Kenya’s exports stay at 25pc of GDP

Saturday March 23 2013

A woman picking tea. Kenya exports semi-processed tea. However, the country could earn more from the commodity if it is branded and packaged locally before export. Photo/FILE

Fresh doubts are emerging over Kenya’s ability to grow her exports with new data showing the contribution of export earnings as a percentage of the country’s wealth has stagnated for a decade.

Data from the Africa Trade and Investment Exchange, a UK-based consulting group helping link foreign investors with enterprises in Africa, shows that the value of exports has remained at an average 25 per cent of the gross domestic product (GDP) since 2003.

This is attributed to overdependence on export of primary products and expensive export procedures that deny the country the opportunity to create more jobs and improve the balance of payments.

Economists say structural weaknesses especially in the way Kenya thinks of the export and manufacturing business are exposing the country to external forces which remain the biggest threat to growth.

Most local exports, for example, have a high import content meaning high cost of production at home will only make the country’s products more expensive when sent out especially in an era when global prices of inputs like fertilisers and chemicals are on the rise.

“There is really not much achievement on exports. What is happening is that exports are only keeping up with general economic growth,” said Kevin Smith, the chief executive officer of Africa Trade and Investment Exchange.


In essence, while the value of Kenyan exports has nearly doubled from Ksh274.6 billion ($3.2 billion) in 2007 to Ksh511 billion ($6 billion) in 2011, the increase is balanced by the growing value of the economy, holding up the exports growth to GDP ratio at an average 25 per cent.

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“The country is not engaging properly with the existing trading partners and the private sector is not fully involved in the search for new export markets,” said James Mureu, the Chairman of the East African Chamber of Commerce and Agriculture.

The data shows the gap between imports and exports of goods and services, known as the current account deficit, now stands above 10 per cent of GDP, which is even higher than debt-riddled Greece.

Kenya’s four main export earners — tea, tourism, coffee and horticulture — do not even earn enough to pay for its oil, not to mention other imports.

According to the Export Promotion Council (EPC), tea accounts for 20 per cent of total exports, horticulture 16.3 per cent and coffee 3.7 per cent. Overall, nearly 90 per cent of Kenya exports are primary products.

Tea is exported as a semi-processed product with tea processing factories being some of the main economic drivers in the rural markets where they are located. But the country could earn more from the commodity if it is branded and packaged locally before export.

Apparels are also exported as processed goods, produced from the Export Processing Zones.

Kenya’s export procedure is also one of the slowest and most expensive in the region, discouraging many would be exporters.

Analysis done by the Africa Trade and Investment Exchange indicates that it takes 26 days to complete the export process in Kenya, compared to a regional best of 10 days and global best time of five days.

The cost of exporting one container of goods from Kenya is $2,225, compared to regional best cost of $500 and global best of $200. An exporter will require eight documents to export from Kenya, compared to a regional best of four and global best of two documents.

Trade experts said this delay can change if Kenya takes advantage of business opportunities presented by her trading partners, to increase market penetration as it also invests in value addition capacity especially in agro-processing.

State-owned agencies involved in import and export sectors including EPC, EPZ and the Kenya Investment Authority have been active in looking for markets for Kenyan goods, but are blamed for failing to include private sector delegations to those trade missions.

Kenya will also need to improve her global ranking by the World Bank at 148/185 countries for ease of export/import compared to UK’s 14 and Tanzania’s 122.

The other ranking by the same bank places Kenya at position 121/185 countries on the ease of doing business compared to UK’s 7 and Tanzania’s 134.