Kenya, Uganda milk products trade still strained forcing farmers to venture into other sectors

UGANDA – Kenya has in the last one year had trade related tensions with its landlocked neighbour Uganda, especially on milk products, which saw hundreds of tonnes of milk from Uganda confiscated in 2020.

According to statistic shared by Nile Post, Uganda’s milk product exports to Kenya were worth US$ 62.9 million in 2018 but earnings have since fallen to US$30 million.

The trade barriers have made farmers in Uganda to turn away from the once lucrative dairy sector to venture into other activities like beef production and bee keeping due to lack of market for their produce.

Davis Mwine, the chairperson of Rukaku Dairy Cooperative told the news outlet that they used to collect 5,000 litres of milk per day but the figure has dropped to 1,000 litres.

The cooperative supplies the country’s leading dairy processor, Pearl Dairy Farm which is currently operating at 15% capacity and has been forced to lay off workers in turn.

“Now the company can no longer purchase the milk from the farmers because there is no market,” said Bijoy Varghese, the general manager of Pearl Dairy Farm.

In a bid to diversify operations, the maker of Lato milk brand invested more than Ush10 bn (US$2.7m) in a commercial honey production project in 2020.

The initiative seeks to train women and youth in bee keeping to strengthen their capacity to produce more than 1,000 metric tonnes of verified and high-quality raw honey to be sold locally and exported.

The company is also seeking to expanded its footprint into new markets such as Ethiopia, Malawi and South Sudan, already having undertaken the necessary regulatory approvals from the targeted countries.

“Now the company can no longer purchase the milk from the farmers because there is no market.”

Bijoy Varghese – General manager of Pearl Dairy Farm

In the initial phase, PDFL will export yoghurt and milk powder. This was decided after the company carried out conclusive market research that indicated these products will do well in the targeted markets.

With the tensions between the two countries escalating, Uganda’s State Minister for East African Affairs Julius Maganda, recently indicated that his country is not ruling out taking Kenya to the regional court over continued trade blockade of many of its farm products.

To this end the two countries have agreed in principle on a bilateral agreement that could put an end to the persistent trade dispute.

The EastAfrican has learnt that under the agreement, Kenya has agreed to a demand by Ugandan authorities to allow more Ugandan sugar in the country in exchange for relaxation of duty on Kenyan exports of fruit juices and verification fees on pharmaceuticals to Uganda.

A Kenyan delegation led by the Ministry of Trade will be visiting Uganda in April to seal the deal that will increase the amount of Uganda’s sugar exports to Kenya beyond the 11,000 metric tonnes per annum the country has been allocated by the Common Market for Eastern and Southern Africa (Comesa) council of ministers.

In return, Kenya expects Uganda to abolish duty on Kenyan juices and pharmaceuticals that have made these products uncompetitive in the Ugandan market.

Last year, Uganda reneged on an agreement to abolish 12 percent duty on Kenyan-manufactured fruit juices and removal of 12 percent verification fee on Nairobi’s pharmaceutical exports, highlighting that it needed the revenue to meet its annual budget.

Still with the recent deal, there is no mention pertaining to milk trade leaving Uganda’s dairy sector in limbo.

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