Constraints and Opportunities in Cross-border Trade

The analysis clearly shows the bottlenecks that the actors involved in CBT are confronted with. Keeping in mind that the Kenyan farmers, who are not actors in CBT, are the losers of CBT it has to be queried whether CBT should be supported.

The Kenyan MoA has to decide whether they want to support Kenyan farmers to be competitive with the Tanzanian farmers, who produce a much better quality for lower prices. On the one hand it would be a good idea to support the Kenyan onion

27 If for example the KRA only estimate that 5 tons cross the border, a Kenyan clearing agent could make a profit of 64 – 79 USD for one clearing. The KRA officials stated that sometimes 5 tons trucks cross the border, while the traders denied this. Therefore, it is not possible to determine the clearing agents profit based on KRA estimates.

producers in improving their performance. On the other hand, subsidies for an uncompetitive sector make little sense if a common market is to be established by 2012. But Kenyan farmers could be supported in investing in crops other than onions.

Nevertheless, the majority of actors involved in CBT benefit from CBT. The increasing volume of onions produced in Tanzania but consumed in Kenya leads to decreased prices, which is beneficial for the Kenyan consumers who are able to consume more onions. Consumers in East Africa are not the only beneficiaries of CBT.

Farmers, intermediaries and clearing agents involved in CBT are able to boost their income through this new opportunity. Only the strength of the Kilombero traders association presents a tough bottleneck for the farmers in Karatu and the traders from Wakulima market. The increased production leads to more work for field workers, porters and other participants in the horticultural sector.

The analysis reveals that everything possible has to be done to smooth CBT, even if the macro-economic dimension of onion CBT is not that important. The obstructive institutions in particular could be further analysed and consulted, to make CBT easier for the private actors involved.

• The political constraints and hostilities in Tanzania could be reduced if local politicians realized that Kenyan intermediaries are not exploiting but transacting business with Tanzanian farmers.

• The Kilombero wholesale market traders association should stop hindering CBT with illegal measurements.

• The KRA has to reconsider its policy of estimating the weight of trucks as it is not transparent. Cooperation between the Tanzanian border authorities and the Kenyan authorities would permit the KRA to use the weight measured by the Tanzanian officials. Even if the KRA estimation increases the levy which the traders have to pay it is not clear how the levy is collected.

• Another aspect is that too many institutions are involved on the Kenyan side of the border. The research did not reveal any need for the involvement of KBS and the Kenya Public Health Office in onion CBT.

With regard to transportation costs cross-border traders are confronted with three key problems.

• Fuel prices are constantly increasing and represent the highest share of their costs.

• Access to transport is not always guaranteed. For example, during high supply traders sometimes are not able to transport their onions from Tanzania to Kenya because they do not have transport at their disposal.

• Transport prices fluctuate. In line with market forces the cost of renting a truck rise if the prices for onions fall. According to the traders involved the cost of renting a truck is 50-60 % higher in high supply season than in low supply season.

With regard as to whether the situation of the poorest actors could be improved by intervention or research in CBT only two possibilities could be found.

• Exclusion of the traders of the Kilombero market would increase the profit of the Tanzanian farmers, who are poorer than their trade partners.

• Organising farmers to help them negotiate with intermediaries from Kenya and Tanzania might further increase their power and profit share. (not only CBT).

• Both governments have to harmonize their measurement standards in cooperation with the value chain actors. Equal bag sizes would improve the negotiating power especially of smaller actors. Equal and reliable bag sizes would increase transparency in CBT. And furthermore they would improve the working conditions of porters if they were not too large. With regard to the role of the EAC in CBT in onions the application of the above mentioned article 4 §2-b of the Protocol on the Establishment of the EAC CU that states that adopting a common standard system for the valuation of goods is planned, could have a substantial impact on producers and traders because of its influence on the extended onion sacks from Mang’ola.

Last but not least: Upgrading could mainly improve the situation of the Tanzanian farmers. If they take over the transportation (renting trucks in TZ) and trading function in Kenya they will increase their profit. But they need to be enabled to do so through business and organisational training.

Weighing station at the border in Namanga (Source:SLE-Team)