29 October 2012

Uganda: Kenya Finally Withdraws Cash Bond

The Kenya Revenue Authority withdraws cash bond issued on imports passing through Kenya

Kampala — Following protracted negotiations between the government of Uganda and Kenya over the issuance of cash bonds on imports transiting through Kenya, traders have demanded for assurance that the incident wouldn't happen again.

Kampala traders under their umbrella organization Kampala City Traders' Association (KACITA) have demanded that the Kenya Revenue Authority (KRA) assures them the cash bond would not be reinstated in future as it had increased the cost of doing business.

Speaking to the East African Business Week in telephone interview, Moses Kalule, the Chief Executive Officer of KACITAsaid that the cash bond had made it expensive to transact business and hence needed assurance from KRA.

"We need assurance that Kenya will not just wake up again and put up a cash bond.. I think the partner states also have to moot punitive measures so as to avoid similar incidents in future," Kalule said.

He also added they were trying to identify an alternative route and that they were studying the cost implications associated with the Dar es Salaam route.

The traders had threatened to drag KRA to the East African Court of Justice to have their grievances listened because there was a 'game of hide and seek' from the revenue officials.

According to Richard Kamajugo, the Commissioner for Customs at the Uganda Revenue Authority (URA), the situation has normalized and that goods were coming in.

"It has been a hide and seek process but now we have ironed out the (cash bond) issue and things are back to normal. So currently, they (KRA) are executing particular bonds on only sugar," he said.

He however admitted that the cash bond had contributed to a substantial decline in the number of cars registered during the month of September.

Unlike a normal cash bond, a particular bond is an insurance bond where it is executed per transaction and ceases to exist once the goods exit the country.

The cash bond on the other hand requires one to execute a paper guarantee of up to Ush1billion and it is from that very guarantee that other transactions would be based upon.

Kamajugo explains, "If someone had another consignment that required them to pay, say, Ush25m, it is from this guarantee that the money would be drawn and goes on til the money is used up."

He added that the particular bond would however be reviewed after three months to evaluate its progress.

Charles Ocici, the Executive Director of Enterprise Uganda says that as members of the East African Community, we shouldn't doubt each other.

"The cash bond was instituted to stop Ugandans from dumping their goods in the Kenyan. The message I believe from Kenya is that they are not experiencing a reduction in illicit products. The cash bond is an extra burden to an importer because it is cash that is locked away indefinitely till one stops importing," he told the East African Business Week.

He added that though Uganda needs explore alternative routes like Dar es Salaam, the country (Uganda) needs to first explore the root cause of the cash bond.

"I am hoping the Kenyans are wrong so that when we go to Dar es Salaam, this (cash bond) doesn't spring up again. I think that before we even plan for Dar, we need to establish the root cause of this, I believe there was a pattern that informed Kenya's decision to issue the cash bond," Ocici adds.

He also advises thatbeing a landlocked country, Uganda needs to work at all times to ensure that there are a number of options like a functional railway line.

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