Smuggling soars as East Africa’s economy wobbles

Specific goods such as cement, rice, soap, wheat flour and cooking oil, which cost less across the border, are some of the most trafficked goods into Uganda.

In March this year, Kenyan authorities closed nearly 200 illegal entry points on the Ugandan border that stretch from Lake Victoria in Majanji to River Malaba, which is a stretch of 57 kilometres. But the enforcement is notoriously fickle.

Smuggling remains a major source of livelihood for the border communities and is egged on by corrupt security personnel at both sides of the divide, which provides unofficial fees for customs officials and income for marginalised communities.

 “Children learn to smuggle early on in life. You start with one bag of cement and cross the border from Kenya with it. You can earn Shs3000 for this,” a smuggler, who preferred to speak anonymously, told this publication.

A day after economic protests swept across Nairobi and major towns in Kenya last week, the ripple effect spread towards the border town of Busia. Sofia, a shabby border outpost that lies at the parallels of the Uganda-Kenya border, remains one of the major smuggling routes.

How it is done

When we travelled there, brazen smuggling activities continued to thrive as trucks from Kenya heavily-loaded with rice, soap, wheat flour and other consumer goods lumbered across the dirt road to get to the Ugandan side.

The other smuggled consignment is trafficked piecemeal and concealed on the back of wheelchairs and boda bodas whose cyclists have to bribe law enforcement.

It can take hours for such a large consignment to cross the border into Uganda as a boda boda can carry as much as a tonne of sugar or cement in one trip.

The routes the smugglers rely on are part of the folklore here— passed on through story-telling to generations in a community that has depended on smuggling as far back as the pre-colonial times.

Once in Uganda, these goods are repackaged and sold at licensed shops. Some locals have blamed smuggling on tough import and export procedures, and rent seeking practices by customs officials.

Goods from outside the East African Customs Union attract import duty that is prohibitive for traders as Mr Godfrey Oundo, the Chairman of the National Association of Cross-Border Traders reveals.

 “They used to import wheat flour and officially pay taxes… but with an increase, it is encouraging people to evade it and more are going informal. If 10 trucks carrying wheat flour used to cross the border now, they are two or three trucks and the rest are informally crossing,” Mr Oundo says.

Mr Abel Kagumire, the Commissioner of Customs at the Uganda Revenue Authority (URA), says limited tax literacy among informal traders fuels smuggling.

 “We have had cases, especially on the eastern borders, of people dodging to pay taxes, thinking URA is going to charge them a lot of taxes. Goods, when they are wholly produced in our neighbouring countries such as Tanzania and Kenya, don’t pay tax. You don’t have to smuggle. Just come through the border, we shall clear you then you go to sell in the shop. You don’t have to go through the bushes, because when we catch you in the bushes smuggling and you don’t have a declaration from either Kenya or Tanzania, we will treat you as a smuggler,” Mr Kagumire says.

 As we trudge across one narrow path, the LC1 Chairman of the area points out houses belonging to local residents who were among the major smugglers from the informal cross-border trade at the peak of the economic crisis during Idi Amin’s era.

 When we finally arrive at the river bank, we encounter two youth who strip to the waist and hoist their goods onto their shoulders and wade neck deep into the river.

Another group of young men swim across rivers with contraband on their heads and backs. For this risky endeavour, they earn a paltry Shs500 per bag that crosses the river. These bags are later handed over to motorcyclists.

Upstream from Malaba is Lwakhakha, as the river at the centre of this informal trade gradually glides through these border towns. On the banks of the river lies Namisindwa District. Here, smuggling is coordinated through phones.

Locations are mapped and this information is shared and updated as orders for consignments from Kenya are received from Mbale and as far as Kampala, and payments are done over the phone through mobile money.

 As this illicit trade is carefully coordinated, informants hide in the shadows of these smuggling routes to provide security alerts to smugglers.

 When goods such as wheat flour, cement and cooking oil are ferried across the border from Kenya, transporters on the Ugandan side are alerted. Our guide, who preferred anonymity, is a second-generation smuggler who is among the transporters.

 At regular intervals, it is a common sight to see a boda boda cyclist speeding past with five bags of cement heading into a nearby town on the Ugandan side. The boda boda cyclist then drops off the smuggled goods at a non-descript location along the way where the goods are picked up or relayed by a vehicle.

Many emerging towns alongside the border sell this smuggled cement as a bag of cement goes for the equivalent of about Shs17,000 in Kenya.

The illicit trade, which is carefully calibrated ensures that goods are then free to move ‘undetected’ by law enforcement as the truck carrying contraband is able to move across several checkpoints.

 Most of the trafficked goods often end up in licensed shops. Smuggling is dominated by family-owned businesses, small scale enterprises, with a low-barrier to entry and uses labour intensive technology, according to a 2015 research study entitled, “Assessing the informal cross-border trade between Kenya and Uganda.” It is usually engendered by a market response to inefficiencies in the formal trade regime.

Ultimately what this boom in smuggling reveals is that it is a significant income source for households at a time of economic hardship and unemployment in both Kenya and Uganda.

Trade experts argue that as the economic downturn in Kenya unfolds, fuelling a surge in smuggling, it is critical to sensitise informal traders about their rights and to provide access to financing to formalise their operations, given the cost of enforcing the law far outweighs the benefits.

To make sense of the latest boom in the informal trade across the Kenya and Uganda border, statistics reveal that Uganda is one of Kenya’s main export markets on the continent.

Data from the Central Bank of Kenya indicates that in May 2023, Kenyan exports to Uganda were worth Shs276b, an increase from Shs255b recorded in April.

 Further, Uganda accounts for 34 percent of Kenyan imports from the African continent from January to March 2023. It is this mutual dependency that shows that if there are any disruptions in the Kenyan economy, the reverberations are felt across its land-locked neighbouring country.

 The post-pandemic economic recovery in Kenya has been disrupted by political upheaval and civil unrest owing to the rising cost of living.

The East African newspaper reported on July 1 that political unrest had caused anxiety among investors, leading to capital flight and panic selling of Kenyan shillings.

 Ugandan banks and forex dealers are not immune from the panic and have also sold Kenyan shillings. The falling demand for the Kenyan shilling has triggered its sharp depreciation recently. The Kenyan shilling trading at Shs27 currently was trading at Shs30 in June 2023.

 “If a Ugandan was buying a Kenyan shilling at Shs30 and he can now get the same shilling at Shs26, that means he needs less Ugandan shillings to buy the same products. So, this is driving informality and making people cross more,” Mr Oundo explains how the depreciation of the Kenyan shilling is driving a smuggling boom in Busia.

 These smuggling routes have also been used by criminal cartels to slip across borders to evade law enforcement after committing crimes such as murder and robberies in the respective countries.

Research

Most of the trafficked goods often end up in licensed shops. Smuggling is dominated by family-owned businesses, small scale enterprises, with a low-barrier to entry and uses labour intensive technology, according to a 2015 research study entitled, “Assessing the informal cross-border trade between Kenya and Uganda.” It is usually engendered by a market response to inefficiencies in the formal trade regime.

Ultimately what this boom in smuggling reveals is that it is a significant income source for households at a time of economic hardship and unemployment in both Kenya and Uganda.

Trade experts argue that as the economic downturn in Kenya unfolds, fuelling a surge in smuggling, it is critical to sensitise informal traders about their rights and to provide access to financing to formalise their operations, given the cost of enforcing the law far outweighs the benefits.

 To make sense of the latest boom in the informal trade across the Kenya and Uganda border, statistics reveal that Uganda is one of Kenya’s main export markets on the continent.

Data from the Central Bank of Kenya indicates that in May 2023, Kenyan exports to Uganda were worth Shs276b, an increase from Shs255b recorded in April.

Further, Uganda accounts for 34 percent of Kenyan imports from the African continent from January to March 2023. It is this mutual dependency that shows that if there are any disruptions in the Kenyan economy, the reverberations are felt across its land-locked neighbouring country.

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