Tanzania reaps spoils of Uganda’s trade fights with Kenya, Rwanda
Monday December 20 2021
Tanzania is emerging as the biggest beneficiary in Uganda’s trade war with Kenya and a diplomatic tiff with Rwanda.
This week, Kampala announced an impending ban on Kenyan agricultural products, signalling an escalation of a trade dispute that has lasted close to two years and whose resolution was expected a month ago through a bilateral forum that aborted.
Uganda’s East African Community Affairs Minister Rebecca Kadaga directed the Agriculture Ministry to list Kenyan products that will be banned from the Ugandan market, noting that the trade squabbles between the two EAC partners had “gone on for too long”.
“Within a short time they (Kenya) too will understand what we are going through,” warned Ms Kadaga.
“We have been too patient. In the past, we have not retaliated, but now we are going to. As the Agriculture Ministry drafts the list of potential products to ban, the East Africa Ministry and their trade counterparts are to continue engaging Kenyan authorities over the pending issues,” the minister said in Kampala.
Meanwhile, there is no respite in the Uganda-Rwanda dispute, which led to the closure of the Katuna/Gatuna one-stop border post in February 2019, with both parties taking a hard line on the issues that led to the closure, which included security concerns.
No one has been watching Kampala’s recent tantrums with more interest than Tanzanian President Samia Suluhu, who has been on a charm offensive in the region since she took office in March this year after the death of John Magufuli, selling her country as a prime investment destination and trade partner.
On December 9, Kenyan President Uhuru Kenyatta was the chief guest at Tanzania’s 60th Independence anniversary celebrations during which he and President Samia held bilateral talks to improve trade between the two nations.
The Tanzanian leader had three weeks earlier held talks with Uganda’s Yoweri Museveni, unlocking business opportunities that will be significant in charting Tanzania’s economic growth path in the post-Covid period.
All the EAC partners are now looking to Tanzania under President Samia as a lucrative consumer market and trading partner, following the elimination of some of the punitive tariff and non-tariff barriers that initially raised the cost of doing business with Dar es Salaam and ran counter to the EAC Common Market.
President Samia has visited the EAC member states except South Sudan and tabled development and trade deals.
During the meetings with President Kenyatta, President Samia announced that a Joint Commission for Co-operation (JCC) charged with eliminating non-tariff barriers between the two nations, which had trade disputes throughout the Magufuli reign, had done a good job of it.
“I commend the JCC for speedily resolving 46 out of them 64 non-tariff barriers that existed and I am sure the remaining ones will soon be resolved,” she said.
This opportunity would not have come at a better time as Kenya seems to have decided to abandon Uganda as its most important trading partner in the region after months of a trade tiff involving agricultural products.
In March, Kenya banned imports of Ugandan maize, a move that saw Ugandan legislators demand retaliatory bans on Kenyan goods. But President Museveni rejected the calls, noting that such action would be against the Common Market.
“The other day I heard some of our MPs talking about retaliation,” he said during his State of the Nation address in June. “I could not agree with that line. What we need is to patiently work for the integration of East Africa. We worked hard to revive the East African Common Market and Uganda is benefiting a lot. Therefore, the idea of retaliation is not good because it plays into the hands of those who want us to break up.”
Uganda’s recent change of stance, analysts say, could be because of several failed attempts to resolve the stalemate with Nairobi. The Cabinet this week seemed resolute that something had to be done.
Kampala is said to have been angered at Kenya’s apparent loss of interest in resolving the dispute, and the fall in trade figures between the two is evident.
Kenya cancelled a planned trade mission to Uganda in November to resolve a dispute over the trade in sugar and milk. Principal Secretary in the Department of Livestock, Harry Kimutai, blamed the deferment on the lack of preparedness by the Kenya Dairy Board. That postponement prolonged a two-year fight over milk and sugar trade between Kenya and Uganda. The mission was to verify claims that sugar and milk imported from Uganda originated from third-party countries, a claim that Kampala denies. “The dairy board was not ready and we have had to push this meeting to December,” said Mr Kimutai.
Ugandan officials accuse Nairobi of ignoring the private sector and not issuing reports on the verification process.
“They only move around with technocrats and go back to Kenya and keep quiet without issuing any report,” Minister Kadaga said. Kenya faces a ban on its key agricultural exports to Uganda: Palm oil, which fetched $64.2 million last year, sorghum ($12.4 million), vegetables ($2.77 million) and legumes ($1.78 million). But trade been Nairobi and Kampala has been on a downward trend since April 2021, with the value of Kenya’s exports standing at $83.25 million in April, $71.78 million in May and $66.85 million in June. Tanzania therefore toppled Kenya as Uganda’s main export market in the EAC. Uganda’s State minister for Agriculture Bright Rwamirama said while the ministry continues to engage Kenya and the EAC Secretariat over the bans, it has a retaliation master plan that it could implement soon.
As the politicians play the game of wits, the East African Business Council (EABC) warns that it will hurt the bloc’s integrated agenda. “We urge a quick convening of the bilateral public-private dialogue between Kenya and Uganda to find win-win lasting solutions on the elimination of non-tariff barriers,” said EABC chief executive officer John Bosco Kalisa in a statement. The EABC wants the EAC partner states to ratify the article on remedy resolution process of the EAC Customs Union Protocol to pave the way for the operationalisation of the EAC Trade Remedies Committee.
“The non-existence of the committee makes it impossible for the EAC Council of Ministers to refer matters on the elimination of NTBs to the team, as is provided for in the NTB Act, 2017,” Mr Kalisa said. Kenya’s Trade Ministry says it has not received any official complaints from Kampala, as stipulated under the trade dispute resolution mechanism in EAC Common Market.
Free market norms
“We are willing to engage with our counterparts to unlock the trade dispute. We are yet to receive any complaints through the official diplomatic channels. When we see something formal, we will respond,” Johnson Weru, Kenya’s Trade Principal Secretary, told The EastAfrican.
However, he noted that trade disputes are part and parcel of a free market.
“We have a Common Market that allows free movement of goods and services, so it is a free market,” he said.
In December 2019, Kenya stopped importing Ugandan milk, particularly the Lato brand. Then the battle shifted to maize. Kenya requires maize imports of 600,000 tonnes per annum, while the exportable surplus elsewhere in the EAC is between 200,000 and 300,000 tonnes.
Uganda exports at least 90 percent of its maize to Kenya, with a cumulative average of 330,620 tonnes. In January 2021, Kenya imported 450,000 bags of maize from both Uganda and Tanzania, and another 300,000 bags in February. Then it pulled the plug, banning maize from Uganda and Tanzania in March, saying it was infested with aflatoxin, a poisonous compound produced by moulds.
Kampala retaliated, imposing tariffs on Kenyan goods like juices and roofing materials.
Nairobi has since lifted the ban on Ugandan maize but uncertainty surrounds the fate of milk and poultry products. Late October, Uganda found an alternative market for their dairy products in Zambia.
This week, Ugandan poultry farmers and traders petitioned their government seeking its intervention to help access the Kenyan market. Kenya is Uganda’s biggest market for poultry products, given the variation in the consumption per capita of eggs between the two countries. An average Kenyan eats between 55 to 68 eggs per year while a Ugandan consumes just 17 eggs.
For Kampala, the escalation of the trade tiffs with Nairobi and Kigali is bound to hurt the economy. The Bank of Uganda says the ban will see the country lose at least $121 million.
But Kenya’s economy too is set to lose, as Uganda is now giving more import business to Dar. Rwanda, which used to import goods through Uganda on the Northern Corridor from the port of Mombasa, is increasingly using the Dar port, especially for the import of petroleum products.
And as the political climate hots up in the run up to next year’s August elections in Kenya, more importers are likely to shun Mombasa port. Many still recall the 2007/8 post-election chaos that caused the damage of goods destined for Uganda and Rwanda.
The aggrieved businesses went to court and were awarded some $63 million, which they are yet to receive. Mr Weru admits that ongoing talks with Tanzania will tilt the balance of trade with Uganda in Tanzania’s favour. “At the moment, Tanzania is gaining at someone else’s expense. If you look at the trade figures, there are more products from Tanzania entering the Kenyan market, compared with Uganda in recent times,” said Mr Weru.
Tanzanian traders are reaping the spoils of the war Uganda has with its neighbours. In the third quarter of 2021, Tanzanian exports to Rwanda grew to 66.37 percent of the total $228.41 million from the EAC, from the 61.18 percent recorded in the third quarter of 2020, according to data from the Rwanda Institute of Statistics released last week.
The volume of goods from Kenya, which is the second biggest exporter to the Rwandan market, shrank 33.44 percent to $76.39 million in the third quarter of this year, from 38.82 percent registered in the same period in 2020.