported the promotion of energy efficiency in the sector.

However, there is need for extensive publicity and to enlist the support of all households on the benefits of DSM. This can be done through media publicity and exhibitions of energy efficient devices to showcase their applicability and potential energy savings.

REFERENCES

 (1)Energy Act No. 12 of 2006

(2)Sessional Paper No. 4 on Energy of 2004

(3)National Energy Policy, Third Draft of May 2012

(4) Kenya’s Climate Change Action Plan: Mitigation on Energy Demand, August 2012.   

(5) Kozloff, K. (undated), Electricity Sector Reform in Developing Countries: Implications for

Renewable Energy

(6) www.erc.go.ke

UNDERSTANDING THE EAST AFRICA COMMUNITY;A QUICK PREVIEW OF THE INTERGRATION PROCESS

HISTORY OF THE EAST AFRICAN COMMUNITY

The East African Community (EAC) is a regional intergovernmental entity comprising of the Governments of Uganda , Burundi, Kenya, Rwanda and Tanzania with the main aim of spearheading the East African economic, social, cultural and political integration. The history of cooperation in East Africa goes back to more than a hundred years. Kenya, Tanzania and Uganda have had a long history of cooperation under successive regional integration arrangements including having had a customs union between Kenya and Uganda in 1917, which the then Tanganyika later joined in 1927; the East African High Commission (1948-1961); the East African Common Services Organization (1961-1967); and the East African Community (1967-1977)[1].

The East Africa Community collapsed in 1977 due to factors such as lack of political goodwill, 1971 coup attempt in Kenya, 1971 coup attempt in Uganda, 1976 Entebbe raid, the ‘Nairobi’ mentality and the problem of transfer taxes. Kenya’s foreign policy under Kenyatta regime also led to the collapse of the Community since it was resentful towards its partners. President Jomo Kenyatta felt that Kenya should not bear the responsibility of ‘carrying’ the poorer members[2]. 

The Partner States negotiated a Mediation Agreement for the division of assets and liabilities following the dissolution of the first East African Community in 1977, which they signed in 1984.This was after the insistence of World Bank. The Committee which came up with Mediation Agreement was under the chairmanship of Prof. Victor Umbricht.The Mediation Agreement also contained a provision which stated that the three Partner States had agreed to explore areas of future co-operation and to make concrete arrangements for such co-operation.

Subsequent meetings of the three Heads of State led to the signing of the Agreement for the Establishment of the Permanent Tripartite Commission for East African Cooperation on 30th December 1993. The East African Heads of State at their second Summit in Arusha, on 29th

April 1997, directed the Permanent Tripartite Commission to start the process of upgrading the

Agreement establishing the Permanent Tripartite Commission for East African Cooperation into a Treaty to deepen and widen regional cooperation.

In 1997, the three heads of state met to review the progress of the Tripartite Commission in drafting the Treaty. In July 1997, the heads of state met again and approved the draft Treaty with minor amendments. The Treaty for the Establishment of the East African Community was finally signed on 30^th November, 1999 and came into force on 7^th July, 2000 following its ratification by all the Partner States.  The Republics of Burundi and Rwanda signed the Treaties of accession into the East African Community on 1^st June, 2007, formally becoming full members of the EAC.However, the application for membership by Somalia and South Sudan was recently deferred following a decision by the East Africa Community Heads of State summit, held in Nairobi on Saturday (December 1^st 2012). South Sudan had applied for membership of the regional economic bloc after its independence last year while Somalia had submitted its application in February 2012.The EAC treaty sets out details of adherence to universally acceptable principles of good governance, democracy, rule of law, observance of human rights and social justice as requirements to join the Community. A country applying for membership has to have also geographical proximity with regional states and be able to contribute towards regional integration.

The Treaty   provides for four levels of integration with the entry point being the Customs Union, the second stage being the Common Market, then the Monetary Union and eventually a Political Federation.

Aims and Objectives

The objectives of the Community are to develop policies and programmes aimed at widening and deepening co-operation among the Partner States in political, economic, social and cultural fields, research and technology, defence, security and legal and judicial affairs, for their mutual benefit.  The primary objectives of the Community shall be to ensure[3];

  (a)    Sustainable growth and development of the Partner States;

  (b)   the strengthening and consolidation of co-operation in agreed fields that would  lead  to equitable  economic development with  the Partner States;

  (c)    promotion of sustainable utilization of the natural resources of the  Partner  States  and  the  taking  of  measures  that  would effectively protect the natural environment;

  (d)   the strengthening and consolidation of the long standing political, economic,  social,  cultural  and  traditional  ties  and  associations between the peoples of the Partner States so as to promote a people-centered mutual development of these ties and associations;   

  (e)    the  mainstreaming  of  gender  in  all  its  endeavours  and  the enhancement  of the role of women  in  cultural, social, political, economic and technological development; 

   (f)    the promotion of peace, security, and stability within, and good neighbourliness among, the Partner States;  

   (g)   the  enhancement  and  strengthening  of  partnerships  with  the private sector and civil society in order to achieve sustainable socio-economic and political development; and 

   (h)   the undertaking of such other activities calculated to further the objectives of the Community, as the Partner States may from time to time decide to undertake in common.

 

COMPARISONS AND DIFFERENCES BETWEEN THE 1967 EAC TREATY AND THE 1999 EAC TREATY

INTRODUCTION

The 1967 EAC Treaty under Chapter 1,Article 1(3) provides that members of the East Africa Community who are referred as “Partner States” include United Republic of Tanzania, the Sovereign State of Uganda and the Republic of  Kenya. This Article does not provide for the admission of other states apart from the three above. However, under the 1999 EAC Treaty, Chapter 1, Article 3(1), it clearly provides that members of the Community are inclusive of Kenya, Uganda, Tanzania and any other country granted membership to the Community. This has seen the inclusion of Burundi and Rwanda as part of the Community which was not originally envisioned in the old East African Treaty.

This Article has made it open for countries to join the Community as long as they share the same objectives as the Community as provided under Article 5 of the EAC Treaty.

The 1967 EAC Treaty had a different institutional set-up as compared to the 1999 EAC Treaty. The institutions of the Community as established under Article 3(1) included;-

(a)the East Africa Authority;(b)the East African Legislative Assembly;(c)the East African Ministers;(d)the Common Market Council;(e)the Common Market Tribunal;(f)the Communications Council;(g)the Finance Council;(h)the Economic Consultative and Planning Council;(j)the Research and Social Council.

The 1999 EAC Treaty under Article 9(1) has established the following organs and institutions of the Community;-

(a)the Summit;(b)the Council;(c)the Coordination Committee;(d) Sectoral Committees;(e)the East African Court of Justice;(f)the East African Legislative Assembly;(g)the Secretariat; and (h)such other organs as may be established by the Summit.

The institutions under the 1967 and 1999 EAC Treaty had similar and different functions or composition at the same time. This is as shown below;-

(1)The East African Authority compared to the Summit

Under the two treaties, the executive authority of the Community lied with the East African Authority in the 1967 Treaty while in the 1999 EAC Treaty, it lies with the Summit. The composition of the two institutions is similar. Article 47 of the defunct 1967 Treaty and Article 10 of the 1999 Treaty provides that the institutions shall consist of heads of state and in their absence, a person holding office as a Minister of Government may be appointed after consultations with other members of the Authority/Summit and shall have for purposes of that meeting all the powers, duties and responsibilities of the member of the Authority/Summit for whom he is acting.

The major difference between the two institutions arose due to the Summit being given additional functions as compared to the defunct 1967 EAC Treaty. These additional functions as provided under Article 11 included;

 (i) the duty to review annual progress reports submitted to it by the Council of Ministers.

(ii)the duty to review the state of peace, security, good governance within the Community. This upholds the principle of peaceful coexistence among the Partner States.

(iii)the duty to review the progress achieved towards the establishment of a Political Federation of the Partner States.

Another major difference between the 1999 Treaty and the 1967 Treaty relates to restriction in terms of delegation of powers and functions. Under article 48(3) the East African Authority had the power to give directions to the Councils and the East African Ministers as to the performance of any functions conferred upon them. However, Article 51(1) creates some confusion since the functions of the Authority are superficial. The Article provides that it shall be the responsibility of the East African Ministers to assist the Authority in the exercise of its executive functions to the extent required by and subject to the directions of the Authority, and to advise the Authority generally in respect of the affairs of the Community. The superficiality may have led to mistrust among Partner States and mismanagement in the Community in the long run.

In response to this weakness of the 1967 Treaty, the 1999 Treaty stipulates in Article 11(9) the specific powers of the Summit that can not be delegated. They are:-

(a)The giving of general directions and impetus;

(b)The appointment of judges to the East African Court of Justice;

(c)The admission of new Members and granting of Observer Status to foreign countries; and

(d)Assent to Bills.

 (2) The East Africa Legislative Assembly under the two Treaties

The election of members of the East Africa Legislative Assembly differed between the two Treaties. Article 57(1) of the 1967 Treaty provides that each Partner State shall appoint nine of the twenty-seven appointed members of the Assembly in accordance with the procedure each Partner State decides. Thus the Partner States had discretion in nominating the members of the Assembly without following set procedures.

However, under the 1999 EAC Treaty, it is clearly stipulated how the members are to be elected to the Assembly. Article 50(1) provides that the National Assembly of each Partner State shall elect, not from amongst its members, nine members of the Assembly, who shall represent as much as it is feasible, the various political parties represented in the National Assembly, shades of opinion, gender and other special interests groups in that Partner State.

 This is a notable departure from provisions of Articles 56 and 57 of the 1967 Treaty for East African Co-operation, under which each Partner State was mandated to “appoint nine” of the “twenty-seven appointed members” of the Legislative Assembly. Thus any breach of this provision may be contested under the East Africa Court of Justice. This was illustrated in the case of Prof. Anyang’ Nyong’o & Others vs. Attorney General of the Republic of Kenya and Others[4].

The dispute was on the legality of the election of Kenya’s EALA representatives in 2006. The was brought before the EACJ by Kenya’s member of parliament (MP), Hon. Prof. Peter Anyang’ Nyong’o and 10 others as applicants versus the Attorney General of Kenya and 5 others as respondents averred, inter alia, that the Clerk to the National Assembly of Kenya submitted an illegal list of the East African Legislative Assembly (EALA) representatives from Kenya and requested the EACJ;-

• To interpret and apply the treaty to the process of nominations and election of Kenya’s representatives to the EALA.

• To declare that the rules of election applied by the Kenya National Assembly constitute a breach of Article 50 of the treaty.

• To declare that the process of election, selection and/or nomination of members to the EALA by Kenya is null and void.   

• To direct Kenya to repeat its nomination and election process in compliance with Article 50 of the treaty.

• To declare that Kenya’s Vice President and Leader of Government Business and the Chairman of the National Rainbow Coalition (NARC) have no mandate to determine persons to represent Kenya at the EALA, and

• To restrain and prohibit the EAC Secretary General and the Clerk to the EALA from assembling, convening, recognizing, and administering oath of office or otherwise presiding over or participating in election of the Speaker or issuing any notification in recognition of the EALA representatives from Kenya.

The Attorney General of Kenya and the other respondents raised objections on key legal questions in relation to the EAC treaty and the partner states. Their submissions centered on the following:

• That the EACJ lacks jurisdiction to determine the case and the jurisdiction vested in the Court in clause 27 (1) of the EAC treaty is restricted.

Article 27 (1) of the treaty provides that “the Court shall initially have jurisdiction over the interpretation and application of this treaty”      

• That Article 52 (1) of the treaty reserves the right of jurisdiction to determine such cases to the institution of the partner states. Article 52 (1) states, “any question that may arise whether any person is an elected member of the Assembly or whether any seat on the Assembly is vacant shall be determined by the institution of the partner state that determines questions of the election of  members of the National Assembly responsible for the election in question”

In its ruling, the EACJ invoked Articles 30 and 27 (1) of the treaty, stating, inter alia, that the Court has jurisdiction to determine the “legality of any Act, regulation, directive, decision or action of a partner state or an institution of the Community.

Article 30 of the treaty provides:-

“Subject to the provisions of Article 27 of the treaty, any person who is resident in a partner state may refer for determination by the Court, the legality of any Act, regulation, directive, decision or action of a partner state or an institution of the Community on the grounds that such Act, regulation, directive, decision or action is unlawful or is an infringement of the provisions of this treaty.”

On the question relating to the legality of the election of the EALA representatives from Kenya, the Justices of the EACJ concluded that they “are satisfied that the EALA and the Community itself stand to suffer irreparable damage if” Kenya’s EALA representatives were not legally elected and directed the elections to be repeated[5]. The ruling of the EACJ not only forced the National Assembly of Kenya to address its internal electoral process but also infringed on its sovereignty. Specifically, the EACJ ruling can be interpreted to mean that regional sovereignty takes precedence over a partner state’s sovereignty. Even though the partner states reacted with hostility against its ruling, the decision by the EACJ has set precedence within the EAC that will go a long way in laying the foundation for the recognition of the EAC institutions for governance.

•   Tenure of Office of elected members of the East African Legislative Assembly differs between the two treaties.

The 1999 Treaty expressly provides^[6] that an elected member shall hold office for 5 years and is eligible for re-election for a further 5-year term.

On the other hand however, the 1967 Treaty does not expressly provide for a specific number of years in which an elected member may hold office. Article 58(1) provides that “a member of the assembly shall hold office until the legislature of the partner state which appointed him first meets after it is next dissolved”.

One of the main limitations of the current EAC treaty is that it does not confer sovereign rights on the people of East Africa through participatory electoral process. More specifically, the East Africans do not participate in direct elections of the EALA representatives, who by virtue of their legislative responsibilities are supposed to serve the interests of the people. The electoral process is largely state-driven, right from the level of the nomination of candidates by political parties to the elections of the EALA representatives by the national assemblies of the partner states as provided for in Article 50 of the EAC treaty.

(3) The East African Ministers as compared to the Council of Ministers

Article 3(1) of the 1967 treaty establishes the East African ministers as one of its organ while Article 13 of the 1999 Treaty creates the Council which shall consist of Ministers responsible for regional co-operation.

The major difference lies in the fact that the current Council of Ministers is the policy organ of the Community. Article 14 provides for the functions of the Council which include;-establishment of Sectoral Committees as provided under the Treaty, implementation of the decisions and directives of the Summit as may be addressed to it and considering the budget of the Community. This functions are very clear as compared to the 1967 Treaty where the defunct Ministers[7] were charged with the responsibility of assisting the authority in the executive functions of the Authority to the extent required and subject to the directions of the Authority. Another major difference is that the regulations, directives, decisions and recommendations[8] of the Council of Ministers are binding on all organs and institutions of the Community other than the Summit, the Court and the Legislative Assembly. This widens the impact of the decisions of the Council in regional matters and makes its existence crucial to regional integration.

 (4) The Courts under the 1967 and 1999 Treaties

The 1999 EAC Treaty establishes the East African Court of Justice[9] which shall be the judicial body which shall ensure the adherence to law in the interpretation and application of and compliance with the Treaty[10].The Court shall consist of a First Instance Division and an Appellate Division. The First Instance Division shall have jurisdiction to hear and determine,

at first instance, subject to a right of appeal to the Appellate Division under Article 35A, any matter before the Court in accordance with this Treaty.

Article 35A provides that an appeal from the judgment or any order of the First Instance

Division of the Court shall lie to the Appellate Division on ;- (a) points of law; (b) grounds of lack of jurisdiction; or (c) procedural irregularity.

Appointment of judges of the court is provided for under Article 24 which states that judges of the Court shall be appointed by the Summit from among persons recommended by the Partner States and it has a proviso to the effect that no more than two judges shall at any time be appointed on the recommendation of the same Partner State[11].

The number of judges shall be a maximum of six provided that of the judges appointed to the Court, the terms of the two judges shall expire at the end of five years, the term of the two other judges shall expire at the end of six years and the remaining two judges shall serve their full term of seven years.

The major difference which arises between the two Courts as provided under the 1967 and 1999 EAC Treaty relates to jurisdiction.

 The 1967 treaty established the Court of Appeal for East Africa. The court was constituted in such a manner as provided by an Act of the community and the Court of Appeal of Eastern Africa established by the East African Common Services Organization Agreements of 1961-1966[12]. The jurisdiction of the court was to hear and determine appeals from the courts of each partner state. The EACA which is now defunct had appellate jurisdiction in criminal, civil, constitutional and human rights matters in East Africa.

The EACJ as established under the 1999 EAC Treaty has limited jurisdiction with no constitutional jurisdiction, no criminal appellate jurisdiction and no civil appellate jurisdiction. Under Article 27(1), the jurisdiction of the Court will be limited to interpretation and application of the Treaty initially. However, it is provided that the Court shall have other original, appellate, human rights and other jurisdiction as will be determined at a future date[13] by the Partner States through a Protocol. Article 6(d) clearly provides the EACJ with human rights jurisdiction by ensuring that there is good governance, including adherence to the principles of democracy, the rule of law, accountability, transparency, social justice, equal opportunities, gender equality, as well as the recognition, promotion and protection of human and people’s rights in accordance with the provisions of the African Charter of Peoples’ and Human Rights.

The role of the East African Court of Justice in the settlement of EAC Common Market Protocol-related disputes is limited to interstate matters, rendering the court irrelevant to cases for individuals and private firms.

Article 54(1) of the Common Market Protocol provides that any dispute between the Partner States arising from the interpretation or application of this Protocol shall be settled in accordance with the provisions of the Treaty.This implicitly confers upon the EACJ jurisdictional powers to determine such disputes between partner states. However, the same protocol does not provide natural and legal persons with an avenue for settlement of disputes concerning them.

(5)The Sectoral Committees

Article 20 0f the 1999 Treaty provides for the establishment, composition and general functions of a Sectoral Committee which is a new organ as compared to the institutions under the defunct 1967 Treaty.

Article 20 provides that, “the Co-ordination Committee shall recommend to the Council of Ministers the establishment, composition and functions of such Sectoral Committees as may be necessary…”

A Sectoral Committee once established is subject to the directions of the Council.It shall:-

(a)be responsible for the preparation of a comprehensive implementation programme and the setting out of priorities with respect to its sector;

(b)monitor and keep under constant review the implementation of the programmes of the Community with respect to its sector;

(c)submit from time to time, reports and recommendations to the Co-ordination Committee either on its own initiative or upon the request of the Co-ordination Committee concerning the implementation of the provisions of this Treaty that affect its sector; and

(d)Have such other functions as may be conferred on it by the 1999 East African Treaty.

(6)The Co-ordination Committee

 The Co-ordination Committee is a new organ established under the 1999 EAC Treaty. Article 17 provides that the Committee shall consist of the Permanent Secretaries responsible for regional co-operation in each of the Partner State. The functions of the Committee are provided under Article 18 which include;-

(a) submitting from time to time, reports and recommendations to the council either on its own initiative or upon the request of the council once the Treaty has been implemented;

 (b) implementing the decisions of the Council as the Council may direct;

(c) receiving and considering reports of the Sectoral Committee and co-ordinate their activities;

(d) requesting the Sectoral Committee to investigate any particular matter.

The Co-ordination Committee shall be meeting at least twice per year preceding the meetings of the Council and may hold extraordinary meetings at the request of the Chairperson of the Committee.

TRANSFER TAX UNDER THE TWO TREATIES/REGIMES

Chapter V on measures to promote balanced industrial development provides for transfer tax[14].

Article 20(3) of the defunct 1967 Treaty provides that a Partner State which is in deficit in its total trade in manufactured goods with the other two Partner States may impose transfer taxes upon the manufactured goods which are transferred to that State and originate from either of the other Partner States.

The Partner State may also impose transfer taxes upon the manufactured goods of a Partner State being goods of a value not exceeding the amount of the deficit in trade in manufactured goods between the State which is imposing the transfer tax and the State of origin of the goods upon which the tax is to be imposed[15].

Article 20(6) provides that Partner State may impose a transfer tax upon manufactured goods only if at the time the tax is imposed goods of a similar description are being manufactured in that State or are reasonably expected to be manufactured in that State within three months of the imposition of the tax, and for the purposes of this paragraph goods shall be deemed to be of a similar description to other goods if, in addition to similar function, constituent parts or content, they are of such a nature as will enable them actively to compete in the same market as those other goods: Provided that this paragraph shall not preclude the imposition, but not the bringing into operation, of a suspended transfer tax at any time: Provided further that, if a transfer tax is imposed in the reasonable expectation that the manufacture of particular goods will commence within three months of the imposition of the tax and such manufacture does not commence within that period-

 (a) the Partner State imposing the transfer tax shall, within twenty-one days, revoke it unless, before the expiration of that period, that Partner State has obtained the directive of the Common Market Council that, conditional upon the commencement of manufacture within a further period of three months, the revocation of such tax may be deferred for such further period;

 (b) notwithstanding that a transfer tax has been revoked, for the reason that the Common Market Council has not within three months of the imposition of such tax given the directive referred to in sub-paragraph  (a) of this proviso, it shall be competent to that Council, where application in that behalf has been made by a Partner State within three months of the imposition of such tax, to direct that, conditional upon the commencement of manufacture within a further period of three months, such tax may be re-imposed.

The rate of transfer taxes shall be determined by the Partner States which imposes it, but no transfer tax may be imposed on any item if the same kind of item is not chargeable with any duty on import and the rate of any transfer tax imposed shall not exceed[16]-

(a) where the duty is chargeable ad valorem or ad valorem as an alternative to the specific duty, 50 per cent of the rate of duty prescribed by the customs tariff of the tax imposing State in respect of the import of the same kind of item; or (6) where the duty is a specific duty with no alternative ad valorem, 50 per cent of the ad valorem equivalent of the specific duty; but if the same kind of item is not chargeable with any duty on import no transfer tax may be imposed.

However under the 1999 EAC Treaty, a different approach is taken on how transfer taxes are going to treated. The 1999 Treaty has provisions that in effect tend to abolish transfer taxes amongst partner states. Article 76 of the treaty provides for the establishment of a common market characterized by the free movement of goods, labour, services and capital and this therefore underscores the fact that there won’t be need for transfer taxes since goods can be moved freely within the common market.

In addition, transfer taxes were imposed in the 1967 treaty with a view to promote industrial development to partner states that lagged behind matters industrial. The 1999 treaty attempts to address the industrial development imbalances through Article 79 whereby partner states are required to take steps that shall among others;

v   Promote self-sustaining and balanced industrial growth

v  Improve the competitiveness of the industrial sector so as to enhance the expansion of trade in industrial goods within the community

Article 80 on strategy and priority areas[17] provides that for the purposes of Article 79 of the Treaty, the Partner States shall take measures to;

(i) harmonise and rationalize investment incentives including those relating to taxation of industries particularly those that use the local materials and labour with the view to promoting the Community as a single investment area[18].

(ii) avoid double taxation[19].

Article 15 of the EAC Customs Union Protocol on national treatment provides that;-

(1) the Partner States shall not: 

 (a) enact legislation or apply administrative measures which directly or indirectly discriminate against the same or like products of other Partner States; or

 (b)  impose on each other's products any internal taxation of such a nature as to afford indirect protection to other products.

 (2)  No Partner State shall impose, directly or indirectly, on the products of other Partner States any internal taxation of any kind in excess of that imposed, directly or indirectly, on similar domestic products. 

(3)  Where products are exported to the territory of any Partner State, any repayment of internal taxation shall not exceed the internal taxation imposed on them, whether directly or indirectly.

The East Africa Common Market Protocol Article 32 provides that the  Partner  States shall undertake  to   progressively  harmonize  their   tax  policies and   laws   to   remove  tax  distortions  in order  to   facilitate   the   free  movement  of   goods,   services  and   capital   and   to   promote   investment  within the Community.  

This means that as a single investment area of East Africa, tax will only be charged on the country of origin of the manufactured goods or for imports at the point of entry for example, the Port of Mombasa or Port of Dar-es-Salaam. This will avoid double taxation arising.

A single regional Customs Authority would mean that customs revenues are collected at the first point of entry, and imported goods proceed to the final destination without stopping at national border points for customs charges or inspection.

EMERGING ISSUES

The 1999 Treaty in particular is a roadmap aimed at strengthening the community and ensuring the challenges that faced the community under the 1967 treaty are addressed. The following issues have been dealt with under the 1999 EAC Treaty so as to ensure the integration process is successful.

(a)The legal capacity of the Community and formation of a Political Federation

Under the 1967 Treaty, the East Africa Community was established for economic and commercial purposes. Each of the Partner state had some autonomy in terms of being sovereign.

However, under the 1999 EAC Treaty, the Community shall be a body corporate with perpetual succession and shall have the power to acquire, hold, manage and dispose of land and other property, and to sue and be sued in its own name[20].As a body corporate, the Community will be represented by the Secretary General[21].

In relation to co-operation in political matters, the idea of a political federation has been mooted in which the Partner States shall establish common foreign and security policies[22].

The objectives of the common foreign and security policies shall be to[23];(a)safeguard the common values, fundamental interests and independence of the Community;(b) strengthen the security of the Community and its Partner States in all ways;(c)develop and consolidate democracy and the rule of law and respect for human rights and fundamental freedoms;(d)preserve peace and strengthen international security among the Partner States and within the Community;(e)promote co-operation at international fora; and (f)enhance the eventual establishment of a Political Federation of the Partner States.

In Article 123(6), the summit has been mandated with the process of initiating the establishment of a Political Federation of the Partner States by directing the Council to undertake the process.

(b)Principles of the Community

The 1999 EAC Treaty has established two Principles which will ensure the integration process does not collapse like before. This is a fundamental departure from the defunct 1967 Treaty. They include;-

(a)Fundamental Principles[24] which encompasses;(i)mutual trust, political goodwill and sovereign equality;(ii)peaceful co-existence and good neighborliness;(iii)peaceful settlement of disputes;(iv)good governance including adherence to the principles of democracy and the rule of law;(v)equitable distribution of benefits; and (f)co-operation for mutual benefits.

(b)Operational Principles[25] have been provided to govern the practical achievement of the objectives of the Community. They include;-

(i)people centered and market driven co-operation;(ii)the provision by the Partner State of an adequate and appropriate enabling environment;(iii)the establishment of an export oriented economy where there shall be free movement of,persons,labour,services,capital, information technology;(iv)the principle of subsidiarity with emphasis on multi-level participation and the involvement of a wide range of stake-holders in the process of integration;(v)the principle of variable geometry which allows for progression in co-operation among groups within the Community for wider integration schemes in the various fields and at different speeds;(vi)the equitable distribution of benefits accruing or to be derived from the operations of the Community  and measures to address economic imbalances that may arise from such operations;(vii)the principle of complementarity; and (viii)the principle of asymmetry.

The fundamental and operational principle were drawn so as to widen and deepen the integration process after the collapse of the East Africa Community in 1977.The principles are a cornerstone for the success of EAC integration. In the general undertaking as to the implementation of the Treaty, the Partner States shall abstain from any measure likely to jeopardize the achievement of these objectives[26].

(c) The Role of Women in Socio-Economic Development

This is a new provision under the 1999 EAC Treaty. This completely differs from the 1977 Treaty since the issue of gender is expressly provided for in the treaty which recognizes women as having a major role in integration and development of the East Africa Community. However, the role of women is expected to be enhanced at the policy formulation and implementation levels within the EAC and the partner states.

Article 121 of the treaty provides that the partner states shall through legislative and other measures;-

(a) promote the empowerment and effective integration and participation of women at all

levels of socio-economic development especially in decision making.

(b) abolish legislation and discourage customs that are discriminatory against women.

(c) promote effective education awareness programmes aimed at changing negative attitudes

towards women.

(d) create or adopt technologies which will ensure the stability employment and professional

progress for women workers, and

(e) take such other measurers that shall eliminate prejudices against women and promote the

equality of the female gender with that of the male gender in every project.

Women are also considered as a vital economic link between agriculture, industry and trade[27].The Partner States will be expected to promote special programmes for women in small, medium and large scale enterprises, not forgetting eliminating all laws, regulations and practices that hinder women’s access to financial assistance including credit.

The Partner States will also be expected to initiate changes in the educational and training strategies to enable women to improve their technical and industrial employment levels through the acquisition of transferable skills offered by various forms of vocational and on-the-job training schemes[28].

(d)Participation of the Private Sector and the Civil Society

One of the main factors that led to the collapse of East Africa Community in 1977 was the “lack of strong participation of civil society” .The inclusion of civil society and private sector in the treaty therefore is an important ingredient for regional integration and development in general. The Partner States have undertaken to formulate a strategy for the development of the private sector and to;-

(a) promote a continuous dialogue with the private promote a continuous dialogue with the private sector and civil society at the national level and at that of the Community to help create an improved business environment for the implementation of agreed decisions in all economic sectors; and

(b)  provide opportunities for entrepreneurs to participate actively in improving the policies and

activities of the institutions of the Community that affect them so as to increase their confidence in policy reforms and raise the productivity and lower the costs of the entrepreneurs.

 Creation of an enabling environment for the civil society and other stakeholders will make them to be more involved in the EAC transformation and development process. The involvement and particularly ownership of the EAC activities by the civil society and other non-governmental organizations (NGOs) is critical for the sustainability of the community’s raison d’être and success.

CONCLUSION

After the creation of the Customs Union and the Common Market, the Monetary Union is the third stage in the integration process of the East African Community bloc, which ultimately aspires to form a Political Federation.

So far the Customs Union Protocol and Common Market Protocol for East Africa have been finalized. The EAC Summit of Heads of State have set April 2013 as the deadline for the conclusion of the Monetary Union Protocol, and EAC Secretary General Ambassador Richard Sezibera has on different occasions reiterated EAC’s commitment to have the Protocol concluded within the set timeframe.

When the team of experts, the High Level Task Force (HLTF) negotiating a monetary union hit a snag last month(November 2012), the 14th EAC heads of state summit meeting in Nairobi last week(December 2012) directed the matter be expedited so as to have it signed by November 2013.The process for the establishment of the East African Monetary Union is underpinned by Articles 5 and 82 of the Treaty for the Establishment of the EAC where, among others, the Partner States undertake to establish a monetary union and to co-operate in monetary and fiscal matters. The primary rationale for a monetary union is to reduce the costs and risks of transacting business across the national boundaries of those countries which comprise the union.

However, the creation of a monetary union for the East Africa Community requires extensive institutional preparation as well as convergence among the region’s economies. The experience of the euro zone shows the need for putting in place adequate safeguards against excessive fiscal deficits and debt. Despite a long period of institution building and many resources invested in preparing the monetary union, the euro zone currently faces a crisis that threatens its continued existence. Given that the EAC is at a much earlier stage in regional integration than was the European Union at the time of the signing of the Maastricht Treaty, it is unlikely that the EAC could create a full-fledged currency union that was effective in creating a zone of monetary stability in much less than a decade. 

There is convincing evidence that EAC monetary union will contribute to greater cross-border trade in finance and goods, delivering efficiency gains from market integration. With a unified currency, international integration with the rest of the world will increase rapidly such that it will be essential not to view the EAC single currency area as a closed unit. By embracing a single currency, EAC Partner States would remove the costs of having to transact in different currencies and the risk of adverse exchange rate movements for traders and travelers alike within the region[29].

---

[1] A. Kasaija, ‘Regional Integration: A Political Federation of the East African Countries?’ African Journal of International Affairs, Vol. 7, Nos. 1&2, 2004, pp. 21–34, Retrieved 16th March 2011 p 25, http://www.ajol.info/index.php/ajia/article/viewFile/57213/45602   

[2] A. T. Mugomba, Regional Organisations and African Underdevelopment: The Collapse of the East African Community ‘, The Journal of Modern African Studies, Vol. 16, No. 2 (Jun., 1978), pp. 261-272 Retrieved

September 9 2009 from JSTOR database available at University of the Witwaterand library website

http://www.jstor.org/stable/160169

[3] Article 5(3)

[4] Ref. No. 1 of 2006, Ruling (EACJ, Feb. 6,2007)

[5] The EACJ, in August 2010, ordered the Government of Kenya, through the Attorney-General, to pay the applicants the legal costs with interests amounting to over $ 2,000,000 which had accrued since the ruling was reached in 2006.

[6] Article 51(1)

[7] Article 51(1) of 1967 Treaty for East Africa Co-operation

[8] Article 14 of 1999 East African Community Treaty

[9] Chapter 8 article 23                                                    

[10] Article 23

[11] Article 24(1)

[12] Article 80

[13] Article 27(2)

[14] Article 20

[15] Article 20(4)

[16] Article 8

[17] 1999 East Africa Community Treaty

[18] Article 80(f)

[19] Article 80(h)

[20] Article 4(1)

[21] Article 4(3)

[22] Article 123

[23] Article 123(3)

[24] Article 6

[25] Article 7

[26] Article 8(1) (c)

[27] Article 122

[28] Article 122(f)

[29] The Kenyan Standard Newspaper, December 4^th 2012.