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Kenyan manufacturers receive preferential access to Sudan

The Standard, Nairobi

Kenyan manufacturers receive preferential access to Sudan

By Kenneth Kwama

6 March 2006

Kenya has signed an agreement with the Sudanese government to allow its manufacturers to export some goods duty free to Sudan.

The accord also assents to a bilateral trade agreement that will open Sudan’s vast market to virtually every Kenyan entrepreneur from May.

The historic concession agreement was signed on Friday, bringing to an end a protracted negotiation process that had lasted close to five years.

The two neighbouring states also set a provisional date of May during which the concerned trade ministers from both countries will meet to sign the agreement in Khartoum.

"We don’t have any objections. We are happy with the document and look forward to doing business with Kenya," said Mutasim Makawi, deputy head of unit at Sudan’s ministry of Foreign Trade, who chaired the last leg of the negotiations.

Under this agreement, the Sudanese government will allow Kenyan products including rubber products, copper and electric cables, human and veterinary medicine, paper products and mango and pineapple juice packed in 250ml packets among others, immediate access into its market.

"The second group of products, including galvanised and steel pipes, stearine, aluminum conundrum and cables, will qualify under Comesa’s rule of changing tariff heading," said Betty Maina, the chief executive officer of the Kenya Association of Manufacturers (KAM).

The Sudanese government has, however, requested a group of manufacturers to provide more information on their products, which it said still needed verification to qualify for export under Comesa’s rule of origin.

The products affected in this range include soaps, cosmetics and several edible oils.

Maina said the concession deal was good for the country, as it will widen the export market for Kenyan products.

"We now want to diversify to other markets like Angola and the Democratic Republic of Congo. It is the only way to ensure that our companies have a wide and consistent market to sell their products," she said.

Trade discussions with concerned Kenyan companies reveal certain common concerns. "One is that great

swaths of almost every market in the Comesa region with about 400 million consumers seem suddenly to depend for their health on Sudan.

"That’s especially true of markets and companies that produce or sell commodities like steel, building materials,

cables and even foodstuff, which the fast growing Sudanese economy is gobbling up as fast as they can be shipped.

The high-speed Sudanese train is expected to get even faster when the South opens up to new investment.

Companies that offer financial services and those that deal with construction are expected to reap from the initial benefits.

But the battle, it seems may just be beginning. Companies like Sameer Africa, East African Cables and Unilever, which were given the go-ahead to start exporting some of their products to Sudan are likely to find life a bit more complicated

given that imports mainly from China and Malaysia dominate this market. The two countries have flooded the Sudanese market with goods produced in highly subsidised processes.

Sameer, which produces Yana tires, will have to contend with a market already overflowing with cheaply produced Chinese rubber products.

"About three months ago, a Sudanese tyre-manufacturer closed shop because it couldn’t keep up with the competition," says Murtaz Yassin, a Khartoum based businessman.

"Honestly, I don’t see how Kenyan products will pull through. They are much too expensive," he says.

To illustrate his point, he gives the example of Kenyan cement, which he says used to retail at Sh5,000 per tonne and was a favourite product before it was edged out by competition from Egypt and Indonesia that retailed at Sh4,000 per tonne.

Maina says the Government should seriously consider reducing the cost of power if it seriously wants to help local industries to grow.

For the past few years, Kenyan companies have been staring hungrily at the Sudanese market as it opened its doors to investors, mainly from China and Malaysia, but

have been kept aback by high production costs, which have made most of their products expensive and uncompetitive.

The stringent licensing requirements by the Sudanese government didn’t help matters either.

"We particularly want to lobby the government to reduce the cost of power," said Maina.