When Kenya’s President William Ruto signed the Finance Act, 2026 into law this week, raising excise duty on imported sugar by more than 300 percent, it triggered alarm among Ugandan manufacturers.

 

They fear the new tax could derail one of Uganda’s most successful export industries, threaten thousands of jobs and undermine years of progress in East African regional integration.

Kenya’s Finance Act, 2026 imposes an excise duty of Ksh40,000 ($308) per tonne of imported sugar, up from Ksh7,500 ($57.82), from July 1.

The fivefold duty increase is meant to shield Kenya’s domestic sugar industry, but Ugandan millers say it will effectively price their products out of the Kenyan market.

Industry alarmThe Uganda Sugar Manufacturers Association (USMA) has written to the ministries of Trade and East African Community Affairs, urging the governments to intervene.

In separate letters dated June 20 and June 25, the association warned that Kenya’s decision threatens not only Uganda’s sugar exports but also the broader principles of free trade under the East African Community (EAC).“The implementation of this measure is expected to significantly reduce the competitiveness of Ugandan sugar in the Kenyan market and disrupt longstanding regional trade relations developed under the EAC integration framework,” USMA chairman Jim Mwine Kabeho said.

Kenya has become Uganda’s largest regional market for sugar, importing an estimated 100,000 tonnes annually to supplement its domestic production.

The industry fears the new tax will sharply reduce demand for Ugandan sugar, leaving manufacturers with excess stocks, lower revenues and shrinking export earnings.

For Uganda, the implications extend far beyond trade statistics. The sugar industry is one of the country’s largest agro-industrial sectors, supporting thousands of sugarcane farmers, creating thousands of direct and indirect jobs, and contributing significantly to foreign exchange earnings and rural incomes.

Manufacturers warn that losing the Kenyan market could trigger reduced factory operations, lower cane prices, delayed investments and widespread job losses across the value chain.

Kabeho said Kenya’s latest move reflects a growing trend of protectionist policies.“It is disappointing that while Kenya continues to experience shortages in domestic sugar production, it is increasingly using tax measures to lock out suppliers from within the EAC,” he said.

The new rate of Ksh40,000 ($308) represents the most significant increase yet and, according to Ugandan manufacturers, amounts to a non-tariff barrier disguised as domestic taxation.

The dispute threatens to reopen one of the region’s longest-running trade disagreements.

Uganda and Kenya have periodically clashed over sugar trade since 2011, when Kenya allowed duty-free imports from Uganda to address domestic shortages.

Kenyan authorities later accused traders of importing sugar from outside the region, repackaging it as Ugandan-produced sugar and exporting it duty-free under EAC rules.

Those accusations culminated in restrictions on Ugandan sugar in 2014 before expanding to other commodities, including milk, maize and eggs.

Over the years, both governments have worked through bilateral negotiations and EAC institutions to remove tariff and non-tariff barriers.

In August 2025, trade ministers from both countries agreed that goods originating in Uganda and Kenya would be treated as transfers rather than imports, reaffirming commitments under the EAC Customs Union and Common Market protocols.

The issue was raised at the 25th Ordinary Summit of EAC Heads of State in Arusha in March this year, where partner states committed to eliminating all outstanding tariff and non-tariff barriers by June 30, 2026.

Seeking talksTrade and Industry Ministry spokesperson Khadija Nakakande said the ministry has informed President Yoweri Museveni about the industry’s concerns, while Trade Minister Sanjay Tana has formally written to his Kenyan counterpart seeking urgent consultations.

Officials say Kampala intends to resolve the matter through government-to-government dialogue and existing EAC mechanisms rather than retaliatory action.

Trade Ministry commissioner Dennis Ainebyoona confirmed that discussions with Kenyan authorities are under way, following earlier engagements led by State Minister for Trade Gen Wilson Mbasu Mbadi.

Kenya, however, maintains that the measure is necessary to protect its domestic industry.

If no resolution is reached, the latest sugar dispute risks becoming another test of whether the EAC can reconcile national industrial policies with its ambition of creating a truly common regional market.

Regional impactPresident Ruto recently defended the tax increase, saying it is intended to safeguard Kenya’s 17 operational sugar factories and protect the livelihoods of about two million farmers and nearly 10 million people who depend on the sugar sector.

Industry leaders acknowledge Kenya’s right to support local producers but caution that such measures should not come at the expense of regional integration.

Ashish Monpara, chairman of Modern Group of Industries and a member of Uganda’s Sugar Council, said the tax could increase consumer prices, reduce demand and hurt manufacturers on both sides of the border.“If the increased duty applies to Ugandan exports, it will reduce our competitiveness and affect regional trade. We hope all EAC member states continue supporting free regional trade while protecting their industries in a balanced manner,” he said.

Monpara noted that sugar is an essential household commodity and warned that excessively high taxes could increase the cost of living for Kenyan consumers while undermining investments made by manufacturers across the region.

Trade figures underscore the importance of the relationship.

According to the Observatory of Economic Complexity, Kenya exported goods worth about $951 million to Uganda in 2024, while Uganda exported products valued at approximately $527 million to Kenya, making the two countries among each other’s largest trading partners.

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