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Bilateral talks could resolve rumbling fight over dairy and sugar trade

A much-needed diplomatic mission could repair the ructions at the heart of East Africa's single market project

Officials from Nairobi are to travel to Uganda next month to verify disputed claims over milk and sugar imports as one of the major trade fights in the East African Community edges towards resolution.

Behind the scenes, the accelerating growth of Uganda's agricultural sector in the region alongside the power of Kenyan finance capital could push both governments to a resolution.

Dairy-farming is a matter of high politics in Kenya. President Uhuru Kenyatta's family has a 50% stake in Brookside Dairies alongside France's Danone with 40% and Dubai's Abraaj Capital with 10%. Brookside controls about 45% of Kenya's processed milk market but controls a substantial segment of the Ugandan market following its takeover of Naushad Merali's Sameer Group holdings in the country in 2015.

Kenyan officials have complained that Ugandan traders are importing sugar from Brazil and reselling it to Kenya as a Ugandan product. Kenya has cut sugar import quotas from its neighbour by almost 80%.

In August, Kenya slapped a 7% levy on milk imports from Uganda, citing concerns that its neighbour is importing powder that is then turned into milk and exported across the border (AC Vol 62 No 20, Rivalry holds back the region). Analysts say the levies were trying to curb Uganda's dairy exports, which have trebled in value between 2015 and 2019.

'Uganda is supposed to export milk to Kenya but there is a problem that will be resolved soon,' said Hassan Wasswa Galiwang, Uganda's High Commissioner to Nairobi.

Kenya's protectionism is hurting its neighbours but there is little sign that the East African Community (EAC) Customs Union Protocol, which supposedly stops such tariffs, will be enforced.

Data from the Kenya National Bureau of Statistics showed that the value of the country's exports to East Africa between April and July came to 25.97 billion Kenya shillings ($234m), 56.6% more than the same period in the previous three years.

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