Joel Ogwang
11 November 2009
Kampala — WITH an average export volume of about 40, 000 metric tones, the tea industry is slowly but steadily emerging as a vibrant source of Uganda's foreign exchange earner.
Sweet statistics
Uganda fetches over $3.4b from its exports annually, according to data from the Uganda Export Promotion Board (UEPB).Other top export earners are merchandise estimated at $1.34b, service ($520m) and labour remittances ($785.8m) that also continue to record steady growth.
From its export of 43,636 metric tonnes in 2007, Uganda garnered $58.9m. In 2008, $76m (about sh156b) was realised from export of 42,384 metric tonnes, with 45,680 metric tonnes produced.
This enthralling growth is set to continue, with about $90m (shs184.5b) expected from exports by the end of this year, according to data from the Uganda Tea Association (UTA). This umbrella body unites growers, processors, traders and exporters responsible for close to 100% of tea exports.
Suffice it to say, Uganda has earned an annual average of $62m (about sh127.1b) oer the last three years from its tea, making it the nation's third largest foreign exchange earner. Other forex earners are cotton, tobacco, flowers, fruits, hides and skins, maize and beans, respectively.
Courtesy of its blossoming tea industry, Uganda currently ranks 13th among the world's largest tea producers and third in the East and central Africa region after Kenya and Malawi.
Composition of the industry
The tea industry employs over 62,000 people, supporting more than 500,000 dependants in Uganda.
The country boasts of 12 tea processing and exporting companies operating 21 processing factories. Four of these are owned by smallholders including Igara, Kayonza, Mabale and Mpanga Growers Tea factories.
Much of the tea produced are the black crush tea and curl tea from tender leaves which are mostly hand picked.
Tea is largely grown along the Lake Victoria Crescent and lower slopes of the Rwenzori Mountains as well as above the Western Rift Valley.
Informal border trade between Uganda and her five neighbours fetched $776m from $231m in 2006, an increase of 236%.
Marketing of tea
About 90% of Uganda's processed and graded tea finds its way to international markets through the Mombasa Auction Market where it is branded and consumed as Kenyan tea.
Europe, the Middle East, Russia, and America are the export destinations for Uganda's tea.
However, upon clearing their dues at the Mombasa entry point, Ugandan businessmen are also charged additional fees of between Ksh500 and Ksh1,000 at the auction point. This occasionally rises to Ksh2,000.
Raymond Agaba, the acting commissioner in-charge of internal trade, says double taxation was a recent predicament.
"We are not happy with the double taxation (of tea exports). Trade should be flowing. We don't want to create a misunderstanding by retaliating," he said.
This threatens cross-border trade between the two neighbours fast-tracking the East African Community (EAC).
The move, too, comes as another trade hurdle to local traders after Uga-chick, a local poultry breeder, was suspended from selling their day-old chicks in Kenya.
"This (suspension of Ugandan exports) shouldn't be happening since it impedes regional trade," Agaba said.
There has also been restriction on export of Ugandan beef and milk to Kenya, says Florence Kata, the UEPB executive director.
"Double taxation (of tea exports) is one of the issues I am faced with. Hidden protectionism is still going on," she says.
Kata regrets that in spite of the fast-tracking and or revitalisation of EAC, some countries still want to maximise profits at the expense of the bloc's spirit of cooperation.
George Ssekitoleko, the Uganda Tea Association executive secretary, says other challenges plaguing traders are weather vagaries, high costs for inputs like fertilisers as well as electricity. Others include; low levels of local tea demand (4-5%), lack of locally conducted tea research and poor infrastructure.
Gagawala Wambuzi, the state minister for trade, confirmed Ugandan exporters raised a petition to Kenyan Government over the illegal tax regimes. If Kenya fails to fully address their plight, the traders may seek legal redress from the East African Legislative Assembly (EALA), he says.
"Double taxation is against the EAC's customs treaty. We are working together with Kenya to sort out the problem," said Gagawala.
Remedy
There is, however, renewed hope for Ugandan tea exporters who have, for long, suffered the burden of double taxation by the Kenya Revenue Authority (KRA).
The double taxation quagmire reportedly drew the attention of Kenyan President, Mwai Kibaki.
Henceforth, officials from Uganda and Kenya held regular meetings to clear any other impediments to regional trade in the revived EAC bloc.
"Kibaki instructed all officials in-charge of taxation to get rid of hindrances to free trade but their reaction is not as we expected," said an official.
As a result, the exporters' predicament has been loosened, with the number of road blocks mounted by both KRA and Police from the border to the Mombasa auction point reduced from the previous 100 to 47.
"The boarder now clears goods until 10 pm," says Agaba.
Promising returns
According to the Uganda Revenue Authority (URA), Uganda continues reaping from the customs union in spite of all its many hurdles.
Intra-trade within the Uganda, Kenya and Tanzania, for example, rose by 20% from $1.52b in 2004 to $1.9b in 2006, according to Nicholas Kanabahita, the URA legal and bonds manager.
"Uganda's imports to Tanzania increased from sh28b in 2005 to sh46b in 2007 while our imports to Kenya have also grown from the sh157b in 2005," he said.
Under the customs union treaty, the bloc agreed on clearing impediments to the regional markets to allow free movement of goods in the greater EAC. Goods manufactured in a member country should be sold in another country at a lower price to avoid suffocating the manufacturer, he says.
"There will also be equal trade incentives to avoid trade diversion (where industries relocate to a country with trade incentives)," he says.
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