The real
issues… [Last year 2012
article rejected by Daily Monitor – as sensitive material]
Are colonial Kenya laws affecting
business?
Sam Mwaka-karama
Debatable
recent events emanating from the Mombasa Port Authority actions; stepping-up
port charges on cargo haulage – triggers questions as to whether Kenya’s
industry protection laws that stem from ancient statutes of British colonialist
legislature are the devises actually affecting economic progress in Kenya and,
sending Kenyan businesses to set-up import shops in Uganda.
The run-away
Kenyan companies now registering and setting-up in Uganda, need the front shops
here in Kampala and indeed Ugandan towns
generally, so as to take advantage of both the EAC economic union principles
and Uganda’s liberal import and export policies; they, the Kenyan companies
also again take advantage of the clearly unfair and ill-formulated exchange
rates between Kenya shillings and Uganda shillings (Most Ugandans ‘wa-ordinary’
have never actually understood the basis for the ill-balanced exchange rate
between Uganda and Kenya).
The Kenyans
utilize the (20+ to 1) money-rates advantage (on capital transfer) and utilize
Uganda’s free import trade atmosphere to greater advantage over Ugandan
companies… for direct import of goods
from countries like Malaysia, Singapore, Indonesia and other ASEA countries
some of who [seem to] have no preferential trade pacts with Kenya.
The goods
imported by the Kenya companies through Mombasa as transit goods to Kampala…
wind-up re-exported to Kenya on new EAC tariffs [before the ‘free-tariffs’
latest terms came in force] updating customs regulations, which are principally
favorable between the member states of East Africa. But more and more eventually
disadvantageous to Uganda!
First of all
– goods from overseas countries that have no preferential trade treaties with
Kenya… eventually accepted into Kenya as re-exports by Kenya companies based in
Uganda, negates the very existence of the ancient protectionist laws… if you
don’t accept certain category of direct imports, why should you accept - the
same - as second country re-export under EAC?
As a result
Kenya has become a rather heavy burden on our country – considering fact that
all the imports paid for through Uganda’s exchange control foreign trade rates,
made by Kenya companies based in Uganda, have to re-export to Kenya – nearly at
zero tariff under the EAC.
In Tea Export
- Kenya has imposed at the port of Mombasa for decades upon decades – a tea
auction system, where Uganda’s tea has always been trapped, declared as of low
quality and bought by auction to obviously be later repacked as “Blended” Kenya
Tea.
Again and
again - considering exchange rates that are perennially disadvantageous to
Uganda against Kenya shillings – it is debatable if the economics, at the end
of the day, might not work-out burdening Uganda economy instead. In practical
terms, the capital markets fiscal rates and finances might look to the
economists very much balanced and desperately competitive – but we Ugandans
might still yawn due to sapped strength.
Even bad as
the Kenya import policy is biased towards protecting the mostly British and
American or European founded industries and other Investments (that might in
this age and times have majority share holders from the Arab World or Asia
etcetera) play a modern game by ancient rules since Central Bank of Kenya is as
well still said to be largely rooted in the 1980s restrictive ‘Exchange
Control’ – with very limited and actually tourism rated ‘Bureau de Change’
system still reputed to be in force.
Liberalization of exchange
control
Uganda
started its liberalization of the foreign exchange system way back in the early
1980s, when the ‘Obote 2’ government introduced the “window two” all bidders
foreign exchange accessibility; if you wanted the (at the time) limited foreign
exchange that badly, you paid more than the official rate, then termed ‘Window
1’. Some Kenyan traditionalist economists, at the time, criticized [even laughed]
at Obote’s ‘window 2’ system. Whose line was never towed then by Kenya. The
last three decades the Kenyans have remained rooted in the old principle –
perhaps that is why Uganda shillings remain perennially disadvantaged against
the Kenya shillings.
However,
Obote’s ‘window 2’, became Museveni’s 1990s “Forex Bureau”. Bank of Uganda had
come-up with the liberalizing policy – to move ‘window 2’ onto the streets and
bazaars…
Impact of the
‘window 2’ factor was immediate way-back in the 1980s. First to benefit was
Uganda Airlines, with several local travelers beefing-up its carriage to
London, Bonn/Cologne, Brussels, Rome and Dubai. Ugandan traders utilizing
‘window 2’ created many businesses between those European countries and later
still when Uganda Airlines opened-up the Dubai route, Ugandans boomed! Soon, a
Uganda Golf team went-out and played in Dubai – Ezra Bunyenyezi, a long time
renowned Travel agent owner of Uganda Travel Bureau, was billed with innovating
that ground breaking Dubai golf tour, together with others including Zia
Moshin, a Pakistani travel expert who was Uganda Airline representative in
Dubai in the 1980s.
Museveni’s
1990s “Forex Bureau” policy that threw ‘window 2’ onto the streets, set the
next phase of Uganda’s traveling trade. And there has been no looking back
ever since. Uganda’s biggest problem though, has been Kenya’s internal industry
protective laws… that has somehow unfairly kept Kenya’s exchange rates too high
against Uganda shillings, what makes business lucrative for Kenyans based in
Uganda and disadvantageous for Ugandan business men, or virtually impossible
for Uganda businesses to equally flourish in Kenya – for those who might want
to do business in Kenya.
For example
Kenya’s products are generally more expensive in Uganda shops, than imported
versions from ASEA countries – it does not make sense at that exchange rate
between Uganda and Kenya shillings, to buy consumer products from Kenya sold by
the trick of packaging! Like a Kenyan tooth paste tube selling at a price close
to that from Indonesia or Singapore – will be smaller in size, while the
packaging might look to be nearly of the same size… that is tricksterism in
marketing! A tooth paste from Tanzania beats the Kenyan one in size, price and
quality…
Recently
Kenya’s Port Authorities have been challenged by the Kenyan importers based in
Uganda who triggered that debate… otherwise those port charges rates now [which
was] in debate in Kenya are killing business with the South Sudan as well and,
affecting Rwanda’s businesses… one might imagine that Kenya having a much
larger port should have a more friendly ports charges to the neighboring member
states of the EAC, not to be seen as undermining the other members.
So that it is
Uganda’s liberal import and export policies that has generally become central
to the harmony of business within the region’s hub – otherwise given the
uncertain status quo Kenya might have to redress much more than it might ever
have imagined possible.
Kenya’s
Members of Parliament are [were]said to be set to walk away with about 9Million
Kenya shillings at the end of a term. That is about or a little less than
290MillionUgx equivalent - in Uganda that will buy two small three and two
bedroom mansions in an estate like Akright or Kensington or even Jomayi. While
in Kenya that would build not less than six three bedroom mansions…
The economics
of pricing building materials in Uganda and that of Kenya are two really very
different formats - Uganda economists might yet have to scratch their heads
about. While the building industry is picking-up with the baby elephant
strengths all over the Region, a huge bulk of the building materials originate
from Kenya industries - shouldn’t Kenya now redress its colonial laws and, make
life a little easier for the other neighbors also? ***
