It’s time we start capitalising on our export potential

Pursuing export-led industrialisation puts a country in a sustainable socio-economic development path. This was highlighted during the Source 21 Comesa International Trade Fair held two weeks ago, which saw government representatives from the Common Market for Eastern and Southern Africa (Comesa) trade bloc showcase the need for opening up our markets, diversifying our manufactured goods and increasing our production capacity.

Exports have played a leading role in rapid growth, boosting the emergence of a modern manufacturing sector, providing employment and reducing poverty in global economies. This is demonstrated by the experiences of Taiwan and South Korea in the 1960s and 1970s, Malaysia, Thailand and Singapore in the 1970s, China in the 1980s and India in the 1990s.

The Comesa, which was founded in 1994, presents us with a market of 540 million people and a Free Trade Area that currently comprises 16 members, which Kenya is part of. Not only does the Free Trade Area offer producers and manufacturers of exportable products an enlarged market for their goods, but it also encourages longer production runs and better, cost-effective utilization of productive capacities.

In 2018, Kenyan exports to Comesa member states accounted for Sh160 billion, which is a 3.8 percent decline from Sh166.4 billion in 2017, according to 2019 Economic Survey. Egypt remains one of the main competitors accounting about 19.4 percent of total exports within Comesa member States in 2018, while Kenya accounted for about 18.3 percent (COMSTAT Database).

The declining export trend calls for robust and strategic measures to increase our exports to the Comesa region. How can we realize this?

First, we must address the cost of production if we are to remain competitive in the regional market. Kenya’s manufacturing sector, for instance, has been operating at about 13percent cost disadvantage compared to our neighbouring countries. Some of the challenges contributing to this include unfair competition from the illicit economy, unpredictability in the policy and regulatory environment and low liquidity in the market affecting operations and therefore productivity.

Second, we must diversify our export portfolio. Currently, Comesa countries mainly trade in agricultural products, which are similar despite the continent’s endowment with an abundance of natural resources, low labour costs, and business-friendly trade agreements. To realize this, we have to undertake value chain analysis on targeted high export potential sectors.

Third, we need to incorporate Small and Medium Enterprises (SMEs) along the value chain. SMEs are integral to the growth of our economy, hence, the full participation of SMEs in the value chain is crucial if we are to grow our industries and regional trade. This means that we have to put in place preference policies that will favour SMEs under procurement as well as having in place a market structure that supports SME lending, market access and capacity building.

Lastly, it is critical that all Member States respect standards, and that the standards are not used to create non-tariff barriers, which impede business.

The writer is Chairman, Kenya Association of Manufacturers.