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Egypt’s Comesa link stalls State fight against cheap food imports

BUSINESS
By Dominic Omondi | June 21st 2021

A trader selling Irish potatoes at Migori market. Most of the Irish potatoes used by fast-food restaurants are imported from Egypt. [Caleb Kingwara, Standard]

The punitive duty on imported potatoes might not increase the price of fries sold by fast-food franchises after all.

There were fears that the decision by National Treasury Cabinet Secretary Ukur Yatani to slap imported potatoes with a higher duty would result in higher prices of fries. This is because some of the fast-food franchises get most of their potatoes from Egypt which enjoys preferential treatment under Common Market for Eastern and Southern Africa (Comesa) rule.

In what was aimed at protecting growers of vegetable products including potatoes, peas, and tomatoes, the finance ministers of the three East African Community (EAC) Partner States agreed to increase duty on their imports.

“To protect these farmers and the sector from cheap imports, the EAC Partner States agreed that vegetable products including potatoes, peas, and tomatoes among others shall attract a duty rate of 30 per cent for one year as we await the finalisation of the review of the EAC Common External Tariff,” said Yatani.

However, this will not restrict the flow of these vegetables from Egypt where fast-food franchises get most of their potatoes.

These restaurants argue that they can’t get the right potatoes from the close to 1.2 million Kenyans who grow the produce.

Ever since Kentucky Fried Chicken (KFC), an American fast-food firm, opened a franchise in Kenya, in 2011 imports of starch from Egypt have increased. Egypt, like Kenya, is a member of the Comesa, a preferential trade area - where countries do not pay higher tariffs for the exchange of goods amongst themselves.

Kenya is among the countries that apply 100 per cent tariff reductions, which means goods coming from Egypt do not attract duty.

It is not just potatoes that Kenya imports from Egypt duty-free, a myriad of other products including iron and steel also enjoy duty-free status. Other products that are imported from Egypt include raw sugar, toilet paper and cleaning products. Other than vegetables, Kenya also extended the 25 per cent duty on finished iron and steel, and 35 per cent duty on furniture imports.

Ever since Egypt joined Comesa, the value of metals imported from the North African countries has increased by more than two and a half times to $39.4 million (Sh4.2 billion) in 2019.

A steel manufacturer who spoke to The Standard on condition of anonymity said they suspect Egyptian manufacturers are getting a lot of subsidy from their government, a fact that makes it hard for locals to compete.

“Egypt’s imports are zero-rated. So an increase in duty does not affect their products,” said the source.

“We don’t have a level playing field,” added the source, noting that the State, besides protecting local manufacturers, should also review the relationship it has with Egypt.

The increased duty would not apply to imports from Egypt, a major producer of steel and iron that is also a member of Comesa.

Local manufacturers continue to struggle with the high cost of production, with electricity taking up about 30 per cent of the costs used in the production of steel.

Other Comesa members States who apply reductions worth 100 per cent include Mauritius, Madagascar, Zimbabwe, Egypt, Malawi, Rwanda, Burundi, Djibouti, Zambia, Comoros and Libya. All the EAC countries except Tanzania are in the Comesa trading bloc.

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