21 August 2017

Kenya Seeks Removal of Dairy Tariff

The unstable trade relations between Kenya and Tanzania could be facing another test over tariffs on milk and dairy products, which Nairobi says are contrary to the East African Common Market Protocol.

Just when trade relations between the two countries seemed to be normalising after disputes that had been ignited by import bans in April, a meeting that had been planned for August 19 was postponed to September 9.

Kenya plans to petition Tanzania to remove the $0.9 per litre tariff on milk and milk products.

The tariff is being blamed for the significant drop in Kenya's dairy exports to Tanzania, which dropped from $20.8 million in 2015 to $1.8 million last year.

Removal of tariff

At the September meeting aimed at ironing out issues that caused the trade dispute, Kenya will be pushing for the removal of the tariff as it is contrary to the EAC protocol that guarantees freedom of movement of goods in the region.

"The Tanzania tariff on milk and milk products is not in line with the EAC Common Market Protocol, and it is important for us to negotiate for harmonisation of tariffs for our products to compete," Margaret Kibogy, the Kenya Dairy Board managing director, told The EastAfrican.

Although Kenya's dairy exports to Uganda attract minimal charges, the high tariff imposed by Tanzania is against the East African Community spirit of deepening trade, she added.

Milk and milk products were some of the products in the trade war between the two countries that was threatening to disrupt bilateral trade.

Kenya set off the dispute when it banned importation of cooking gas from Tanzania in June: Tanzania retaliated by banning exports of unprocessed foods, milk products and cigarettes.

By pushing for harmonisation of the dairy products tariff, Kenya is hoping to grow its market share in Tanzania and Rwanda.

Despite being home to one of the largest livestock populations in Africa with more than 20 million head of cattle, Tanzania depends on milk imports from Egypt, South Africa and Europe, largely due to low milk production and lack of a processing industry.

South Africa has a tight grip on the Tanzanian market as both countries are members of the Southern Africa Development Community bloc.

Kenya's milk production stands at 5.5 billion litres annually, in Tanzania it is 2 billion litres. In both countries, about 60 per cent of the milk produced gets to the market through informal channels with the rest being processed.

Tanzania consumes 47 litres per person annum. Uganda consumes 52 litres per person per annum and Kenya 120 litres. The World Health Organisation recommends 200 litres per annum.

According to Ms Kibogy, Kenya is determined to grow its regional exports. In the first half of this year, exports to Uganda stood at $768,613, and in Rwanda exports were worth $303,650.

Kenya leading processors, Brookside Dairy and New KCC, aim to increase their export market for long-life products such as butter, ghee, UHT and powdered milk.

With25 processors, Kenya's dairy sector contributes four per cent to the country's GDP and employs an estimated 1.5 million people directly and indirectly.


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