Geza Ulole
JF-Expert Member
- Oct 31, 2009
- 59,208
- 79,447
Why Tanzania, Kenya trade ties blow hot and cold
The price of Tanzania’s onions imported by Kenyan traders keep shifting. It increased from Sh108 per kilo in February this year to Sh118 in April due to logistical challenges posed by coronavirus testing at the Kenya-Tanzania borders.
When President Kenyatta ordered the closure of the border except for cargo vehicles in May, and Tanzania retaliated by banning all cargo trucks, the price shot up to Sh150.
The volatile onion prices mirror the erratic relations between the two countries.
The challenges faced by onion traders are also representative of the woes businesses have to grapple with whenever there is a misunderstanding between the two countries, whose sibling rivalry is always never far from the surface.
ESCALATED DISPUTE
The question then is how does the trade between the countries look like? Who stands to lose more in case of an escalated dispute?
Tanzania has a nearly balanced trade with Kenya, importing goods worth Sh23.3 billion in 2017, while exporting goods worth 23.7 billion.
However, trade between the two countries has been on a downward trend since 2014 when Kenyan exports to Tanzania stood at Sh64.7 billion and in 2015 when imports from Tanzania peaked at Sh79.4 billion.
This decline tells of simmering differences and political grandstanding between the administrations in Nairobi and Dar es Salaam that has resulted in cold war policies that have made it difficult to do business across East Africa’s big economies.
DOWN MEMORY LANE
The uneasy ties between Nairobi and Dar did not start yesterday. It goes back to when the two countries had just attained independence from the colonialists.
It was the closure of borders between Tanzania and Kenya in 1977 that finally killed the decade-old East Africa Community. The threats of border closures, seizing goods and discrimination have continued to date.
When EAC was revived in 2000 trade slowly began to pick up between the two countries. Kenya’s annual exports grew from Sh10.7 billion in 2002 to Sh64.7 billion in 2014 while imports grew from Sh3.5 billion to Sh79.4 billion in 2015.
However, with new administrations in Nairobi in 2013 and in Dar es Salaam in 2015, trade plunged to a decade low.
Kenya’s isolationist policy of courting Rwanda and Uganda to the Standard Gauge Railway through “the coalition of the willing” was viewed as a geopolitical move against Tanzania.
However, as the coalition of the willing collapsed, Tanzania scored its own geopolitical wins by convincing Kigali to link with Dar’s SGR and Kampala to route the East Africa Crude Oil Pipeline through the country.
Tanzania also differed over the Economic Partnership Agreement that almost blocked Kenya from the European market and was only allowed access under special arrangements with EU countries.
DIPLOMATIC ROW
Traders from both countries have raised issues including lack of preferential treatment on Kenyan textiles, edible oil, cement and lubricants with growing administrative barriers that have cropped up to slow bilateral trade.
Relations also soured when Kenyan milk products were greatly affected by the trade wars that saw the value of export to Tanzania drop by 79 per cent between 2014 and 2016.
In 2017, Kenyan millers strongly opposed the government’s move to allow Tanzanian firms to bring in wheat flour duty-free.
It was only in 2018 during the summit of EAC heads of State that President Kenyatta and President John Magufuli acknowledged the gravity of the problems and agreed to resolve them through their respective ministries.
But the frosty relations resurfaced when Kenya’s Starehe Member of Parliament Charles Njagua made xenophobic statements against Ugandans and Tanzanians doing business in Nairobi threatening to storm their businesses. This sparked a diplomatic row.
CORDIAL RELATIONSHIPS
The see-sawing relations then seemed to thaw with President Kenyatta’s private visit to Chato, the home of Tanzania’s president John Magufuli in July last year.
It was thought that with the two heads of State cultivating personal cordial relationships, the bilateral ties would be recalibrated in a way that small disputes would not arise and muddy trade between the two countries.
However the latest tiff over coronavirus means that the uneasy relations between the two countries persist, with same old issues still simmering beneath the veneer of calm and display of brotherliness.
Mr Sallu Johnson, a regional expert on customs and logistics, told Smart Company that politics tends to get in the way of bilateral ties, with businesses bearing the brunt of any diplomatic tiff.
He said that although there are agreements among, for instance, the buyers, sellers and transporters of onions, which specify who bears liability for the goods in transit, the contract does not deal with such an occurrence as the border closure.
LOGISTICAL NIGHTMARE
“Borders are meant to be transit points, not interchange terminals. A political order that goods should be offloaded and changed creates a logistical nightmare,” Mr Johnson said.
“As a transporter ferrying the onions, you’re aware that it starts deteriorating as soon as it leaves the farm and any further delay reduces the quality, and you may end up selling them in Mombasa at a throw-away price so you do not incur a huge loss,” he said.
The Kenya Association of Manufacturers (KAM) says the current row, which appeared to have been resolved following the Kenyatta-Magufuli intervention, is only a tip of the iceberg.
Long standing issues, especially Tanzania’s continuous increase of internal taxes as measures to protect their own industries, have stifled investments and market access for locally manufactured products.
“Tanzania has continued to increase taxes on Kenyan products. Whilst this is aimed at protecting Tanzania’s industries, the measures are discriminative, and [this] goes against the EAC Customs protocols,” KAM chief executive Phyllis Wakiaga said.
KAM said that Tanzania has imposed excise duty (80 per cent higher) on Kenyan cigarettes despite tobacco raw material being fully sourced from Kenya since 2005.
EAC LAWS
“The non-tariff barriers (NTB) on cigarettes presents a significant excise/pricing disadvantage. This is contradictory to Article 15 (National Treatment) of Protocol on Establishment of the EAC Customs Union, which is categorically against discrimination on the same or like products of other Partner States.
“In addition, Article 8 of the Treaty Establishing the East Africa Community provides that, the EAC laws take precedence over similar national laws on matters pertaining to the implementation of the treaty,” Ms Wakiaga points out.
Through Animal Diseases (Animal and Animal Products Movement Control) amendment, Tanzania has also imposed import and export fees on beef and beef products.
This has increased levies to Tsh4,800 per kilo of meat (from Ksh200 to Kh500) and Tsh1,800 per kilo for milk against the spirit of the EAC where Tanzania (a partner State) is required to accord equal treatment to products from Kenya.
Subsequently, this has negatively affected Kenya beef and beef products into Tanzania.
Tanzania Revenue Authority (TRA) has not been issuing assessment for confectionery until Atomic Energy Certificate is attached in the TRA system.
This implies that samples have to be provided by an agent/client to the Tanzania Bureau of Standards in Arusha and a fee of 0.4 per cent of invoice value paid.
A new requirement from the Government Chemists and Lab Allied (GLCA) is that all transporters of chemicals must have this licence to transport chemicals into Tanzania that cost approximately $2 per metric tonnes.
Tanzania is also subjecting 1 per cent of the invoice value of transfer of roasted coffee products from Kenya into Tanzania. This is mainly done by the Tanzania Coffee Board, which increases the cost of the Kenyan product in Tanzania.
But while Nairobi blames Dar for most of the anti-trade practices, in some cases Kenyan companies have not helped in creating confidence.
Closures of Nakumatt and Uchumi supermarkets without paying Tanzanian suppliers has been raised in diplomatic round tables as some of the issues derailing relations.
MY TAKE: Media houses should be balanced when reporting a trade dispute, Kenya has also blocked the following Tanzania's manufactured goods!
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Local glass manufacturer, Kioo Limited likely to trigger Dar, Nairobi
27May 2020
The Guardian Reporter
IN contravention of East African Community’s free market protocol, Kenyan authorities have imposed a 25 percent excise duty on Kioo Limited’s glass exports to the country.
In a statement released yesterday, Kioo Limited it has raised the issues with the relevant ministries in the country but has also approached East African Court Justice to urgently intervene as the tax imposed is a clear violation of the EAC’s Customs Union Protocol.
Kenya recently enacted the Business Laws (Amendment) Act, 2020 which amended the Excise Duty Act of 2015 by imposing the new tax on imported glass bottles (excluding glass bottles for packaging pharmaceutical products) at a rate of 25 percent with effect from March 18, 2020.
“Under the Excise Duty Act, there are no exemptions granted to goods imported into Kenya from East African Community partner states and the new excise duty rate of 25 percent will therefore apply to glass bottles imported into Kenya from Tanzania,” the Dar es Salaam based company said in its statement.
The company further added that the amendment will result in an increase in the cost of imported glass bottles compared to those which are locally manufactured in Kenya hence impose a tariff barrier.
“The integration pillars of the East African Community include, the establishment of a Customs Union and a Common Market. Articles 75 and 76 of the Establishment of the East African Community Treaty, respectively provided for establishment of the Customs Union and Common Market,” said the statement.
The company explained that under the Customs Union Protocol, member states commit to deepen and strengthen trade among themselves hence agreed to eliminate internal tariffs and other charges of equivalent effect as well as eliminated non-tariff barriers to boost intra-regional trade.
The statement added that the Customs Union Protocol on the establishment of the East African Community Common Market is aimed at accelerating economic growth and development by providing for free movement of goods, labour, services, capital and the right of establishment within the EAC bloc.
“Kenya’s recent actions with respect to the excise duty on glass from Tanzania contravene the provisions of the EAC Treaty. Kenya is an important market of glass and glass products manufactured by Kioo,” the company lamented.
It also said that this will affect Kenyan glass purchasers as they will have to rely only on glass produced within Kenya adding that there are two glass producers in Kenya and they, together, cannot meet the total domestic demand but also do not currently have the capability to supply the technology that Kioo offers.
It said that Tanzania and Kenya have more or less the same cost structures and market potential because while Tanzania has local gas available, Kenya has local soda ash both of which are major cost drivers in the business and almost neutralize the advantage to both countries.
“During current Covid 19 outbreak when markets are already badly affected, this has come as a body blow to Kioo Limited,” the statement noted saying the company converts locally available materials into value added finished product as championed by President John Magufuli’s industrialization drive.
Kioo is one of the largest manufacturers of container glass for the soft drinks, beverage, beer, liquor and food industry in the EAC bloc with the most modern and technically capable plant which offers best quality, light weight and cost reduction opportunities to customers.
The statement went on that Kioo has invested significantly over the years to enhance the capabilities of the plant and it employs over 600 people in direct employment and many more indirectly that support the business. It elaborated that currently, the plant has a capacity to produce about 400 tons of glass per day and it exports almost 60 percent of its products after meeting local demand.
Dar ethanol ban to boost local demand in rush for sanitisers
Demand for locally produced ethanol is set to rise after Tanzania banned all exports to Kenya to facilitate manufacture of sanitisers and disinfectants.
The ban imposed last week by Trade minister Innocent Bashungwa follows growing demand in the neigbouring country.
Ethanol is a key ingredient in manufacture of the two products that will help in the fight against the coronavirus pandemic.
"Ethanol producers should also increase production to meet local demand for raw materials used in making sanitisers," he said in a statement.
Tanzania has been a major source of ethanol for Kenya's spirits and bio-ethanol manufacturers, spawning rampant smuggling to evade steep taxation.
Unscrupulous importers have also been using Tanzania as a smuggling route for Kenyan-made ethanol that is 'exported' to Tanzania and 'imported' by Kenyans at zero-rated terms.
Last week listed sugar miller Mumias announced plans to distil ethanol for local use to boost its income revenues.
In Kenya, all dealings in ethanol have been decriminalised to allow free movement from local processors to sanitiser makers.
Spectre International, Mumias Sugar Company and Muhoroni-based Agro Chemicals are the main ethanol producers who source molasses from Muhoroni, Miwani, Kibos, Chemilil, Sony, Soin, Mumias, West Kenya, Butali, Transmara and Nzoia sugar companies.
Ethanol’s use as a cooking fuel is also on the rise, thanks to the logging ban now in its third year.
The ban has seen Kenyans embrace use of cooking gas and bioethanol stoves away from the traditional charcoal-based fuel. Spectre, associated with the Odinga family, produces 30 million litres of ethanol, Agro Chemicals (18 million) and Mumias 16 million annually.
Kenya has scrambled to boost ethanol supply including ordering release of stocks held by law enforcers as the crisis mounted.
Dar ethanol ban to boost local demand in rush for sanitisers.
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Tanzania raises concern over Kenyan ban on cooking gas imports
THURSDAY, JUNE 29, 2017 14:37
A Kenyan ferries an assortment of cooking gas cylinders, February 21, 2016. The Tanzanian government has expressed concern over Nairobi’s refusal to allow cooking gas imports through Tanzania land borders. FILE PHOTO | NMG
The Tanzanian government has expressed concern over Nairobi’s refusal to allow Tanzanian exporters to transport cooking gas to Kenya through Kenya-Tanzania land borders.
Industry, Trade and Investment Permanent Secretary Prof Adolf Mkenda, in a statement on Thursday, said Tanzania had only learnt of the ban through the Kenyan media.
He said Kenya’s decision was against East Africa Community (EAC) protocol and had breached an agreement reached between the two countries after Kenya imposed a ban on importation of cooking gas from Tanzania on May 18, 2017.
Prof Mkenda said Kenya’s decision had affected businesses and ordinary citizens who earn their living through cooking gas trade.
He noted that the issue had featured during an EAC sectorial meeting in early June that brought together ministers of trade, industry, finance and investments from EAC member states.
He said the June 2, 2017 meeting reached a decision that Kenya should lift the ban in adherence to the EAC protocol.
“During the meeting, Kenya agreed to lift the ban on importation of cooking gas and wheat through Tanzania-Kenya borders,” he said.
“However, it is with great disappointment that we have learnt through the Kenyan press that Kenya government has continued to implement the ban,” Prof Mkenda added
He said he has already registered complaints by the Tanzanian government on the matter through his Kenyan counterpart
Wheat ban
Besides imposing a ban on importation of cooking gas through the two countries’ borders, Kenya has imposed a ban on importation of wheat, which, according to Prof Mkenda, is against EAC trade regulations.
He said that following Kenya’s decision, the Tanzanian government would continue to take measures to ameliorate the situation. However, the PS didn’t elaborate what measures have been taken so far.
Asked to elaborate, Prof Mkenda said in a telephone interview with The Citizen that it was too early to reveal the measures that have been taken by the government in the wake of Kenya’s decision.
He, however, reaffirmed that Tanzania would continue to adhere to EAC protocol.
“We will continue to strengthen trade relations between us and other EAC member states…we still believe Kenya is one of our key partners when it comes to trade in the EAC bloc,” Prof Mkenda said in the statement, adding:
“We believe that decisions which are made in the official meetings between EAC member states must be implemented by concerned parties.”
Price surge
The decision by Kenya’s Energy ministry raised the possibility of a shortage of cooking gas and a surge in the prices of the commodity.
On April 24, Kenya's Principal Secretary Andrew Kamau announced the ban on gas imports through Tanzania, a move meant to eliminate illegal cooking gas filling plants that posed safety and security risks.
“The Cabinet Secretary has written a letter to Energy Regulatory Commissions, Customs and Kenya Bureau of Standards and designated Mombasa as the only point of import for LPG. So if you want to play in this game, come and invest in Kenya, import through Mombasa and then we can now follow up who is supplying unlicensed dealers. But now this whole thing about Tanzania is a thing of the past,” Mr Kamau then said at a briefing for oil marketing companies.
Mr Kamau later confirmed that the full implementation would begin by the end of the month.
Dar 'concerned' over Kenya ban on TZ gas imports
