Intra-regional trade dropped in 2009

Kenya’s overall performance in intra-regional trade suffered a knock last year as the spill-over effects of the global economic crunch took toll on Africa, new data shows.

Projections by the Central Bank of Kenya (CBK) said that the country’s trade with the East African Community (EAC) and the Common Market for Eastern and Southern Africa (Comesa) suffered a dip over the period to November both in terms of export and import value.

“Imports from both the EAC and the Comesa regions declined from Sh14 billion ($193 million) and Sh32 billion ($430 million) to Sh11 billion ($153 million) and Sh23 billion ($ 315 million) respectively, in the year to November 2009,” CBK said in it monthly economic review for December.

Declines in value were also witnessed in exports with statistics showing that shipments to both the EAC and the Comesa regions declined from Sh88 billion ($ 1,174 million) and Sh117.5 billion ($1,567 million) to Sh87.45 billion ($ 1,166 million) and Sh108.9 billion ($1,452 million), respectively, over the same period.

“Last year was bad in terms of business because there wasn’t sufficient demand in both markets. The global financial crisis affected everyone and people only took up basic items,” an exporter, Mr Sunil Patel, told Business Daily.

Working paper

The projections by the CBK come barely a month after a working paper published by the IMF predicted that the spill-over effect of the global financial crisis would reflect on the profile of regional and intra-regional trade on the basis of diminished private capital flows, foreign remittances, depleted market demand and foreign aid inflow.

Messrs Paulo Drummond and Gustavo Ramirez in their paper titled; Spill-over Effects and the East African Community: Explaining the Slowdown and Recovery predicted that Kenya and other EAC countries would suffer knocks in their trade patterns owing to the export-oriented nature of their economies.

“This has made the economy (EAC) more exposed to declines in external demand. Kenya in particular is much more open than Rwanda, with Tanzania and Uganda right in between,” they argued.

Statistics showed that currently exports formed a greater share of the EAC economies — on average 20–25 per cent of GDP compared to 10–15 per cent in the 1980s and 15–20 per cent in the 1990s.

This makes regional economies more vulnerable to external demand even as export destinations became more diversified, with more exports now going to other emerging and developing economies.

The latest data by CBK confirmed the projections by the IMF paper with Kenya’s trade with both Comesa and EAC remaining subdued over 2009.

Kenya’s subdued intra-regional export profile reflected in the manufacturing sector where the CBK data revealed mixed performance in the production of key export commodities targeted at regional market destinations.

“In early 2009, soda ash mining faced stiff competition from cheaper synthetic imports from China. This forced closure of some plants at Magadi Soda Company,” the CBK said.