Kenya is on course to a bigger import bill for Chinese consumer goods such as fish, phones, tyres and cement amid growing concerns that the mountain of products being brought in could stifle performance of the local industries.
The Asian giant is the only country whose annual exports to Kenya have crossed the Sh300 billion mark, cementing its position as the largest supplier of East Africa’s largest economy.
Imports from China hit Sh320 billion last year, up from Sh248 billion in 2014 – representing a 29 per cent growth, according to the Kenya National Bureau of Statistics (KNBS) data.
The import growth trend is expected to continue this year based on the latest half year data even as the world’s most populous country’s economy falters back home, forcing it to turn to foreign markets such as Kenya.
China’s phones exports to Kenya rose to Sh2.8 billion in the year to June compared to Sh2.4 billion in a similar period last year.
Mobile handsets topped the list of items that local traders ordered from China last year, underlining the popularity of the low-priced smartphones despite some concerns about quality.
The KNBS data shows that China’s fish exports to Kenya grew to Sh80.6 million in the year to June compared to Sh78.5 million in a similar period last year.
Kenya’s appetite for Chinese fish imports hit Sh1 billion for the full year of 2015, meaning the figure could grow even further this year based on the half year quantities. The Asian country also targets local diners with smoked fish as well as dried and salted varieties.
China stepped up its shipment of cheaper tyres to Kenya in the review period to serve price-sensitive motorists. The KNBS data shows that Kenya imported tyres worth Sh2.8 billion from Beijing in the first half of the year, up from Sh2.5 billion in a similar period of 2015 and Sh1.8 billion in 2013.
While the low-priced tyres have been pocket-friendly to motorists, local manufacturers remain the biggest losers as their margins continue to shrink.
Kenyan manufacturers have recently raised the red flag over the uncontrolled flow of Chinese tyres into East Africa, saying the cheaper Asian products undercut them, posing a threat to their business.
Sameer Africa early this month announced closing of its Yana manufacturing factory in Nairobi due to increased cheaper imports.
Kenya took in Sh6.2 billion worth of railway construction materials from China between January and June, up from Sh53 million last year for the Sh327 billion standard gauge railway being built by China Road and Bridges Corporation (CRBC).
Clothes imports from China, however, shrunk marginally in the review period to Sh2.9 billion from Sh3.1 billion.
The KNBS statistics show that Chinese imports totalled Sh150 billion in the year to June, up from Sh149 billion in the same period last year. This is equivalent to 22 per cent of Kenya’s total import bill that stood at Sh689.8 billion in the period.
The growth indicates that Kenya’s imports from Beijing are poised for a further rise this year, and is likely to exceed last year’s Sh320 billion in imports.
The bilateral trade is, however, heavily skewed in favour of the world’s second largest economy, denying Kenya the much-needed hard currency inflows. Nairobi earned less than Sh5 billion from its exports to Beijing last year.
China grew its cement sales to Kenya 10-fold in the first half of the year. Chinese contractors control the majority of Kenya’s multi-billion shilling infrastructure projects including the standard gauge railway, highways, ports and real estate.
The Asian nation sold to Kenya Sh2.2 billion worth of the construction materials in the year to June compared to Sh201.6 million in a similar period of 2015.
The Chinese cement import growth comes in a period when prices in Kenya have dropped significantly on increased imports and expansion by established and new players, creating excess supply. The entry of imports from Ethiopia courtesy of Nigerian businessman Aliko Dangote is further expected to drive down prices.
Local firms produced 3.2 million tonnes of cement in the year to June against a consumption of 2.9 million tonnes, leaving a surplus of 300,000 tonnes.
Fierce price wars
The average retail price of a 50-kg bag of cement has dropped to Sh670 from the peak of Sh740 in 2008 due to fierce price wars.
Asian manufacturers enjoy lower energy costs and are entitled to State subsidies, allowing them to gain market share in East Africa where cheaper products are in high demand.
The World Bank has warned that cheap Chinese imports may hurt Kenya’s bid to join the elite club of industrialised nations as projected in its Vision 2030 economic blueprint.
“Because Kenya produces and trades few intermediate goods, researchers have concluded that Chinese imports could lead to a de-industrialisation,” the World Bank said early this year.
Kenya’s fledgling manufacturing sector has stagnated at an average of 11 per cent to the gross domestic product (GDP) in the past 10 years. This has created room for imports of goods that cannot be manufactured locally, pushing up the country’s import bill, which towers above exports, and piling pressure on the shilling.
Analysts reckon that the Chinese import growth is being driven by local traders’ preference for fast-moving cheaper stock, including those that can be made here, posing competition to local companies.
There is need for a policy rethink on imports that can be produced locally to avert possible suffocation of local industries, says X N Iraki, an economics lecturer at the University of Nairobi.
China has also been pushing for adoption of Chinese language in Kenyan universities through Confucius Institute alongside Mandarin cuisines in hotels.
The KNBS data shows, however, that Kenya deeply cut its imports of Chinese vehicles and spare parts to Sh2.4 billion in the year to June compared to Sh11.9 billion in a similar period last year and Sh3.1 billion in 2013.
Chinese motorcycle imports also shrunk to Sh1.4 billion in the review period from Sh1.6 billion in the year to June of 2015 and Sh1.5 billion in 2013.