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THE REPUBLIC OF MINISTRY OF AFFAIRS

REPORT ON CONTINUED PROHIBITION OF UGANDAN DAIRY PRODUCTS TO ACCESS THE KENYAN MARKET

{.0 INTRODUCTION

Rt. Hon. Speaker and Hon. Members' During the sitting held on 29thJuly,2020 Hon. Tusiime Michael MP (Mbarara Municipality) rose on the issue of National lmportance of the impact of the move by the Kenyan Government prohibiting Ugandan dairy products from accessing Kenyan Markets would have on the East African Community lntegration Agenda.

2.0 Hon. Members, the pre Covid - 19 periods and more specifically the last quarter of 2019 and first quarter of 2020 saw a tremendous decline in Uganda's trade especially in manufactured goods transferred to for the first time in 3 years. This followed a well-designed, sophisticated and systematic effort by Kenya authorities targeting not only finished goods transfer, but also the exponential increase in costs on raw material imports.

3.0 Hon Members, Pearl Dairy is a Ugandan Registered Company exporting milk to Kenya with established stores in; Eldoret, , Meru, Nakuru and Mombasa.

1 Pearl dairy Limited has an investment of over USD 50m and workforce of over 1,500 people. Pearl Diary farm's installed capacity is 800,000 liters per day however currently they are operating with 120,000 litres per day about 15% percent of the installed capacity. The Kenyan market is the preferred target market for Lato milk within the EAC Region; this follows the closure of the Rwandan Border at Katuna in February 2O1g and with 's tariff barriers of Tshs 2,OOO on each diary product making the Tanzanian market uncompetitive for dairy products. ln January 2020 Pearl Dairy Limited Company depots in various parts of Kenya were raided and stock worth over USD 640,000 was confiscated by the Kenyan authorities. At the same time, about 34 trucks carrying milk to Kenya were denied entry and retuned to Uganda. On l6thJanuary 2020, the Company closed all its operations in Kenya. There was also a deliberate smear campaign in the country's media to discredit the brand hence causing untold embarrassment and loss. The confiscated stock was later returned to the company, however, stock worth about USD 500,000 had since expired. Subsequently, Kenya started limiting liquid permits applied for to a few per week about 10 percent of the liquid permits applied for.

NOTE:- The Kenya market has been one of the biggest export destination of Ugandan milk exports accounting for about USD 100 million dollars annually for Lato Milk only.

The dairy sector has over 35 compliant companies in Uganda and a total national installed capacity of over 1,600,000 liters per day (23o/o of production). The major milk players include the following;

2 1. Brookside Dairy Limited 2. Sameer Agriculture and livestock ltd 3. Jesa Farm Dairy 4. Maama Omulungi Dairy ltd 5. Pearl Dairy Farms Limited 6. Trust Dairy Farm ltd 7. Amos Dairies Uganda 8. Paramount Dairies 2010 ltd Limited 9. Paramount Dairies Limited 11. Vital Tomosis Uganda ltd 10. Lakeside Dairy Limited 12. Rainbow lndustries 13. Premier Dairies ltd (Megha) Limited 14. Kooke Enterprises 15. Maddo Dairies ltd Limited 16. Dairyman's Cheese 17. Bensimo Group Uganda ltd 18. Vital Tomosi Dairy 19. Birunga Dairy lndustries ltd Limited

4.0 REASONS ADVANCED BY THE KENYAN GOVERNMENT FOR THIS ACT

The Kenya Government, while conducting this operation claimed that the Lato Milk;

. Does not meet the EAC Rules of Origin criteria. . Counterfeit Milk . Substandard Milk Our view is that these claims are unjustified and mere Non-Tariff Barriers aimed at frustrating Pearl Dairy/ Lato Milk from the Kenyan market because of the following reasons:- Does not meet the EAC Rules of Origin criteria This is not correct. A joint verification mission was conducted by a team of Ugandan and Kenyan officials on Uganda's diary sector in December 2019. ln its report, the joint team concluded that the milk from Uganda meets all the EAC Rules of origin. However, the joint verification report was not signed

3 by the Kenyan representatives pending their further consultations on the matter. Counlelrteit Milk

Counterfeiting is an issue of infringement on lntellectual Property i.e. a Trade Mark. Lato Milk is a trade mark for Pearl Dairy meaning that the issue of counterfeiting does not arise.

Subsfan dard Milk Milk and other related products are covered by the harmonized EAC Standards for Milk, and Lato Milk meets these standards which are developed and enforced by the Bureaus of Standards of all EAC Governments. More stil!, before exporting the milk to Kenya, clearance is given by the Kenyan and Ugandan Ministries of Agriculture and Dairy Development Authorities that the milk meets the requisite standards plus the National Standards Bureaus of both Partner States.

5.0 ENGAGEMENTS BY THE TIJIINISTRY The Ministry convened a meeting with relevant stakeholders to establish the facts concerning the matter on 8th July 2020 and came up with a way forward. During the meeting the following was established:

o A verification mission was conducted in December 2019 with the main aim verifying that the milk originates from Uganda and, that Uganda had sufficient capacity to supply milk to Kenya. This was proved though the report was not signed by the Kenyan delegation pointing out the need for further consultations and guidance from higher authorities in Kenya. . An lnter-ministerial meeting comprising of Ministry of Agriculture, animal lndustry and Fisheries, Ministry of Foreign Affairs, Dairy Development Authority, Ministry of East Africa Community Affairs,

4 Presidents' Office and the Pearl Dairy was held at the Ministry of Trade lndustry and Cooperatives; ln the meeting, it was agreed that:- o The Honorable Minister of Trade, lndustry and Cooperatives briefs H.E the President on the matter and seeks HE's guidance on the appropriate way forward. The guidance by HE was sought in which he guided that a positive approach of consistent engagement be pursued other than imposing retaliatory measures o A 'Protest Note' against the action by Kenya be developed and shared through diplomatic channels. This was done and delivered to the Kenyan Government through Diplomatic Channels. To date, no response has been received from the Government of Kenya.

6.0 coNcLUsroN The Ministry is committed to:- Continuous engagement with the Government of Kenya to resolve the impulse and other Non-Tariff Barriers; The bilateral meeting the Ministry has earlier scheduled with Kenya on 27h July 2020 by Video was postponed at Kenya's request, further engagement is still on going and the Kenyan Minister of East African Community, and Agriculture are yet to commit the bilateral. ia. Engage other Countries especially; DRC, South Sudan and Algeria during forth coming Joint Permanent Commissions to open up their markets for Uganda's milk and milk products to ensure we get alternative markets. lt has been noted that Lato Milk has been able to start exporting milk to Ethiopia, Malawi and South Sudan. Algeria is next on the list of potential markets as the government of Uganda works with the private sector to find more markets for Uganda's milk. m Explore domestic markets: There are over 10 million school going young people in Uganda in over 20,000 schools both Government and Private. It is important to begin to explore the possibility to doing business with this huge demographic segment once schools open post Covad-19. This will

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not only increase the nutritional value intake by the students, but it will also offer a livelihood to farmers, manufacturers and employees as a whole. This should be done partly through Parents and Teachers Associations.

iv. Uganda lnsurance Authority should introduce an export guarantee insurance scheme by licensed insurers in Uganda to de-risk regional exports.

V Holding the EAC secretariat accountable especially NTB matters which are politically motivated in the region. The EAC secretariat should be empowered to take the mantle and prevail over matters that distort intra - regional trade and compromise the spirit of the customs union and common market.

Rt. Hon Speaker and members after having a bilateral engagement with the Government of Kenya on Diary products, w€ shall report back on the actionable recommendations that would have been agreed upon by the two parties.

ius Wandera (Hon) Minister of State for East African Community Affairs P.O. Box 7343, Ministry of East African Community Affairs

6 a MEACAWA 23.03

IEtlPHOlttES: 041-43'm100/4340U2 Ministry of East African Community Affairs a r E-MAIL: [email protected] Znd Floor Kingdom Kampala Building Webiiter www,meaca.go.ug TELEFAXT (X1-t|3tt8171 Plot 31A-35A & 37A- 39A Nile Avenue Yusuf ln any correspondence oo P.O. Box 7iI43, rhk subject please quote No: ECA 91/1001227 lol Kampala, UGANtIA

9th September, 2O2A ,HT R€FU8i,IC OT UGANOA

Dr. Kevit Desai, CBS Principal Secretary Ministry of East African Community and Regional Developrnent Nairobi, KENYA

BILATERAL ENGAGEMENT BETII'EEN UGANDA AND KENYA OIT SUGAR CANE AND DAIRY PRODUCTS

Reference is made to the lettervvritten by my Minister to your Minister Ref. ECA 326t966101 dated 14th JuIy, 2O2A on the above subject matter among others.

This is to fur:ther request that a bilateral rneeting between Kenva ancl Uganda shorrld be held tu discur*i i.l"ru alluvc issrtcs

It is our propr:sal ihrit the rnceting sirould be held on Wednesday l6tt,September, 2A'2A at 11.0O arn via t-he Video Conlerencc.

This is to request for your concurrence on the above meeting

Please t Principal Sect'etat1: the assurance of my highest consideration. e I Edirh N.Mwanje (Mrs) PERMAI{ENT SECRETARY

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, ,2,-" \ iL:.ltlalti r wt2 - r; visli;r-l Revision No:00 Page 1 of 1 "-':' Effective Oate: 12103/2019