An evolution in containerised transport is helping Kenya to sidestep hurdles in African markets and sell its fresh produce, among them avocados, at premium prices abroad.
Kenya which has traditional exported its avocado to southern Africa and the Middle East (then the farthest market) is today— thanks to evolution in technology— able to sell most of its produce in Europe where the commodity fetches roughly triple the price in these markets, a new report shows.
The report, titled ‘‘East Africa weathers tough conditions to return a mixed bag of trade growth’’, was compiled by global shipping firm Maersk. It says the inception of controlled-atmosphere containers has made Europe within reach for local exporters.
“This (technological evolution) has led to a growth of 34 per cent in 2016 over 2015”, states the report released in Nairobi yesterday.
The regional market for Kenya’s avocado had contracted considerably after South Africa imposed a ban on its fruits in 2006 citing infestation by fruit flies. Angola also banned import of bananas from Kenya.
With the inception of controlled atmosphere containers, 70 per cent of an estimated 115,000 tonnes of avocado produced mainly by small-scale Kenyan farmers annually, end up in various export market, with Europe as the main destination.
Kenya’s avocado farming has recently attracted global attention, with Guri Avocados inking a deal with Kiambu County in August which will see the farmers export the fruits to Israel. Demand for the fruit in Australia is also expected to boost trade volumes of the produce to that country.
Previously, Kenya’s avocado faced challenges in meeting export standards. For instance, fruits for export should fill a four-kilogramme carton which must contain eight to 12 avocados.
But fruits that are harvested in most parts of the country especially in the northern part of the Rift Valley require 18 to 20 pieces to attain the required standards, posing a challenge in the export market.
Also most part of the country produce the fruit but lack information on the export market.
The Maersk report further said that growth in exports of avocados and other produce like tea, non-frozen vegetables, beans and animal fodder also resulted in a two per cent growth of containerised trade volumes on the Northern corridor (Kenya, Uganda, South Sudan and Rwanda).
During the period, the Central corridor (Serving Tanzania, parts of Rwanda, Burundi, Zambia, Malawi and DRC) experienced a decline in trade volumes.
“The silver lining in the overall tepid containerised trade performance is the Northern Corridor that grew by two per cent in the first nine months of 2016, with imports growing two per cent and exports growing three per cent. Countries in the Central Corridor are facing some macro-economic headwinds, resulting in a contraction, especially in imports, which showed a year-on-year decline of eight per cent,” says Steve Felder, Managing Director, Maersk Line Eastern Africa.
New levies, weakening currencies, new gateways, internal conflict in Burundi and other external factors were blamed for the contracting trade volumes on the Central Corridor.
The report noted a tax crackdown in Tanzania and the levying of VAT on transport services from Tanzania to and from hinterland countries was one of the notable Non-Tariff barriers.
“One reason for the sharp decline in exports from the Central Corridor is fall in the commodity prices. Also the fact that containerized volumes from neighbouring countries, including Zambia and Democratic Republic of Congo, which used to pass through the Dar es Salaam port, moved out via other gateway ports like Durban in South Africa and Walvis Bay in Namibia,” said Chukwuma Mokwe, Maersk Line Eastern Africa Trade Manager.
Political stability, fewer trade barriers and new infrastructure ,the report noted, are the key drivers of regional growth. And the report predicts that next year’s general election may have a direct impact on trade in the region.
The report says that historically there is a trade slowdown of up to 20 per cent in imports starting around three months prior to the election date, and only picking up once the situation stabilises.
“As per our estimates, the East African trade will contract by four per cent in 2017 with imports declining by five per cent and exports declining by two per cent. Northern Corridor is set to out-perform the Central Corridor in both import and export segment again,” says Felder.
The report, however, noted improvements made in the region to improve trade by highlighting the second container terminal in Mombasa which has eliminated congestion within the port thus improving productivity and the construction of the Standard Gauge Railway (SGR) which it says has a huge potential of reducing cost of logistics and decongesting the roads and reducing carbon emissions.
“To improve trade volumes in our region, the East African economies need to attract more foreign investments, which can only happen if we continue to work towards removing trade barriers and providing a conducive environment for business in general and industrialization specifically,” said Felder.