Kenya’s exports to the region dropped by the largest margin in three years in the third quarter of last year, to $275.7 million from $380.3 million in the first nine months of 2015, new data shows.
All countries in the region, with the exception of the Democratic Republic of Congo, cut their uptake of imports from Kenya, according to a report from the Kenya National Bureau of Statistics.
While the drop in exports has been attributed to encroachment in key market segments by Chinese products, local factors like taxation, new competing industries in export markets and instability in South Sudan have contributed to the trade down turn.
Goods from China, some of dubious quality, have flooded the market, making the Asian giant the biggest exporter to the region.
Relying on Africa
Kenya relies on Africa to absorb more than 40 per cent of its manufactured exports. The data shows a 30 per cent drop in exports to Uganda to $152.1 million in the period under review, from $228.18 million over the same period in 2015.
“Africa remained the leading destination of the country’s exports, accounting for 40.6 per cent of the total during the review period. Within Africa, Uganda was the largest market for Kenya’s exports, accounting for 11.3 per cent of total export earnings, followed by Tanzania, which accounted for 5 per cent of total export earnings in the third quarter of 2016,” the report notes.
Tanzania’s imports from Kenya dropped to $67.5 million in the third quarter of last year, from $78.2 million over the same period two years previously.
Rwanda, which in 2015 was the only country that had increased its imports from Kenya, also recorded a drop to $43.12 million from $56.55 million. It was only DRC that recorded an increase at $51.3 million from $48.8 million.
The KNBS figures show that imports from China rose to $935.4 million in the third quarter of 2016, from $909.8 million over the same period the previous year, making it the leading source of imports in the Asian region.
Kenya has also seen its trade with the region drop significantly over the quarter to $359.4 million, from $480.1 million over the same period in 2015.
Kenya exports edible oil, fabrics, food, animal products, tobacco and cement to the region, but the growing push by local firms to set up subsidiaries in the region has also seen a decline in supply of these goods.
The biggest drop in exports was registered in cement, which dropped to $7.6 million, from $25.6 million in 2015. Cement manufacturers blame the declining volumes on the proliferation of cheap imports, while the entry of Dangote Cement into markets like Tanzania compounded the problems as the firm offered a 40 per cent price cut on its products.
Concerns over adulteration of the country’s petroleum products saw its exports to neighbouring countries drop to $13.9 million, from $20 million in the third quarter of 2015.
In October, Kenya’s Energy Cabinet Secretary Charles Keter said that the regional economies, apart from Uganda, had drastically reduced fuel imports from the country; Kenya also lost business to Tanzania.
“We have decided to cancel all the licences for the firms involved. We cannot allow cartels to compromise the quality of our petroleum products, thereby hurting our exports,” said Mr Keter.
British American Tobacco company on the other hand, accused the Tanzanian government of imposing higher local content requirements for exports, leading to Kenya’s exports dropping to $23 million last year, from $38.6 million in 2015.
Edible oil exports to the EAC dropped to $11.9 million from $12.4 million. Salt also dropped to $9.89 million from $13.69 in the third quarter of 2015.
Joseph Kosure, the head of the bilateral Trade Division at the Ministry of Foreign Affairs and International Trade said that the drop in numbers could also be attributed to firms setting up shop in traditional export markets, leading to a drop in orders from Kenya.
“We have seen firms like Bidco establish footprints in Uganda, General Motors in Tanzania and other firms, resulting in a drop in orders,” said Mr Kosure.
Trade and Industrialisation Principal Secretary Chris Kiptoo said that recently, the Cabinet approved a national export strategy seeking to correct the decline in exports.
“From our data, 70 per cent of our exports end up in 12 markets, six of them being in Africa. This shows that our export destination is narrow. This strategy will now see us diversify and penetrate while also deepening our export destinations,” Dr Kiptoo said, adding that regionally, they have had discussions with Tanzania on how to deal with the trade barriers affecting exports and imports between the two countries.
The report also shows that the imports of European Union products (mostly from the United Kingdom and the Netherlands) into the country rose despite export earnings by Kenya, from these two destinations declining in the quarter under review.
This could signal bad news for the stalled ratification of the Economic Partnership Agreement (EPA) as it could embolden Tanzania, which has taken issue with the “skewed” EPA, saying it favours the EU and threatens its local manufacturing base. Kenya has under a month to persuade Tanzania and Uganda to sign the agreement, before the February 2, deadline.
Outside of the region, The Netherlands and the UK remained the key markets for the country’s exports including tea, coffee and flowers, jointly accounting for 14 per cent of total exports in the third quarter of 2016. In Asia, Pakistan provided a vital market for the country, with a 15.2 per cent increase in exports to $91.3 million.
Buoyed by the Africa Growth and Opportunity Act (Agoa), and driven by a rise in clothing and apparels exports, earnings from America grew by 12.4 per cent.