Phyllis Wakiaga, KAM CEO.
A study by the Kenya Association of Manufacturers last month showed that Africa continues to be Kenya’s leading export destination, accounting for 40.6 per cent, with the East Africa Community taking up 21.1 per cent of total exports in 2016.
This means our exports to EAC was slightly more than half of the total exports in Africa. However, total export earnings decreased by four per cent and explained by a decrease in exports to Uganda and Rwanda by 9.3 and 2.5 per cent, respectively.
In the past five years, Kenya witnessed the growth of EAC neighbours through efforts to industrialise and grow their economies. Kenya which has always been a trailblazer in this regard, has now, at best stagnated and at worst, lost its footing in some areas.
This is a sign that we need to act fast if we want to remain a beacon and notable investment hub in Africa.
There is an urgent need to start focusing on diversifying and growing exports to secure markets.
According to AFdB, intra-African trade has decreased from 18 per cent in 2000 to 15 per cent in 2015. In markets such as the EU, most States have two or three regional partners who account for more than half of their intra-EU exports.
With these statistics, it is apparent that EAC have not fully harnessed the opportunities offered by their market and this has, by and large, been attributed to regulatory and institutional trade barriers.
The entry of cheap imports into the region also eroded the competitiveness of products, taking up a large share of markets.
For this reason, Kenya needs to tighten existing ties with EAC allies and consequently, bank on shared identities and interests to negotiate better market access for priority products under the EAC industrialisation policy.
A good case in point is the recent trade disruption between Kenya and Tanzania, which resulted in huge losses for the two countries.
Tanzania is the sixth largest export market for Kenyan products and one of the fastest-growing economies in EAC. Kenya is the second largest export market for Tanzania.
There is a lot of economic potential to be harnessed through bilateral trade, and it not only stands to benefit each country and the region at large. Last week, Kenya and Tanzania resolved to address the concerns raised and constantly engage in regular bilateral meetings with a view to ease the flow of goods and services across the borders.
The team from Kenya, led by the Trade ministry, also incorporated the business community to support in providing technical expertise towards enhancing trade ties and establishing a framework that seeks to eliminate barriers towards a sustainable long-term agreement.
The National Trade Policy launched last June is another notable effort by Kenya to look into matters of regional integration, through the promotion of policies in this regard in the medium term plan for economic development. This move was a recognition on the important role that export markets play in Kenya’s vision to industrialise and achieve sustainable growth.
Exports are a key driver of wealth creation and growth of local jobs. By accessing more markets regionally and internationally, local industries can expand, guaranteeing the thriving of related value-chains and hence the circulation of money within the economy.
This will ensure local goods compete with imports from other countries, but also secure existing and potential markets. This needs to be a priority in development and execution of trade policies, which includes developing incentives to promote growth at producer, processing, marketing and distribution levels.
Meanwhile, we should also be in touch with the region’s industrialisation goals to ensure we form sturdy linkages across borders that will guarantee access and mutually beneficial deals in future.
We are already doing this by improving infrastructure but the efforts should be supplemented with the will to sustain current trade ties. For East Africa to move up the global value chain ladder, we must strengthen regional value chains by building and cementing existing alliances.
Africa exports Sh50 billion in raw cotton annually, but it imports processed cotton worthy Sh400 billion, this definitely presents an opportunity for EAC especially since this is as a priority sector in the EAC industrialisation policy.
Many such opportunities exist but we must build local industries’ capacity to meet the demands of regional markets and guarantee sustainable positive trade relations in Africa and globally.
The writer is: Ms. Phyllis Wakiaga Kenya Association of Manufacturers chief executive officer