Nairobi: Kenya and Tanzania have moved to quell growing unease in their trade relations - which have hit the lowest ebb over the past weeks - easing a number of barriers in give-and-take pacts that could see businesses make massive gains. Besides the meeting between Tanzania’s President Jakaya Kikwete and Kenya’s Mwai Kibaki, which was followed by a public announcement by the former that he would spearhead the removal of non-tarrif barriers hindering movement of goods and labour, bilateral talks by the ministers for the East African Community, Trade, Agriculture and Livestock resolved a number of controversial issues.
A report on the bilateral talks, seen by The EastAfrican, indicates that Kenya has agreed to remove a levy of KSh2 ($0.024) per kilogramme on the agricultural products imported from Tanzania, following a complaint that the charge did not conform with international trade practice.
Tanzania on the other hand, promised to look into a complaint about taxation of cigarettes and revert with a possible solution by the end of the month.
Other complaints raised during the bilateral talks include transit charges of Ksh1,000 ($12) per truck carrying produce from Tanzania and a road toll of $32 per truck, imposed by Olkejuado County Council in Kenya, restrictions imposed on flowers from Tanzania on transit through Kenya’s Jomo Kenyatta International Airport to Europe and a 25 per cent tax imposed on Kenyan beef and pork products.
On the levy imposed on agricultural products, the Kenyan delegation explained that the charge was cess fee (a tax on the movement of agricultural produce raised by local authorities in Kenya) collected by Kenya Revenue Authority on behalf of Horticultural Development Authority for the purpose of developing the horticultural sector.
According to Richard Sindiga, the Kenya’s director for economic affairs in the Ministry of East African Community, the Kenyan ministers promised to revoke the gazette notice on the levy by the end of the year. The Kenyan ministers also told the meeting, which was chaired by Musa Sirma, Kenya’s Minister for EAC, that all county councils had been instructed to stop levying the charges on trucks ferrying produce.
On Tanzania’s complaints over flowers, the Kenyan ministers informed the meeting that the limitation was on flower imports to Kenya under the plant importation order (The Plant Protection Act). “The pest risk analysis process identified some risks which ought to be managed through a bilateral plant quarantine arrangement between the Kenya Plant Health Inspectorate Services (KEPHIS) and the Tanzanian Plant Health Services of the ministry of Agriculture,” said Mr Sindiga.
The ministers directed that the bilateral arrangement be finalised and signed by December 31.
The first grievance presented by Kenya was that the Tanzania Revenue Authority requires cigarette imports from Kenya to contain 75 per cent local content and had in its 2012/1013 proposed to increase excise duty.
In the complaint, Emily Waita, area head of communications at British American Tobacco Kenya, said the requirement for 75 per cent local content did not recognise the EAC rules of origin and also contravened the tax harmonisation objectives of the EAC Treaty. “The issue is more specific to the taxation system (excise), cigarettes can still be exported to Tanzania regardless of the quantity of local content, however it can be interpreted as favouring local products,” said Ms Waita.
Tanzania’s tax on cigarettes is Tsh8,210 ($5) per mille (1,000 cigarettes) for plain cigarettes with more than 75 per cent domestic tobacco, Tsh19,410 ($12.3) per mille for filter cigarettes with more than 75 per cent domestic tobacco and Tsh35,117 ($22) per mille for all other cigarettes with less than 75 per cent domestic tobacco.
On this matter, the Tanzanian delegation said the documentation provided was not sufficient proof of the stated rates, and requested more time to review the evidence and revert with a possible solution before the end of the month.
Kenya also complained that beef and pork products from Farmers Choice were being charged 25 per cent because the company is in the EAC Duty Remission Scheme (company imports raw materials freely but exports its products outside the EAC). Farmers Choice said it imports only sausage casings and spices that constitute four per cent of the imported input, should enjoy duty remission because the company rears pigs that are used to manufacture sausages, and that the other manufactured products from beef and chicken are sourced locally from Kenya.
Tanzania, however, argued that a Common External Tariff (CET) applies on finished goods whose input enjoy duty remission when exported to other partner states and that extra information was required before the matter could be considered.
The ministers, therefore, agreed that a regional committee be constituted to propose how to treat products which use small proportions of imported inputs under the EAC Duty Remission Scheme and that Tanzania should consider the Kenyan request by December 31.
Trade between Kenya and Tanzania
Trade between Kenya and Tanzania has grown tremendously in the last five years, when the common market became operational. The value of Kenya exports to Tanzania doubled from $270.5 million in 2007 to $494.1 million in 2011 according to the Kenya Economic Survey 2012. The value of Tanzania exports to Kenya also more then doubled in the same period, from $77.6 million in 2007 to $183.5 million in 2011.
However, even as the ministers tackled some of the sticky issues, it is clear that there is growing discontent between the two countries. It has emerged that a Tanzanian investor was last week denied permission to construct a pharmaceutical factory in Kenya, and forced to buy a loss-making one instead. The incident highlights the numerous barriers the two countries, continue to erect that block trade.
While the five EAC member states have in principle agreed to remove non-tariff barriers by December 2012, the deal largely depends on the willingness of the individual countries in the absence of a legally binding framework. Frustration is growing among landlocked countries like Rwanda, Burundi and Uganda which are paying a heavy price for unnecessary and costly delays caused by NTBs like weighbridges and port inefficiencies in Kenya, through which their goods must pass.
Earlier this year, Rwanda threatened to take its neighbours to court over the continued existence of NTBs in the EAC, which it says, increase the cost of doing business for its industries, making them uncompetitive.
Tanzania has been seen as a dithering and reluctant member of the EAC, raising doubts as to its commitment to ideals of the common market, while the enthusiasm of Kenya’s public and private sector to hasten the integration has been interpreted as domineering, leading to sour relations.
“We have agreed that experts from the two countries need to consult regularly and directly without waiting for the main JCC sessions so that issues that have been identified are addressed faster,” said Kenya’s Foreign Affairs Minister Prof Sam Ongeri.
Trade disputes between the two neighbours were raised during the EAC Sectoral Council on Trade, Industry, Finance and Investment (SCTIFI) in May, with each partner accusing the other of levying charges outside those agreed in the East African Common Market Protocol.
The SCTIF, decided that the two partners hold a bilateral meeting to enable them remove the NTBs between them, which were becoming a stumbling block in the efforts by EAC to allow free trade in the region.
“What is important is that we should create a conducive environment for more investment opportunities in both countries for businesses to thrive. This will further consolidate our brotherly ties,” said President Kikwete after talks with President Kibaki.
According to President Kikwete there were growing complaints among traders from the two countries accusing the governments of blocking trade and slowing down the removal of trade barriers.
Kenyan and Tanzania companies operating in either country have been finding it difficult to get work permits, and this has greatly restricted the movement of professionals, especially in the service sector.
Other fresh non-tariff barriers reported by Tanzania, are discrimination against some products originating from Tanzania such as beer, Konyagi, Maasai sandals; restriction of advertisement of Tanzanian products in Kenya and smuggling of Tanzanian cloves within the EAC Customs Union before they are exported as originating from Kenya.
Kenya also reported that juice maker Delmonte’s products are charged a CET of 25 per cent for exporting its products to Tanzania yet it is in the EAC Remission Scheme.
Kenya further complained that traders exporting goods from Kenya to Tanzania are required to lodge export entry documents with Tanzania Revenue Authority in Dar es Salaam and pay duty before loading goods.