Ideas & Debate

Future of economy hangs on exports expansion

port

Offloading cargo at the port of Mombasa: Flexibility and easy procedures in a country’s export sector are the ones that speed up business operations and attract investors. PHOTO | FILE

Kenya has never really been a serious exporting country. Our complacency with vulnerable sectors such as agriculture and tourism has severally been laid bare by nature through acts of weather and more recently by terrorists.

The over dependence on agricultural exports – over 50 per cent of total goods exported, when we know all too well that the sector is prone to weather and international prices is very telling. Yet the country has huge potential to expand her export base.

For starters, we could go for low lying fruits by penetrating ready markets in the region. There are striking similarities in the consumption habits of East Africans, why then do we export so little to the region when most of what is produced locally has appeal in the region?

While about 46 per cent of our exports go to Africa a cursory look at our major markets in Africa reveal that what they buy from us is a negligible fraction of their imports of the same products from the rest of the world. In other words with the right strategies more could be sold to the same markets.

Value addition in the agriculture sector has been ignored or minimally emphasized. Admittedly much of the produce is needed fresh but there are other remnants that can be processed further.

Besides the enormous losses due to poor agricultural practices could be converted variously into tremendous value adding opportunities.

What drives export competitiveness? Among the key factors that enhance a country’s competitiveness are capacity strengths; quality of business environment; and extent and appropriateness of trade facilitation. 

Quality and quantity of infrastructure affects costs of doing business in a major way. Production costs ultimately translate into selling prices.

Given more-or-less uniformity in product functionalities the price becomes a critical consideration. Costly products bond themselves to the sellers while cheaper ones fly out to buyers. 

Important infrastructure includes roads, electricity, water, IT and related facilities. Perhaps one should be awake to the fact that it is one thing to have these facilities and another thing all together how well they are utilised.

Good roads will not ease traffic jams if drivers do not respect traffic rules. Huge amounts of water and electricity will not necessarily imply more production if wastage and proper reticulation are not addressed.

The operating environment impacts on exporters by the rigidity or ease of the regulations, policies and procedures guiding business activities. Strict rules, difficult to comply with result in lengthy procedures, higher costs and corruption.

Flexibility and easy procedures speed up business operations and attract more investors. Closely linked to this are the issues of documentation, transaction processing, transport and connectivity.

It is clear that services have taken over leadership of Kenya’s economic growth. Trade in services thrives on trade facilitation.

Transport, border procedures, connectivity etc all determine if it easy for service providers to enter and sell their services to foreign markets in whatever mode.

Within the content there are myriads of service opportunities ranging from transport to business processing outsourcing; financial to professional services; creative arts to business development services.

Similarly there are as many Kenyans with the right capacity to offer these services.  How many are doing it, even at the regional level? It is true that internet and related costs in Kenya have gone down drastically but how about transport costs (road, railway or air)?

How about obtaining permission to carry out business in foreign countries? How about visa requirements? How about language barriers?

Kenya has made many and long strides to improve the business environment. The investment climate has risen against the odds and showed clear signs of sure improvement. How else would we be rated seventh best emerging market for investments?

The various ongoing projects- 10,000km tarmac; 5000MW; SGR; Lapsset ; Konza among others, including private sector initiatives such as Two Rivers and Garden City shopping experiences are prime signals that the country is ready for investments.

These are strong pillars to leverage export development on. The question is whether we are able to see the enormous export potential laid bare by these investments and why there is such deafening silence regarding the very low level of exports.

How do we explain gaping and perpetual trade deficits? How do we expect the country to realise double digit growth based only on domestic trade?

The Export Promotion Council rolls out grand programmes year in year out. They have in the past carried out surveys in major regional markets such as South Sudan, DR Congo and Mozambique. I stand to be corrected. EPC is not in business of exporting.

They can only facilitate and that also only to the extent of the resources availed to them. The resources here include recognition and constant reference to them as the key drivers of export development.

Unfortunately one does not here the kind of pronouncements expected from the powers that be challenging Kenyans to venture out and take their merchandise across the borders.

This is not to imply there is not exporting being done; only the scales are negligible. It is largely held that there is a possible correlation between export growth and poverty reduction. 

Some development agencies including the International Trade Centre even used to have export-led poverty reduction strategies. Is it high time we revisited such?

While more money to devolution is a good chorus to sing more money from the counties would sound even sweeter.

I remember days when Murang’a County Council used to give some education bursaries to a good number of secondary school students. I am certain the Treasury secretary would treasure giving awards to the leading counties in terms of taxes paid to the exchequer.

Counties should hasten to build SPVs for investments and install their regions as the new frontiers of growth including export development. Am sure there would be some money somewhere to do sector mapping and identify priority areas which can be used to propel growth.

In the meantime the leadership, public and private should show more concern about the trade deficits. Export competitiveness has potential to improve overall quality and standards of our goods and services, reduce unit costs and lower selling prices.

Mr Ndung’u is an independent consultant in trade competitiveness development based in Botswana.