China struggles against weak global demand, targets exports to E. Africa

Tuesday October 29 2013

Cargo for export being loaded onto a ship. Latest data by the Kenya National Bureau of Statistics shows that China exported goods worth Ksh95.5 billion ($1.1 billion) to Kenya for the first seven months of this year up Ksh95.1 billion ($1.1 billion) sent to Kenya a similar period last year. Photo/FILE

Cargo for export being loaded onto a ship. Latest data by the Kenya National Bureau of Statistics shows that China exported goods worth Ksh95.5 billion ($1.1 billion) to Kenya for the first seven months of this year up Ksh95.1 billion ($1.1 billion) sent to Kenya a similar period last year. Photo/FILE NATION MEDIA GROUP

By SCOLA KAMAU, Special Correspondent

China’s exports to Kenya grew only marginally  in the first seven months of 2013 compared to the previous period.

Latest data by the Kenya National Bureau of Statistics shows that China exported goods worth Ksh95.5 billion ($1.1 billion) to Kenya for the first seven months of this year up Ksh95.1 billion ($1.1 billion) sent to Kenya a similar period last year.

This lower than expected growth in exports from China helped narrow the gap between China and the United Arabs Emirates (UAE), the second and third largest exporters to Kenya respectively. Earlier this year, China was closing in on India and opening up a lead against UAE as the leading source of imports into Kenya.

Anxiety rises

Meanwhile, faltering global demand is denting China’s economic growth prospects, which rely heavily on global demand for imports. 

China’s exports globally fell 0.3 per cent year-on-year to $185.64 billion last month, data released by the Customs Administration on October 12 showed. Imports, however, increased 7.4 per cent to $170.44 billion.

China’s economy continued to struggle against headwinds, with the National Bureau of Statistics reporting last week that GDP grew by 7.8 per cent between July and September, up from 7.5 per cent in the second quarter of this year. It was 7.7 per cent in the first three months of 2012.

Experts said China will increasingly seek exports market in emerging economies in Africa and Middle East to reverse this trend.

Infrastructure development in East Africa has seen trade tilt in favour of China. In neighbouring Tanzania, China registered increased exports in 2012, thanks to the construction of the 542 km long gas pipeline connecting the south of the country to the commercial hub of Dar es Salaam.

During the year, China exported goods worth $1.1 billion to Tanzania, up from $986 million in 2011. Tanzania’s exports to China dwindled from $632 million to $534.5 million. Tanzania exports cotton yarn, garlic, vegetables, marble, gold compounds, copper ore (concentrates), pyrethrum flower (powder), quartz and coffee to China.

Uganda’s imports from China rose to $41 million per month between January and July 2013, rising  11 per cent during the same period.

Uganda’s imports from Kenya grossed $336 million in the first seven months of 2013 while Egypt sent exports worth $25.5 million to Uganda, making Kenya Uganda’s biggest source of imports within the Comesa bloc.

Imports from India stood at $746 million, compared with $288 million worth of imports from China. Imports from the UAE to Uganda stood at $196.8 million.

Though China has been the more aggressive hunter of trade opportunities in the country’s infrastructure and natural resources sectors, on an annual basis, India remains Kenya’s largest source of imports.

During the first seven months of 2013, the UAE’s exports to Kenya rose slightly to Ksh85.5 billion ($982 million) from Ksh83.2 billion ($967 million) in the seven months to December 2012.

During the period, India’s exports rose 6.7 per cent, from Ksh120.7 billion ($1.4 billion) to Ksh128.8 billion ($1.49 billion). Kenya, under former president Mwai Kibaki, was keen on cutting its trade dependence on traditional partners like Britain, Germany and the US, with preference being given to opening new markets in Asia while deepening trade within the EAC.

The major imports from Asia are machinery, motor vehicles and industrial chemicals. With support from their governments, Chinese and Indian firms are targeting the expected opportunities in Kenya’s telecoms, mineral extraction, and engineering and consumer goods markets, fields previously dominated by Western firms.

Kenya’s imports in the seven months to July 2013 consisted mainly of industrial supplies with a share of 28.2 per cent, while fuel and lubricants and machinery and other capital equipment registered shares of 24.6 per cent and 20.5 per cent respectively.

Experts said China’s exports to the EAC could grow at a faster rate next year as governments embark on aggressive infrastructure projects, a sector that China mainly serves.

“In 2014, demand for building materials will go up in Kenya as the government pursues several big projects,” said Vimal Shah, chairman of the Kenya Private Sector Alliance (Kepsa).

Kenya’s economy  slowed to 4.3 per cent in the quarter ending June 2013 compared with 5.2 per cent in the first quarter and 4.4 per cent in the second quarter of 2012 affecting  the growth of real estate, which accounts for a big percentage of Chinese cement.

Infrastructure developments by the government including road construction slowed before and after elections and as the country took time to settle into the devolved system.

New deals between China and Kenya have been signed in the third quarter. Kenya, in August, signed deals worth $5 billion with China to construct a railway line and an energy project.

China is expected to play a critical role in the realisation of Vision 2030, especially in the execution of capital-intensive flagship projects.
India has relied heavily on Kenyan firms such as banks, as well as public bodies that are turning to India for IT solutions.

India’s global exports in September this year were valued at $27,679.33 million registering an 11.15 per cent increase compared with $24,902.00 million recorded last year.

India mainly exports capital goods to Kenya, is expected to maintain its position in coming years as experts predict growth in demand for non-consumable goods.

“We expect infrastructure-related goods to increase their share of global trade, providing strong opportunities across both developed and emerging economies for exporters and importers of those goods and merchandise that can be manufactured as a result,” said James Emmett, HSBC global head of trade.

HSBC predicts that the UAE’s real merchandise global export growth will slow down to 1.5 per cent in 2013 and 2 per cent in 2014 from 11 per cent in 2011 and 4 per cent in 2012, reflecting the fall in oil exports.

However, the export base is gradually diversifying into other sectors where it has a competitive advantage, such as plastics, petrochemicals and pharmaceuticals.

South Africa exported goods worth Ksh45 billion ($529 million) to Kenya in the six months to June up from Ksh32 billion ($376 million) over the same period last year. 

However, a series of strikes in the automotive and mining sectors coupled with a weakening currency have curbed production.  Exports decreased by 7.6 per cent in August to 70.7 billion rand ($7.2 million), as imports decreased by 0.13 per cent.

Experts said South Africa has positioned itself to exploit the under developed manufacturing industry in Kenya.

“South Africa is an advanced economy with established manufacturing base that is able to supply a variety of goods that are not available across the region,” said Mr Shah.

Customs data shows that Kenyans mainly imported industrial supplies and refined petroleum products.

Saudi Arabia, which mainly supplies murban crude oil, saw its share of the market drop by almost a half  to  Ksh21 billion ($247 million) in the first six  months to June 2013, from Ksh41 billion ($482 million) in the same period last year as international prices shot up reducing demand in the country.

Kenya dynamic in region

The trade figures also showed Uganda maintained its lead as Kenya’s top export destination in the six months to June although the figures declined compared with the same period last year. 

Uganda bought goods worth Ksh27 billion ($318 million) in the six months to June, down from Ksh30.2 billion ($355 million) last year.

Pakistan more than doubled its imports from Kenya to take the second position at Ksh23 billion ($270 million) from Ksh11 billion ($129 million) over the same period last year. 

Kenya’s main exports are food and beverages. However, also exports industrial supplies, fuel and transport equipment. Like the other East African Community countries, Kenya has been keen to grow regional trade despite the existing non-tariff barriers.

Food and beverages category accounted for highest category of exports share in the six months to June at 45.37 per cent, the KNBS data shows.

EAC Integration Secretary Barrack Ndegwa said barriers by governments would negatively affect EAC’s mission to achieve free movement of goods and services slowing growth of trade among the EAC counterparts.

“Each country has its own non-tariff barriers; we need to move to the implementation period to enhance free movement of goods and services and grow trade amongst ourselves,” he said.

Kenya’s exports to Tanzania fell to Ksh17 billion ($200 million) from Ksh20 billion ($235 million) in the six months to June 2013 compared with the same period last year to put the EAC member state in the fourth position. Egypt and UAE were fifth and sixth respectively.

Additional reporting by Joseph Mwamunyange

Advertisement