EPC: CORRECTING THE BALANCE
The Export Promotion Council has been chipping away at the problem of Kenya’s negative trade balance. Mr. Peter Biwott, EPC’s ebullient CEO is upbeat that by promoting production efficiencies, effective information dissemination and finding a permanent solution to markets for Kenya’s exports, the country will not only reverse a decades-long slide down the international trade ladder but also make Kenya’s foreign debt burden insignificant. Kenya debt at 58% share of Gross Domestic Product is sustainable. If Kenya can enhance exports, with increased foreign exchange, access to global development finance will be easy and more affordable. Mr. Biwott talked to C&I’s Eric Obwogi.
As he ushers us into his office, Peter Biwott quickly points out how the fourth estate has been tireless in highlighting the seemingly precarious situation with Kenya’s foreign debt, which has been deemed unsustainable. “It is actually sustainable”. On his mind are the twin issues that require a positive tilt. Both Kenya’s balance of trade and the notion external debt situations are clearly less than ideal.
The country’s trade deficit, which he has been burning the midnight to roll back has a direct implication on the foreign debt and enhancing the country’s role in international trade will strengthen the country’s financial situation and turn the spotlight away from the trillions owed to international lenders.
When EPC was established, Kenya was exporting Kshs.9 billion worth of commodities to the international market, it’s offering for the international market limited to a handful key agricultural products, which were exported to destinations that could be counted on one hand, while the country’s ports were busy ushering through tones of imports. Now Kenya exports about Kshs.600 billion worth of exports.
That early trend precipitated a widening trade deficit that in 2017 stood at Kshs.1.1 trillion. Imports rose by 20.49 per cent to $17.5 billion, far outweighing exports which expanded by a measly 2.78 per cent to Kshs.594 billion. The huge disparity has seen Kenya’s trade deficit shoot up by 33 per cent compared to 2016.
Mr. Biwott attributes the widening trade imbalance to the stage of economic development that Kenya is at the moment. “We are a growing economy, and at this point, we still have to import machinery, farm implements, lots of resources that Kenya doesn’t produce to build our infrastructure,” he points out.
This has upped the stakes against achieving a winning position for the country. “There is also cut-throat competition for market share for commodities that are similar to what we produce, and the current situation is a wakeup call for the country to diversify as we realign ourselves with the Big 4 Agenda, which highlights manufacturing as a central pillar in this economic blueprint,” he points out.
Kenya has done a lot of infrastructural upgrading and development in the last decade, improving movement of goods and personnel, which is central to vibrant trade and which will unlock the greater export potential of the country.
“Focus should shift to stimulating the country’s production capabilities because one of the findings of our engagements internationally has shown that despite the existence of a market, we need consistency in our production and serve up sufficient quantities to meet the international market appetite for our exports,” says Biwott.
EPC has been focusing on consolidating and enlarging Kenya’s traditional export markets of East African Community (EAC), COMESA and the European Union, and seeking to diversify with the aim of establishing a firm foothold in new and emerging markets of Eastern Europe, North America, Asia and Rest of Africa.
In July, the Integrated Kenya National Export Development and Promotion Strategy and the AGOA Strategy Action plan were launched with the objective of transforming the economy by linking Kenya’s productive sectors to export markets which will boost the volume of exports to Kshs 1.2 trillion by 2022.
Biwott says that there is still huge untapped potential and opportunities available to Kenya under AGOA, the US textile and apparel market of $83billion. Yet Kenya is currently exporting only Kshs.340.7 million, meeting a meagre 0.3% of that demand. The country’s AGOA strategy targets to double exports to the US from Kshs 562 million in 2017 to 1105 by 2023.
To tap the AGOA opportunity, he says traditional Kenyan exports like tea and coffee should find their way into the US market, as should flowers and fresh fruits, speciality foods and vegetables.
Excursions to the China Shanghai expo, dubbed China International Import Exposition where Kenyan firms got the opportunity to showcase their products are some of the efforts made to expand Kenya’s foreign trade footprint. During the event, deals were signed that will spur trade between Kenya and China. President Uhuru Kenyatta led the delegation to China. EPC was at hand to facilitate travel by the firms and played a key role in the visit as the lead implementing agency for Kenya’s participation in local, regional and international trade fairs, exhibitions and expositions.
A memorandum of understanding (MoU) for the establishment of a trade negotiation working group whose aim will be to negotiate trade tariffs especially on Kenya’s tea and coffee exports to China as well as explore additional markets for the country’s cash crops was also penned.
Crucially, a Sanitary and Phytosanitary deal between the two countries that is meant to open doors for over 40 per cent of Kenya’s fresh produce including avocado, mangoes and cashew nuts, and Stevia – a sweetener largely grown in the Rift Valley – into the expansive Chinese market was also reached.
“EPC was able to organize side events in collaboration with KEPSA, whereby Kenyan private sector got separate exclusive opportunities to meet and interact with both Chinese private sector as well as government representatives,” says Biwott.
He adds that Kenya is seeking to revitalize its trade with African countries. There are plans to hold exhibitions in key African markets to reverse a steady slide in its exports to the continent.
Exports earnings from Africa have been falling steadily since 2011, figures from the Central bank of Kenya indicate that exports in five months through May fell to Sh91.88 billion from Sh93.05 billion during the same period last year, extending a sustained drop in the last eight years.
“Africa is crucial to Kenya. Trade is about distance, and the closer the countries, the greater the volume of trade possible. Given Kenya’s relatively more advanced manufacturing base, we have a competitive advantage to sell mostly to Africa and being a member of the East African Community (EAC) and 19-member Common Market for Eastern and Southern Africa (Comesa) enhances regional market access.
“Africa remains the single most lucrative market for Kenya’s exports, and is key boosting the manufacturing sector’s contribution to GDP from 8.4 per cent (in 2017) to 15 per cent (in 2022),”
He says EPC intends to aggressively pursue promotional activities in the EAC and the entire continent with a view to expanding Kenya’s market share. Forays into Rwanda, Democratic Republic of Congo, Mozambique, Ghana, Nigeria, Ethiopia, Egypt and Sudan are in the pipeline.
As part of the Country’s Pan African agenda, EPC organized for Kenya’s participation during the Intra Africa Trade Fair (IATF), in Cairo Egypt between 11th and 17th December, this year. Kenya participation showcased products such as teas, coffee, handicrafts, flowers, tourism and financial services which are popular among the Northern Africa and Middle East Buyers. The IATF gave the Kenyan exporter an opportunity to interact with entrepreneurs from across the Continent in shaping the future of Africa business. Leading Africa entrepreneurs including Dangote group featured prominently during the fair. Kenyan companies such as Brookside Dairies, Burn Manufacturers, Mofarm, Melvins Marsh International, KETEPA, equatorial nuts, Kevian, Domarns, Gipsons and Mbogo Valley tea exporters got an opportunity to offer Africa their high-quality exports. The companies are already exporting to North Africa and Middle East.
According to Biwott, EPC supports Kenya’s position for removal of trade barriers between African countries to encourage movement of goods, services and labour through African Continental Free Trade Area (AfCFTA,) which will create a market of at least 1.2 billion people upon ratification. Kenya and Ghana were the first countries to deposit the ratification instruments in May. During the IATF in Cairo, negotiations were held on removal of tariff and non-tariff barriers to intra Africa trade from technical experts to Africa Ministers of Trade.
Building on these success stories, Kenya will be participating in the International Horticulture Exposition in Beijing in April, 2019, and World Expo Dubai 2020. EPC will launch in early 2019, its Kenya Export Market Development Programme (KEMDP) that will present to exporters information on over 200 niche trade promotion events worldwide.
Lack of information has been a major bottleneck. For example, Kenya could be importing from China, yet Nigeria has what we need. Counties have been given the mandate on trade development and they will be key in growth of exports from Kenya. EPC has been setting up county trade information centres so that SMEs have an avenue to access data on opportunities for exports. A database and journal on trade information are being developed.
“We are currently developing a directory with a target of over 5000 registered exporters by 2022. We will distinguish between large scale and small-scale producers for export (SMEs), and advise the government on offering targeted incentives to improve their input into Kenya’s export figures,” So far there are the export processing zones (EPZ)s and special economic zones – the government has already licensed two SEZs that are expected to be fully operational in the medium term.
“Intra – Regionalization”
“To strengthen the backbone of our exports, we should come up with economic blocs based on the river basins which will yield up to eight blocs, drawn from along the river basins. The lake basin in Western Kenya is a fine example. Currently the Coast Development Authority and the Lake Basin Development Authority handles this success stories. Kerio Valley, Tana and Athi River, and Ewaso Ng’iro South and North could all form useful economic blocs. Each would be distinguished according to dominant resources, and a lively trade relationship among them would ensure a vibrant economic activity within the country, even before we talk about exports.
“We could use these partnerships to achieve economies of scale, and with an enhanced competitive edge through value addition, better production and qualitative efficiencies, more effectively participate in regional markets,” he adds.
According to Biwott, the cosmopolitan group formed will also provide an avenue to diffusion for ethnic fault lines generated by negative politics. Periodic election-based violence would be a thing of the past.
Currently, the council is working with the International Trade Centre (ITC) to train officers who will in turn offer capacity building and strong product development support to SMEs.
“Kenya has the potential to become a net exporter, and we are at the take-off point. That is why I tell Kenyans not to focus on the country’s debt burden. We should instead strive to increase what we sell outside the country to boost our earnings from international trade. Kenya can take in 200% debt burden and we would not lose sleep about it. It is when we are not working to create value and favourable trade balance that it becomes truly unsustainable,” he says.
He points out that the patriotism element is important. “We need to support our government, to deliver on the great initiatives. The sacrifices given up by our forefathers should not stop with the current generation,”
Kenyans should live up to their reputation, roll up their sleeves and work hard. We are at the take-off stage. Commit to it and Kenya will take its position in the global trade high table.