Kenya slaps tax on Ugandan milk

Kampala, Uganda | THE INDEPENDENT  |  Ugandan milk crossing over to Kenya will be charged 16% Value Added Tax (VAT) as a measure to protect their local market.

This week, Kenyan officials were in Uganda for a verification exercise to see whether the glut of milk entering their country was actually being produced in Uganda.

Uganda trade ministry officials could not disclose what was deliberated on in the Kampala meeting. But Kenya’s Principal Secretary in the department of trade Chris Kiptoo told Kenyan media on Friday evening that they “deliberated on possible measures to remedy the concerns of Kenya and agreed that VAT be imposed on milk imports into Kenya”

When contacted this week, Uganda Dairy Development Authority boss Dr. Jolly Ziribwedda played down the issue Kenya has with Ugandan milk, telling us “all was well.”

Uganda has seen its milk production grow tremendously with reforms in the dairy sector to 2.6bn litres a year in 2018.

At least 144million litres are sold in Kenya every year, according to industry estimates. Kenyan companies like Brookside and Fresh Dairy are big processors of milk exported there.

But Kenya has seen its production leap up to more than 5bn litres a year. In particular, production has been so high from April this year because of favourable conditions, depressing local prices but also prompting the country to look for ways to protect local farmers.

The tax means Ugandan milk will be more expensive in Kenya, compelling consumers there to go for the local ones. On the Uganda side, it means more depressed prices for the dairy farmers who are already crying over the Shs 400 per litre they are earning. Milk prices have fallen from the Shs 800 per litre at the start of the year.

In October, President Museveni told dairy farmers that he had secured a market in China. This is yet to come through.

Milk is one of the thorny issues that East African countries are battling with for a while, many having to bend the east common market protocol provision of the free flow of trade to protect their market.

In 2010, Kenya blocked milk from Uganda to protect fits farmers. In 2017, Tanzania placed a $0.9 tax on every litre of milk from Kenya to protect its farmers.

This year, each country is looking to protect its own.

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