Kenya and Tanzania have stepped up wheat importation to meet a growing demand amid declining production in the region, despite a stringent common external tariff of 35 per cent.
In the past few months, wheat has been among the leading bulk commodities imported through the port of Mombasa.
Data from the Kenya Ports Authority for the week ending May 2 shows that the cargo terminal handled 32,878 tonnes of wheat, the second largest consignment after clinker at 32,917 tonnes.
The increase in imports is being driven by oversupply on the international market, particularly by Russia, the world’s leading wheat producer.
Russia is a leading source of imports to the EAC, mainly because of the short shipping routes from the Black Sea. Other exporters are Brazil, Australia, Argentina, Canada, Germany and Poland.
Now, large-scale wheat farmers in Kenya are concerned that the stocks of the cheap imports being accumulated by millers will make it impossible for them to access the market in July when they harvest.
Wheat is trading at $245 per tonne on the international market, compared with $225 per tonne a year ago.
Trade spat intensifies
The increase in imports is also intensifying a trade spat between Kenya and Tanzania. Nairobi is accusing Dar es Salaam of disregarding the rules of origin by re-exporting wheat from outside the East African Community into the Kenyan market.
The rules of origin determine the national source of a product and their importance is derived from the fact that duties and restrictions depend on the source of imports.
The EastAfrican has learnt that large consignments of wheat being imported by traders in Tanzania through the port of Dar es Salaam is finding its way into Kenya duty-free on the basis that it is locally produced in Tanzania.
To address the matter, the two countries called a bilateral meeting in Dar es Salaam for May 10 but The EastAfrican has learnt that it was called off indefinitely.
“The rules of origin dictate that if you import wheat you cannot re-export it without paying duty. Kenya has been soft by allowing products to be re-shipped into the country because of failure to enforce the rules,” said the chief executive of Cereal Growers Association Anthony Kioko.
While wheat from outside the EAC attracts 35 per cent duty, wheat produced by farmers in the region is zero-rated.
“There has been a significant increase in imports because local production cannot meet demand. The problem is there is a dispute on the rules of origin,” said Janet Ngombalu, East Africa Grain Council regional programs co-ordinator.