Firms push for removal of protectionist policy in EA

From left: Presidents Uhuru Kenyatta (Kenya), Paul Kagame (Rwanda) and Yoweri Museveni after the trilateral talks in Entebbe, Uganda. President Jakaya Kikwete of Tanzania and Pierre Nkurunziza of Burundi stayed out of the loop of the third infrastructure summit in Kigali, Rwanda on Monday. Photo/PPS 

By George Omondi

In Summary

• Firms say the protectionist policy, which imposes heavy import duties on commodities, is making local goods uncompetitive in other markets.

Kenyan companies are pushing for changes in the structure of East African Community’s customs taxes, ahead of a crucial meeting by the bloc’s ministers in Kampala, Uganda, on Thursday.

‘‘The protectionist policy, which imposes heavy import duties on commodities such as wheat, maize, rice, milk powder and sugar, is making our goods uncompetitive in other markets,’’ said James Ojiambo, regulatory affairs manager at Nestle Kenya.

“We are shouldering high cost of production partly because most of the items designated as the region’s sensitive products such as milk powder and sugar also happen to be our core inputs,” he said.

Under the East African Community (EAC) Common External Tariff structure, goods that local firms are capable of producing are classified as sensitive items and are shielded from external competition by high import duties.

Sugar attracts a common external tariff of 100 per cent, rice (75 per cent), milk cream (60 per cent) while maize imported from non-EAC member markets is charged 50 per cent duty.

Similarly, the wheat grain and flour attract import duties at 35 per cent and 60 per cent respectively.

Firms relying on protected items as inputs have called for a review of the customs structure, saying local producers have failed to meet domestic demand, forcing them to pass on the high cost of imports to consumers.

“The government should move with speed to abolish the custom taxes on grains from outside EAC in order to boost flow of stocks and stabilise flour prices,” said Cereal Millers Association chairman Diamond Lalji.

Kenya produces just one third of its wheat and rice grain requirements. An assessment by Egerton University’s policy thinktank, Tegemeo Institute, indicates that the country has to import 30 per cent of the national maize requirement after a disappointing long season harvest.

Apart from customs tax structure, the local firms have taken issue with the long process of clearing their goods at the border.

“We have signed pacts and even harmonised 1,200 standards for use in the region but member states have been slow at embracing them,” said Kenya Bureau of Standards’ official David Kimetto.

EAC council of ministers are set to meet in Kampala on Thursday to review progress on regional integration, paving the way for a heads of state summit at the end of the month.

At a forum organised by the Kenya National Chambers of Commerce and Industry in Nairobi last Wednesday, local firms called for a review of policies on firms under various export promotion schemes.

Nestle Kenya said the duty remission scheme that it currently enjoys has also locked most its products out of the regional market.

“The condition of the remission scheme is that only 20 per cent of our products are allowed for sale in the entire region yet this (EAC) has been our central focus market,” said Mr Ojiambo.