India beats China in Kenya trade deals

A Tata plant in India. The car firm is among Indian multinational companies with operations in Kenya. Photo/FILE
A Tata plant in India. The car firm is among Indian multinational companies with operations in Kenya. Photo/FILE 

India has extended by Sh30 billion the gap between it and China as the biggest source of Kenya’s imports in the first eight months of the year, latest official trade data shows.

The Kenya National Bureau of Statistics import figures for up to August show that Kenya bought goods worth Sh144.1 billion from India, compared to purchases worth Sh114.9 billion from China.

During a comparative period in 2012, India exported goods worth Sh122.1 billion to Kenya, with imports from China worth Sh113.3 billion in the same period.

Non-food industrial supplies remain the biggest item on Kenya’s import basket, taking up 32 per cent as at August 2013, ahead of fuel and lubricants at 21 per cent.

Kenya mainly imports textiles, medical supplies, industrial machinery, vehicles, electronic and semi-processed goods from India.

Imports from China mainly comprise heavy machinery, electronics, vehicles, textiles and a range of household goods. Indian firms have made significant inroads supplying equipment to mining, healthcare and energy sectors in Kenya in recent years.

Tata Chemicals manufactures soda ash in Magadi, while Reliance Industries, Tata Motors, and Bharti Airtel are other Indian multinational corporations with operations in Kenya.

The Indian traders also gain advantage from knowledge of the local markets through connections by fellow traders of Asian origin who are Kenyan citizens.

A research by London-based Overseas Development Institute (ODI) earlier this year also showed the strengthening trade ties had translated into Kenyan businesses being recipients of most funding from Indian banks among low income African countries in the past five years.

The report by ODI on international private capital flows shows Indian banks increased lending to Kenyan businesses six-fold between 2005 and 2012, a period when the emerging Asian economic giant has become the leading source of Kenyan imports.

Indian banks have also moved to cash in on the increasing Indian volume of trade by opening representative offices in Nairobi.

The Central Bank of India got approval to open a representative office in Nairobi from the Central Bank of Kenya in February, while Bank of India is also planning expansion within Kenya by opening more branches.

“It is anticipated that the representative office will facilitate and support the growing trade links between Kenya and India,” said a Central Bank of Kenya statement announcing approval for the lender to open the Nairobi office.

The increase in Indian exports to Kenya has further tilted balance of trade in favour of the emerging Asian economic giant, with exports to India having declined by 19 per cent to Sh7.5 billion in 2012.

Indian drug manufacturers also stand to benefit from increased business as a result of recent changes to the value added tax (VAT) Act.