Bilateral deals could boost intra-EAC trade

Two recent bilateral trade deals, one unveiled early this week between Uganda and Kenya and the other, negotiated late last month between Rwanda and the Democratic Republic of Congo (DRC) have been lauded by experts as a step in the right direction towards deepening intra-regional trade. Kenya will once again start accepting sugar exports from Uganda, a deal signed by President Uhuru Kenyatta and his counterpart, Yoweri Museveni, during the former’s three-day state visit to Kampala. The announcement was received angrily by a section of the Kenyan public led by opposition leader Raila Odinga who described it as a ‘sour deal’ that will only flood the Kenyan market with cheap Ugandan sugar hence hurting local sugar manufacturers. Odinga told Kenya’s Daily Nation that: “This deal on sugar is sour. It comes at a time when Kenya’s leading sugar manufacturer, Mumias Sugar, is struggling to get back on its feet; sugarcane farmers across the country are also struggling as a result of lack of payments”. His remarks irked President Kenyatta who responded in a televised speech lambasting the opposition leader for opposing a deal that in the president’s view is good for intra-regional trade. “I would rather get cheap sugar from Uganda than Brazil. It’s only logical; we should work to strengthen our own in this region,” countered Kenyatta. Where Odinga sought to score a political point with Kenyans, Kenyatta chose to speak and sound like a regional statesman and he countered Odinga’s tackle with trade statistics that showed how Kenya’s balance of payment receipts surpassed those of Uganda. “Uganda imports US$700 million worth of products from Kenya, annually, yet they only export US$150 million to Kenya, in our small markets, we must look and think big for the benefit of our region,” said Kenyatta. President Uhuru’s remarks received a national round of applause in Uganda with many commentators saying his was the kind of spirit they needed for foster regional integration. According to 2014 data from the East African Community Secretariat, in 2013 alone, total intra-EAC export trade amounted to US$ 3.5 billion while the total imports amounted to US$ 2.3 billion,. Sweet Sugar has in the past triggered bitter relations between Kenya and Uganda with the former accusing Ugandan dealers of being dishonest, importing cheap sugar from outside the region and re-packaging it for export to Kenya, moreover duty free, under the Common Market Protocol. Regional business press place the genesis of the Kenya-Uganda sugar woes to 2011 when Uganda experienced a serious sugar shortage, a gap that they were allowed to fill with imports from outside the region. But it would soon emerge that Uganda had imported more sugar than it needed and when its own local production recovered, the country had a huge surplus most of which headed to Kenya; too cheap that it rendered Kenya’s locally made sugar noncompetitive on the market. In 2012, over 1,200 bags of sugar belonging to Minister Kahinda Otafiire were impounded and destroyed at Mombasa port after a successful legal suit by Kenya’s sugar guru, Mumias. That same year, Kenya slapped a ban on Ugandan sugar exports on suspicion that it was foreign sugar repackaged to look Ugandan. The alternative was to pay a 100 percent levy. With the new sugar deal in place, it is hoped that the trade rivalry will finally come to an end although the Kenyan opposition seems to be determined to halt it. Available statistics from both countries indicate that Uganda produces 462,500 tons of sugar annually against a consumption need of just 300,000 tons leaving them with a sizeable surplus for export. On the other hand, Kenya reportedly consumes 860,000 tons of sugar annually but produces just 650,000 tons leaving behind a deficit that not even Uganda’s surplus can adequately fill. Clearly, there’s room for trade. Inside Rwanda-DRC trade deal Quite often, there have been reports of bullets flying from the Congolese side of the border and landing onto the Rwandan side and in the process, this has done nothing but create an environment of insecurity and uncertainty. Yet beneath that insecurity is a multi-million dollar cross-border trade between Rwanda and Eastern Congo that has managed to thrive in spite of regular bouts of armed violence and un-harmonised trade facilitation regimes on either side of the customs offices. From July 22 to 24, negotiators from both countries met in Kigali to discuss these affairs and also agree on a list of commodities that shall be privileged under a new bilateral simplified trade regime. “We harmonised the list of commodities which now awaits the approval of the trade ministers of both countries,” said Peace Basemera, a trade expert with Rwanda’s Ministry of Trade and Industry. Basemera, who was on Rwanda’s negotiation team said a date for the Ministers’ meeting hasn’t been yet set but is expected to happen next month. DRC is Rwanda’s largest trade partner in the region but geo-political squabbles in the past have shadowed an otherwise lucrative trade relationship between the two countries. Customs’ statistics show that between 30,000 and 35,000 people cross the Goma-Rubavu border on a daily basis. The numbers could increase if trade was better facilitated. Due to a lack of a harmonised trade agreement between the two countries, Rwandan traders have in the past reportedly been harassed on Congolese territory and claims of rampant corruption are also rife. For instance, Rwanda has a customs facilitation procedure for goods worth Rwf500,000, approximately US$600. Such volumes don’t require a clearing agent. The threshold on the Congolese side of the border is placed on goods worth US$2500. At the end of the meeting, the negotiators agreed to fix the threshold at US$2000 applicable under the proposed Simplified Trade Regime (STR) between the two countries. The negotiators also agreed that the harmonised list, containing over 160 trade commodities, is not exhaustive and that they will be meeting periodically, after every six months from the date of implementation of the STR. This STR between Rwanda and DRC was negotiated under the Common Market for Eastern and Southern Africa (Comesa) and the meeting was facilitated with support from the African Development Bank and the European Union. Both agencies seek to deepen intra-regional trade among countries of the East African Community and the Great Lakes region as a whole. Tasara Muzorori, who represented the Comesa Secretariat, said the STR will especially benefit small scale cross-border traders and will also boost employment and livelihoods among the youth and women. DRC has already reached an STR agreement with Zambia and Jean-Jacques Chiribagula Ntwali, who headed the Congolese negotiation team, expressed hope that an agreement would be reached with Rwanda as well. But progress will be determined partly by how fast the two countries settle existing sticky issues such as the case of Bralirwa’s alcoholic products and mineral water which are currently not allowed to enter the Congolese market. “Those are subject to further negotiations. What the Congolese don’t want are certain types of beers and soft drinks from Rwanda that would compete with their own locally produced beverages,” said Basemera. Early last year, DRC slapped an unfriendly levy on Bralirwa products to make them expensive on the Congolese market; a move that was aimed at protecting locally brewed beverages in that country. The development has hurt Bralirwa’s revenues since then.

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Bilateral deals could boost intra-EAC trade