Nairobi — Kenya's Treasury intervened last week to salvage apparently frosty cross-border trade relations between Kenya and Uganda.
The Kenya Revenue Authority (KRA) has been accused of making unilateral and controversial policy statements that have warranted the trade dispute that is slowly degenerating into a diplomatic row.
Kenya's Finance Minister Robinson Njeru Githae has further called for a meeting next week between KRA and other involved stakeholders to unlock the deadlock that is threatening bilateral trade relation between the two senior members of the East African Community.
Kenya is accused of imposing a controversial trade bond at the port of Mombasa for goods destined to Uganda, a situation that has caused uproar among Ugandan business community and caught the intervention of President Yoweru Museveni who has expressed his disappointment through the Ugandan High Commission in Nairobi.
currently, it costs importers approximately $3,800 to transport a 40-foot container from Mombasa to Kampala by road.
"We are already setting up mechanisms to resolve the trade dispute. In the meantime, KRA has been directed not to engage in any policy declarations without due consultations with all involved parties," said Githae.
Uganda is currently Kenya's biggest trade partner with over 50 per cent of Kenya's exports finding market in the East African nation. Thawing of relations between the two countries could be a major economic blow to Kenya, a move the government is moving fast to forestall.
In the meantime, Ugandan importers have threatened to boycott the port of Mombasa in what could deal a huge economic blow to Kenya.
The new cash-bond in question requires the traders to deposit an amount equivalent to the value of the imported good, which the traders complain is too high and unreasonably expensive.
"What Kenya is doing now is contravening the discussed and agreed on regulations that government international trade and specifically goods-on-transit. we read a lot of mischief in the latest directive," said Morrison Mugisha, a Ugandan trader affected by the directive.
Sources from among the Ugandan business community in Kenya told the East Africa Business Week that Ugandan importers will first of all protest the new levy in the short term but meet and strategize on alternative routes in the event that the trade relations deteriorate further.
The most viable alternative for Ugandan importers would be the Port of Dar es Salaam. Though considered longer and more costly, it could be their next port of call if the relations with Kenya are not improved in good time.
The traders are also justifying their case for an alternative with the general elections in Kenya around the corner amid memories of the post-election violence that rocked the country five years ago.