Kenya's exports spike on weak shilling, tea

Kenya is seeking ways to take advantage of the turnaround in exports which have risen faster than imports for the first time in more than five years.

Tuesday February 16 2016

A worker operates a sisal twinning machine at

A worker operates a sisal twinning machine at Oba Kunta African Exports factory in Sori, Migori County. JACOB OWITI | NATION  

By OTIATO GUGUYU
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Kenya is seeking ways to take advantage of the turnaround in exports which have risen faster than imports for the first time in more than five years.

According to Financial Times, sliding energy prices helped fuel a 13 per cent year-on-year fall in Kenya’s total import bill in September.

In contrast, exports rose 24 per cent year-on-year, largely due to a 58 per cent jump in the value of tea exports as prices rose despite significant fall in volumes.

This has shifted focus on the slump of Kenya’s export sector which has seen growth in the manufacturing sector stagnate at 11 per cent of the GDP for over ten years, according to the Kenya Association of Manufacturers (KAM).

A new department of commerce and international trade at the Ministry of Industrialisation will this week meet stakeholders to discuss how to exploit the opportunities in value-added exports.

“I met over 150 stakeholders with three things on the table; validation of a trade policy, an export development strategy and a position on the Economic Partnership Agreements (EPAs),” newly appointed Permanent Secretary Chris Kiptoo told Smart Company.

He said his department is set to deliver a new set of rules on taxes, subsidies, import and export in the next four months to boost trade.

Mr Kiptoo said he would focus on a trade policy to address the imbalance in Kenya exports against imports. The gap between exports and imports narrowed significantly last year thanks to drop in oil prices.

The National Treasury says the current account deficit went down from 10.7 per cent in November 2014 to 7.2 per cent. “Our current account has been huge because we have not been doing well in exports, we need to fix that,” Mr Kiptoo said.

EXPORT STRATEGY
The new commerce department would also spearhead development of an export strategy to boost Kenya’s capacity to produce for the global market.
Kenya largely exports services in the financial and tourism sector which suffered last year in the wake of several terror attacks by Al Shabab.

However fall in crude oil prices saw a significant drop in export receipts which made the current account deficit to fall to $4.3 billion in the year to November 2015 from a deficit of $5.8 billion in the year to November 2014.

It is however worth noting that policies which aim to change international trade flows have the tendency of restricting imports and subsidising local producers. Kenya will find itself in a tight spot having signed free trade area deals that prohibit protectionism to keep off imports and provision of subsidies to boost exports.

Kenya has up to the first quarter of 2017 to open its markets to sugar imports from the Common Market for Eastern and Southern Africa (Comesa).
Last year the World Trade Organisation (WTO), of which Kenya is party to, agreed to eliminate agricultural export subsidies.

Kenya, which is classified as a developing country, will only be allowed to use transport and marketing subsides until 2023.

Under the WTO arrangement, Kenya can only advance credit to farmers for 36 months but will have to limit the tenure of export credits to one and a half years by 2019.

“Some like the Economic Partnership Agreement has been a long and winding, probably controversial negotiations because of the concern of how do we protect the interest of East African Community and what we managed to do is to have a sensitive list to take care of the interests if the East African economies,” KAM CEO Phyllis Wakianda said.

Ms Wakianda however said these regimes do come up with some positive agreements like the Trade Facilitation Agreement of the WTO that will make it easier to move goods across borders.

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