Kenya now sees the standoff as a threat to trade and regional integration

The stand-off between Uganda and Rwanda is now proving to rattle Kenya as the East Africa economic powerhouse fears for a drop in trade volumes, in the wake of dwindling exports to her neighbours.

Nairobi has now expressed concerns that a prolonged diplomatic row between the two hinterland states will hurt trade, a move that could also affect business at the Port of Mombasa which is a key entry and exit point for cargo traded along the Northern Corridor.

The Northern corridor mainly serves Kenya, Uganda, Rwanda and Burundi with Uganda being the biggest transit destination for cargo imported through Mombasa.

Uganda controls about 73 per cent market share of transit cargo at the Mombasa facility with motor vehicle units being among the top transit cargo.

South Sudan accounts for about 10.6 per cent share, DR Congo (5.7%), Rwanda (3.3%) Tanzania (2.6%) and Burundi (1.1%).

Uganda-Rwanda standoff

The tiff between the two East Africa Community (EAC) member states has been simmering for years, but worsened recently when Rwanda closed its borders mainly the Gatuna border post.

The Rwandese government cautioned its citizens against travelling to Uganda. The tension has also seen Ugandan citizen remain hesitant from making cross border movements, a move that has affected trade and day-to-day activities by locals living on either side of the borders.

Both countries have traded accusation of interference with each other’s internal affairs where Rwanda has accused her neighbor of among others; providing a ground for rebel groups and subjecting its citizens to illegal arrests and torture.

On the other hand, Uganda has accused her neighbour of transporting goods through the common transport corridor in breach of the provisions of the East African Community Common Market Protocol, a move that led to the holding of Rwandan trucks for weeks before they were released.

Kenya’s fears

Kenya now sees the standoff as a threat to trade and regional integration.

According to Kenya’s East African Community and Regional Development Cabinet Secretary Adan Mohamed, any stalemate among the East Africa member states is a threat to trade and regional integration.

“EAC is an important market for us. Trade gets facilitated at border points and that is why our borders are important. If there is any blockages along the border points, it is likely to be disruptive, if there is a delay at the Malaba border its disruptive and we have to unlock that. If there is a problem between Uganda and Rwanda it becomes also a problem. It is a problem that needs to be solved by the sovereign states,” Mohamed said.

He was speaking in Nairobi during a stakeholder’s forum on ‘ease of doing business’, organized by the Kenyan government.

“We continue to monitor the situation. The good thing about East Africa is if something happens at the border, our leaders talk and those things are resolved and life moves on,” the CS affirmed.

He noted that the Northern Corridor remains critical for Kenya, Uganda and other hinterland states.

“The Northern Corridor is a very important part of our trade programme for us. The port of Mombasa, through Kampala up to Kigali is a corridor that is absolutely important,” he said.

The recent move by Rwanda’s President Paul Kagame to visit Tanzania where he met President Magufuli is seen to have rattled Kenya.

Kagame’s visit is linked to a possible talk for an alternative import-export route through the port of Dar es Salam, a move that could reduce Rwanda’s activities through Kenya’s port of Mombasa.

Mohamed said the region should remain focused on integration, noting that all EAC member states are important to each other.

“EAC is a market that benefits everybody. No single EAC country can ignore the common. Every country requires free movement of goods to enable each to benefit,” Mohammed said, even as he expressed confidence that the issues between Uganda and Rwanda will be resolved soonest possible.

East African Business Council (EABC) chairman Nicholas Nesbitt said the business community is feeling the effects of standoff.

“We have heard complaints from our members in Uganda and Rwanda and even from our members in Tanzania and Kenya. Everyone along the supply chain is affected. We have raised our concerns we believe they have been heard,” said Nesbitt who is also the chairman of the Kenya Private Sector Alliance (Kepsa).

“We don’t necessarily know the answers to what the two presidents and their governments are working on. They are both strong leaders, very capable, they know each other very well and we do not intend to delve into the politics on it but we just need to raise our concerns because everybody is affected with what is going on,” he told journalists in Nairobi.

The East African Community (EAC) secretariat has also raised concern over the matter as it called for a truce.

Secretary General Liberat Mfumukeko said the secretariat has sent teams to both Uganda and Rwanda to find out issues on the ground.

“We have our experts in Rwanda and Uganda for a fact finding mission. We are going to have a report very soon and from the report as EAC , we will be able to engage the partner states,” Mfumukeko said.

The standoff comes even as the member states move to discuss the EAC Common External Tariff (CET),an annex of the EAC Customs Union Protocol which guides duty charged on imported products into the community.

Regional trade

Kenya has been losing ground on her exports to the region where in 2017, total exports to her EAC peers were valued at Sh114.8 billion, a drop from Sh121.7 billion the previous year.

Uganda, Rwanda and Tanzania have also had past trade wars on specific items under the EAC Common Market Protocol.

The Kenya economic survey (2018) shows the value of exports from Kenya to Tanzania dropped to Sh28.5 billion from Sh34.8 billion in 2016. Exports to Uganda dropped to Sh61.8 billion from Sh62.2 billion while those to Rwanda dropped to Sh17.1 billion from Sh17.5 billion.

On the contrary, the value of imports increased in favour of the three key regional trading partners with Tanzania leading with Sh17.2 billion worth of exports to Kenya up from Sh12.8 billion in 2016. Uganda and Rwanda each exported goods worth Sh42 billion and Sh1.7 billion, up from Sh19.3 billion and Sh774.6 million respectively.

Total imports from the region closed at a whopping Sh60.9 billion compared to Sh32.9 billion the previous year, meaning Kenya has been losing ground on trade volumes with her neighbours.

If the diplomatic row amid existing trade differences continue, Kenya remains amongst the biggest losers on trade volumes with her peers who are substantially trading with other Sub-Saharan countries and the rest of the world.

Rwanda tops in trading with her peers accounting for 58 per cent of EAC’s primary and manufactured goods followed by Uganda (31 per cent), Kenya (23 per cent),Burundi (17 per cent) and Tanzania 10 per cent.

While regional trade in the EAC is close to 26 per cent, it is relatively low compared to other blocs such as SADAC (47 per cent) and the European Union at 67 per cent.

“EAC is one of the fastest growing but there is more that needs to be done. We must closely collaborate to ensure we move to towards the spirit of the East Africa Community,” said Peter Mathuki, EABC executive director and CEO.

Source: The Exchange

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.