Cross-border trade offers Kenya a route to faster economic growth

Trade has for a very long time been the engine of growth that creates employment opportunities, reduces poverty, improves allocation of resources and expands the economy.

The World Trade Organization (WTO)'s annual reports show trade has delivered major economic and social progress and lifted millions of people out of abject poverty.

Employment opportunities have been created in the manufacturing and service industries that handle imports and exports.

Trade also enhances cooperation between countries and encourages specialisation, which leads to production of high quality goods.

That is why countries, including Kenya, strive to make an impact and control a sizeable portion of the $32 trillion global trade.

According to the Economic Survey 2023 by the Kenya National Bureau of Statistics (KNBS), the country’s expenditure on imports rose by 17.5 percent to Sh2.5 trillion while earnings from exports increased to Sh873 billion ($ 5.93 billion) last year.

Petroleum products accounted nearly 25 percent of total imports, mainly from United Arab Emirates. The imports generally comprise machines, iron and steel, fats and oil as well as plastics.

Horticulture, tea, coffee and apparel are leading exports from Kenya.

However, trade is being impacted negatively by climate change, adverse weather conditions, pandemics as well as sanitary and phytosanitary factors.

The war in Ukraine has negatively affected international trade, largely through increases in price of some essential commodities and services. This has resulted in decrease from benefits of international trade.

The rising interest rates and the winding down of economic stimulus packages have also had a negative impact on trade volumes. Volatility in commodity prices and geopolitical factors will also continue to make trade developments uncertain.

But Kenya can make a big leap forward in terms of economic growth through increased cross-border trade.

Kenya is a signatory to the Common Market for Eastern and Southern Africa (COMESA), which is regarded as the largest market for trade and investment on the continent due to its composition of 21 African States and a huge purchasing power of its over 600 million people.

Furthermore, Kenya also reaps from the intra-regional trade within the East African Community (EAC), which stood at Sh1.49 trillion ($10.17 billion) by September last year. The intra-EAC trade, accounting for imports and exports in the seven EAC Partner States, grew to 15 percent in 2021 to Sh1.39 trillion ($9.5 billion).

Kenya is also a signatory to the African Continental Free Trade Area (AfCFTA), which comprises 54 states with a population of about 1.3 billion people.

The writer is a multilateral trade expert and a former chairman of the Association of Professional Societies in East Africa (APSEA)