Part VII of the EAC Competition Act, 2006 (the Act), provides a Partner State may grant a subsidy if it is of the opinion it is in the public interest to do so. However, a Partner State shall before granting any subsidy notify the Authority.

A Subsidy refers to any measure or support conferred on a selective basis to undertakings by the State (or national public authorities). State subsidies have the ability to affect or influence the process of competition in a market as it entails the grant of an economic advantage conferred upon an undertaking over its competitors. 

Further, the Act provides that a Partner State shall not grant:

  1. any subsidy for the promotion of exports or imports between the Partner States;
  2. any subsidy granted on the basis of the nationality or residence of persons or country of origin of goods or service.

Notwithstanding the above, the Act provides a list of exemptions allowing a Partner State to grant state subsidies, which includes; consumers of certain categories of products or services, promotion of social services; and, for the development of small and medium-sized enterprises.