VENTURES 10 APR 2020
Kenya’s government has unveiled a new set of regulations guiding the dairy industry, in response to cries from farmers who termed last year’s controversial draft punitive and draconian.
The revised laws prevent milk processors in the country from setting and adjusting farm gate prices arbitrarily in the event of a shortage or glut, The EastAfrican reported, with a view to cushioning dairy farmers whose fortunes have been on a decline in recent years.
The agriculture cabinet secretary and the Kenya Dairy Board will now determine the minimum farm-gate prices based on factors such as cost of production, transport and statutory deductions. Price controls will also be introduced to protect farmers from exploitation by processors. “We have been pushing for predictable pricing for raw milk and farmers will not complain if the prices are set fairly,” said Gideon Birgen, chief executive of Kenya’s Dairy Farmers Association.
Beyond the issue of pricing, however, farmers in the country have had to deal with an influx of cheap dairy imports from regional neighbors, a problem that has threatened to collapse the once-thriving industry.
In response, the government has slapped a 10 percent import levy on dairy products to protect the local industry from unfair competition, in addition to other stringent conditions for importation to stop dumping, particularly from Uganda.
Authorities seem to have had enough after giving in to pressure from farmers, who continue to demand protection from cheap milk exports amid rising stocks. But the protectionist move by the government is unlikely to go down well with Kampala, Kenya’s largest trading partner in the region, with whom a trade war has been brewing for some time now.
The milk row between both countries has taken many turns.
First Kenya, through the Trade Ministry, had sought a tactical ban by introducing a 16 percent duty on all milk exports from Uganda as part of measures to protect the local dairy sector. But before it could materialize, President Uhuru Kenyatta repealed it, limiting the levy to milk imports outside the East African Community.
The Kenya Revenue Authority then seized milk produced by Uganda’s Pearl Dairy, a move which Kampala protested but said was not going to hit back at, despite calls on President Yoweri Museveni for retaliatory action.
There is no telling if Uganda will be able to overlook Kenya’s moves any longer with much of its milk targeted through seizures or return of truck-loads of products. Retaliation would take many forms, including targeting a number of goods from Nairobi, such as juices, household items or building materials in a similar protectionist stance.
The EAC is supposed to be a free market where local products move duty-free between countries. But the escalating trade dispute between Kenya and Uganda over milk exports is just one of many cases in the region. Over time, Tanzania has shut its borders to Ugandan timber, sugar, and maize, while Kenya, which is open to imports of maize and beans from Uganda, has been reluctant to open its market to manufactured products from Kampala.
It underlines critical gaps in the existing regional integration framework that could potentially harm the economies, experts say, warning that unless resolved early, these trade tiffs could affect the region’s growth and investment profile.