Uganda loses more ground as Kenya’s leading market

Uganda’s long-held position as Kenya’s top market weakened further in the first five months of the year after export earnings dropped in a period that saw significant increase in shipments to Netherlands.

Kenya earned a total of Sh19.8 billion from exports to Uganda in the period to May, a 15.4 per cent drop from the Sh23.4 billion earned from the landlocked State in a similar period last year.

The decline in exports to Uganda which began nearly 30 months ago has significantly narrowed the gap with the Netherlands which romped to second position in the first quarter of the year after overtaking UK.

The exports to Netherlands increased by 22.8 per cent to Sh18.3 billion by May compared to Sh14.9 billion recorded in a similar period last year, data prepared by Kenya National Bureau of Statistics (KNBS) indicate.

In Kenya, traders and policy experts hold varied views on the shift.

“We have had fleeting market access issues with Uganda but not on the scale that should cause decline in exports,” said Mr Anthony Weru, a senior programme officer at the Kenya Private Sector Alliance.

“There is a general feeling that the East African Community’s common external tariff locks out goods of most Kenyan companies,” he said.

Kenya has signed market integration pacts with Uganda, Tanzania Rwanda and Burundi to open up borders for goods and services. The pact has, however, been dogged by power implementation at national levels.

ALSO READ: America overtakes China in race for Kenyan imports

The KNBS data indicate that drop in exports to Uganda has defied the depreciation of the shilling against regional currencies which makes Kenyan goods cheaper in East Africa.

The shilling continued to weaken against regional currencies, exchanging for an average of USh28.97 in May 2014 compared to 30.74 at a similar period last year.

In May, the Kenyan shilling depreciated against most major currencies, except the Tanzanian shilling.

“We find it very strange that Kenya’s exports to EAC have continued to fall in the last two years,” John Randa, the World Bank Kenya economist said about the release of June Economic Update.

Within government circles, officials have been quick to link the drop in exports to EAC countries to growing preference by firms to set up business units in the same states.

Cost of doing business

According to this explanation, export figures drop when an active exporter opt to set up a production unit in the neighbouring states rather than ship goods across the border.

“You know we are a common market but cost of doing business is still higher in Kenya than the other EAC states,” a government official who asked not be named said last week.

Similarly, traders have attributed growth in exports to Netherlands to increased shipment of cut flower to Dutch auctions.

“This period falls within the flower industry’s high season which, unlike last year, has not been interrupted by politics,” said Jane Ngige, the CEO of Kenya Flower Council.

The figures indicate that earnings from exports to all the country’s top five destinations shrank except for the Netherlands and US – which recorded earning growth of 26.7 per cent to Sh14.7 billion compared to Sh11.6 billion the previous year.

Over the period exports to Tanzania dropped marginally from Sh14.6 billion to Sh14.5 billion while value of goods shipped to UK dropped from Sh16.3 billion to Sh15.1 billion.