Kenya has embarked on a fresh bid to increase cross-border trade with South Sudan, hoping to benefit from improved relations between Juba and Khartoum with the resumption of oil flow.
Kenya’s Export Promotion Council (EPC) has concluded a feasibility study aimed at identifying new business opportunities to expand the country’s exports.
Among other things, the study considered the possibility of building warehouses in South Sudan where Kenyan manufacturers can repackage their bulk goods into smaller sizes for sale in the local market.
EPC chairman Hudson Aluvanze said South Sudan, if well tapped, could be the game-changer in boosting Kenyan exports. “There are enough facilities in the country and we feel that assisting our businessmen by offering warehousing services to increase the shelf life of perishable goods will make us more competitive in this market.
“We are also rethinking our export approach in DR Congo and Ethiopia,” he said.
The EPC cited discrimination, inadequate government support, police harassment, lengthy commercial dispute resolution, insecurity and high costs of doing business as the major impediments for Kenyan traders in the neighbouring country. The agency now wants Juba and Nairobi to enter into a new bilateral trade agreement, ensure trade diplomacy presence and build infrastructure to address the trade hurdles.
By expanding its exports, Kenya could repair its balance of payments position. In 2003, the value of Kenya’s exports could have paid for 65 per cent of its imports, but the figure had dropped to 30 per cent by 2012, which has left Kenya vulnerable to external shocks like increased world oil prices.
Kenya is keen to extend the success that its service-based companies — banks and insurance companies — have had in South Sudan to the manufacturing sector, as part of a broad government policy of diversifying export markets.
Data shows that Sudan (one country at the time) accounted for 3.6 per cent of Kenya’s total exports in 2009, with a revenue of $162 million, while in 2010 exports to Sudan accounted for 4.5 per cent of Kenya’s total exports attracting export income of $229 million.
South Sudan is opening its economy to trade with partners in East Africa, after it successfully seceded from Sudan in July 2011.
However, its poor transportation link to Kenya was among the weaknesses that a team appointed by the EAC Council of Ministers cited last year to delay Juba’s membership to the regional bloc.
On Tuesday, Sudan and South Sudan agreed to open 10 crossings along their joint border to boost travel and trade, in order to ease strained relations between the two neighbours that nearly drove them to war.
With the resumption of oil flow to Sudan, South Sudan’s economy is expected to pick up as the revenues fuel increased spending by both the government and the private sector, opening up new business opportunities in the country.
Kenya is planning to diversify its key exports markets away from Europe, with the country’s newly elected government saying it would look to Africa to grow its exports.
In a 2012 report, the World Bank estimated that demand for Kenyan goods in high-income countries would remain flat, mirroring their economic growth figures, but is expected it to grow rapidly within EAC countries on the back of steep GDP expansion.
Europe, one of Kenya’s major export markets, is expected to grow by an average of 2 per cent this year, compared with an average of 5 per cent in East Africa.
In November, Kenya signed an agreement with Ethiopia that allows Kenyan businesses to invest and export to the market with fewer restrictions.
Ethiopia restricts foreign investors from venturing into the telecommunications, banking, media, retail, insurance and electricity sectors, but allows them entry into selective areas.
Kenya is now focusing on growing its trade beyond Uganda and Tanzania.