Since the 1970s and long into the early 1990s, Uganda was heavily dependent on its eastern neighbour, Kenya, for largely all essential commodities. Trade between the sister countries was the source of revenue for a majority of Ugandan traders who took buses to Kenya and returned with truckloads of essentials including sugar, soap, and even bread.
While this started tipping in the late 1990s when Uganda began a robust industrialisation programme and also later began to import from China, the economies of the two African Great Lakes countries are tied at the hip. Kenya is Uganda’s top trading partner in Africa.
Over the last 24 years, Ugandan exports to Kenya have steadily increased at an annualized rate of 12.7 percent — up from US$16.1 million (€13.3 million) in 1995 to US$282 million (€233 million) in 2019 — mainly due to increased exports of maize, milk, and sugar.
Likewise, Uganda is Kenya’s leading export destination in Africa, accounting for 28.6 percent of Kenya’s total exports on the continent in 2019. Key Kenyan exports to Uganda include refined petroleum, palm oil, iron, and salt.
Uganda’s rapid industrialisation and the commercialisation of agriculture, which is the backbone of the country’s economy, saw the landlocked Uganda begin to realise surpluses in production. These surpluses have in turn caused a ripple in Kenya’s economy and as Deputy President of East Africa’s economic giant stated during a visit to Uganda recently, the Kenyans are beginning to feel the pressure on their economy resulting from the surplus.
Kenya’s Deputy President William Ruto, while speaking during a function to officially launch a multi-billion dollar pharmaceutical factory in Matugga, on the outskirts of Uganda’s capital Kampala, in July noted thus; “Uganda of the 70s was a Uganda of shortages including sugar and other commodities, today it is a country of surpluses. As I was driving here, in the market in Kawempe, I saw surplus fruits. We are beginning in Kenya, to feel the surplus in Uganda and we feel the pressure. That reminds us, that we need to rejig our thinking by building a bigger market to supply deficits in Kenya and surplus in Uganda.”
To place Mr Ruto’s remarks in context, a report from the Kenya Revenue Authority (KRA), indicates that in 2018, Uganda for the first time in history exported more goods to Kenya than any other country in the East African region. According to the report, in the five years running to 2018, the country decreased its deficit with East Africa’s largest economy. Records from the Central Bank of Kenya show that Uganda exported goods worth Shs1.1 trillion (Ksh30.21b) compared with imports of Shs965b (Ksh26.08b), resulting in a trade deficit of Shs153b (Ksh4.13b) in the period under review.
Uganda’s exports to Kenya in the period running between January and September 2018 stood at Shs1.5 trillion compared to Shs908.7bn in 2017. This Shs1.5 trillion figure compared to Tanzania and Rwanda’s Shs820b and Shs499b respectively. Uganda accounted for 70.36 per cent of the 419,548 tonnes of Kenya’s maize imports, an equivalent of about 4.66 million 90-kilogramme bags, in the five months leading to May 2018, according to data from the KRA.
Uganda also overtook South Africa as the largest seller of goods to Kenya in Africa in the review period with the latter’s invoice expanding to 17.07 per cent to nearly Shs1 trillion (Ksh28.37b) compared with a year earlier as reported in the East African newspaper. In 2017, imports from Kenya fell to Shs2.28 trillion (Ksh61.82b), down from Shs2.3 trillion (Ksh62.17b) in 2016 and Shs2.5 trillion (Ksh68.41b) in 2015.
The question to ponder is whether the turning tables will negatively affect relations between the two age-old trade partners and sister countries. Already, a standoff existed in 2020 that forced Kenya’s Trade ministers to visit Uganda where a number of concessions were made.
The standoff began in December 2019, when Kenya stopped importing Ugandan milk. Later in July 2020, Kenya banned importation of Ugandan sugar in contravention of an earlier agreement signed between President Museveni and Kenya’s Uhuru Kenyatta, to increase Uganda’s sugar exports to Kenya.
Kenya insisted that they were acting on suspicions of the quality of the Ugandan exports and doubted whether the country met food safety control standards. The authorities also confiscated Uganda’s milk exports including milk powder and long-life milk for what they called ‘verification checks’.
After the ban on poultry products, Kenya also banned the importation of maize from Uganda and Tanzania in March 2021, citing aflatoxins. Uganda retaliated this by imposed tariffs on Kenyan goods including juices and roofing materials. Kenya lifted its maize ban after less than a week.
Perhaps aware of the impact of these actions on the East African integration, the two governments quickly moved to address the issues being raised by either side.
In April 2021, following the visit of the Kenyan trade minister to Kampala officials from the two countries announced they had mooted a plan to bring an end to the standoff. Kenya agreed to allow Uganda’s sugar greater access to its market, allowing up to 90,000 metric tons of Ugandan sugar per year into Kenya.
Uganda also pledged to abolish a 13 percent excise duty on Kenyan-manufactured juices, malted beers and spirits, and to scrap a 12 percent verification fee on pharmaceuticals manufactured in Kenya. It has also committed to abolishing a 20 percent excise duty on furniture manufactured in Kenya and an 18 percent value-added tax on Kenyan-made exercise books.
The eyes of various experts remain glued on the prospects of a seamless regional integration strategy despite the hiccups so far experienced.
Uganda’s President Yoweri Museveni, an ardent advocate for integration of the countries in East Africa, has used the rift between the two countries to call for fast tracking of the process. Mr Museveni argues that when the regional bloc of Uganda, Kenya, Tanzania, Rwanda, Burundi, South Sudan and the DR Congo federate, the recent spat over maize, poultry products, milk and sugar exports with Kenya as well as the Uganda-Rwanda border closure would not have happened.
Museveni called for dialogue, negotiations and ideological clarity to be deployed as this is key to the expansion of the market frontiers for Ugandan products that are now in surplus. Museveni further argues that if leaders had united, the EAC would not be governed by a treaty. It would effectively be one country commercially and therefore much easier to trade.
Analysts have also stated that the trade rift between the East African nations risks a return to classical mercantilism and self-defeating nationalism, that have the potential to reverse gains of the common market protocol, which came into force in January 2010, allowing for free movement of goods, services, labour and capital within the East African region.
