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Stoking the fires of trade cordiality

Kenya’s exports to Tanzania rose by nearly a third in the first five months of the year, giving a clear indication of the warming up of relations that had threatened to derail trade between the two nations. Latest data from the Kenya National Bureau of Statistics (KNBS) show a 28.6 per cent growth in the goods valued at US$ 100 million that Tanzania imported from Kenya between January and May this year compared to a similar period in 2017.
Trade relations between the two East African Community (EAC) countries had been going south in recent years following the enforcement of a raft of tariff and non-tariff barriers. The long-running dispute had pushed Kenya’s exports to Tanzania to a 10-year low in 2017. However, the two countries recently announced the end of the trade disputes. The announcement came on the back of bilateral meetings between the two countries’ ministry of trade officials that took place in Dar es Salaam on the behest of President John Magufuli of Tanzania and his Kenyan counterpart, Uhuru Kenyatta.
More recently, Tanzania and Uganda had denied duty-free market access for Kenyan-made confectionery, juice, ice cream and chewing gum. This followed suspicion by officials from the respective countries that Kenya was using zero-rated industrial sugar which enjoyed tax incentives thus slanting competition in favour of Kenyan goods.
A communique signed between the two countries called for an “effective and timely implementation of agreements made during bilateral meetings with a view to easing the flow of goods and services”.
This would pave the way for Kenya to sell goods such as textiles, which had been locked out of the preferential access by Tanzanian authorities. Kenya’s textile products, produced at the Export Promotion Zones (EPZs) were particularly denied privileged access to the Tanzanian market, with Dar es Salaam moving to protect its own local textile market. Officials in Dar es Salaam had argued that the action by Nairobi to allow manufacturers at the EPZs to sell textile products locally had made it difficult for similar goods from Tanzania to compete in the Kenyan market. Firms at Kenya’s EPZ are allowed to sell up to 20 per cent of their finished products in the local market. Because of the various incentives, such as tax breaks which these firms enjoy, they are able to sell their products more cheaply in the market, undercutting competitors that do not enjoy similar treatment.
Tanzania has traditionally been Kenya’s second largest market in the EAC after Uganda. Kenya sells a variety of products such as soap, textiles, palm oil, medical drugs, cooking fats, iron sheets, sugar confectionery, margarine, cigars, and milk among others to Tanzania. On her part, Tanzania sells mostly agricultural goods such as maize, wheat, onions, among others, to Kenya.
Some of the other large trading partners of Kenya include Pakistan, Netherlands, the UK and the US. Kenya sells mostly cut-flowers or semi-processed agricultural produce such as coffee and tea to these countries while importing mostly industrial and capital goods such as steel, construction machinery, and lubricants among others.
In the clearest signal that the two neighbours are keen on casting their trade differences completely aside, immigration chiefs from the two sides plan to meet to resolve issues at border crossing points. Senior officials from the two sides will also jointly tour LungaLunga, Isebania and Namanga, to acquaint themselves with the flow of trade at these border points.
Revenue authorities from the two nations will also resolve challenges on the electronic Cargo Tracking system for Tanzanian cargo trucks.The resolution comes as a major relief to Kenyan manufacturers, whose sales have been hurt by the trade disputes. When the EAC Common Market Protocol came into effect in July 2010, Kenya’s export volumes to Tanzania rose to a record US$383 million (at current exchange rates in about a year). Several trade disputes in recent years had, however, seen the value and volume of exports decline to levels before the EAC trade deal was ratified.