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How Sugar Soured Trade Ties Between Uganda and Kenya

Meeting in Kampala, regional sector and tax officials close to resolving standoff

Uganda and Kenya have agreed to lift a ban on cross-border sugar trade, ending a two-year standoff that has threatened to sour bilateral commercial ties. Uganda Revenue Authority Customs Commissioner Richard Kamajugo said last week that sugar dealers could now apply for licences and start exporting to Kenya.

“We have agreed that partner states should stop importing sugar from outside East Africa,” Kamajugo said at a meeting at Serena hotel, attended by officials from Kenya Revenue Authority, Kenya Sugar Board, URA, Uganda Sugar Manufacturers Association (USMA), and Rwanda Revenue Authority.

It all started in 2011, when Uganda was experiencing an acute sugar shortage. Kampala was then allowed to import duty-free sugar to cover up the gulf. Kenyans say Uganda took the chance with two hands, importing more than it needed. A few months later, Ugandans repackaged that sugar to export it to Kenya duty-free, citing the 2010 East African common market protocol, which allows free movement of goods and labour within the region.

Kenya blocked the sugar, saying it should attract a 100 per cent levy. At the meeting last week, Kenyan authorities told Uganda bluntly that they did not trust sugar from here. Beatrice Memo, the KRA commissioner for Customs, told reporters that they wanted to be sure that sugar exported to Kenya was genuinely from Uganda.

“Maybe [there is] mistrust. A lot of sugar comes from outside the region to Uganda and you export that sugar again,” Memo said.

She wondered why, at a time when Uganda was facing a sugar deficit, some Ugandans sought to export sugar. Today in Uganda, sugar producers are reeling with limited market because of the Kenya ban and the conflict in South Sudan.

Surplus production:

Annually, Uganda produces 462,500 tonnes yet the country can only consume 300,000 tonnes, according to Jim Kabeho, the USMA chairperson. Sugar prices here have fallen sharply due to surplus production. A kilo now goes for as low as Shs 2300, compared to as much as Shs 6,000 at the peak of the shortage.

An official from Kinyara Sugar told the meeting that his company alone had about 50,000 tonnes in the store with no market. Sugar trade between Uganda and Kenya has for long been a thorny issue in the relations between the two East African Community members.

Kenya says because sugar from Uganda goes there cheaply, it imposes undue competition on the local producers.

“At one moment you say you have a deficit. But soon after you start exporting we have the reason to question and satisfy ourselves,” said Rosemary Mkok, CEO of the Kenya Sugar Board (KSB).

Uganda, she said, needed a body like KSB, which would issue exporters certificates showing that it’s really sugar from Ugandan factories at Kakira, Kinyara, or Lugazi entering Kenya. Otherwise, it will be hard for Kenya to believe Ugandan traders.

But can this meeting’s resolutions hold?

Kassim Omar, the vice chairperson of the National Monitoring Committee for the Non-Tariff Barriers, told The Observer that there was more to the problem than was being publicly discussed.

“The formation of cartels by very big corporations supported by their governments has had a big impact on the sugar industry,” Omar said. “Kenya’s allegations are based on wrong information. It’s a question of syndicates within the business community to block the other party from trading.”

Nairobi refutes Omar’s claim, with officials insistent on the lack of sector regulator as the major problem. Kenya produces more sugar than Uganda – 600,000 tonnes annually – but not enough for its market. It has been importing sugar from Comesa countries.

“If someone decides to get sugar from somewhere else at a cost two times more than they would have used in Uganda, know there is something sinister,” said Omar, who also heads the Uganda Freight Forwarders Association.

Not new:

Such trade wrangles between Uganda and Kenya are not unprecedented. In 2012, more than 1,200 bags of sugar belonging to Minister Kahinda Otafiire were destroyed at Mombasa port. Kenya accused him of using packages of a local producer there in a cover-up to dump sugar in their country.

Earlier in 2008, Kenya blocked imports of Ugandan day-old chicks and chicken products claiming they were not up to their standards. Uganda responded by refusing to lift the ban on the importation of beef, bull semen and other associated products from Kenya.

Some observers argue that such trade disputes are bound to happen anywhere in cross-border trade. Isaac Shinyekwa, a research fellow on Integration at the Makerere-based Economic Policy Research Centre (EPRC), cited the European Union, a fairly-developed common market. There are still disagreements. He is optimistic Uganda and Kenya will finally find a way out.

For now, sheer mistrust, unnecessary regulations, and efforts to protect their own among the EAC partner states will continue to marsh down the sugar sector and sour trade ties.

Source : The Observer

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