Uhuru Kenyatta secures Mombasa port trade after deal

Uganda and Rwanda are set to join Kenya in relocating top customs officials to Mombasa Port in a new pact seeking to boost the flow of goods and curb dumping of cheap imports in East Africa.

Under the deal struck by President Uhuru Kenyatta, Uganda’s Yoweri Museveni and Rwanda’s Paul Kagame, Kenya has undertaken to create space for its partners to set up customs clearing units.

“The presidents agreed to implement a programme for Uganda to collect customs duties before goods are released from Mombasa port. For goods destined for warehousing in Uganda importers would continue to execute the general bond security,” a communique issued after the Entebbe meeting said.

However, this will be done after ongoing reforms at the port which include amending Kenya Ports Authority (KPA) Act to recognise East African Community (EAC) as a single customs territory, space rationalisation and expansion of berths.

READ: Uhuru cargo order signals single EAC customs body

The agreement reached on Tuesday will also see joint revenue teams being stationed at Oluhura and Mpondwe border points.  

The three leaders said they would monitor progress of the reforms which have strict timelines through a meeting every two months.

Once fully implemented, the three countries will effectively be operating as a single customs territory ahead of the plan by EAC heads of states to extend it to the whole region - including Tanzania and Burundi - by November.

Firms have argued that putting the revenue officials in one location will end trade diversion and reduce the disputes that have arisen out of products imported under bilateral deals that member states sign with non-EAC states.

“There is need for strict enforcement of the region’s Common External Tariff (CET) for finished products,” says Ruth Mugugu, the General Motor’s communications manager for Sub-Saharan Africa Export markets.

The Kenya-based motor vehicle assembler has in the past argued that second hand vehicles imported at zero tariffs by some member states are diverted to other EAC markets.

“Since the launch of the EAC customs union, the motor vehicle industry has witnessed sustained violations of the CET relating to Motor Vehicles by the Partner States,” she said.

The Uganda and Rwanda customs officials have, for instance, locked out Kenyan rice farmers from selling the commodity across the border on fears that cheap Pakistani rice could also find its way to their markets.

EAC rice farmers are cushioned by a CET of 75 per cent but Kenya imports the commodity at 35 per cent from Pakistan under a bilateral pact signed a few years ago to safeguard the tea market.

At the moment, Kenya is yet to resolve a long standing market access dispute with Ugandan sugar firms whose products it has continued to block from its market on suspicion that they are imports from outside EAC.

The Ugandan exporters have also had a long running dispute with KRA over treatment of second-hand vehicles imported through Mombasa Port.  For oil importers, a pipeline running from Mombasa to Rwanda will completely eliminate trade diversion.

“Generally, when revenue officials from various member states are stationed at every common entry point of the region, these rows will end because all taxes on imports will have been collected at first point of entry,” EAC Director-General of trade and customs Peter Kiguta said in an earlier interview.

For KPA, the changes will safeguard its dominance of regional transit cargo that has been under threat as more traders from landlocked states shunned inefficiency at Mombasa port and Northern Corridor.

The deal is set to counter a similar trilateral agreement reached between Tanzania and the two landlocked countries to encourage use of the rival Port of Dar es Salaam and Central Corridor.

The Tanzania’s Central Corridor is longer and in worse state of repair than Kenya’s northern corridor. However, Uganda has been offering its traders 15 per cent rebate to encourage the shift as they await the 800-kilometre railway line to be constructed jointly at a cost of  Sh230 billion ($2.7 billion).

This campaign, coming after the 2008 post-election violence which paralysed transport on Kenya’s northern corridor for close to one month have seen the Kenya port lose considerably on regional business.

The Mombasa Port now handles about 85 per cent of Uganda’s export and import cargo, down from 99 per cent in 2011. Rwanda which also used to transport 60 per cent of its cargo through Mombasa has also scaled down its use of the Kenyan facility from 60 per cent to 20 per cent.

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KPA data, however, shows Uganda remains the dominant transit destination accounting for 4.85 million tonnes or 73.1 per cent of its 2012 transit traffic.  Rwanda recorded 260,238 or 3.9 per cent share of transit traffic in 2012.

On Tuesday, the presidents said the new trilateral pact was part of their efforts to eliminate non-tariff barriers on trade and movement of labour that hamper intra-EAC trade and full implementation of the Common Market.

The three leaders agreed to revamp the existing railway network and also construct new standard gauge railway line from Mombasa Kenya to Uganda and extend it to Rwanda.

The new standard gauge railway line is particularly expected to ease pressure on the roads which currently haul 97 per cent of cargo, causing delays as countries enforce weight limits.

To boost movement of persons the three presidents agreed to speed up the EAC electronic identity cards and single tourist visa.

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