Trade experts slam Kenya-Uganda sugar deal feud

The first-ever East African manufacturing business summit closed yesterday in Kampala with participants urging partner states to recommit themselves to the customs union and avoid protectionism in order to allow for free trade and fair competition to prevail in the region.
Workers at Kabuye Sugar Factory package sugar. A recent deal allowing Ugandan surplus sugar to access the Kenyan market has sparked off a row in the two EAC nations. (File)
Workers at Kabuye Sugar Factory package sugar. A recent deal allowing Ugandan surplus sugar to access the Kenyan market has sparked off a row in the two EAC nations. (File)

The first-ever East African manufacturing business summit closed yesterday in Kampala with participants urging partner states to recommit themselves to the customs union and avoid protectionism in order to allow for free trade and fair competition to prevail in the region.

Speaking at the two-day summit, Dr Mukisa Kituyi, the secretary general of United Nations Conference on Trade and Development (UNCTAD), said the current hullabaloo in Kenya over Ugandan sugar exports is a symptom of an inefficient EAC customs union authority.

“If there was an efficient and properly working customs union authority there would be no notion of exporting from Uganda to Kenya because you would not call that exporting,” he said.

Early last month, presidents Uhuru Kenyatta and Yoweri Museveni reportedly struck a deal allowing Ugandan surplus sugar to access the Kenyan market.

Although the deal also reportedly allows Kenyan dairy products to access the Ugandan market, the development was received with hostility by Kenyan opposition politicians lead by ex-prime minister Raila Odinga.

Odinga, who lost the presidential election to Kenyatta, insists that the deal, whose details have not been made public, will make Kenyan sugar uncompetitive, and he has since been rallying farmers to reject it.

Kenya and Uganda have since around 2010 had a longstanding conflict over sugar, culminating into a ban of Ugandan sugar exports in December 2012.

The ban was based on allegations that Uganda was abusing EAC customs union benefits by importing tariff-free sugar from outside the region and repacking it for export to Kenya duty-free, in process making huge profits at the cost of Kenya’s locally-made sugar.

Kenyatta’s government inherited the ban when he became President in 2013. In April 2015, Henry Okello Oryem, Uganda’s state minister for foreign affairs, announced that an agreement had been reached to lift the ban.

The ban removal, according to insiders, was conditional, requiring Ugandan sugar exports to undergo a tedious examination process to prove its origin, a process that would take weeks, according to claims by Ugandan traders.

If any, the deal last month could have been aimed at removing these conditionalities and allowing Ugandan sugar to circulate freely in Kenya in return for Kenyan dairy products to access the Ugandan market.

But angry Kenyan opposition leaders led by Odinga last weekend addressed a huge rally of Kenyan sugar farmers and made it clear that Ugandan sugar was not welcome to Kenya.

“We are not against trade with Uganda; they can bring in matooke (bananas), beautiful women or even long-horn cattle from Mbarara, but their sugar is not welcome,” an Odinga ally told the crowd of sugar farmers over the weekend.

During the same rally, Odinga warned Uganda President Museveni not to interfere in ‘Kenyan home affairs’, a remark that followed Museveni’s own, telling Odinga not to ‘waste our time’ by resisting Ugandan sugar.

On his part, President Uhuru has urged Odinga to detach politics from trade, adding that Kenya, which has an annual sugar deficit of over 100,000 metric tonnes, would rather buy Ugandan sugar than Brazilian sugar.

Misguided debate

In a televised interview in Uganda recently, EAC Secretary General Richard Sezibera said the debate on Ugandan sugar is a misguided one because both countries are bound by the East African customs union which Kenya, Tanzania and Uganda signed in March 2004.

Rwanda and Burundi joined the customs union four years later in 2008, and started applying its instruments in 2009. The customs union literally removed borders and allowed goods produced within the region to access markets in any of the five partner states without restriction.

According to Sezibera, there is no such a thing as Ugandan sugar, Kenyan beef or Rwandan chicken; instead, he pointed out that these are East African products that should be allowed to circulate freely.

“The customs union made EAC a single customs territory, which means any goods produced within the region should move freely, so Kenya has no right to block Ugandan sugar and Uganda should not block Kenyan beef,” said Sezibera.

According to Sezibera, there are no additional agreements needed to allow either Ugandan sugar or Kenyan beef to access markets in either countries because the customs union catered for that and created a common market for all players in the region.

“This debate is misguided and does not make sense; in fact, these are non-tariff-barriers (NTBs) and they should be removed to allow free flow of trade,” he said.

Sezibera also revealed that most EAC countries have a sugar deficit which home production cannot satisfy, adding that every year, countries apply to be allowed to import more sugar from outside the region.

No room for jingoism

Benjamin Gasamagera, the chairman of Rwanda’s Private Sector Federation, said countries like Kenya and Uganda that are the pioneers of the customs union should act as role models and stop playing protectionism politics against partner states.

“Otherwise, every country has something to protect, but that is a path we do not want to take; the path we need is one where we keep pushing to achieve what we signed up for and that’s a functional common market for all,” said Gasamagera.

Samuel Kasule, the commercial director at Cimerwa, Rwanda’s primary cement producer, would ideally be one of those with ‘something to protect’ after his firm recently unveiled a new plant with capacity to supply the home market and retain enough surplus for export.

But Kasule said investing in a new plant was aimed at improving their own efficiency to favourably compete with cheaper cement products from Uganda, Kenya and Tanzania.

“As Cimerwa, we know that we cannot run to our government asking them to block Hima or any other regional player; it is therefore, up to us to improve our efficiency to compete favourably and that is why we invested in a new plant,” he said.

According to Kasule, there will always be a cheaper product on the market, and so advises Rwandan producers to compete on quality not price, saying it is the only way of gaining a competitive edge over rivals.

“Generally, the Kenya-Uganda saga over sugar teaches us that there should be a fine balance between political rhetoric and business logic, otherwise, what we are seeing is the politics overriding trade,” he added.

Anti-NTB bill coming

Are the protectionist tendencies by individual partner states punishable under EAC laws? For instance, can Kenya be sued for blocking Uganda sugar?

According to Sezibera, that will soon be possible once heads of state append their signatures to the EAC Elimination of Non-Tariff Barriers Bill.

“I look forward to the heads of state assenting to the Bill which allows people to take to court countries that will have put in place NTBs,” said Sezibera.

In March this year, EALA passed the Bill, whose objective was to enforce Article 13 of the Protocol on the establishment of the EAC Customs Union in which partner states agreed to remove, with immediate effect, all existing NTBs.

Once passed by EAC heads of state, traders affected by NTBs would be free to seek legal redress in the East Africa Court of Justice.

The EAC secretariat says at least 85 per cent of previously identified NTBs have since been eliminated, but the remaining few are still making trade in the region costly and complicated.

editorial@newtimes.co.rw

 

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