US firms step up race for Kenya’s high-end market
Posted Thursday, September 29 2011 at 00:00
A number of US-based companies dealing in high-tech products are lining up to enter the Kenyan market over the next six months as America races to protect its share of the East African market from Asian countries.
Chinese, South Korean and Indian exports to Kenya have grown steadily in recent years at the expense of the US and other western nations.
This shift in trade ties is behind America’s rising concern over Asia’s growing power in East Africa’s largest economy as recently revealed in leaked diplomatic cables.
Now, the US’s chamber of Commerce is scouring for opportunities for its firms with bias in the services sectors where its sees little competition from Asian countries that flooded the Kenyan economy with low cost electronics, clothes and toys.
Some of the firms looking to set up shop in Kenya are Marriot Hotels, military and civilian engineering company BAE Systems, solar water systems contractor DACC Global and private security and disaster response firm Pax Mondial, says Camille Richardson, the commercial counsellor at the US Embassy in Nairobi.
Others such as IBM and General Electric are planning to expand their operations in the country.
“We have had many inquiries in the last few months from American companies that want to set up in Kenya. We are telling them this is the best time to come in because of ongoing reforms,” said Mr Richardson.
He added that US could pose stiffer competition in the services sector where it sees no competition, as Asian firms led by China dominate infrastructure business.
Production and export of cheap toys, mobile phones, radios, television sets and clothes has fuelled China’s booming economy in the past decade, propelling it to the world’s second largest and sparking debate over how best America should respond.
While China’s cheap goods have flooded the streets and supermarkets in Africa, America is set to deepen its presence in the high-tech goods market such as planes, medicines and medical equipment.
This is expected to cause worry to both Japan and US, who for decades have controlled a larger share of the hi-tech market including software development, medicine and aerospace while China has increased its research spending by 10 per cent each year for the past decade.
Over the last 10 years, the sales of Chinese goods in sub-Saharan Africa rose more than eight times and Chinese firms have won major construction deals in the region, causing jitters in Western capitals. China’s main interest in Kenya has been in infrastructure that also helps open untapped markets and vast natural resources tucked away in neighbouring Uganda, Sudan, and parts of the DR Congo.
US is also seeking to increase its trading volume with Kenya, which has had stagnant growth .Volume of trade between Kenya and US grew from Sh35.9 billion in 2002 to Sh68 billion in 2010 compared to growth of Kenya-China trade from sh6.3 billion in 2002 to sh180 billion in 2010.
US embassy officials said US will increasingly focus on the high end market where it believes it has an edge even as China moves up the ladder in research and development (R&D) investments. Data from R&D Magazine reckons growth in US research funding will slow down this year, while China is expected to eclipse Japan for second place globally in R&D investments.