INDICATOR

Manufacturing key in Kenya's post-Covid trade, says report

In Summary
  • Increase in exports was mainly noted in industrial supplies (non-food) and capital equipment
  • This came with a rebound on intra-East African Community trade as Kenya recorded the biggest export volumes on trade with her regional peers
A ship loaded with cooking oil at Kisumu port for transport to Uganda on Lake Victoria
Image: MAURICE ALAL

Manufactured products remain key in driving Kenya's long-term post-Covid recovery on trade, a report launched yesterday indicates, even as it paints a gloomy picture for commodity exports.

Called 'Waving or drowning– impact of the Covid-19 pandemic on East African trade, the report by TradeMark East Africa, United Nations Economic Commission for Africa and African Economic Research Consortium, notes Kenya recorded strong performance in trade in the last quarter of 2020, buoyed by manufacturing.

Increase was mainly noted in industrial supplies (non-food) and capital equipment.

This came with a rebound on intra-East African Community trade as Kenya recorded the biggest export volumes on trade with her regional peers.

Total volumes shipped from Kenya (exports) to the region were valued at Sh165 billion in quarter three (October-December) 2020, picking up from slow performance of Sh130 billion in the second quarter when the impact of Covid-19 was rife on regional economies.

Pre-Covid, the volumes were valued at Sh175 billion (January-March), the report released this week indicates.

Heightened dependence on commodity export, such as tea for Kenya, is however worrying, the survey notes, as tea prices remained depressed last year.

Uganda, a key trading partner with Kenya, had the second-highest volumes valued at Sh137.4 billion.

Exports from Kenya to Uganda are mainly palm oil and its fractions, iron or non-alloy steel, petroleum oils and salt, among other goods.

Intra-EAC trade hit a negative 110 in April when countries closed their borders to slow the spread of the virus.

It started picking up in May in three countries (Kenya, Uganda and Burundi).

UNECA director of Africa (sub-regional office - East Africa) Mama Keita called on EAC member states to tap into the African Continental Free Trade Area to grow their exports and reduce the huge balance of trade, currently in favour of foreign markets – mainly China.

The vouch on manufacturing however comes amid concerns by local manufacturers (in Kenya), who have decried an unpredictable regulatory environment, high electricity costs and logistic challenges.

At least six counties in the region, among them Kenya, have ratified the agreement that came into effect on January 1.

“Close partnership is however needed for countries to reap full benefits of the agreement,” Mama Keita said.

TMEA, UNECA and African Economic Research Consortium have jointly called for continued support of key export sectors, strengthening of regional value chains and a double down on policies to diversify economies.

There is also need to address challenges facing informal traders who according to TMEA, the sub-sector, mainly dominated by women and youth, is on its knees despite border movement slowly picking up.

The vouch on manufacturing however comes amid concerns by local manufacturers (in Kenya), who have decried an unpredictable regulatory environment, high electricity costs and logistic challenges.

The Kenya Association of Manufacturers, which last week launched an action plan to accelerate the recovery of manufacturing, said high taxation is making local products uncompetitive.

This, as the country continues to witness an influx of cheap imports.

Cashflow and liquidity challenges also need to be addressed, KAM said, as industries struggle to recover from the impact of the pandemic, which last year saw the sector's growth decline by about four per cent (in quarter two), amid reduced production in key sub-sectors.

“Regulatory inefficiencies, high cost of production, logistics, cash-flow and liquidity challenges must be urgently addressed to increase competitiveness of manufacturing sector,” said KAM chief executive Phyllis Wakiaga during the launch of the 'Manufacturing Priority Agenda 2021.'

The action plan is pegged on five pillars namely; competitiveness and level playing field, enhanced market access, pro-industry policy and institutional framework, SMEs development, and industrial sustainability and resilience, all targeted at a stronger post-Covid recovery.