Why I cheer loud when Kenya and Uganda fight over trade

Wednesday January 15 2020

By Charles Onyango-Obbo

Sections of the Kenya milk industry, and some politicians, are having beef with Ugandan milk.
According to Uganda and Kenya media, Kenya Anti-counterfeit Unit raided distributors’ warehouses in Meru, eastern Kenya, and confiscated up to 23 tonnes of milk powder, produced by Pearl Dairy in, wait for it, Mbarara, western Uganda.

Similar raids were carried out in Nairobi.

Those who have issues with Ugandan milk, claim it is flooding the Kenyan market and has led to the collapse of prices. Not able to believe that all this milk is coming from Uganda, last month after an uproar, including by MPs, Kenyan officials toured Uganda to check. Now Kenya are proposing to impose a 16 per cent Value Added Tax (VAT) on Ugandan milk. Not too long ago, Kenyan producers were up in arms over Ugandan tomatoes and eggs.

At the same time, Daily Monitor reported a squabble between Kampala and Nairobi over the 13 per cent Excise Duty imposed on Kenyan pharmaceuticals, beers and spirits by Uganda.

The Daily Monitor quotes a tax expert who spoke on condition of anonymity, who said; “Kenya should now understand that it is competing with Uganda in terms of trade, noting that it would be unfair for government to exempt taxes on imports that are manufactured here.

“We are now in competition. It is not like in the old days when we were importing everything from Kenya. They are beginning to feel the impact of the competition and they are now looking for all excuses to suffocate this competition,” he said.

In a reversal of fortune, at various points in recent times, Uganda has had a trade surplus with Kenya. Non-agricultural exports to Kenya are rising – as Kenya efficiencies and competitive advantages move into financial services, and technology.

When Kenyan friends ask me where all these Ugandan products that are disturbing Kenyan businesses are coming, I usually tell them; “Don’t fly to Uganda. Drive there, and note especially what’s happening on the sides of the highway from Jinja all the way to Kampala…part of Kenya’s industrial lunch is being eaten by the slew of companies that have sprung up along there over the last 15 years along that stretch”.

But this is bigger than that. Lato milk is processed not in Kampala or Namanve, but in Mbarara. And Meru, where it was seized, is a long way beyond Nairobi. Twenty years ago, this would not have happened.

So, what has changed? This column has told this story before. Two years ago, I flew to Kisumu, from where I rented a car to Tororo, and some days later to Kampala. The remarkable thing is that I never gave my Kenyan directions.

He knew parts of Uganda better than I did. He had been to some of the most far flung places, and taken all the panyas around Kampala, as he drove around collecting eggs, some of which he delivered as far as Mombasa.

Part of this has been made possible by the frenzy of “infrastructure politics”, as governments in East Africa and, indeed, most of Africa and the developing world, now rely on building railways, mega airports, dams, dual carriageways, and big bridges, for legitimacy in an age where good old-fashioned ideology is virtually dead.

It has opened up domestic and regional markets in ways that not all leaders and officials in the capitals have fully comprehended. In trading time, the distance between Mbarara and Meru today, is shorter than the distance between Kampala and Nairobi 20 years ago. They, therefore, get blindsided by what is happening with things like Lato milk.

There are many other factors at play, but one we must mention is what has happened to the East African Community (EAC). The EAC is frequently criticised as a failure, a view that is understandable if one is viewing it from a valley.

Consider that the modern EAC(I) that collapsed in 1977, was formally established in 1967. Versions of it had existed in the pre-independence period, as the East African High Commission (EAHC) from 1948 to 1961, the East African Common Services Organisation (EACSO) from 1961 to 1967.

The present EAC was officially re-established in 2000, but in reality, was informally functional from about 1995. In any event, it has now been around for 20 years, twice as long as EAC(I) or it is previous relatives.

Twenty years is a long time. These small trade scuffles between Kenya and Uganda, and with Tanzania, and with Rwanda, and with everyone else, are, actually, a good thing. They are the pay off on all on the millions of tonnes of metal and asphalt that have been laid in East Africa in the last 25 years, and the fruition of two decades of drip-drip integration.

Mr Onyango-Obbo is curator of the “Wall of Great Africans” and publisher of explainer site Roguechiefs.com.
Twitter: @cobbo3