Lauri Elliott

Originally posted at www.afribiz.info.

Regional economic communities (RECs) are intergovernmental bodies established to foster mutual economic development and cooperation amongst a group of countries.  For Africa, RECs will gradually lead to one continental economic community called the African Economic Community (AEC).  The AEC will be a pillar of the African Union.

Like economic hubs, RECs can provide a strategic focus for businesses and investors.   RECs focus on creating at least a free trade area, customs union and common market between member countries.  While this helps the member countries with cross-border trade and opening markets to the world, it also opens larger and more varied opportunities for businesses and investors.

As an example, if you planned to concentrate your business and investment ventures in the East Africa economic hub of Kenya, you would greatly benefit from the infrastructure and institutions developed for the East Africa Community (EAC).  The EAC consists of Burundi, Kenya, Rwanda, Tanzania and Uganda.  It has a combined population of about 130,000,000 compared to about 40,000,000 in Kenya alone.  For those who do business and invest in consumer markets, the difference in market potential based on size is excellent.

In fact, the EAC is a good regional economic community on which to focus.   It has many key developments, which may cause an explosion in economic opportunities in the next decade.  One is the backhaul fiber optic cable laid, connecting all the EAC countries with broadband capacity. In addition, there are a few undersea cable projects (e.g., EASSY, SEACOM) that will connect this backhaul to international broadband as early as June of this year.  Currently, this market is served primarily by expensive satellite infrastructure.

Another development is an improved rail system between the port city of Dar es Salaam in Tanzania to the interior countries of Burundi and Rwanda.  Not only will it improve the efficiency and speed of transport, but it is estimated to reduce the cost of transport by 40%.

Developments like these not only improve the business environment, but serve as investment opportunities through public/private partnerships.  These type of investments require large investment pools, but EAC is establishing a regional stock exchange with electronic trading system this year.  It will enable even small investors to invest in East African firms.

There are eight RECs in Africa recognized by the African Union, which you can preview and link to their individual websites from here.  To learn more about the EAC, visit www.eac.int.  There you will find the development strategy for the EAC through 2010.  You can also view the EAC Guide for Investors.

As always, we provide a monthly list of resources on doing business in Africa, which you can access here.  And this month, we have started daily short blurbs related to the monthly article to give you more insights into regional economic communities in easily, digestable chunks.  Follow or join the feed here.