Lula visit deepens shift in Kenya’s global trade

President Luiz Da Silva’s Tuesday visit to Nairobi has added fresh impetus to the ongoing shift in Kenya’s choice of economic partners in favour of the world’s emerging powerhouses such as Brazil, China and India, economists said.

The shift, which has been gathering pace since President Kibaki came to power in 2003, has seen Kenya turn East – to China and India – for financial, technical and commercial ties for the headroom it needs to reduce its dependence on Europe and North America.

Mr Da Silva, the Brazilian President, and his Kenyan host came out of a meeting at State House Nairobi with a business deal that promises to unlock new areas of social and economic cooperation, including bio-diesel fuel production and soccer training.

Brazil, Russia, India and China belong to the group of the world’s emerging economic powerhouses commonly known as BRICs that, save for Russia, have recently emerged as top players in Africa’s trade and investment scene.

A deepening of ties between Africa and the BRICs has seen the proportion of Africa’s trade with the emerging economies rise from 4.6 per cent in 1993 to more than 19 per cent in 2008.

Kenya is expected to use its growing ties with Brazil to seek affordable technology and loans to build the infrastructure it needs to push economic growth to the double digit levels target required to realise the Vision 2030 development goal.

Brazil has emerged as the world’s leader in biofuels production technology which it has been using to shield its economy from the turbulence of the petroleum market.

Like India and China, the South American nation has also emerged as a global powerhouse in the production of cheap goods that require advanced technology such as generic drugs.

Direct flights

Kenya’s bilateral engagement with Brazil has remained low mainly due to obstacles such as lack of direct flights between the two nations.

“What is absolutely striking is how much change there has been between the BRICs and Africa,” Mr Jacko Maree, the CEO of South Africa’s Standard Bank, told Reuters in an interview. “We like to think that the whole story has only just begun.”

President Kibaki’s hand in the ongoing shift is being seen in the fact that he has not visited or hosted any major European leader since coming to power eight years ago but has made several trips to China and India.

Brazil’s arrival in Africa is being seen as promising the continent a fresh opportunity to diversify policy advice, trading partners and sources of investment to South America.

“While Sino-Africa trade has grown particularly rapidly, Brazil’s has remained relatively flat at around 18 per cent of Africa’s total trade with the BRICs in the past two decades,” Simon Freemantle and Jeremy Stevens of Standard Bank said in a recent analysis of the BRICs activities in Africa.

Brazil has, however, stepped up the race for Africa that has seen President Da Silva follow in the footsteps of China and India with to visit to a number of African capitals for the signing of multi-billion commercial deals.

“What brings them together is that they are at the frontier of capitalism,” said Christian Lohbauer, an international relations expert at the University of Sao Paulo in an interview with BBC.

“These efforts and initiatives have manifested themselves in the mushrooming of high-level official visits to Africa driven by, and in tandem with, the economic and political expansion of the BRICs on the global stage,” the Stanbic economists say.

More recently, Brazil has made its National Development Bank (BNDES) the driver of its business partnerships in Africa that finances its exporters and major projects that its firms are carrying out abroad.

By deepening its ties with Brazil, Kenya is likely to benefit from bio-diesel technology that is now becoming an option for energy-deficit economies around the world.

Brazil’s most significant commercial venture in Africa remains state-run Petrobas, a petroleum company with a big presence in Angola and Nigeria.

Mr Da Silva has over the years advocated the expansion of Brazil’s ethanol production activities to other markets, financing exports and transfer of technology to the target markets.

Kenya is expected to enter the ethanol fuel market in September following the release of a formula that will see petroleum blended with ethanol at the ratio of 85:15.

Mumias, Kenya’s largest sugar miller is already lining up for the bio-fuel business with the establishment of a plant to produce 25 million litres of ethanol per annum from 100,000 tonnes of molasses that will earn it Sh1 billion in additional revenue annually.

“Kenya has a lot of land to support bio-fuels,” the Brazilian President said at State House, Nairobi, on Tuesday.

“Brazil is a world leader in this field and Kenya stands to gain as we seek ways of becoming more efficient in our management of the energy sector,” President Kibaki said.

Besides energy, Kenya’s new found partnership with Brazil could also bring major fortunes in the aviation industry where President Kibaki said the government was looking forward to concluding Bilateral Service Agreements to facilitate faster movement of persons between the two countries through direct flights.

Brazil is also a major maker of aeroplanes and its Embraer brand is part of national carrier, Kenya Airways’ latest fleet modernisation programme.

So far KQ has grown its fleet of the 70-seater Embraer 170 aircraft to six using them on regional routes such as Nairobi-Kigali and Nairobi-Juba.

Last year, Brazil deepened its foray in Africa with the launch of an international TV channel aimed at acting as a channel for cultural cooperation.

President Da Silva said the aim of the Portuguese-language channel is to present Brazil to the world even though analysts said the move only symbolized the South American nation’s growing interest in Africa.

TV Brasil Internacional, based in Brasilia, broadcasts to 49 African nations via Maputo.

So far it has won audiences in the Portuguese-speaking African nations such as Mozambique, Angola, Cape Verde, Guinea-Bissau, and Sao Tome and Principe.