EDITORIAL: Kenya and Africa trade deficit a wake-up call

What you need to know:

There is a gap of Sh156 million between imports and exports for the first six months of the year.

A report indicating that Kenya has for the first time bought more goods from African countries than it sold to the continent signals a worrying trend for a country eying an upper middle-income status in the next 10 years.

Kenya not only needs to export more than it buys from Africa but should also expand its sales outlets in other parts of the world as envisaged under the economic blueprint, Vision 2030.

Latest official trade data however shows there is a gap of Sh156 million between imports and exports for the first six months of the year.

The data published by the Central Bank of Kenya, shows that the country’s exports dropped at a faster rate of 1.96 percent to Sh107.55 billion in the first six months of the year.

By comparison, imports declined at a slower rate of 0.99 percent to stand at Sh107.71 billion.

This indicates that Kenya is slowly losing its competitiveness in Africa. In East Africa where it trades on preferential terms with neighbours, exports to countries like Uganda, Tanzania and DRC have fallen while imports from these states have doubled in most cases.

For countries such as South Africa which do not enjoy special trade arrangements with Kenya, a strong industrial base that churns out diverse products at affordable prices has done the trick.

The lesson is stark. Kenya cannot expand its markets in Africa when most of the products it has on offer are primary or extractive goods. The country must walk its talk on value addition.

Secondly, the country must address its cost of doing business and ensure that its manufactured goods are able to compete anywhere across the continent.

With its long value chain and manual operations, a vibrant manufacturing sector implies more jobs for the youth.

In short Kenya - whose economy is expected to expand by six percent this year - must fix its export engine if that growth dividend is to be distributed fairly across its various segments.

It is a long-established fact that the rate of economic growth and the distribution of income and wealth in a country are closely related to export growth.