Tensions between Uganda and Kenya... and the reason is sugar

Written by: Ayman Ragab

In 2025, Uganda was Kenya's largest export market in Africa and the third-largest source of its imports on the continent; however, bilateral trade relations remain fraught with frequent disputes.

Trade tensions are escalating again in East Africa. Since July 1st of this year, Kenya has imposed a consumption tax of 40 shillings per kilogram ($0.30 USD) on imported sugar, according to the Finance Act of 2026, an increase from the previous rate of 7.5 shillings ($0.05 USD) per kilogram.

Kenya aims to protect local producers and support local manufacturing through this measure, which increases the cost of importing foreign sugar, but this raises concerns among its suppliers.

Unpopular measure

Although Uganda is not directly targeted by this decision, its manufacturers were quick to respond. For Jim Munyoro Kabeho, chairman of the Uganda Sugar Manufacturers Association, there is no room for doubt: ”The implementation of this measure is expected to significantly reduce the competitiveness of Ugandan sugar in the Kenyan market and disrupt the established regional trade relations that have emerged within the framework of East African Community integration,“ he told the regional newspaper “The East African” on June 29.

Potential consequences for the sector include reduced sales revenue, inventory buildup due to lower cross-border demand, and job losses.

He added, “It is unfortunate that while Kenya still suffers from a deficit in local sugar production, it is increasingly using fiscal measures to exclude suppliers within the East African Community,“ describing the decision as an example of ”a growing trend towards protectionist policies.”.

Ugandan sugar industry market strategy

It should be noted that East Africa's largest economy represents a strategic market for the Ugandan sugar industry. Structural problems within the Kenyan sugar sector, which is unable to meet a demand exceeding one million tons, have created a favorable environment for the growth of imports from low-cost producers.

Uganda has taken advantage of this situation to increase its production capacity over the past decade to meet the needs of this neighboring market at a lower cost.

The country, which has become a net exporter of sugar, is currently the second-largest supplier of this commodity to Kenya after Mauritius, with its exports reaching 62,760 tons during the 2024/2025 season, according to US Department of Agriculture data.

More broadly, this new customs measure comes at a time when the region is already experiencing delicate tensions over this essential commodity. At the end of November 2025, Kenya ended the protectionist system that had been in place since 2001, which had imposed restrictions on sugar imports from neighboring countries.

Government control of import volumes

Despite this decision being welcomed, it was accompanied by restrictive measures, as the government still controls import volumes by issuing import licenses, although in theory, purchases are not supposed to be subject to specific quotas.

Meanwhile, Nairobi continues its efforts to secure exemptions from the East African Community Customs Protocol to import sugar from outside the subregion at rates lower than the standard customs duty of 100%. The most recent window for exemptions, which closed at the end of June, allowed ten companies in the beverage and confectionery sectors to purchase 208,600 metric tons at a reduced rate of 10%.

15-year struggle

This new dispute over sugar is not new, as in 2011, a disagreement arose between the two countries over this commodity.

Tensions arose from the Kenyan government's suspicions that sugar imported from Uganda and exempted from customs duties had been repackaged and presented as a local Ugandan product to circumvent trade laws.

These claims led to restrictive measures and border closures, depriving Ugandan producers of a vital regional market. The dispute escalated into an institutional conflict involving tax authorities, sugar agencies, and regional bodies. Ultimately, the issue was resolved through diplomatic and technical efforts.

In July 2014, a tripartite meeting between the tax authorities of Uganda, Kenya, and Rwanda resulted in concrete commitments, including the simplification and acceleration of Kenyan import permit procedures, as well as the enhanced exchange of information between departments and private sector actors.

Trade Integration: A Persistent Headache

This situation is reminiscent of prior incidents, particularly the one involving maize in 2021, when Kenya imposed phytosanitary restrictions due to the presence of aflatoxins. In the dairy sector as well, Kenya consistently accuses the Ugandan dairy industry of exporting reconstituted milk to its markets, made from cheap imported milk powder from Europe, thereby questioning Uganda's ability to produce a genuine exportable surplus.

Beyond the confrontation, this new development clarifies the precise equation between protecting sensitive sectors and the necessity of removing trade barriers to strengthen regional integration in the sub-region.

At the 25th ordinary summit of East African Community heads of state in Arusha last March, the bloc's member states pledged to remove all customs and non-customs barriers by June 30, 2026. However, it's not that simple.