Kenya, Uganda sugar row tests spirit of integration

Saturday November 22 2014

Cargo trucks line up at the Malaba border awaiting clearance. Uganda claims that Kenya is blocking its sugar from entering the country. PHOTO | FILE

Officials from the Ugandan Ministry of Trade and the Kenya High Commission in Uganda will make a joint verification visit to Malaba border post in the coming week as they try to defuse an escalating dispute over sugar exports.

The visit follows a crisis meeting held on November 13 between the two parties.

Through their umbrella organisation, the Uganda Sugar Manufacturers Association (USMA), sugar millers announced that they had given up on efforts to access the Kenyan market, citing anti-free trade practices by the Kenya Sugar Board (KSB), the Kenya Police and the Kenya Revenue Authority.

Speaking in Kampala on November 18, USMA chairman Jim Kabeho accused the three agencies of blocking Ugandan sugar from reaching the Kenyan market.

“We are stopping all sugar exports to Kenya until the two governments resolve the issue of continued blockage of our export consignments to Kenya. Kenyan products, including sugar, enter the Ugandan market without hindrance. However, despite assurances to the contrary, our efforts to export sugar to Kenya continue to encounter numerous obstacles,” Mr Kabeho said.

According to USMA, the Kenya Sugar Board subjects Ugandan sugar to import permits, a requirement that is defunct under the EAC Common Market Protocol.


Securing the permits is a protracted and expensive process; licensees are required to pay Ksh100,000 ($1,162) for each consignment, but even that is no guarantee that the sugar will get through.

“After KSB issues the permits, the consignments are either blocked by KRA, which disputes the valuation used on the invoices, or the police, who impound the trucks saying Ugandan sugar is not allowed into Kenya,” said Mr Kabeho.

This leads to additional costs in the form of demurrage charges for the additional time the trucks are held at the border.

James Onen, Permanent Secretary at the Ministry of Trade, said efforts are underway to resolve the impasse.

“Kenya allows the imports, but the challenge is the non-tariff barriers that delay the consignments at the border. Last week, we met the Kenyan High Commissioner to Uganda who had the full mandate of his government to handle the issue and we agreed to send a joint team to the border next week to ascertain what really happens on the ground,” Mr Onen said.

However, the manufacturers are not placing much faith in the latest initiative, saying that Kenyan delegations have always promised to act on the complaints but nothing changes.

The latest meeting on the issue was held in Kampala on July 21 between the Uganda Revenue Authority, KRA, KSB, Rwanda Revenue Authority, USMA and the respective ministries of trade.

USMA presented three issues — the lengthy clearance and authorisation Ugandan sugar exports are subjected to by KSB, the lack of progress towards resolving the issue despite several meetings, and Rwanda’s sugar imports, which are far above the annual deficit for that country.

As KSB outlined the procedures for importing sugar into Kenya, it acknowledged that quota restrictions were not applicable to sugar originating from the EAC.

The meeting agreed on eight points for immediate action, among them a reduction of red tape for clearing sugar imports from the EAC by the KSB, clearance of sugar for direct consumption under the Single Customs Territory framework, and KSB to work closely with USMA to facilitate legitimate sugar imports. Four months later, there has been no action on any of the points, USMA claims.

USMA now blames powerful sugar cartels in Kenya that are keeping consumer prices artificially high.

According to USMA’s calculations Kenya is a sugar-deficit country, producing only 500,000 of the 800,000 tonnes consumed annually. Despite this deficit of 300,000 tonnes, preference is given to imports from outside the region. This has kept the retail price for sugar in Kenya at Ksh130 ($1.4) for a kilogramme compared with Ksh89 ($1) in Uganda.


USMA says that on the basis of this deficit and anticipating a liberal trade regime, Ugandan manufacturers invested $200 million in capacity expansion over the past three years, taking the industry’s combined production past the national demand of 320,000 tonnes last year.

The industry had budgeted for a surplus of 145,000 tonnes this year, but these plans were thrown into disarray by the outbreak of conflict in South Sudan last December, and the actions of the Kenya Sugar Board.

As a result, wholesale prices for sugar dropped 15 per cent in Uganda as manufacturers tried to free up warehousing space. Contract suppliers of cane also suffered price cuts and reductions in volumes sold as millers scaled down production.

With the Comesa Free Trade Area coming into force, the millers expect more issues.

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“The tripartite agreement will complicate matters further because as we are failing to manage the EAC, the Comesa Free Trade Area will open our markets to sugar from countries with mature industries that have long recovered their cost of investment. Therefore, how we manage our integration is going to be critical,” said Raju Sareen, corporate marketing manager for Kakira Sugar Works.