How Uganda is set to benefit from Kenya – Tanzania ‘economic war’

How Uganda is set to benefit from Kenya – Tanzania ‘economic war’
President Museveni and Tanzania's President Samia Suluhu before the signing of the Host Agreement on the oil pipeline. Experts say Suluhu is eager to work more with Uganda.

Kampala, Uganda | URN | Experts believe Uganda could benefit from the East African Region “economic war” between the two local giants, Kenya and Tanzania.

A fight for Uganda’s cargo has emerged in the past two years, with Kampala seeking to take advantage of the war, by tabling new conditions.

Apart from air, Uganda can only be connected to the rest of the world by rail or land through these two countries involved in the economic tag of war. For purposes of trade, Uganda is connected either through the major ports Mombasa and Lamu in Kenya or Dar es Salaam and Tanga in Tanzania.

While the government says as it considering ways of increasing the volume of cargo through Tanzania, it wants Kenya to give Uganda better terms of using Mombasa, than what other hinterland countries have.

This ‘economic war’ is not new because the two biggest economies in East and Central Africa have been at it even before independence.

What has changed however, is what Tanzania’s approach is under Hassan Samia Suluhu , since she became president in April this year in a sudden change of things in her country.

Her predecessor, John Pombe Magufuli appeared outright bent on putting Tanzania first in everything, even if it meant threatening the East African integration process.

He hijacked the opportunity that Kenya had to host more than two thirds of the East African Crude Oil Pipeline, when he convinced Uganda would benefit more if the pipeline was routed through Tanzania to Tanga Port.

Magufuli left almost no room for negotiation when he felt the economic fortunes of his country or citizens were being threatened.

He banned Kenyan flights to Tanzania when the former advised that Tanzanians entering the country would be quarantined due to the absence of measures against Coronavirus in their country.

Magufuli also auctioned thousands of head of cattle owned by Ugandans and Kenyans for allegedly crossing into Tanzania.

On the contrary, Uganda and Kenya, for example have mutual frameworks to handle cross-border grazing.  In fact, Uganda government constructs and maintains valley dams in Karamoja for the use of herdsmen both in Uganda and from Kenya.

Now, President Suluhu Hassan prefers to talk over regional trade, cross-border movement and regional infrastructure.

She has since taking office visited Uganda, Kenya and Burundi, where she said the visit was aimed at reviving the old friendly ties between the two countries.

She also signed eight economic, social and political development agreements with her host, Everisto Ndayishimiye.

On her first visit to Kenya in May 2021, she, together with her host Uhuru Kenyatta announced the signing of an agreement to transport liquefied petroleum gas from the Kenyan port of Mombasa to the Tanzanian city of Dar es Salaam.

Uganda wants to reduce its reliance on Kenyan ports, especially for the supply of petroleum products, and this means taking more cargo through rival port Dar es Salaam.

Uganda ships 85% of her imports and export through Mombasa, but also accounts for more than two thirds of the market for Kenya’s ports, with other users being South Sudan, Democratic Republic of Congo and Rwanda.

Earlier this month, Uganda Railways Corporation carried out a pilot exercise, shipping half a million litres of fuel through Dar Es Salaam to Port Bell.

This is aimed at advising government and the private sector on what decisions to take regarding importing or exporting through the central corridor.

Though Dar es Salaam or Tanga, cargo can be shipped by either rail and water or road and water or a combination of the three models of transport.

Uganda Revenue Authority’s Assistant Commissioner External Operations, Julius Rubagumya says that apart offering completion between the Central and the northern corridors, it is always good to have alternatives.

He observes some unfair terms in using the Kenyan route like the little time allowed to keep the goods at Mombasa before they start incurring storage charges.

He says that Uganda must take advantage of the developments that are happening in the region in terms of infrastructure and other programs.

The trial shipment through Dar es Salaam by Uganda also means that if rolled out, Kenya could lose the 13% market for refined petroleum products which Uganda provides.

Two years ago, Kenya invested almost 1 billion dollars in improving facilities at Eldoret and Kisumu to ease transportation of petroleum products to Uganda, and also developed an inland port at Kisumu meant for other cargo from Uganda.

Read Also: Uganda, Tanzania sign major oil agreement fulfilling Dr Magufuli’s pipeline project

Ugandans however rejected the Naivasha facility as not economically viable for them. As this was going on, Tanzania has also been importing the port facilities at Dar-es-Salaam, as well as negotiating lower tariff and other charges with Uganda’s revenue authority and the private sector.

This is also being supported by the road and rail system the country is building from Dar-es-Salaam to the Lake Victoria and also to the border with Rwanda.

Despite the central corridor being much longer for Ugandan cargo moving between the country and the sea, these developments are aimed at making transportation cheaper and safer compared to the northern corridor in Kenya.

For now, the Ugandan authorities agree that Kenya still has better facilities, but Rubagumya says they just need alternatives.

But with the revived oil and gas sector development in Uganda, it is expected that more importers and transporters will be attracted to follow the central corridor because of the improved infrastructure along the crude oil pipeline.