Why Kenya’s trade pact with Uganda may come at a price

The jury was still out yesterday as to whether Kenya may have got a raw deal from the flurry of economic pacts signed with Uganda during President Yoweri Museveni’s three-day visit. While some praised President Uhuru Kenyatta’s success at gaining his counterpart’s backing for the extension of the Standard Gauge Railway (SGR) to Uganda in what is likely to unlock its funding from China, others felt this may have come at a much higher cost in the long run.

The two leaders on Wednesday closed ranks on the need to extend SGR to Kampala via Malaba, ending months of uncertainty over the financing of the cross-border railway. China Exim Bank has maintained that Kampala has to get Kenya’s commitment to building the rail from Kisumu to Malaba as a pre-requisite for securing funding for the line running from Kampala to the common border.

The standoff had prompted Uganda to shelve plans to build an SGR line connecting the capital Kampala with Malaba town. While the deal was seen as a win for Kenya in its bid to increase exports to the landlocked country, it had to make concessions that analysts and the wider Kenyan public deem detrimental to the economy in the long-term.

President Kenyatta in return offered the Ugandan President land in Naivasha to build a dry port, conceded to allow a tripling of sugar imports from 36,000 tonnes to 90,000 tonnes and resumption of poultry imports that had been halted over concerns of avian flu. He also promised follow-up talks that would eventually see Ugandan dairy farmers allowed to export more produce to Kenya with less paperwork and have Kenya buy pharmaceuticals from Uganda.

Uganda would for its part lift the ban on Kenyan beef also blocked over mad cow disease which is currently only a Sh370 million trade and halt charging duties on fruit juices. Analysts reckon Kenya may have ceded too much ground in its quest to secure the SGR deal, with Kenyatta’s dalliance with Museveni likely to rub off Rwanda, another key trade partner,

the wrong way. Early this month, President Kenyatta travelled to Rwanda on a two-day working visit where he met President Paul Kagame who had just held private talks with Tanzania’s John Pombe Magufuli and South Africa’s Cyril Ramaphosa over the simmering Kigali-Kampala border tiff.
“Kenya should be very careful because we have more to lose if the situation escalates because we need both of them,” said an economist with a regional firm. Institute of Economic Affairs Chief Executive Kwame Owino said Kenya would not gain anything by playing partisan in the conflict.

“This is an opportunity for Kenya to be the bigger “person” and bring all the countries together,” said Mr Owino. Director of Petroleum Focus Consultants George Wachira said despite the SGR deal, it would be difficult to achieve the same fete on the planned regional oil pipeline in which Uganda holds all the cards. “Uganda is committed to the Tanzania route.

What they have not agreed on are the tariffs, so that one is gone, we have also advanced with our plans,” Mr Wachiara said. However, East African Community and Regional Development Cabinet Secretary Adan Mohamed lauded the deal. “The key highlight was that when President Kenyatta took over, it took three weeks for cargo to reach Uganda, it now takes one week and by the end of the year, it will take two days courtesy of the SGR and cargo handling.”

Source: Standard Digital Kenya