Protectionism hurting Uganda-Kenya trade, says Rwabwogo

Just last week, Kenya instituted a ban on sugar imports, which is expected to seriously impact the Uganda sugar sector. 

“The laws are very clear, but in actual trading, we have push-and-pull and push back, because each country is trying to protect its jobs,” Mr Rwabwogo told Kenya’s Business Daily in an interview, noting: “It’s not a conflict - it is political constituencies that are entrenched in each of our countries that often interfere with good decision-making.”

Kenya and Uganda’s trade relations have frayed over the past five years amid a wave of disputes over products ranging from dairy to diesel.

Data from the Ministry of Finance indicates that Kenya is Uganda’s largest export destination, accounting for an average of 32 percent of Uganda’s total exports within East Africa.

On the other hand, Uganda’s imports from Kenya average at about 42 percent. Tanzania has in recent years leapfrogged Kenya as Uganda’s largest import source in East Africa.

However, Uganda trades at a monthly deficit of $9.17m (Shs34b) with Kenya. Data from Kenya National Bureau of Statistics shows that Nairobi shipped goods worth Shs953.6b to Kampala in the three months to March. 

But the value of exports to Kenya from Uganda through formal routes fell to Shs27.8b in the three months to March, from Shs30.5b a year earlier, according to trade data from Kenya National Bureau of Statistics.

“When you put tariffs on food in Uganda, you cause a lot of problems,” Mr Rwabwogo said, noting: “If you say ‘I cannot supply you milk,’ but then your consumers are paying 30 percent more, they will begin to smuggle that milk. It’s not good economics.”

Therefore, he said, there should be cooperation on food supply chains, but noted that it's not as simple as joint development in clear cases where one country produces goods more cheaply than another, citing the case of where Uganda grows maize much more cheaply compared to Kenya.

“We could process maize jointly and have feed for animals. Feeding animals will mean cheaper milk produced in Kenya. But why do you want cheap milk in Kenya when Uganda has two rainy seasons and can give you cheaper milk? Now our production capabilities have grown in Uganda, I expect pushback,” he said.

Mr Rwabwogo also took issue with Kenya's move in July to double the bond fee for imported fuel consignments destined for Kampala via the port of Mombasa, which is hampering Uganda's direct fuel import scheme, saying this was another non-tariff barrier that prolongs Uganda’s ability to stand alone on fuel imports.

He also urged business leaders to take a more prominent role in trade, including the East African Business Council, which should take a stronger stance on non-tariff barriers.

“Stop fearing each other or suspiciously treating each other … have a genuine conversation about what the future looks like. Because if you don’t, there are larger companies that will come and have you for a pittance,” he said.

Exporting raw materials 

Mr Rwabwogo is also encouraging Uganda and Kenya to work together to stop exporting raw materials such as iron and copper and to invest in on-shoring regional processing capacity to produce things like steel and electrical cables and upscale East African industry.

“We are not using [trade cooperation] tools. We are taking knee-jerk reactions, nationalistic and we are not looking at the bigger market of East Africa. There is no alternative to trading with each other because if we don't these markets become supermarkets of those with better productive capabilities.”