Kenya gears up for export-led growth

Kenya is fast tracking a raft of new export strategies to boost growth and bridge the yawning trade gap. This followed a 1.4 percent increase in the trade deficit from $11.3 billion in 2017 to $11.5 billion in 2018.

Kenyan Cabinet Secretary of Trade and Cooperatives Peter Munya said on Wednesday that, despite the country's exports recording a 3.2 percent increase from $5.94 billion in 2017 to $6.13 billion in 2018, imports stood at $17.6 billion in 2018.

The information came a little over a month after the United Nations Conference on Trade and Development warned in a report that commodity-dependent countries were vulnerable to negative commodity price shocks and price volatility.

The UN agency considers a country to be export-commodity-dependent when more than 60 percent of the country's total merchandise exports are composed of commodities.

Kenya's major exports included tea, horticulture, apparel and clothing accessories, coffee, titanium ores and concentrates. They account for 62 percent of its merchandise exports. This points to Kenya's continued dependence on commodity exports. Its progress toward diversification is moving slowly.

Economists said a higher trade deficit handicaps a country's ability to create jobs. Kenya is therefore targeting an average annual growth in exports of 25 percent between 2018 and 2022.

In light of this, Kenya will structure export strategies to be country specific. With its exports to Africa accounting to 35 percent of total exports in 2018, Kenya should strongly pursue the realization of the Africa Continental Free Trade Area, which opens up a market of 1.3 billion people.

Munya said Kenya's increased trade engagement with China last year saw exports to the country jump up by $20 million. China, therefore, together with the United Kingdom, the European Union, India and the United States will continue to be targeted as key markets.

To buoy quantity of exports and increase variety to global buyers, the country plans to unveil a commodity exchange in the next nine months.

"We are waiting for resources and government approval of a warehouse receipt system. We are also working on upgrading warehoused that would be linked with the system," Munya said, adding that the system would also reduce the middle men and clamp down fraud.

Other strategies being fast-tracked are establishment of special economic zones to attract more foreign investments, improve access of finance to the small and medium-sized enterprises, curbing illicit trade, building capacity of local producers and improving intellectual property rights and standards.

The strategy, however, faces serious headwinds such as the ongoing China-US trade tensions. External demand for Kenyan products is likely to be subdued due to the ongoing trade frictions that are coming against a backdrop of generally slowing global trade, said Nyongesa Lemmy, a senior policy analyst at African Policy Institute, a think tank based in Nairobi. Kenya needs to set realistic and achievable targets, he added.

The goal is unrealistic, Lemmy said, as Africa still faces a huge infrastructure deficit and needs to spend more than $300 billion a year on ramping up infrastructure by 2020.

China can play an import role in boosting Kenya's exports, he added.