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Cross-border trade costs ease on EAC, AfCFTA initiatives

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Stanbic Bank branch on Kimathi Street Nairobi. FILE PHOTO | DENNIS ONSONGO | NMG

The cost of accessing regional and continental markets for Kenyan businesses is gradually easing, findings of a survey suggest, citing falling tariffs and customs procedures.

Traders who participated in a survey conducted by top-tier lender, Stanbic Bank, said that the burden of high taxes, infrastructure challenges, political instability, and conflict when buying and selling goods with other African countries was on the decline.

Read: KRA's tough rules for trade across borders to boost taxes

About 31 percent of Kenyan firms reported cross border trade landscape to be either “very or extremely easy” in May, according to the Africa Trade Barometer index, nearly doubled from 17 percent in September last year.

“This result may be driven by the fact that the majority of the businesses exports are sold to fellow EAC member states, where the existence of the EAC Common Market Protocol and EAC Customs Union has eliminated or significantly reduced tariffs and trade barriers,” research analysts at Stanbic Bank wrote in the report released to media last week.

“The EAC has also harmonised customs procedures among member states and thereby significantly simplified trade processes between member states, which may explain why the majority of businesses are not significantly impacted by customs regulations.”

The findings further suggest that the proportion of surveyed businesses that were aware of opportunities under the African Continental Free Trade Area (AfCFTA) has nearly tripled to 43 percent in the review period compared with 15 percent previously.

This came after the Accra-based AfCFTA secretariat launched a year-long Guided Trade Initiative (GTI) in October last year aimed at stress-testing operational, institutional, legal, and trade policy environment under the proposed common market on the continent.

The initiative covers trade in tens of products such as tea, coffee, ceramic tiles, batteries, processed meat products, sugar, pasta, glucose syrup, dried fruits, and sisal fibre.

The pilot scheme is being implemented in eight countries: Kenya, Tanzania, Rwanda, Ghana Egypt, Mauritius, Cameroon, and Tunisia.

“In general, most Kenyan businesses believe that the implementation of the AfCFTA will reap benefits for their businesses,” the Stanbic analysts say. “The most commonly identified benefits are easing the movement of goods and services across borders, greater competition, as well as providing a larger market for goods and services.”

Africa’s under-developed transport networks have been blamed for raising the cost of goods and services as much as 40 percent, rendering intra-African trade uncompetitive.

For instance, the first consignment of Kenya’s value-added tea to Ghana which left the country last October reached Port of Tema in February this year, underlining the non-tariff hurdles hampering intra-African trade.

“While infrastructure challenges persist, certain trade obstacles have been alleviated over time. Both intra-Africa and global trade logistics have improved, with businesses highlighting improved rail infrastructure and airport operations,” the report states.

Read: How cross-border securities trading will boost market liquidity

Kenya is amongst African countries with the highest share of intra-Africa trade. For example, Africa accounted for 19.14 percent, or Sh328.70 billion, of Kenya’s Sh1.72 trillion total trade value in the January-June 2023 period, according to provisional official data.

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