New rail lifts Chinese exports to Kenya by 50pc

The building of the new railway has helped increase China’s exports to Kenya in the eight months to August by Sh69.8 billion as the appetite for US and India made goods dropped.

Official data shows that Kenya's imports from China grew from Sh140 billion between January and August last year to Sh209.8 billion same period this year — accounting for a fifth of Kenya’s total imports. This marks a 49.8 per cent jump in Chinese exports to Kenya.

Imports from the US dropped to Sh60.5 billion from Sh106 billion in the period to August, coming a distant third after India whose exports fell to Sh162.7 billion from Sh174.3 billion.

Institute of Economic Affairs chief executive Kwame Owino attributed the surge in imports from China to the ongoing Sh327 billion standard gauge railway that will link Mombasa port to Nairobi upon completion in 2017.

“The growth in China’s exports to Kenya is largely due to supply of railway machinery,” said Mr Owino in an interview.

China Road and Bridge Corporation, which was contracted to build the rail, has been importing  machinery, steel beams and other metals since construction started early this year.

The Kenya National Bureau of Statistics data, however, shows bilateral trade is heavily in favour of China which bought just under Sh3.4 billion from Kenya in the period to August.

Kenya exported Sh26.9 billion worth of merchandise to the US. Key items imported from China include heavy machinery, electronics, vehicles, textiles and household goods.

XN Iraki, a lecturer of economics at the University of Nairobi, said the growth in Chinese exports was partly being driven by local traders’ preference for fast moving cheaper stock from the Asian nation.

READ: Kenya top gainer in China shift to consumption

India, however, remains the largest exporter to Kenya on yearly basis, having sold Sh264 billion worth of goods to Nairobi last year followed by China at Sh248 billion. Kenya mainly imports textiles, pharmaceuticals, industrial machinery, vehicles, electronic, motorcycles, tuk tuks and semi-processed goods from India.

The analysts said that Kenya Airways’ purchase of five Dreamliner jets from US-based Boeing was the key driver of the growth in Kenya’s trade with the US last year alongside purchase of General Electric locomotives by Rift Valley Railways.

Dr Iraki says the drop in the US exports was expected, following last year’s jump in growth that was driven by the one-off purchases.

The KNBS said the purchase of the Dreamliners and train engines accounted for 70 per cent of the value of Kenya’s imports from the US in 2014.

“US exports to Kenya are likely to increase because of investment in power sector, coming on the back of President Obama’s visit in July. I see bilateral relations growing vibrant,” said Dr Iraki.

The KNBS data shows that Kenya’s total imports stood at Sh1.02 trillion compared to Sh1.04 trillion in eight months to August last year while exports grew to Sh379.3 billion from Sh283.2 billion.

China has entrenched its presence in the country with intense economic diplomacy that started with President Mwai Kibaki’s election in 2002.

At Sh209.8 billion, China’s exports to Kenya have grown seven-fold since 2007 when they stood at Sh28.7 billion in the review period, below America’s Sh37.9 billion.

Kenya’s current account deficit — the difference between exports and imports — stands at 9.8 per cent of the gross domestic product compared to 9.2 per cent last year, a position the World Bank considers worrisome.

“Kenya relies too heavily on short-term capital flows to service its current account,” the bank says in its latest report on Kenya’s economy.

“In order to service and reduce external indebtedness, policymakers need to focus on increasing the production of traded goods to enhance the capacity to generate foreign exchange.”