While Beijing boasts a huge market of about 1.3 billion consumers, it is
conspicuously missing from top 10 markets for Kenya’s exports.
By BRIAN NGUGI and NEVILLE OTUKI
When China first whizzed past India as the largest
supplier of goods to Kenya in 2015, the change in the trade matrix did
not go unnoticed.
The ascendancy of Beijing to the top of Nairobi’s import
table quickly generated debate on whether Kenya’s dalliance with the
Dragon economy was mutually beneficial.
Ever since, the country has maintained an East-ward view, as a casual look at major infrastructural projects shows.
By looking East, President Uhuru Kenyatta’s policy
of economic diplomacy in the initial years of his presidency mirrored
that of his predecessor Mwai Kibaki.
It is, however, not hard to see who is reaping the
most from this relationship. Official data shows that Chinese imports to
Kenya peaked at Sh320.8 billion in 2015, while the Asian nation took in
a paltry Sh8.4 billion worth of goods from Nairobi, highlighting the
depth of the imbalance.
Analysts reckon that the influx of Beijing imports
has largely been fuelled by construction materials being brought in for
the ongoing Chinese-funded standard gauge railway connecting Mombasa
port city to Nairobi.
Conspicuously missing
While China boasts a huge market of about 1.3 billion consumers, it is conspicuously missing from top 10 markets for Kenya’s exports.
While China boasts a huge market of about 1.3 billion consumers, it is conspicuously missing from top 10 markets for Kenya’s exports.
Experts and local manufacturers now say there is an urgent need for a rethink in the bilateral trade relations.
“This is one of the most lop-sided trade
relationships in the world. In fact if you stripped out titanium, the
Kenya export pipe to China would read close to zero. Clearly both
governments need to energise their responses to this problem,” said Mr
Aly-Khan Satchu, chief executive of Nairobi-based investment advisory
firm Rich Management.
“Agoa (the African Growth and Opportunity Act) was a
US silver bullet for exactly the same problem and China will surely
have to look at something similar.”
Mr Satchu said countries such as Ethiopia had
managed to create policies that protect local industries and Kenya
should take a similar route.
“The solution to this problem is being seen in
Ethiopia. CS Adan Mohamed is trying to level this by trying to create a
Kenya Inc, which is investor and manufacturing friendly. We need to win
in the shift of low-cost manufacturing from China into cheaper
destinations,” he said.
Chinese import growth is also being driven by local
traders’ preference for the Asian country’s fast-moving cheaper stock,
including those that can be made here, giving local factories sleepless
nights.
This has fanned fears that the widening of Kenya’s
import bill compared with the narrow export receipt could spell doom
for the country’s quest to industrialise as spelled out in the Vision
2030 blueprint.
Lock out importsAt this point, there is need for a policy rethink to lock out imports that can be produced here, says Dr XN Iraki, a lecturer of economics at the University of Nairobi
The Kenya Association of Manufacturers (KAM) Chief
Executive Officer Phyllis Wakiaga said there is need for reforms to
enhance the fortunes of local factories.
“The relationship between China and Kenya is more
complex than the present narrative depicts. China has demonstrated that
it is a development partner in terms of providing quality infrastructure
to our country,” Ms Wakiaga told the Smart Company.
She said infrastructure projects being executed by the Chinese will stimulate development in the country which would eventually lead to a win-win situation for both nations.
She said infrastructure projects being executed by the Chinese will stimulate development in the country which would eventually lead to a win-win situation for both nations.
“China has made investments based on Kenya’s
geography, which makes it a huge business hub for East Africa and an
avenue to access Central African countries. This access will not benefit
just the Chinese,” she said.
“There is definitely alarm over the trade deficit, and whilst this is a concern, we have to remember that there are other countries that have a huge trade deficit with China such as Germany and those economies are still afloat.”
Even then, she noted that manufacturers would like to see deliberate steps by the government to devise measures that will protect local manufacturers and Kenyan jobs.
“Regulatory and tax measures that would prevent dumping from foreign markets (dumping which lowers the value and capacity for local manufacturers) are very critical in ensuring that local manufacturing and subsequently the economy thrives, despite the existing trade imbalance,” said Ms Wakiaga.
“We would also like to see measures against counterfeits which seem to double every year and irregular tender practices by foreign contractors. We have seen an increase in unhealthy competition due to the latter and this has led to local companies shutting down because they are unable to compete on fair grounds; these include SMEs that are in the auto repair business.”
She said Kenya’s net loss from counterfeit products amount to approximately $368 million (Sh37.9 billion).
She added that the solution to this menace lies in legal redress.
“This is why it is important that the government hastens the passing of the Trade Remedies Bill to protect local manufacturers from some of these avoidable menaces. However, the move by government to introduce additional duties to imported steel last year has gone a long way in promoting the local steel industry,” said the KAM boss.
A look at the latest basket of Kenya’s exports to Beijing underscores a trend that has for long been associated with the most populous nation.
“There is definitely alarm over the trade deficit, and whilst this is a concern, we have to remember that there are other countries that have a huge trade deficit with China such as Germany and those economies are still afloat.”
Even then, she noted that manufacturers would like to see deliberate steps by the government to devise measures that will protect local manufacturers and Kenyan jobs.
“Regulatory and tax measures that would prevent dumping from foreign markets (dumping which lowers the value and capacity for local manufacturers) are very critical in ensuring that local manufacturing and subsequently the economy thrives, despite the existing trade imbalance,” said Ms Wakiaga.
“We would also like to see measures against counterfeits which seem to double every year and irregular tender practices by foreign contractors. We have seen an increase in unhealthy competition due to the latter and this has led to local companies shutting down because they are unable to compete on fair grounds; these include SMEs that are in the auto repair business.”
She said Kenya’s net loss from counterfeit products amount to approximately $368 million (Sh37.9 billion).
She added that the solution to this menace lies in legal redress.
“This is why it is important that the government hastens the passing of the Trade Remedies Bill to protect local manufacturers from some of these avoidable menaces. However, the move by government to introduce additional duties to imported steel last year has gone a long way in promoting the local steel industry,” said the KAM boss.
A look at the latest basket of Kenya’s exports to Beijing underscores a trend that has for long been associated with the most populous nation.
Hunting spree
It’s an open secret that China has for years been
on a hunting spree for minerals on the continent. Titanium, used as an
alloy with other metals to produce lightweight metals for jet engines,
tops the list of China’s imports from Kenya, accounting for over 95 per
cent of what it buys from the local market.
The Kenya National Bureau of Statistics
(KNBS) data shows that the Asian economy swallowed titanium shipment
from Kenya valued at Sh5.3 billion in the first 10 months of last year.
Kenyan tea came at a distant second in Chinese
imports at Sh139 million in the review period, followed by coffee (Sh73
million) and fresh vegetables (Sh2.3 million).
The statistics bureau is yet to make public the data for the last two months of 2016.
Beijing is a resource-hungry economy and has in
recent years made in-roads in African nations for minerals and oil to
feed the rising appetite.
“It’s no secret that world-class oil deposits lie
under and off the coast of East Africa,” says a report by US-based
research firm Casey.
The study titled "The Global Race for African Oil
says East Africa" will emerge as a crucial oil and gas province, raking
in trillions of dollars as energy-thirsty economies like China race in
to buy the resource.
“During the next few decades, trillions of dollars
will flood into East Africa in exchange for its resource riches – and
right now, most of that is set to come from China,” the study says.
To address the trade imbalance, Dr Iraki says a bit of protectionism would not hurt Kenya.
“We can become more efficient, reduce labour costs, create local demand by improving on the quality and in the spirit of ‘Trumponomics’, become more patriotic,” he says in reference to the protectionist policy adopted by newly elected US President Donald Trump.
“We can become more efficient, reduce labour costs, create local demand by improving on the quality and in the spirit of ‘Trumponomics’, become more patriotic,” he says in reference to the protectionist policy adopted by newly elected US President Donald Trump.
According to the Kenya Institute for Public Policy
Research and Analysis (Kippra) the huge trade imbalance between Kenya
and China in favour of China is not surprising.
The Kenya Association of Manufacturers (KAM) Chief
Executive Officer Phyllis Wakiaga said there is need for reforms to
enhance the fortunes of local factories.
“The relationship between China and Kenya is more
complex than the present narrative depicts. China has demonstrated that
it is a development partner in terms of providing quality infrastructure
to our country,” Ms Wakiaga told the Smart Company.
She said infrastructure projects being executed by the Chinese will stimulate development in the country which would eventually lead to a win-win situation for both nations.
She said infrastructure projects being executed by the Chinese will stimulate development in the country which would eventually lead to a win-win situation for both nations.
“China has made investments based on Kenya’s
geography, which makes it a huge business hub for East Africa and an
avenue to access Central African countries. This access will not benefit
just the Chinese,” she said.
“There is definitely alarm over the trade deficit, and whilst this is a concern, we have to remember that there are other countries that have a huge trade deficit with China such as Germany and those economies are still afloat.”
Even then, she noted that manufacturers would like to see deliberate steps by the government to devise measures that will protect local manufacturers and Kenyan jobs.
“Regulatory and tax measures that would prevent dumping from foreign markets (dumping which lowers the value and capacity for local manufacturers) are very critical in ensuring that local manufacturing and subsequently the economy thrives, despite the existing trade imbalance,” said Ms Wakiaga.
“We would also like to see measures against counterfeits which seem to double every year and irregular tender practices by foreign contractors. We have seen an increase in unhealthy competition due to the latter and this has led to local companies shutting down because they are unable to compete on fair grounds; these include SMEs that are in the auto repair business.”
She said Kenya’s net loss from counterfeit products amount to approximately $368 million (Sh37.9 billion).
She added that the solution to this menace lies in legal redress.
“This is why it is important that the government hastens the passing of the Trade Remedies Bill to protect local manufacturers from some of these avoidable menaces. However, the move by government to introduce additional duties to imported steel last year has gone a long way in promoting the local steel industry,” said the KAM boss.
A look at the latest basket of Kenya’s exports to Beijing underscores a trend that has for long been associated with the most populous nation.
“There is definitely alarm over the trade deficit, and whilst this is a concern, we have to remember that there are other countries that have a huge trade deficit with China such as Germany and those economies are still afloat.”
Even then, she noted that manufacturers would like to see deliberate steps by the government to devise measures that will protect local manufacturers and Kenyan jobs.
“Regulatory and tax measures that would prevent dumping from foreign markets (dumping which lowers the value and capacity for local manufacturers) are very critical in ensuring that local manufacturing and subsequently the economy thrives, despite the existing trade imbalance,” said Ms Wakiaga.
“We would also like to see measures against counterfeits which seem to double every year and irregular tender practices by foreign contractors. We have seen an increase in unhealthy competition due to the latter and this has led to local companies shutting down because they are unable to compete on fair grounds; these include SMEs that are in the auto repair business.”
She said Kenya’s net loss from counterfeit products amount to approximately $368 million (Sh37.9 billion).
She added that the solution to this menace lies in legal redress.
“This is why it is important that the government hastens the passing of the Trade Remedies Bill to protect local manufacturers from some of these avoidable menaces. However, the move by government to introduce additional duties to imported steel last year has gone a long way in promoting the local steel industry,” said the KAM boss.
A look at the latest basket of Kenya’s exports to Beijing underscores a trend that has for long been associated with the most populous nation.
Hunting spree
It’s an open secret that China has for years been
on a hunting spree for minerals on the continent. Titanium, used as an
alloy with other metals to produce lightweight metals for jet engines,
tops the list of China’s imports from Kenya, accounting for over 95 per
cent of what it buys from the local market.
The Kenya National Bureau of Statistics
(KNBS) data shows that the Asian economy swallowed titanium shipment
from Kenya valued at Sh5.3 billion in the first 10 months of last year.
Kenyan tea came at a distant second in Chinese
imports at Sh139 million in the review period, followed by coffee (Sh73
million) and fresh vegetables (Sh2.3 million).
The statistics bureau is yet to make public the data for the last two months of 2016.
Beijing is a resource-hungry economy and has in
recent years made in-roads in African nations for minerals and oil to
feed the rising appetite.
“It’s no secret that world-class oil deposits lie
under and off the coast of East Africa,” says a report by US-based
research firm Casey.
The study titled "The Global Race for African Oil
says East Africa" will emerge as a crucial oil and gas province, raking
in trillions of dollars as energy-thirsty economies like China race in
to buy the resource.
“During the next few decades, trillions of dollars
will flood into East Africa in exchange for its resource riches – and
right now, most of that is set to come from China,” the study says.
To address the trade imbalance, Dr Iraki says a bit of protectionism would not hurt Kenya.
“We can become more efficient, reduce labour costs, create local demand by improving on the quality and in the spirit of ‘Trumponomics’, become more patriotic,” he says in reference to the protectionist policy adopted by newly elected US President Donald Trump.
“We can become more efficient, reduce labour costs, create local demand by improving on the quality and in the spirit of ‘Trumponomics’, become more patriotic,” he says in reference to the protectionist policy adopted by newly elected US President Donald Trump.
According to the Kenya Institute for Public Policy
Research and Analysis (Kippra) the huge trade imbalance between Kenya
and China in favour of China is not surprising.
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