Burundi's isolation by EU over tyranny poses trade risk for Kenya's exporters

Flower firms stand to lose billions of shillings if EPA deal with European Union is not signed by October 1, 2016. [PHOTO: ANTONY GITONGA/STANDARD]

NAIROBI: Burundi has presented the biggest challenge yet to the trade pact that is expected to save Kenyan farmers from hefty taxes when selling to the European Union.

The devastating news came this week after legislators from the EU Parliament said Europe was never going to enter a deal with Pierre Nkurunziza whom they cite as an autocrat. Political upheavals occasioned by Mr Nkurunziza’s decision to run for a third term as President overshadows the blow delivered by Tanzania and Uganda when they walked out of the Economic Partnership Agreement.

“We cannot sign with Burundi before it embraces democracy,” said Maria Arena, an MP in the European Union Parliament.

That position significantly takes away any practical hopes for Kenya and the East African Community to sign and ratify the EPA before October 1. The EU will not sign any deal with the EAC of which Kenya is a part of, because Burundi is also a member of this customs union. Effectively, time has run out for Kenya to save its exporters from the heavy taxes that range between five and 22 per cent.

Punishing Kenya

Among the top exports to the EU from Kenya are cut flowers, coffee and tea. In the unfolding situation, the same exports from the neighbouring countries will become much cheaper, edging out the Kenyan produce on competitiveness.

Flower exports alone could attract Sh600 million in taxes in a single month, translating to over Sh7.2 billion a year. The impact is much bigger when all products are evaluated. Ms Arena said there was no chance of a deal before the October 1 deadline, suggesting that Kenyan exports will inadvertently be heavily exposed but there was a slim chance of a lifeline.

“We have asked the EU Commission for an extension from October 1 because we see this punishing Kenya for a decision that is beyond its doing,” she added. There, however, was no guarantee that the EU would grant the extension in the requisite timelines, if ever.

On the flipside, Burundi and the three other EAC countries, all ranked as Least Developed, produce all the major agricultural commodities which Kenya exports to the EU. Already, Deputy President William Ruto has led a high level negotiating team to Bujumbura, in what is now emerging as mission impossible of talking Nkurunziza into democracy.

The Burundian leader has shown determination to stay on considering the bloody chaos that followed his contested bid and eventual win in a third term in elections largely boycotted by the opposition. Nkurunziza was sworn in to office in August of last year, and has since been focused on crushing voices that do not tow his government’s line. Frantic attempts to intervene and dissuade him from the decision by the international community have fallen flat.

Kenya has a tiny window to renegotiate with the EU for a totally new trade pact whose timelines are unknown. Even worse, the conditions for the reviewed agreement are much tougher, including a requirement of evidence that Kenya is committed to and was working towards achieving the Sustainable Development Goals — a list of 17 elaborate measures, elimination of child labour from all production and other strenuous demands along the supply chain.

Those demands are part of the 25 requirement before the EU agrees to enter an agreement under the Generalised System of Preferences (GSP) Plus.

Least developed

Bernd Lange, the chairman of the EU Parliamentary Group who was flanking Ms Arena at the United Nations Conference on Trade and Development meeting in Nairobi,  said there is not much of space for Kenya to avert taxes on its exports.

“There is really not much we can do for Kenya,” Mr Lange said, adding that the Parliament had no control of the decision-making by the Commission.

EAC countries negotiated jointly for the troubled EPA, which had however meant little to all members except Kenya whose status has been reviewed from a least developed nation to a lower middle income State.

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