How Kenya’s excise duty removal on eggs, onions will impact Uganda, EAC farmers

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Kenya has proposed to eliminate the excise duty on eggs, potatoes, and onions originating from the East African Community (EAC).

This proposal follows discussions held during a meeting in May, where finance ministers from EAC member states convened to deliberate on customs measures designed to safeguard and promote regional industries.

The EAC ministers concurred on various custom measures to enhance the competitiveness of locally manufactured goods. These measures include permitting temporary exemptions from the Common External Tariff and implementing higher rates when needed to promote local production within the region.

In his 2024/25 Budget speech to Kenyan Parliament, Kenya’s Treasury Cabinet Secretary, Njuguna Ndung’u, highlighted the proposal to rescind the 25% excise duty that was imposed on these agricultural products last year.

“To promote trade across the East African region, I propose the removal of this excise duty on imported eggs, potatoes, and onions originating from East African Community partner states, subject to goods meeting the EAC rules of origin,” he said.

The duty proposed to be removed has severely strained trade relations between Kenya and its neighboring countries, particularly Uganda, which has been a major exporter of eggs to Kenya. This tension has been exacerbated by significant increases in the prices of various goods within Kenya.

According to reports from the Kenyan media, the country has experienced a sharp rise in product prices, reflecting the broader economic impact of these strained relations.

A May 2024 report by the Kenya National Bureau of Statistics (KNBS) highlights the extent of this price inflation. By May, the price per kilogram of onions had surged by 67.7%, while the price of potatoes had increased by 10%.

Eggs also saw a dramatic rise in prices due to the reduced supply following the re-imposition of the tariff.

Kenya had reinstated the levy on eggs imported from Uganda in June 2022, reigniting a trade conflict between the two East African Community allies. This levy had previously been suspended in December 2021 after bilateral discussions aimed at resolving trade disputes.

The reintroduction of the tariff occurred at a sensitive time when the two nations were still grappling with unresolved issues regarding milk exports. Kenya had barred the importation of Ugandan dairy products in 2019.

Moreover, in 2020, Kenya further strained its trade relations with Uganda by blocking the importation of Ugandan sugar and sugarcane. This blockade inflicted substantial financial losses on traders, amounting to billions of shillings. These successive trade barriers have not only impacted the availability and prices of essential goods in Kenya but have also undermined the economic cooperation and integration efforts within the East African Community.

The cumulative effect of these trade policies has been detrimental to both countries, fostering economic instability and disrupting the livelihoods of traders and consumers alike.

Kenya’s move to scrap excise duty on imported eggs, potatoes, and onions originating from East African Community partner states could be the result of a meeting between Kenyan President William Ruto and his Ugandan counterpart Yoweri Museveni in May 2024 in Nairobi.

Prior to the Ruto – Museveni meeting, the two nations held the second Joint Ministerial Commission (JMC) meeting in Kampala from 12th to 14th May in which Senior Uganda and Kenya government officials that included Ministers and Ambassadors discussed the challenge of trade barriers.

The Kenyan Cabinet Secretary for Foreign and Diaspora Affairs, Dr Musalia Mudavadi who led the Kenyan delegation to Kampala told the JMC meeting that the issue of non-tariff barriers was a matter that must be prioritized.

“It is my desire that the issues on Non-Tariff Barriers that have continued to hamper cross-border trade between our countries are further discussed at length and a conclusive position reached to enable the augmentation of bilateral trade,” he said.

After the JMC meeting, the two countries came to a mutual agreement to eliminate tariff and non-tariff barriers that have been escalating the cost of trade between the two EAC allies.

HOW KENYA’S EXCISE DUTY REMOVAL ON EGGS, ONIONS WILL AFFECT UGANDA, EAC FARMERS

The move by Kenya to abolish the excise duty on eggs, onions, and potatoes originating from the East African Community carries significant implications. The elimination of this tax will facilitate a smoother and more efficient cross-border flow of these essential goods.

This policy shift is expected to bolster economic cooperation and strengthen the bonds between member states within the EAC bloc.

Uganda, in particular, stands to benefit significantly from this policy change, as it has been a huge exporter of poultry products to Kenya.

The removal of the excise duty is expected to alleviate the financial burden on Ugandan egg producers, making their products more competitive in the Kenyan market.

This change could lead to increased trade volume, benefiting Ugandan farmers.

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