Better cross-border trade key to EA growth

By CAROLE KARIUKI

 

Presidents Pierre Nkurunziza (Burundi), Jakaya Kikwete (Tanzania), Uhuru Kenyatta (Kenya), Yoweri Museveni (Uganda) and Paul Kagame (Rwanda) at the East African Community Heads of State Summit in Nairobi. PHOTO | JEFF ANGOTE 

In Summary

• One key change is the National Electronic Single Window System, which has cut the cost of tax compliance for businesses.

Kenya’s economy has made remarkable gains over the past five years, maintaining a robust growth rate. 

The GDP growth stood at 5.4 per cent in 2014, an improvement on the 5.1 per cent recorded in 2013 and 4.6 per cent in 2012. 

The outlook is equally robust, with growth projected to reach 7.0 per cent by 2017 for an average of 6.7 per cent between 2014 and 2017).

Kenya’s GDP now stands at $55 billion following last September’s rebasing making it the ninth largest in Africa and the fifth largest in Sub-Saharan Africa.

There is global recognition of positive economic and other reforms that should yield a positive growth outlook. 

US-based Bloomberg has recently ranked Kenya as the third fastest growing economy in a global survey of 57 economies projected to register rapid growth this year.

This places the country alongside China, India, the Philippines, and Indonesia as the only economies expected to register a five per cent growth rate this year.

Besides, the United Nations Conference on Trade and Development (UNCTAD), in its World Investment Report 2014, says Kenya is developing as the favoured business hub in the Eastern and Central African region — another plus for the economy.

Oil and gas exploration, manufacturing and transport are projected to be the leading investment attractions in the country in the medium and long term.

Fortune magazine rates Kenya as one of the seven top investment destinations to watch in the emerging markets, ahead of continental giants Nigeria and South Africa.

The country currently accounts for 40 per cent of the EAC’s GDP and the country’s competitiveness index as measured by the World Economic Forum stands at 3.9 (2014-2015), making it the sixth most competitive economy in sub-Saharan Africa (after Mauritius, South Africa, Rwanda, Botswana, and Namibia). 

This data suggests that Kenya was rightly picked by US President Barack Obama to host the Global Entrepreneurship Summit (GES2015) next month.

Inflows

In recent years, Kenya has experienced an influx of Foreign Direct Investments (FDI) inflows, reaching Sh116.4 billion (US$1.2b) in 2014. This capital primarily went into the oil and gas and manufacturing.

A new report released by the African Development Bank (AfDB) ranks Kenya among the top 10 destinations for FDI in Africa.

Over the past two years East Africa’s largest economy has been aggressively implementing a series of reforms to ease investments and doing business.

This transformative policy approach and the general improvement of both infrastructure, gives Kenya a major boost as an investment and business destination.  

Policy reforms and infrastructure development have reduced the cost of doing business in Kenya, thus attracting more FDI inflows. 

The list of companies set to invest in Kenya in 2015 includes Carrefour (a French multinational retailer), Radisson Blu, Park Inn Hotel, Business Connexion (an ICT service provider based in South Africa), and Imperial Health Science.

All indications are that the country is fast becoming a favoured business hub, not only for oil and gas exploration but also for manufacturing, transport and ICT.

It is already the world leader in usage of mobile phone money transfer platforms, bringing millions of hitherto unbanked people into the formal economy.

The Kenya Private Sector Alliance (KEPSA) and the Government of Kenya have been involved in proposals to expedite regional integration so as to facilitate cross-border trade with neighbouring countries as well as improve Kenya’s overall investment climate. 

One key reform is the National Electronic Single Window System (NESWS), which has drastically reduced cost of tax compliance and facilitates cross-border trade within the East African Community (EAC).

The NESWS, which replaces cumbersome and fraud-prone manual systems, is being implemented through integration with all stakeholder systems involved in clearing cargo (such as the Kenya Ports Authority, Kenya Revenue Authority, Kenya Plant Health Inspectorate Services, Kenya Bureau of Standards and 23 other agencies involved in the inspection of cargo. The system is expected to double East African trade to $33.3 billion by 2016.

Major reforms have also taken place at the Mombasa Port where the stakeholders have crafted a Community Charter that President Uhuru Kenyatta launched on June 30, 2014.

The charter aims to create efficiency at the Port of Mombasa in light of competition from neighbouring ports. Mombasa is the largest port in the region, with significant growth in traffic volumes in recent years.

In the past 10 years, traffic increased by more by than six per cent per annum to 22.3 million tonnes in 2013.  The Kenya Ports Authority expects the Port of Mombasa to handle 1,650,000 TEU by 2016.

Development partners have also not been left behind in the support of these types of initiatives. For instance, TradeMark East Africa (TMEA) has, to date, mobilised more than $98 million to support infrastructure development at the port.

This indeed boosts confidence among investors that Kenya is the main gateway into East Africa.

Another noteworthy reform has been the improvement of inland infrastructure through various targeted interventions. There has been a reduction of weighbridges to four along the Northern Corridor, namely Mariakani, Mlolongo, Gilgil and Malaba, as well as the introduction of weigh-in-motion weighbridges which has resulted in a drastic reduction of time for clearance and transportation of transit goods.

With Kenya’s economy showing remarkable gains over the past five years supported by investments guarantees; a liberalised and stable economic atmosphere; abundant natural resources; highly trained and affordable manpower; access to regional and international markets; a fairly well developed infrastructure; the “One-Stop-Shop” service centres and other new facilities, the country’s Vision 2030 is within reach.

All this should drive the nation closer to achieving greater economic prosperity.

Ms Kariuki is the CEO, Kenya Private Sector Alliance. Kariuki.kui@gmail.com