Ban on Dar’s products in Nairobi sparks trade, diplomatic dispute

Tanzania's President John Magufuli (left) with his host President Uhuru Kenyatta at State House Nairobi on October 31, 2016. PHOTO | PSCU 

In Summary

• Kenya denied Tanzania wheat flour and cooking gas entry on lower duty over origin and safety concerns respectively.
• Tanzania hit back with bans on milk products, margarine and tyres with countries interpreting EAC rules differently.
• Zambia caught up in the dispute as its maize exports to Kenya have been denied passage by Tanzania.

By ALLAN OLINGO
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Presidents John Magufuli and Uhuru Kenyatta have stepped in to stem an escalating trade war that has seen Tanzania and Kenya exchange import bans on several commodities.

The EastAfrican has learnt that President Magufuli wrote to his counterpart in Nairobi early last week to complain about Kenya’s ban on its gas and wheat exports and other trade barriers.

“The Tanzania presidency has officially complained to Kenya. However, we have received communication from them banning our exports of tyres, margarine and fermented milk products. We hope this trade war is nipped in the bud before it gets out of hand,” a source said.

Kenya is digging in, saying it will only allow wheat flour and other products that are milled from grain wholly produced in Tanzania, or whose full Common External Tariff (CET) rate has been applied.

“The conclusion that wheat imported at a reduced rate of 10 per cent within Kenya, Tanzania and Uganda can be subjected to a preferential regime is not accurate. Not all importers in Kenya are allowed to import wheat at 10 per cent and millers are also subjected to restrictions on the limit they can import under the duty remission scheme,” a brief prepared in response to President Magufuli’s reads.

President Uhuru is expected to study the brief before responding to his Tanzanian counterpart. The trade spat comes just days after Kenya started enforcing work permit rules along its border, with Tanzania, rendering many workers jobless.

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It also underlines uneasy diplomatic relationship between Nairobi and Dar es Salaam since President Magufuli came to power in October 2015, forcing a review of the Economic Partnership Agreement with Europe and persuading Uganda to opt for an oil pipeline through Tanzania.

Effect the ban

On Wednesday, Dar in a statement protested Nairobi’s move to totally ban gas and wheat imports from its territory despite an agreement reached between the two countries. Kenya said it would effect the ban this month because of safety concerns over the gas coming through from Tanzania.

Trade Principal Secretary Dr Chris Kiptoo said Kenya would not allow Tanzanian wheat if a 25 per cent CET tariff is not paid.

“We import our wheat under duty remission at 10 per cent instead of the 35 per cent. Our neighbours were granted a stay of application on the CET rate and therefore import theirs too at the same percentage as ours. The reason they got a stay was to allow them to plug their deficit, but we are seeing their traders trying to sell the same to us at no duty cost. That’s against the EAC rules,” Dr Kiptoo said.

Tanzania cited the same trade rules in its protest.

“We believe that decisions made in the official meetings between EAC member states must be implemented by concerned parts,” Permanent Secretary in Tanzania’s the Ministry of Industry, Trade and Investment Adolf Mkenda said.

READ: Tanzania protests Kenya's move to block gas imports

Already, the EAC Secretariat has written to Kenya over the trade dispute.

A wheat deficit

The EastAfrican, however, understands that Kenya’s reservations with the wheat imports stem from the fact that Dar es Salaam is a wheat deficit country.

“The reason Tanzania asked for a stay is because they have a deficit. If then you don’t have enough supply, then how can you have enough to export? They were told that goods under remission of CET cannot be profitably traded,” EAC Principal Secretary Betty Maina told The EastAfrican.

Uganda and Tanzania have a stay of application of CET rate and import wheat at 10 per cent instead of 35 per cent. Rwanda and Burundi were last year granted stay of application of the CET.
Tanzania argues that even Kenya applies the 10 per cent CET stay but the governance structures for the two countries under this programme are different. Kenya requires its millers to stack up all the domestic wheat before applying for any import but Dar on the other hand does not.

Mr Mkenda said that Kenya’s decision was against the East Africa Community agreement reached between the two countries.

“We have expressed concern over Nairobi’s refusal to allow Tanzanian exporters to transport cooking gas to Kenya through Kenya-Tanzania land border. We decided at the EAC sectorial meeting, which brought together ministers of trade, industry, finance and investments from the EAC that Kenya should lift the ban. During the meeting, Kenya agreed to lift the ban on importation of cooking gas and wheat through Tanzania-Kenya borders,” Mr Mkenda said.

Cooking gas

Kenya’s Petroleum Principal Secretary Andrew Kamau said that it will not allow the imports of gas via trucks starting July over safety concerns.

“We have designated Mombasa as the only point of import for LPG. So if you want to play in this game, come and invest in Kenya, import through Mombasa and then we can follow up who is supplying unlicensed dealers. But now this whole thing about Tanzania is a thing of the past,” Mr Kamau said.

Ms Maina said that Kenya will be purchasing a gas testing facility to be stationed at the border Custom points of Namanga and Voi but in the meantime, the ban will stay in effect.

“Before the testing facility is installed in these Customs border points, Mombasa will remain as the only entry point for gas for the country to track the quality of LPG imports into the country. This isn’t a ban but an issue of the point of entry of the product.

What we have told Tanzania is that they should pass it through our designated gas facility in Mombasa where we will be able to test the product on its quality and safety, rather than through Namanga where we don’t have facility to test the product,” Ms Maina said.

Safety and quality

It is understood that at the Council of Ministers meeting, Tanzania insisted on its traders trucking their gas products through Namanga back into Kenya, with the latter arguing that given the region imports its LPG products through Mombasa, it made no sense in trucking it from Mombasa into Tanzania, then Dar re exporting it via Namanga.

“We have recently promoted the use of gas, and we would like to champion safety and quality of the same product. Unfortunately, we cannot vouch for the same product that is being trucked because we don’t know how it was handled and repackaged.

That’s the reason we aren’t allowing the gas imports through our inland ports,” Ms Maina said.

The EastAfrican understand that Kenya has already communicated its intention to have the ban stay for a period of up to four months as it seeks to purchase and install the new testing facilities at in the border points.