Row as Uganda protests milk seizures by Kenya

Kenyan farmers deliver milk to a processing plant. Under the current rules of origin, only goods produced wholly from local inputs are allowed to cross national borders without attracting Customs taxes. PHOTO | FRANCIS MUREITHI | NMG 

In Summary

• Uganda issued the note on Wednesday expressing deep concern about “illegal seizures of Ugandan-made milk products under the Lato brand.”
• There has been increased supply of cheap milk from Uganda, leading local processors to raise concerns on the negative impact this has had on sales.
• Kenyan milk processors say they are witnessing low sales, especially in western Kenya where there is an influx of the cheap Ugandan milk.

By BUSINESS DAILY
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Kampala has sent a protest note to Nairobi demanding the immediate release of consignments of milk seized by Kenyan officials on alleged quality concerns, sparking a fresh diplomatic row between the two neighbouring countries.

Uganda, which is Kenya’s biggest trading neighbour in the region, issued the note on Wednesday expressing deep concern about “illegal seizures of Ugandan-made milk products under the Lato brand.”

The Ugandan ministry of Foreign Affairs said the seizures by Kenyan authorities, which on January 2, have caused “heavy financial losses to the company”.

Goods worth over Ksh36 million ($360,000) have been confiscated, over fears that they are contraband, counterfeit and substandard the Ugandan ministry said, according to documents tweeted by Ugandan government spokesman Ofwono Opondo on Thursday.

In the protest note, Uganda said the decision by Kenya “contravenes the principle of good neighborliness” and Kenya’s obligation under the treaty establishing the East African Community, Customs Union protocol, Common Market protocol and World Trade Organisation trade facilitation agreement.

“This has resulted not only into confiscation of 54,310 kilos of powder milk valued at $203,630 and 262,632 litres of UHT milk valued at $157,106 but also have witnessed a sustained negative campaign against Uganda’s milk and milk products, contravening the principle of good neighbourliness and Kenya’s obligations under the Treaty Establishing the East African Community, Customs Union Protocol and Common Market Protocol and the WTO Trade Facilitation Agreement,” the protest note read in part.

By the time of going to press yesterday Kenyan Agriculture and Trade ministry officials had not responded to Business Daily’s request for a comment.

Cheap milk

There has been increased supply of cheap milk from Uganda, leading local processors to raise concerns on the negative impact this has had on sales.

Kenya’s imports from Uganda more than doubled between 2016 and 2017 from Ksh19.28 billion ($192 million) in 2016 to Ksh42.04 billion ($420 million) 2017.

As at 2018, imports from Uganda to Kenya stood at Ksh41.94 billion ($419 million). Exports to Uganda from Kenya on the other hand dropped from Ksh62.16 billion ($621 million) in 2016 to Ksh61.88 billion ($618 million) in 2018.

Kenyan milk processors say they are witnessing low sales, especially in western Kenya where there is an influx of the cheap Ugandan milk. This comes even as volumes of Kenyans milk continue to rise.

Local processors have had to compete with Lato milk from Uganda, which is retailing at Ksh40 ($0.40) for a half litre packet. This brand has dominated western Kenya and is also retailing in some shops in Nairobi.

President Uhuru Kenyatta recently directed the Kenya Bureau of Standards (Kebs) and the Directorate of Criminal Investigations (DCI) to impound any powdered milk or dairy products that do not meet Kenyan standards.

Levy

But he slammed brakes on a 16 percent duty proposed to be imposed on milk imports from Uganda, implying that local dairy farmers will have to grapple with the influx in a relief to Uganda. Mr Kenyatta instead directed that the duty only be levied on milk products coming in from outside the East African Community (EAC).

The announcement overruled the recommendations of a verification mission that went to Uganda at the tail end of last year, which called for the duty on imports to protect farmers.

Milk prices have fallen by 33 percent in the last one year as processors cut the amount paid to farmers, citing a sharp increase in production. A litre of milk is going at an average of Ksh20 ($0.20) across the processors from a high of Ksh37 ($0.37) in 2018.

It is alleged that on January 2, Kenyan authorities seized 43,000 kilos of milk powder and another 21,600 litres of milk on January 7.

Later, on January 11, they seized 79,200 litres of milk and consignments of Lato brand totalling to 11,310 kilos of milk powder and 161,832 litres.

The Ugandan Ministry said in the protest note that the “illegal seizures” were executed despite the fact that the goods had been cleared for entry by the Kenyan Ministry of Agriculture, Livestock and Fisheries, the Kenya Revenue Authority, the Kenya Dairy Board and the Kenya Bureau of Standards among others.

“The Ministry would like to request the government of Kenya to immediately release the seized consignments of Lato branded milk as they were duly cleared by the relevant Kenyan government bodies for importation into Kenya and are not contraband, substandard and counterfeit as alleged,” the statement read.

The Ugandan government also urged the Kenyan government to cease any operations targeting Ugandan made milk exported to Kenya and also refrain from any actions against Uganda’s exports to Kenya, be it milk or any other products, that contravene the EAC Customs Union Protocol and Common Market Protocol.

Data presented to the Kenyan Parliament recently shows that milk imported from EAC, with the most volumes coming from Uganda, hit 110.7 million litres between January and September last year, from three million litres in 2016.