Investigations by the Nation in Nairobi and three main border points — Isebania, Namanga and Loitokitok — revealed a booming illicit trade in farm produce, which is hurting farmers’ bid to earn a living.
While produce from the East African Community (EAC) member states is not taxed, as per the trading bloc’s protocol, traders at the border points — impatient to make profit from the thriving business — collude with police and customs officials to avoid the necessary checks.
Between January and February 2018 alone, Kenyan traders imported more than 77,500 tonnes of maize from its neighbours, according to data from the Regional Agricultural Trade Intelligence Network (Ratin), earning Ugandan and Tanzanian farmers some Sh3.1 billion in cash.
One of the boxes to be ticked at the border point is the certificate of origin to ensure only produce from the EAC member states benefit from import duty exemption. But with the illicit trade, one can never be sure, with reports that some of the maize ending up in Kenya actually comes from Malawi and South Africa.
Maize, sugar, rice, finger millet, Irish potatoes, beans, onions, fruits and eggs are among the products in high demand.
Much of Kenya’s farm produce is uncompetitive thanks to poor soil, high costs of inputs and politicisation of crops like maize, whose market benefits well-connected individuals at the expense of farmers.
Decades of cultivation, often growing one crop, with one type of fertiliser have virtually killed farming even in the once high-producing areas.
Enter taxation of inputs and farm machinery plus lip service to irrigation and the unholy mix makes Kenya’s agriculture one of the least profitable in the world. At 1.6 tonnes per hectare, maize output is way below Uganda’s six and the global best of 12 tonnes.
Reintroduction of 16 per cent VAT on fertiliser and crop and animal protection products is expected to further dampen Kenyan farmers’ fortunes.
“Kenya has introduced taxes on agricultural inputs, a thing that no other country in the world has done. In fact, other countries subsidise agricultural inputs to encourage production,” notes Mr Gerald Masila, the East Africa Grain Council executive director.
Kenyan farmers, he says, will not compete fairly with farmers in Uganda where the machinery and diesel are far cheaper.
Potato is the second most important staple food after maize, yet currently up to 80 per cent of the commodity consumed in Nairobi comes from Southern Tanzania, according to industry experts. And, despite travelling up to 1,500km, it ends up in Nairobi’s Marikiti market cheaper than the variety produced in, say, Ol Kalou, less than 100km outside the city.
Yesterday, a kilo of Kenyan potatoes went for Sh110 while the Tanzania crop cost Sh100.
Onions and tomatoes, too, are popular. “We usually sell the Tanzanian onions much faster than the local or Chinese variety because they are cheaper,” said Mr Joseph Kiarie at Marikiti. A 40kg net goes for Sh3,200 while the Kenyan variety costs Sh3,600.
A Nation team that visited the busy market this week was told to order for the stock in advance.
Kenya opened One-Stop-Border Posts (OSBP) as part of the East African Community Protocol’s desire for easier movement of goods and people.
And while goods are supposed to pass after being inspected, most of them come in after traders pay bribes to customs officials or through panya (unofficial) routes.
The latest addition to the growing list of produce smuggled from Tanzania is fish despite Kenya hosting a large body of Lake Victoria waters. Tilapia from the Kenyan side goes for between Sh400 and Sh600 apiece, depending on size, while similar fish from Tanzanian tilapia costs as little as Sh200.
To import agricultural produce officially, traders must get a licence and undergo rigorous clearance at the border point.
The process begins with clearance with Tanzanian customs offices. On the Kenyan side, goods are inspected by Kenya Bureau of Standards to ensure they adhere to health standards. The goods then go through Kenya Revenue Authority, which determines the import duty to be paid if they originate from outside the EAC. All these services are under one roof at the OSBP.
But traders say this is a tedious process that takes several hours, leading to huge losses as their goods go bad.
To move in their goods without scrutiny or to pay smaller bribes, traders use many tricks. One popular way is to buy goods and distribute them among several boda bodas who carry them across unofficial routes.
“We co-ordinate on the phone their movement as we wait for them on the other side,” revealed a trader who has been in the business for nearly 10 years.
Police collect bribes from the cyclists, as opposed to dealing directly with the traders. Once safely on the other side, the goods are loaded onto pickup trucks or lorries.
So protective are traders of their business that attempts by our team to discreetly take photos at one of the panya routes at Isebania were thwarted. The traders roughed up our photographer and confiscated his camera. It took police intervention to save him from further harm, but not before he was told to delete all the photos.
The effect of the influx of cheap imports is low morale on Kenyan farmers. Ms Susan Kong’ato from Uasin Gishu County says she invested Sh2 million to farm 35 acres in 2018 and harvested 960 bags. “But the high cost of production and lack of market have forced me to cut down to 20 acres,” she says.
Kenya can’t also meet its demand for other major foodstuffs. Last year, demand for wheat stood at two billion tonnes as the country produced just 165,000 tonnes. Demand for rice stood at 706,000 tonnes against a local production of 81,000 tonnes.
“I’ve never dealt with Kenyan goods. I make good profit with Tanzanian eggs and rice. If they are banned, I will definitely close my business,” a Kenyan trader told us at Isebania.
The trader, who has also previously dealt with maize, says the situation is the same in Busia where maize, eggs and sugar enter Kenya easily.
Kenya has lifted the ban on Ugandan poultry products following bilateral talks between Presidents Kenyatta and Yoweri Museveni. This means that Kenyan farmers can expect stiffer competition in an unequal market.
But it is not only agricultural goods that are smuggled across the border; beer and other drinks flow freely as they are far cheaper in Tanzania. In Kenya, for instance, half a litre bottle of Tusker lager costs Sh200 at an average joint while across the border, Kilimanjaro Lager will cost you only Sh70.
That there is little or no scrutiny at the border means anything goes as all manner of imports come in. There are fears that trade, especially in maize, is fuelled by well-connected individuals who import from places like Mexico when the window is opened.
Our investigations revealed that between 10 and 15 trucks loaded with maize leave Arusha alone for Namanga daily.
There are four other border points on the Kenya-Tanzania border: Isebania, Ilasit-Loitokitok, Taveta and Lunga Lunga.
Some of the traders we interviewed blamed the customs office at the border for driving trade underground with their high-handed ways.
KRA officials have never bothered to do public education or speed up their checks, it is claimed. “Instead, what happens routinely is confiscation or a process that takes as long as 24 hours to have your goods cleared,” a trader lamented.
Our attempts to give KRA a chance to comment were unsuccessful as our messages and emails went unanswered.
But it is not only from East Africa that Kenya imports its agricultural produce. Up to half of the garlic consumed in the country now comes from China.
Dr Tim Njagi, a development economist at the Tegemeo Institute, says farming in Kenya is uneconomical because of its land policies that favour speculation as opposed to production.
“We need to encourage consolidation and discourage subdivision,” he says.
While Tanzanian produce flows in freely, it has become extremely difficult to have Kenyan goods get to its southern neighbour because of stringent rules. In January, Tanzania slapped 25 per cent duty on Kenyan confectioneries.
Yet Kenya can’t replicate the hostility because it is a signatory to the World Trade Organization rules, which require countries to open their markets to foreign players as per existing bilateral trade protocols.
“EAC laws, for instance, demand that no taxes are imposed on goods from the region at any of their borders,” Agriculture Principal Secretary Hamadi Boga told the Nation.
He said his ministry is working on reducing the cost of production so that local farmers can compete favourably within the region.
Additional reporting by Zephania Ubwani, Aggrey Omboki and Anita Chepkoech.