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Tanzania hits Kenya with eggs, sausage, milk taxes
Tanzania’s President Samia Suluhu Hassan (left) having a conversation with her Kenyan counterpart William Ruto at the 24th Ordinary Meeting of the East African Community (EAC) Leaders held at the Arusha International Convention Centre (AICC) in Arusha, Tanzania on November 30, 2024.
What you need to know:
- The return of trade barriers at a time when the Kenyan shilling has strengthened against regional currencies has cut earnings for traders trucking goods to the neighbouring country.
Tanzania has hit Kenya with fresh protectionist levies on eggs, dairy and meat products, and confectionery like biscuits, upsetting East African Community (EAC) Customs Union’s rule and cutting exports earnings for traders.
The tariff barriers threaten to reopen another round of on-and-off frosty trade ties between the two countries, which had shown signs of thawing in recent months.
Kenyan manufacturers have blamed the “discriminatory taxes” by authorities in Dodoma for a Sh4.2 billion fall in domestic exports earnings from goods sold to Tanzania last year, the first drop in eight years, except the Covid-19 pandemic period in 2020.
Tanzania is charging sugar levy at the rate of Tsh1,000 (about Ksh50) per kilogramme on Kenyan-made confectionery such as sweets, biscuits and chocolates, a fee which does not apply to locally made products.
Kenyan-made dairy products such as yoghurt, ice cream, cheese and butter also attract a Tsh1,000 levy per kilogramme or litre, about 19 times more than Tsh50 for similar locally made products.
The Kenya Association of Manufacturers (KAM), the sector’s lobby, further says that Tanzanian authorities have slapped a 25 percent excise duty on exports of hatching eggs to Kenya, contrary to the spirit of the EAC Customs Union.
The higher charges have made Kenyan products more expensive and less competitive in Tanzania, hurting their sales in East Africa’s largest country by population.
“(Tanzania imposed) discriminative taxes on confectionery, dairy products and meat products such as sausages,” KAM said via email.
“That means what is being charged to Kenyan products is higher than what is charged to [Tanzanian] nationals.”
The EAC Customs Union Protocol, signed in 2005, allows free movement of goods, services, capital and labour within the seven-nation trading bloc, making it a free trade area with zero duty on domestic goods and services and a common external tariff on imports.
The return of trade barriers at a time when the Kenyan shilling has strengthened against regional currencies, including Tanzania’s, has cut earnings for traders trucking goods to the neighbouring country.
Trade data released by the Kenya National Bureau of Statistics (KNBS) showed the value of domestic exports to Tanzania fell 7.36 percent to Ksh51.84 billion in 2024 from Ksh55.96 billion in the prior year.
That marked the first fall in earnings from total goods sold to Tanzania since 2017, when protectionist policies imposed by then President John Magufuli resulted in a 17.72 percent drop to Ksh29.27 billion.
This analysis excludes the year 2020 when the value of exports to Tanzania also contracted 6.0 percent to Ksh31.83 billion on transport restrictions to curb the spread of Covid-19 infections.
“There is a need to enforce time-bound resolution of NTBs (non-tariff barriers) to eliminate injury to local manufacturers,” KAM said.
Nairobi has over the years been involved in persistent trade rows largely with Dodoma and Dar es Salaam (previous capital city) over tariff and non-tariff disputes, prompting intervention by respective ministers and sometimes heads of state.
Last August, for instance, Kenya’s Agriculture and Food Authority imposed a 2.0 percent levy on the customs value of cereals and legumes from Tanzania, sparking protests from traders. The move was temporarily shelved to allow stakeholder engagement.
Tanzania had earlier in February 2024 temporarily suspended issuance of new tea import permits for Kenyan traders, citing concerns about the quality of consignments.
The tiff was, however, resolved after then Kenya’s Trade Principal Secretary, Alfred K’Ombudo, held talks with Tanzania officials in Arusha.
“Countries usually want to make sure that you demonstrate that this is a product from East Africa, and not a product from other places that’s being paraded and packaged as an EAC product. We will never eradicate that kind of issues as long as there are traders who try and do some of these malpractices,” then EAC Affairs Cabinet Secretary Adan Mohamed, now a senior official under President William Ruto’s Council of Economic Advisers, said.
“The principle behind having a customs union is that no business is being disadvantaged. You don’t give other people an unfair advantage to get access into EAC without enjoying the same benefits.”
Provisional trade data shows Kenya’s annual earnings from goods sold to key African countries dropped for the first time in six years, shining the spotlight on the competitiveness of the manufacturing sector amidst the strengthening of the shilling against major international currencies.
Traders earned an estimated Ksh421.34 billion from goods exported to other African countries in 2024 compared with Ksh429.69 billion in the prior year, bucking a trend of sustained growth since 2019.
The marginal 1.94 percent, or Ksh8.35 billion, drop came in a year the shilling gained about 17 percent against the US dollar, the most used currency in international currency, meaning earnings shrank when converted into shillings.
