Kenya and Uganda have struck a deal allowing cheaper Ugandan sugar into the Kenyan market, ending the long-running feud over the trading of the commodity across their common border.
The deal President Uhuru Kenyatta signed with his Ugandan counterpart Yoweri Museveni in Kampala also clears the way for Kenyan traders to export beef to Uganda under similar terms, deepening the commercial ties between Kampala and East Africa’s largest economy.
The agreements were signed during Mr Kenyatta’s three-day visit to Kampala where he held bilateral meetings with his host Mr Museveni and addressed the Ugandan parliament.
Ministry of Trade officials said they were expediting issuance of import permits to Ugandan sugar traders to enable them feed the undersupplied Kenyan market.
Kenya has had a near diplomatic stand-off with Kampala over the Ugandan traders’ quest to export sugar to the region’s largest economy, arguing that the country did not produce enough sugar to meet its consumption needs and would therefore not have excess to export.
The Kenyan authorities have maintained that Ugandan traders were importing sugar cheaply for repackaging and exporting to lucrative markets such as Kenya.
Uganda has strongly defended itself against the allegation, arguing it has excess production capacity that can produce sugar for export to the Common Market for Eastern and Southern Africa (Comesa).
Foreign Affairs and International Trade secretary Amina Mohamed said the slow pace of processing of permits for Ugandan sugar exporters was behind the stalemate, adding that the issue had been resolved.
Mrs Mohamed said the delays had been caused by Kenya’s re-organisation of ministries and directorates in the sector, including the Kenya Sugar Board which is now a unit within the Agriculture, Fisheries and Food Authority (AFFA).
The AFFA, however, maintained yesterday that the agreement did not provide for free flow of Ugandan sugar into Kenya but a guided movement of the lucrative commodity to prevent the flooding of the Kenyan market and killing local millers.
“The imports would have to be based on Kenya’s deficit,” said AFFA director-general Alfred Busolo.
Uganda has continually faulted Kenya’s 2012 decision to block sugar imports from the neighbouring country in violation of the East African Community (EAC) common market protocol, which provides for free movement of goods without restrictions.
Kenya’s sugar market remains protected from cheaper Comesa imports under special safeguard measures that were supposed to end in January 2012 but have since been extended annually at the request of Nairobi.
Uganda produces about 465,000 tonnes of sugar against a consumption of 320,000 tonnes, leaving it with a 145,000-tonne surplus.
Kenya produces 650,000 tonnes of sugar against a demand of 860,000 tonnes, leaving a 210,000-tonne deficit that is met through imports, according to the AFFA.
Kenyan authorities have in the past couple of years capped sugar imports at 300,000 tonnes to protect local millers.
“We have a deficit of 110,000 tonnes of table sugar and import all our industrial sugar which is not produced locally,” said Mr Busolo.
Mr Kenyatta and Mr Museveni yesterday underscored the critical role that bilateral trade, investments and security play in forging regional integration.
President Kenyatta cited the economic benefits East Africa would reap from closer cooperation in areas such as infrastructure development and interconnectivity.
Kenya is undertaking major joint infrastructure projects with its neighbours, including the Lamu Port Southern Sudan-Ethiopia Transport (Lapsset) corridor, the standard gauge railway (SGR), an oil pipeline, an electricity pool and a shared oil refinery in Uganda.
Mr Kenyatta said the SGR, for instance, is expected to slice the cost of moving cargo from Kenya’s Mombasa port to Kampala by 60 per cent and cut the time taken from three days to 24 hours, resulting in lower commodity prices.
“Our political, economic and security partnership will be key to ensuring that East Africa becomes the hub that brings these two worlds together,” said Mr Kenyatta during his address to Ugandan lawmakers.
Mr Kenyatta acknowledged the ever-growing socio-economic divide in the populations of the two nations, saying there was need to empower youth to drive growth through innovation to bridge the wealth gap.
“I have no doubt that it is not gold or oil or other precious minerals buried in our soil that will make us wealthy. In our young population, we have the world’s most precious resource,” he said.
Ugandan officials have been pushing their Kenyan counterparts to open the local market and help balance bilateral trade, which is heavily skewed in favour of Nairobi.
Uganda bought Sh60.7 billion worth of goods from Kenya last year, making it the largest destination market, compared to Sh17.5 billion it exported to Kenya, according to official
This is set to expand following Uganda’s decision to open its market to Kenya’s beef and related products and Kenya’s easing of sugar import regulations.
“We are going to put in place mechanisms to implement this directive as soon as next week,” Uganda Trade minister Amelia Kyambadde said, adding that the decision had been reached despite Kenya’s failure to enact the relevant legislation before opening the beef market as had been agreed earlier.
Kenyan supermarkets and banks have expanded their footprints to Uganda, underlining the economic significance of the land-locked nation, which has become rich in hydrocarbons with more than three billion barrels of recoverable oil.
Government records show that about 350 Kenyan companies have a presence in Uganda, with investment portfolios in excess of Sh81 billion.
The Uganda Sugar Manufacturers Association (USMA) has in the past accused powerful sugar cartels in Kenya of using import controls to defeat competition, a situation that has kept consumer prices artificially high in the region’s biggest market.
Uganda’s sugar is on average Sh30 cheaper per kilogramme compared to Kenya’s, according to the USMA.
In August 2011, Kenya allowed Uganda to import sugar through the port of Mombasa duty-free for six months to help plug a deficit. The only rider was that the sugar would be exclusively for Ugandan market.
Dumping of sugar
Kenyan officials thereafter raised the red flag over increased dumping of sugar from Uganda into its domestic market for which the 100 per cent import duty had not been paid.
Under the EAC Common External Tariff (CET) structure, sugar attracts duty of 100 per cent, a factor that makes imports outside the trading bloc expensive.
Mr Kenyatta said Kenya would deepen its ties with Uganda to bolster security in the region, critical for creating an environment for investments and for tourism to flourish.
Officials from the two nations are also set to hold a forum to tackle pending issues such as standardisation for tea and maize, access to Uganda of Kenyan cement and rice, EAC duty remission scheme and anti-malarial drugs and charges of plant import permit.