Kenya’s supply chain opportunities with Britain after BrexitWednesday April 07 2021
Even before Covid-19, the world had economic uncertainties. In 2019, the IMF projected an economic growth of 3.3 percent down from 3.6 percent in 2018. Today, upheavals have affected supply chains in every industry. With the successful inventions of the Covid-19 vaccine, 2021 will provide higher supply chain efficiency rate.
In June 2016, the UK voted by a narrow margin in favor of leaving the European Union (EU). The UK left the bloc on January 31, 2020 and left the EU Single Market end of 2020.
According to Peterson Institute for International Economics, the EU is the world’s most deeply integrated economic area and is much more favourable to trade than any other economic bloc.
Kenya and Britain have an established trade and investment relationship involving high value horticultural produce and beverages responsible for 90 percent of total Kenyan exports to the UK.
However, Kenya’s share of exports to the UK is declining with competition from neighbouring countries due to high cost of production, wages, marketing systems and standards compliance.
On December 8, 2020, Kenya and the UK signed an Economic Partnership Agreement that will ensure that British businesses in Kenya can benefit from duty-free access to the UK markets.
Much as this agreement seemed lucrative and celebrated, Kenya must use this opportunity to increase export products to the UK to balance its foreign trade. Kenya’s imports are three times more than its exports.
With Brexit, the UK is renegotiating its trade deals with countries, including Kenya.
Brexit confers a number of supply chain opportunities including better Kenya-UK collaboration, improved quality control, improved cash flows, on-time deliveries due to a more cohesive market, improved risk mitigation and reduced overhead costs.
Kenya’s major foreign exchange largely relies on the agriculture sector. The horticulture sub-sector alone generates more than $1 billion annually.
It is estimated that more than 500,000 people, including more than 100,000 flower farm employees, depend on the floriculture industry, impacting more than 3.2 million livelihoods.
According to the East African Policy Centre, Kenya has more to lose from Brexit-related trade disruption than any other major flower-exporting country.
Kenya is far more exposed to the UK and EU markets than the other major developing country growers, for instance Colombia and Ecuador whose main markets are the US and Russia.
Today, most companies are under pressure to re-structure, re-design and re-think their supply chain strategy, where and how to produce, source for raw materials and how to fulfill their customer’s demand.
In such turbulent times, defining your supply chain network design is much more important than before.
With Brexit, the UK must now give Kenyan exporters the same market access they enjoyed before Brexit. Kenya must exploit such trade deals to ensure they optimise their supply chain operations.
Manufacturers should design more products customised for the British market.