Kenya trade deficit falls by Sh28bn on lower imports

Kenya Association of Manufacturers chairman Sachen Gudka. PHOTO | DIANA NGILA | NMG 

By CONSTANT MUNDA
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Summary

The deficit dipped to Sh833.03 billion in the January-September period from Sh860.88 billion in the same period last year

Kenya’s trade deficit in the nine months through September 2019 narrowed by 3.24 percent, or
Sh27.85 billion, partly helped by reduced demand for industrial imports.

The deficit — the gap between imports and exports — dipped to Sh833.03 billion in the January-September period from Sh860.88 billion in the same period last year, data published by the Central Bank of Kenya (CBK) indicates. This the first drop in deficit since 2016.

Total imports dropped 3.68 percent, or Sh48.97 billion, year-on-year to Sh1.28 trillion, the statistics show, largely driven by a drop in key drivers of production in Kenyan factories such as machinery and transport equipment, chemicals and manufactured materials.

Expenditure on machinery bought from abroad reduced by 5.5 percent to Sh327.21 billion, manufactured materials dropped 5.69 percent to Sh221.64 billion, while orders for chemicals dipped 7.75 percent to Sh177.78 billion.

Total exports, on the other hand, slipped Sh21.12 billion, or 4.5 percent, to Sh449.47 billion due to reduced earnings from domestic exports largely farm produce.

Manufacturers blame higher electricity charges compared with countries such as Ethiopia and South Africa as well as multiple levies and fees such as Import Declaration Fee (IDF) and Railway Development Levy (RDL) and delays in VAT refunds for piling up costs for industries.

That makes Kenyan products uncompetitive, they argue.

“Our cost imbalance (with regional competitors) at the moment is 13.3 percent, but hopefully it will decrease with some of the concessions in the budget (Finance Act 2019),” said Kenya Association of Manufacturers (KAM) Chairman Sachen Gudka in a recent interview.

“If Kenya is to industrialise and be a manufacturing powerhouse in the region, we need to have value-addition and having the right tariffs across the value chain.”

Income from tea exports dipped to Sh82.21 billion from Sh106.71 billion between January and September 2018, coffee’s slowed to Sh17.50 billion from Sh19.28 billion, while horticulture — which has overtaken tea to become the largest export earner — posted Sh84.84 billion from Sh82.97 billion.

A slowdown in earnings from suggests a difficult operating environment for domestic enterprises, hurting income and job opportunities.