Kenya’s exports to the East African Community have fallen, largely due to stiff competition from cheap Chinese imports and its own unfavourable tax regime.

A survey by the Ministry of East African Community Affairs shows that the volume of Kenya’s exports to the EAC has declined sharply with the major challenge being unfair competition from Chinese traders and the country’s value added tax (VAT) system that has become an impediment to export business.

According to the survey, competition from Chinese goods and the unfavourable tax regime account for over 25 per cent and 10 per cent of the total decline in Kenya’s exports to the EAC countries respectively.

Other taxation measures such as the industrial development fee (IDF) as well as the railway development fund make Kenyan manufactured goods 5 per cent more expensive than imports from Comesa and SADC countries, according to the report seen by The EastAfrican.

Electronic single window

The report further says that the implementation of an electronic single window system to facilitate cross-border trade is yet to boost trade.

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It points out a number of obstacles in the implementation of the platform, particularly related to the understanding of the system itself, the complexity associated with compliance requirements, project support requirements and overall change management programmes.

“This explains the further decline in Kenyan exports, particularly to Uganda in 2014,” says the report.

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“In fact, one of the biggest impediments to the implementation of the SWS was frequent system downtimes that significantly delayed the export process,” the reported adds.

Frustrated importers who find the new system complex to learn or expensive to comply with have opted to import from China and Dubai.

The decline in exports cuts across the manufacturing sector from food processing to metal fabrication, the report says.