Are colonial Kenya laws affecting business?

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? ***