The ascendency of William Ruto to the presidency of Kenya has raised speculation, and hope, among the people of the East African Community, for better trade and economic relations within the region. The business community will for long remember the troubles that they have faced dealing with the Kenyan authority over the last five years, the last term of office of President Uhuru Kenyatta.
Every trader, and in this case, a cross-border trader, wants to operate in a predictable environment, with a stable policy regime implemented to the dot. The absence of this has been the main shortcoming traders in the region face since the revival of the community 21 years ago. However, for Uganda, the impromptu bans on exports to the region’s largest and most advanced economy especially in the last five years even threatened change in government policies.
In 2020, the government of Uganda estimated that losses arising from the non-tariff barriers by Kenyan authorities amounted to 480 million dollars or about 1.7 trillion Shillings. These barriers are in the form of delayed border clearance of perishable goods which led to destruction, and an outright ban on sugar, dairy products, poultry products, and beef, among others.
Kenya has always claimed three main reasons for its actions. It accuses Uganda of exporting substandard products, especially milk, maize, and beef, not fit for human consumption. The country has also at other times accused Uganda of importing goods from other regions as far as Brazil, for sugar, and repackaging it as made in Uganda allegedly to avoid paying taxes.
Kenya has sent numerous delegations to Uganda to inspect the Ugandan factories and determine whether the country has enough capacity to produce in surplus or not. There has never been a report by any of the delegations to confirm or dispel their suspicions. The other reason that has been stated is that Uganda imposes high tariffs on Kenyan goods, in violation of the EAC tax regime.
In December 2021, the government of Uganda threatened to ban some Kenyan agricultural products from the Ugandan market in retaliation. At that time, there was a ban on sugar, eggs, and milk, specifically Lato Milk. The threat to ban Kenyan imports came just after Ugandan poultry farmers called on the government to reciprocate the actions of Nairobi.
President Yoweri Museveni has always maintained a soft stance on the Non-Tariff Barries-NTBs between Kenya preferring diplomacy as opposed to retaliation. He at one time said Uganda would never reciprocate but would continue talking with the other countries. This was markedly different from the approach taken by Tanzania, which usually responded with an immediate retaliation, and when Samia Suluhu Hassan became president, one of the first moves by Kenya was to agree to remove tariffs between the two countries.
In spite of the bans, Uganda’s trade with Kenya continued to grow. Uganda Manufacturers Association Executive Director Daniel Birungi said Kenya’s actions were out of fear of Uganda’s rapid growth in export production, adding that it was “being done with a view to discourage dealing in Uganda originating goods, especially poultry, milk, sugar.”
Ruto is a renowned businessman with businesses both in Kenya and across the region, with his biggest portfolio outside Kenya being in Uganda, according to reports, including in petroleum distribution and farming. According to Business Daily, the past decade under Kenyatta shows that Kenya’s balance of trade against EAC members has declined by 604 billion Shillings (19.1 billion Kenya Shillings), as traders looked at other options.
Trade with the region was saved from further decline when Tanzania had a change in the presidency last year. With the promising radical approach to policies he did not believe in, President Ruto has rekindled hope that his reign could be for the better, and stabilize trade relations. The immediate reversal of the directive that imports destined for Western Kenya and beyond to Uganda and other countries be cleared at Naivasha instead of Mombasa has caused excitement among Ugandans.
Ugandan traders led by Mukwano Industries petitioned the court in Kenya against the directive and it was yet to be determined at the Court of Appeal when Ruto reversed the directive. The Ugandan importers found it tedious and longer to operate through Naivasha and that it increased the cost of doing business, according to Kenneth Ayebare, the Uganda Cargo Consolidators Association chairman.
According to records, Uganda remains Kenya’s largest trade partner in the region, accounting for 44.2 percent of the country’s total trade volumes with the region last year.
Ayebare, who is also the Chief Executive Officer of Marine Time Cargo, says it is time for the government and the private sector leadership to take advantage of the market opportunities, expecting that the trade will be stable.
The East African Business Council (EABC), the apex body of the private sector in the EAC East African Community region, has expressed hope that the Ruto presidency will work for the promotion of trade, especially by putting in place the desired physical infrastructure.
This includes the extension of the Standard Gauge Railway, SGR, from Naivasha to the border at Malaba. Kenya has previously shown reluctance to complete the stretch, saying it would not be economically viable unless it was sure that Uganda would simultaneously build an SGR from Kampala to Malaba.
The Ugandan part of the project has been frustrated by the Chinese funder who stepped back, also unsure that Kenya might not complete her own project. Works and Transport Minister General Katumba Wamala said last week that they were looking at the legalities involved if they terminated the negotiations and found another willing funder so that they build the line.
“The East African Business Community acknowledges with gratitude President William Samoei Ruto’s profound determination to promote the role of the private sector as the engine for socio-economic growth in the EAC bloc. The business community is devoted to joining President Ruto’s vision and aspirations of realizing prosperity for all East African citizens through trade,” said John Bosco Kaliisa, the EABC Executive Director.
Former MP and economic commentator, Stephen Birahwa Mukitale that countries should stop nationalistic ideas when thinking of development and instead think of integrating all forms of development aspects. He says for example that Ruto should lead his counterparts to develop what he calls the Great Lakes Infrastructure/transportation system.
This, according to him, should include the railway connectivity projects, the Lake Victoria vessels, and the Lamu-Eldoret pipeline among others, taken as EAC projects. He says that this way, there will even be political will by all heads of state in the region. Mukitale says that the EAC countries are failing to attract big infrastructure investors like in the railway projects because they are not negotiating as a block, and prefer conducting transactions individually.