China’s partnerships with Kenya in major construction projects has led to an increase in exports of building machinery to the country. It also exports communication equipment, electronics, and textiles to Kenya. Photos/File
China has gained an upper hand in its war with India for control of Kenya’s fast growing consumer market.
China expanded its exports to Kenya by 18 per cent in the first quarter of the year to become the second most important source of foreign goods for East Africa’s largest economy, according to the latest data released by the Kenya National Bureau of Statistics (KNBS).
India’s share of exports to Kenya dipped by five percentage points to 16 per cent during the same period, showing a shift in consumption patterns.
KNBS data indicates that the value of China’s exports to Kenya rose by 37.7 per cent to Sh38.6 billion in the first three months of 2012 pushing India with an exports value of Sh33.4 billion to the third position.
The United Arab Emirates (UAE) remains Kenya’s top source of imported goods and products with a 21 per cent share of the market that is mainly linked to its huge petroleum exports.
China and India have intensified their rivalry for control of Kenya’s imported goods market in the past 15 years with the traditional Western world partners as the main losers.
The Asian giants have mainly grown their share of Kenyan consumer goods market through the offer of affordable credit lines as they move to diversify their exports markets away from Europe and America.
“The shift to East Asia is mainly being driven by the search for value for money and the decline in the number of trade barriers,” said John Omiti, a senior research analyst at Kenya Institute of Public Policy Research and Analysis (Kippra).
India, which has controlled Kenyan market for most of the past decade, was initially beaten to the second spot in 2010 before rising to recapture it last year.
Key items in the list of China’s exports to Kenya include heavy machinery, electronics, vehicles, textiles and a range of household goods.
Kenya mainly imports textiles, pharmaceuticals, industrial machinery, vehicles, electronic and semi-processed goods from India.
China, the biggest beneficiary of Kenya’s massive infrastructure projects, has also been expanding its reach to broadcasting, telecommunication, textile and general consumer goods.
“China’s increasing role in the construction of Kenya’s infrastructure has helped boost its exports of machinery and equipment to Kenya,” said Samuel Nyandemo a senior economics lecturer at the University of Nairobi.
China has also emerged as a major supplier of textile, motor vehicles, shoes, batteries, and motor vehicles parts to Kenya through a mass market pricing strategy that has caused disquiet among local manufacturers and importers.
The Asian nations, whose economies are among the fastest growing in the world, have been deepening their grip on African market with a mix of increased diplomatic activity and foreign direct investments, grants and loans.
President Kibaki has since coming to power in January 2003 shepherded Kenya towards the East in search of cheaper funding for infrastructure development, and new markets for exports – a move that has left Kenya’s traditional European trade partners in a hard place.
Dr Omiti said hundreds of Kenyan importers have flocked to the East, responding to the significant decline in trade barriers such as export subsidies that Europe offers its farmers against African exports.
Dr Omiti, however, points to the imbalance in Kenya’s commercial engagement with the Asian nations saying it remains largely limited to the export of low-value primary commodities like tea, coffee and hides.
Kenya also lacks high-value primary exports but that is expected to change with the recent discovery of oil deposits in Turkana.
Kenya’s exports to Asia rose 17 per cent to Sh95.4 billion last year and is expected to grow by double digits this year.
China, which has positioned itself for mega infrastructure projects in Kenya, is also expected to continue growing its share of the domestic market and widen its lead on India.
Kenya’s dalliance with China has however come with associated risks such as the rise in the volumes of counterfeit goods that hurt consumers and make it harder for local industry to thrive.
Other Asian countries such as South Korea have stepped up export of electronic products to Kenya, exerting pressure on traditional source markets such as Japan.
Japan, a quality electronics manufacturer, remains the single largest source of direct funding to Kenya outside donor agencies.
South Korea’s bid to deepen its presence in the African market is expected to benefit from the launch next month of direct flights between Seoul and Nairobi.
State-owned Korean Air’s direct link to Nairobi is expected to firm the country’s grip on Kenya’s household electronics market where it has taken leadership from Japan.
Akihiko Tanaka, the president of the Japan International Cooperation Agency (JICA), last week met Kenya’s Finance minister, Njeru Githae, to sign an infrastructure grant worth Sh29 billion for road projects in Mombasa and Nairobi.
The value of Japan’s exports to Kenya, mainly comprised of second-hand cars, rose by Sh1 billion to Sh12 billion in the first quarter of 2012.
Japan is Kenya’s biggest holder of public debt followed by France and China.
Uganda remains the top destination for Kenya’s exports. Its intake rose by four per cent to Sh15.8 billion in the first three months of 2012 from Sh15.1 billion over the corresponding period last year.
It is closely followed by Tanzania which took in Sh10 billion worth of Kenyan goods over the same period.
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The share of imports from the US has also declined steadily in the past three years to 2011 and now accounts for only 3.4 per cent of the total import bill.
US corporations such as General Electric (GE) have however been showing interest in Kenya’s infrastructure projects, a development that could help stop the slide.
Locomotives GE last week signed an MOU with Vision 2030 Secretariat for the supply of locomotives, electricity and health care equipment to the respective sectors of the Kenyan economy.
India and China are big trade partners but their economic and political ambitions have intensified their rivalry, sparking fears of a possible war between the two nuclear powers.
Trade between the two countries is projected to rise from about $70 billion to $100 billion in the next four years despite the bitter territorial disputes on their common borders.
Both countries are building military infrastructure near disputed territories in what is seen as preparation for a possible military mobilisation should the dispute escalate into a war.
