7 November 2012

Uganda in Frantic Search for Alternative Sea Route

Uganda's private sector and the Government are in frantic discussions to enable an alternative route through Dar es Salaam away from Mombasa as a safeguard against possible interruptions from post-election violence from Kenya.

The discussions, according to Gideon Badagawa, the Private Sector Foundation (PSFU) chief, have reached the highest level of the country's Presidential Economic Council, as well as the ministries of finance and trade, as a caution for the unpredictable Kenyan route.

"Incentives are being weighed (as an option) to encourage traders to use Dar es Salaam and Tanga through Mwanza in the event of violence," said Badagawa.

He said in future as the states of Tanzania and Uganda develop appropriate infrastructure for the Dar-Mwanza route, the tax rebates, if adapted, will be scrapped.

"Ultimately, you put away the incentives when the infrastructure is developed and allow normal trade," said Badagawa.

It costs an additional $1,500 to transport a container from Dar es Salaam to Kampala, over and above what is paid for the shorter but equally inefficient and crowded Mombasa route.

One of the issues is offering tax rebates and incentives to businesses that decide to use the Dar es Salaam-Mwanza route instead of Mombasa in the event that chaos breaks up again.

"You cannot tell what will happen. We were sure until we got to 2007. I do not remember how far ago they (Kenya) had this turmoil."

"We might have a reoccurrence, you never know. What we are saying is, can we have an alternative route," Badagawa said.

The issue also emerged as an emergency because of the recent tax bonds imposed on vehicles and sugar destined for Uganda.

On the tax bond, PSFU say they are pushing to understand why Kenya took such an uncalled for unilateral decision.

PSFU, Uganda's umbrella business lobby group, has described the cash bond as one manifestation of a non-tariff barrier in the EAC.

"For the time being, it has been pushed away but who knows, it could bounce back. No country should institute policies that would affect others," said Badagawa, adding that he shudders to imagine what would happen if Uganda took such a decision against Burundi and Rwanda.

"There is an automatic tracking system and this has been a big issue," he added.

The tax bond led to the holding up of about 600 containers of sugar and 2,000 vehicles at Mombasa following a directive by the Kenya Revenue Authority that transit goods coming to Uganda execute a cash bond equivalent to the tax value of the consignments that would be imposed on the same goods were they to be sold in Kenya.

The August 29 Kenyan directive caused a cargo movement paralysis and a stand-off, bringing back bad memories to Ugandan importers who use Mombasa-a port that still remains the shortest route for inland states that have no direct access to the sea.

This later led to the question on where we are on the progress of developing these facilities. On paper, there are several good proposals on how to avert the abrupt Kenyan scenario should it occur again, especially with the impending February 2013 Kenyan general elections.

One of them is building smaller inland ports to access the sea via the lake side ports of Bukasa in Uganda and Musoma in Tanzania, connected by railway to Arusha in the Tanzanian interior and to the port of Tanga on the Indian Ocean.

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