Kenyan companies have extended their search for export markets beyond East Africa, seeking to avoid the trade disputes and general economic slowdown that have been taking toll on their operations in the regional market.
Kenya Revenue Authority (KRA) data shows that Egypt and the United Kingdom overtook Tanzania and narrowed the gap with Uganda as top export destinations for Kenya in the first two months of the year.
The value of exports to Egypt jumped 73 per cent to Sh7.67 billion in first two months of this year, placing the North African nation in the third position after UK (Sh7.72 billion) and Uganda which shed 9.4 per cent from the Sh10.73 billion it recorded in February last year.
Tanzania, usually in neck-and-neck race for second slot with UK, fell to fourth position as a major export destination having taken in only Sh6.47 billion worth of Kenya’s January and February exports. The amount was five per cent less than last year’s.
The first quarter figures are a continuation of East Africa’s decline as a key market for Kenya’s exports that began last year. Kenya’s exports to East African Community member states shrank by 1.8 per cent to Sh134.9 billion in 2012 down from Sh137.2 billion in 2011, according to the Economic Survey 2013.
The decline in trade volumes came on the back of a slowdown in the region’s economic growth to an average of 5.7 per cent from an average of 6 per cent in 2011.
Growth was slowest in Uganda, Kenya’s single largest market, where the rate of economic expansion dipped to 4.1 per cent from 5.1 per cent the previous year.
Kenyan entrepreneurs have also linked the decline in trade with EAC member states to persistent market access wars placing it top on the agenda of newly-appointed Cabinet Secretary for East African Affairs, Commerce and Tourism Phyllis Kandie.
“Most of the trade disputes have been resolved at the top but remain outstanding on the ground due to poor flow of information to implementing agencies,” Peter Kiguta, the director-general of customs and trade told the Business Daily last week.
Ms Kandie is expected to come face to face with the raging market access wars in the next two weeks when the region’s ministers meet to review the state of the market in the first half of the year.
Egypt’s emergence as a major export destination for Kenya comes hardly one year after Nairobi resolved its long-running trade dispute with Cairo over the local value addition rule.
Egypt, a key importer of Kenyan tea, had in 2011 raised its local value addition requirement for Kenya’s goods to 45 per cent, a move that Nairobi interpreted as an attempt to lock out its galvanised iron sheets.
Like Kenya, Egypt is member of Comesa Free Trade Area whose rules of origin require products from member states to have at least 35 per cent local value addition for free entry into any of the 19-member trading bloc.
Kenya’s Jubilee government has set its sights on riding the wave of positive economic prospects in Africa to boost its chances of delivering high growth.
“Generally, the Sub-Saharan Africa growth will be sustained and is projected to rise to 5.8 per cent in 2013 from this year’s 4.8,” Cabinet Secretary for Devolution and Planning Anne Waiguru said last week.
Pakistan, which gives Kenyan tea preferential treatment in exchange for similar terms for its rice exports to Kenya, has also emerged as a key export destination for Kenya that took in Sh6.44 billion in the first two months of the year or a 41 per cent growth over the first two months of 2011.
Kenya, which is East Africa’s largest economy, is currently embroiled in a costly tit-for-tat trade wars with its EAC partners. Top in the list of raging disputes is Uganda’s restriction of entry to Kenya’s beef and imposition of a 75 per cent duty or $200 (Sh16,800) per tonne on Kenyan rice.
Under the EAC Customs Management Act, rice and beef produced in the region have duty-free access to the regional market. The quantity of exports is also unlimited.
Tanzania has also persisted in its denial of entry to Kenyan cigarettes on grounds that they do not meet the 75 per cent local tobacco content threshold.
Kenyan companies say these moves are purely driven by rivals in neighbouring States who are using State apparatus to keep potential competitors from domestic markets.
“Unless the private sector is united and begins to think of the region as one market, these disputes will never end,” said Vimal Shah, who chairs the Kenya Private Sector Alliance.
“We have reached a point where we have to agree on the kinds of barriers that can be resolved through talking and those that require legal sanctions, including redress from the East African Court of Justice,” said Mr Shah.
Most Kenyan firms have opted to resolve the disputes through the established EAC institutions. Kenya’s Mastermind Tobacco broke this tradition two weeks ago when it accused the Uganda Revenue Authority (URA) of taking sides in the market access war that pits it against rival cigarette producers in the landlocked country.
“The URA has used the dispute as an excuse to ban the transit of our Supermatch cigarette to South Sudan and other markets in the region,” the company said on May 10.