Kenya and Uganda, two members of the East African Community (EAC) are embroiled in a tussle after Kenya seized products by a milk brand based in the neighbouring country.
The Kenyan government is accused of impounding milk products worth Sh36 million (US$ 360,000). The products include 43,000kgs of milk powder and 262,632 litres of milk by the milk brand owned by Pearl Dairy Farms Ltd.
Uganda complains that Kenya is violating the East African Community (EAC) protocol by seizing the products.
Kenya’s leading trading partner
In a letter on January 15, Uganda said, “The Government of the Republic of Uganda protests the manner in which authorities in Kenya have continued to deliberately constrain and impose unwarranted restrictions on the smooth importation of Uganda’s milk and milk products into Kenya and is deeply concerned about the illegal seizure of Ugandan-made milk under the Lato brand by authorities in Kenya on allegations that they are contraband, counterfeit and sub-standard.”
The Kenyan government is yet to respond to the demands by one of its leading trading partners, Uganda, which imported goods worth Sh61.9 billion last year.
Data from the Kenya National Bureau of Statistics (KNBS) shows that the landlocked country pushed total transit volumes by 10 per cent from 8.6 million tonnes in 2017 to 9.6 million tonnes at the port of Mombasa in 2018. This volume accounted for more than a quarter of business at the port.
Kenyan farmers have for the past few years been complaining about unfair trade practices which are killing the country’s agricultural sector.
The milk sector has been the hardest hit where the gate prices for a litre of milk have been on a decline. A litre has been retailing for as low as Ksh 18 making the country’s farmers feel the heat since the cost of production has been going up.
To pacify the situation, on Tuesday January 14, President Uhuru Kenyatta announced that he was moving his focus to the economy which he said should be more important than politics.
On the agricultural sector, especially, Kenyatta said, “To protect our milk producers from illegal imports, I have directed the National Treasury to impose 16% VAT on milk products that have originated from outside the EAC. I have further directed KEBSs, Customs and the DCI to impound any powdered milk or milk products that does not meet Kenyan standards.”
He said that Kenyan farmers have continued to get high milk yields but a surplus in the market has precipitated the low prices for their milk.
“The situation has been exacerbated by the incursion of powdered milk which is smuggled into Kenya from outside our Eastern Africa Region. This has caused financial hardship to dairy farmers.”
In addition to the imposition of tax on imported milk, Kenyatta directed that the National Treasury release Ksh500 million (US$ 5 million) to enable the New KCC to purchase excess milk from farmers and convert it into powder milk. He further ordered the release a further Ksh575 million (US$ 5.75 million) for the works on two New KCC milk plants, one in Nyeri and one in Nyahururu. The two plants, he said, would enhance their processing capacity.
“In sum, my intent is to boost the milk industry with 1.07 billion shillings in the immediate run as a way of supporting their efforts,” he added.
Lato milk seizures in Kenya
The Kenyan government authorities have been busy starting late last year when 3,000 bags of powdered milk and packets of Lato milk were seized on December 27.
This consignment was impounded on claims that it had been smuggled into the country without paying taxes.
In the first week of 2020, Kenya’s Directorate of Criminal Investigations (DCI) detectives seized another batch of at least 20,000 packets of Lato milk and milk powder at a depot in Meru town.
Again, they said the goods were suspected to have been illegally brought into Kenya from Uganda.
And on January 12, 6 lorries were nabbed in Uasin Gishu County ferrying Lato milk. The reason for the seizure as that the consignments were again smuggled into the country. The lorries had 13,000 cartons of milk estimated to be worth Sh7 million.
The government of Uganda says that it is deeply concerned about the “illegal seizures of Ugandan made milk and milk products under the Lato brand, causing heavy financial losses to the company”.
In a protest note, Uganda said that Kenya should be responsible for any products spoilage and losses incurred after the seizure.
The note adds that Kenyan should address any trade concerns within the EAC and bilateral frameworks.