Markets & Finance

US beats Africa to third spot on list of Kenya import source

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President Uhuru Kenyatta and US Secretary of State John Kerry lead talks between Kenyan and US delegations at State House, Nairobi on May 4, 2015. PHOTO | PSCU

Kenya has for the first time bought more goods from the United States in one year than it did from the whole of Africa, underlining growing commercial ties that are expected to deepen with the recent thawing of relations and President Barack Obama’s visit in July.

US exports to East Africa’s largest economy rose to Sh168 billion last year compared to the Sh146 billion worth of goods and services that came from Africa, according to data from the Kenya National Bureau of Statistics (KNBS).

At Sh146 billion, the value of imports from Africa dropped marginally even as the value of goods and services from the world’s largest economy tripled.

The exponential growth of US exports to Kenya happened despite the Kenyan President Uhuru Kenyatta standing out as a leading advocate of intra-Africa trade who has made a series of trade promotion trips across the continent since coming to office in 2013.

“The value of imports from South Africa contracted from Sh70 billion to Sh63 billion in 2014. The value of imports from Mozambique and Nigeria also dropped by 60 per cent and 56 per cent respectively,” said the KNBS in this year’s economic survey report.

Kenyan exports to Africa rose by four per cent to Sh241 billion, supported largely by increased purchases by Ethiopia, the Democratic Republic of Congo and South Sudan.

The KNBS data shows export volumes to Kenya’s largest market, Uganda, dropped by seven per cent while trade with Somalia also contracted by Sh3.7 billion.

“The biggest reason there is so little intra-Africa trade is that we produce the same things – raw material. So why trade among ourselves? No wonder South Africa and Egypt are doing well because they have a good manufacturing base,” said Dr XN Iraki, a lecturer of economics at the University of Nairobi.

Intra-Africa trade is also hampered by physical and non-tariff barriers, making it easy for countries outside the continent to grab trade opportunities.

East African countries are currently working on projects such as the Lamu Port and South Sudan, Ethiopia Transport Corridor (Lapsset) to link their markets. Non-tariff barriers include visa applications, at a fee, in order to travel to most of the other African states.

The rapid growth of exports to Kenya has caught the eye of the world’s largest economy, which is seeking to stop China’s hitherto unchallenged march on the fast-growing continent.

“There seems to be a sustained effort to increase the amount of trade between the US and Kenya. Behind Clinton, Kerry and Obama visit is trade and investment. Americans know how to smell money,” noted Dr Iraki.

John Kerry, America’s Secretary of State, finished his two-day tour of the country Tuesday while the US President, whose biological roots are in Kenya, is expected in the country in July.

READ: Uhuru and Kerry hold talks on security, Obama visit

Mr Kerry’s comments were largely confined to the fight against terrorism but Kenya has indicated it will be pushing for the introduction of direct flights between Nairobi and Washington during the visit by Mr Obama to boost trade between the two states.

READ: Kenya steps up push for direct flights to US

India is the largest exporter to Kenya, with goods worth Sh264 billion purchased last year followed by China, Sh248 billion.

The US had initially been unreceptive of the Kenyatta government but has in the recent past worked on smoothening relations between Washington and Nairobi as the economic significance of the country grew and the weight of the criminal charges facing the President eased.

The Americans will, however, have to work harder to win the hearts of the President’s supporters with a survey released on Monday showing a majority of Jubilee adherents view China more positively than the Americans in development relations.

The survey by Ipsos Synovate found that a majority of Kenyans, 35 per cent, favour stronger trade relations with the US than China, at 23 per cent.
Besides a growing middle class, Kenya has recently discovered oil and is undertaking huge infrastructural projects, attracting the American business community.

The KNBS said 70 per cent of the imports from the US were associated to purchase of aircraft and associated equipment, indicating that the volumes could be a one-off as Kenya Airways slows down on growing its fleet.

Washington is bent on making the numbers stick with incentives being offered to businesses importing from the US. The White House organised its first African-American summit last year, a move that was seen as driven by Washington’s realisation that it was missing out on Africa’s growth.

“Apart from faster processing of visa, the US commercial service has been verifying for us manufacturers we end up engaging with,” said Sammy Ng’ang’a, the managing director of Yashinoya Trading and Construction Company, which imported machinery from the US worth more than Sh91.6 million ($1 million), including those to be used in developing geothermal wells.

America also hopes to ride on the high cultural interaction between Nairobi and Washington compared to Beijing.

Kenya’s exports to the US were Sh38 billion, attributable largely to the African Growth and Opportunity Act (Agoa) trade agreement, compared to Sh6.5 billion worth of goods purchased by the Chinese.

READ: Agoa textile exports lift Kenya, US trade 27.9pc

Kenyans working and schooling in the US contribute more than half of the cash sent back to the country by those in the diaspora. Last year diaspora remittances were Sh130 billion.

Moses Ikiara, the chief executive of Kenya Investment Authority, said Americans were planning a US-Kenya summit to be held in Nairobi this year, offering their businesses a platform to showcase their products and scout for opportunities in the country.

Kenya, being a growing economy, is expected to continue importing increasing amounts of capital and intermediary goods to support production — a space that should interest American companies.