Kenya builds up strong manufacturing base as EAC takes a fifth of exports

EPA Kenya builds up strong manufacturing base as EAC takes a fifth of exports

 

East Africa Community (EAC) members accounted for a fifth of total Kenyan exports in 2016 according to the Institute of Chartered Accountants in England and Wales (ICAEW’s) latest report.

The analysis, titled Economic Insight: Africa Q2 2017, found that Kenya stands to gain considerably from stronger economic growth of regional partners, as it can take advantage of increased demand from these economies.

The report, released yesterday and commissioned by ICAEW and produced by partner and forecaster Oxford Economics, provides a snapshot of the region’s economic performance. The report focusses specifically on Kenya, Tanzania, Ethiopia, Nigeria, Ghana, Ivory Coast, South Africa and Angola.

According to the report, the African continent accounted for 41 per cent of Kenya’s exports in 2016 while Europe and Asia each accounted for approximately a quarter of total exports. Uganda held the position of Kenya’s largest single export destination accounting for 11 per cent of total exports during 2016.

Agricultural products such as tea and flowers made up the bulk of exports. However, whilst the country has an advantage in terms of value-added compared to regional African peers, this story is not replicated beyond Africa. Receipts from these commodities are largely determined by factors such as global commodity prices and domestic weather conditions (affecting production), and not necessarily the state of world trade.

Michael Armstrong, ICAEW Regional Director, Middle East, Africa and South Asia said: “Kenya stands to benefit from stronger growth in the East Africa region as it is well positioned to take advantage of rising demand for manufactured goods. Furthermore, its location and relatively developed transport infrastructure will allow the country to act as the gateway into the East Africa region.”

The EAC is considered the most progressive trade bloc in Africa. Collaboration on regional infrastructure has reached a level rarely seen on the continent with construction of the $26 billion Lamu Port – Southern Sudan – Ethiopia Transport (LAPSSET) corridor underway. Furthermore, a Single Customs Territory (SCT) system will take effect across the EAC from July 31, facilitating trade between member states by electronically connecting countries’ custom clearance systems.

A pilot programme involving certain goods and entry points has generated positive results, and if implemented successfully, the SCT could significantly stimulate trade in the region by reducing the cost of doing business.

However, the bloc is not without its challenges as the United Nations Economic Commission for Africa (UNECA) recently cautioned against the signing of the Economic Partnership Agreement (EPA) between the EAC and the European Union (EU) in its current form, which does not bode well for the EPA’s implementation. Kenya stands to lose the most without the agreement as it is not classified as a least-developed country, it would not receive duty-free and quota-free access under the EU’s Everything-But-Arms initiative.

Non-tariff barriers are another major concern for EAC member states. A monitoring tool identified 19 non-tariff barriers that remain unresolved, ranging from restrictions on Kenyan beef exports to Uganda, to the requirement that companies exporting to Tanzania should register, re-label and retest goods already certified by other partner states.

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