Kenya and Egypt are headed for a trade dispute that could affect the former’s tea exports following allegations that Cairo is importing sugar from Brazil and exporting it to Kenya as its own after repackaging.
The two are among the 19 members of the Common Market for Eastern and Southern Africa’s Free Trade Area, where products meeting the rules of origin enjoy preferential import taxes.
Under Comesa, a product must be fully produced in the exporting country, or the cost of landing at the port of destination must not exceed 60 per cent of the total cost of the materials used in the production of the product. The value added should account for at least 35 per cent of the ex-factory cost of the product.
Kenya says that just packaging sugar from Brazil does not meet the rules of origin threshold. Nairobi says Egypt is also exporting electronic equipment and paper materials from other countries under the same guise.
“The allegations by Kenya against Egypt were first about sugar. But the list has expanded to electronics and paper,” Comesa senior trade policy advisor Mwansa James Musonda, who is arbitrating in the dispute said.
Mumias East MP Benjamin Washiali said Egypt’s actions meant that other countries that are not members of Comesa were benefiting from the preferential incentives offered under the trade bloc.
Mr Washiali accused Comesa of weak policing of compliance with the rules of origin.
The MP spoke in Lusaka during a recent workshop organised by Comesa to discuss ways of ending the arbitrary food export and import bans within the bloc.
Egypt was not represented at the workshop but Mr Musando said Kenya lodged the complaint with Comesa, upon which the trading bloc instituted a fact-finding mission by Kenyan officials to Egypt.
Kenya Revenue Authority officials were part of the delegation, which visited several sugar factories in Egypt.
However, the report, which they presented to the Kenya government, was rejected on the grounds that it was not a reflection of Egypt’s true sugar production capacity.
The Kenya government appealed against the decision and was allowed to send a second fact finding mission that composed of international trade experts. It was during this visit that additional issues on electronics and paper arose, prompting protests from Egypt.
Comesa has now ordered Egypt to allow yet another fact finding mission from Kenya, which would also assess electronics and paper manufacturers. The dates for the mission are likely to be announced once the new Egyptian government settles in office.
The dispute, if not resolved immediately, could have ramifications for Kenya’s 600,000 small scale tea farmers as Egypt is one of the biggest buyers of Kenyan tea.
Kenya National Bureau of Statistics data shows that tea dominates Kenya’s trade with Egypt, accounting for 96 per cent of the Ksh21.4 billion ($251.7 million) worth of goods that it exports to Egypt (compared with imports worth $350.5 million).
Tea farmers in Kenya, the majority of whom are small scale, are yet to receive half year bonus payments because of what the Kenya Tea Development Agency, which manages over 64 factories says are poor prices at the world market partly due to the Egyptian crisis, instability in Pakistan and over production.
According to Mr Washiali, Egypt has been blackmailing Kenya threatening that in case of an escalation of the trade dispute, it will boycott buying Kenyan tea.
Data from the Tea Board of Kenya shows that the volume of tea shipped to export markets increased marginally to 42.7 million kilogrammes in June this year, compared with 42.3 million kilogrammes in the same period last year.