He argued there needs to be formal processes of tracking the origin of material, and checking the certificates of country origin for authenticity.Īccording to Olam’s CFO for southern and eastern Africa, Bikash Prasad, informal trade makes up around 43% of the continent’s GDP and imposes numerous challenges to the viability and sustainability of genuine corporations. “If you have heavy investments in projects to produce a certain amount of sugar for a country, and suddenly there are illegal imports flooding in, it can blow you out of the water.”Īt last month’s Africa Trade & Export Finance Conference in Cape Town, Ian Henderson – a metals consultant at commodities trader Gunvor – said similar illegal trade takes place with minerals being smuggled across borders and smelted elsewhere. And George noted it can be a huge threat to companies operating throughout the supply chain. This illegal trade has been triggered by the abuse of overlapping trade regimes, which can be difficult to deter. The dispute has only recently been resolved, with Kenya agreeing to raise its quota for sugar imports from Uganda to 97,000 metric tonnes, equal to nearly half of its import requirement, according to Ecobank’s research. “Uganda took them to the tribunal of the EAC about this, saying it was unacceptable,” recalled George. Kenya’s sugar sector, already struggling to be commercially viable, quickly experienced an influx of cheap imports which resulted in the government banning all sugar imports from Uganda in 2012.īut Uganda argued this was a violation of EAC trade rules.
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And by doing this you can avoid taxes of between 20% and 40%.” “The problem was that some traders, unscrupulous traders, imported duty-free into countries like Uganda and Tanzania and then re-bagged the sugar, claiming it was Ugandan and Tanzanian sugar before exporting it duty-free to Kenya under the EAC. “So a deal was done, allowing members of COMESA to import sugar from the world market duty-free to make up for the shortfall,” explained George, adding there is normally a large duty on these imports. However, a severe drought a few years ago led to a drop in production and supply in the region. The country has imposed a quota on how much sugar can be imported duty-free from other EAC and COMESA countries, the idea being to limit the volumes of cheaper imports and enable the reform its own sugar industry. One prominent example can be seen in Kenya’s sugar sector which suffers under high production costs that make it difficult to compete with imports from neighbours.
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Tanzania is not a member of COMESA, but is of both the EAC and the Southern African Development Community (SADC).Īccording to Ecobank’s head of research, Edward George, this almost “spaghetti bowl” of cross-over membership between trade blocs can – and is – causing problems with illegal trade. For example, Uganda and Kenya are both members of the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC). Some African countries form part of multiple trade blocs. Africa’s “spaghetti bowl” of cross-over membership between trade blocs can – and is – causing problems with illegal trade, highlighted Edward George, Ecobank’s head of research.