Kenya, Uganda Locked in New Sugar Trade Dispute

Sugar cane (file photo)

3 SEPTEMBER 2021

The Monitor (Kampala)

By Gerald Andae

Uganda has protested a 79 percent cut on its scheduled sugar exports to Kenya, reigniting trade disputes between the two East African Community states.

Agriculture Minister Frank Tumwebaze said Thursday Uganda was "not happy" with restrictions on its sugar exports to Kenya.

"We need an honest conversation about these trade restrictions from your side," he said in a tweet addressed to his Kenyan counterpart, Peter Munya.

Mr Tumwebaze was reacting to a notice by the Sugar Directorate in Nairobi that traders will only be allowed to import 18,923 tonnes of sugar from Uganda, down from 90,000 tonnes that Kenya had earlier said would be shipped in from its landlocked neighbour.

Kenya's Trade Cabinet Secretary Betty Maina and her Ugandan counterpart had in April this year agreed that Uganda would export 90,000 tonnes of sugar to Kenya as soon as the verification mission on the country of origin was completed.

A deal between the two countries allowed Uganda to export surplus sugar into the country three years ago. But Nairobi delayed the implementation until late last year when the neighbouring state was allowed to ship in 20,000 tonnes of the 90,000 tonnes surplus that it had requested.

The change of plans by Kenyan authorities have rubbed their Ugandan counterparts the wrong way amid threats of retaliatory action.

"Kenya imports about 450,000 tonnes of sugar. If your sugar board (trade police) allowed Uganda to export to Kenya its 150,000 tonnes still your sugar import demand would remain unmet. So nothing explains the restrictions on Uganda," Mr Tumwebaze said.

"Should we also start a board to restrict or give permits to Kenyan margarine and plastics? Yes, we could check on their standards too!"

The two countries struck a deal in April to resolve the persistent trade dispute between them following a seven-day visit by Kenyan officials led by Ms Maina to Kampala.

In addition to discussing non-tariff barriers (NTBs) affecting trade between the two countries, the Kenyan delegation sought assurances that the sugar exported to Kenya was wholly produced in Uganda.

Kenyan producers argue that the commodity coming from the landlocked neighbour originates from third party countries -- a claim Kampala denies.

Following the visit, the two nations signed a framework of trade co-operation and agreed that Kenya would import up to 90,000 metric tonnes of Ugandan sugar per year from July 1, 2021.

The officials also agreed to abolish a 35 percent excise duty on liquid petroleum gas cylinders manufactured in Uganda.

"Kenyan authorities would immediately implement the March 2019 Joint Ministerial Commission Decision that allowed Uganda to export to Kenya, duty-free, 90,000 metric tonnes of wholly originating sugar annually," a joint communique issued after the meetings read in part.

The deal was uplifting for Ugandan sugar exporters who had previously been restricted to 11,000 metric tonnes per year allocated by the Common Market for Eastern and Southern Africa (Comesa) Council of Ministers.

Official data shows that Uganda produces about 510,000 tonnes of sugar annually, of which about 360,000 are consumed locally and the rest offered to the regional export market.

In reciprocation to Kenya's concessions, Uganda committed to abolishing a 13 percent excise duty on Kenyan-manufactured juices, malted beers, and spirits with effect from July 1, 2021 and scrapping a 12 percent verification fee on pharmaceuticals manufactured in Kenya.

Uganda had introduced discriminative excise duties under the Excise Duty Amendment Act 2017. As part of the pact in April, Kampala also committed to abolishing the 20 percent excise duty on furniture and 18 percent value-added tax (VAT) on exercise books manufactured in Kenya with effect from July 1.

Additionally, Uganda undertook to abolish the 18 percent VAT charged on processed poultry meat exported from Kenya and zero-rate drugs manufactured in Kenya with effect from July 1.

Despite these pledges, both countries have reneged on implementing some of them--triggering intermittent disputes such as the latest one on sugar trade.