UAE beats India in doing business with Kenya, China remains king

The United Arab Emirates (UAE) has emerged a strong trading partner with Kenya becoming the second biggest import source after China, ending India’s run of over five years.

This comes amid increased trading activities between Kenya and the Middle East, which now accounts for 24.6 per cent of the total value of imports into the country.

Last year, the value of imports from the UAE more than doubled to Sh407billion from Sh178.5 billion in 2021, a 128.2 per cent growth.

This was driven by increased importations of petroleum products, which came on the back of high demand in the recovering economy in the post-Covid pandemic era.

The figures captured in the Economic Survey 2023 now pushes India to third on the list of top import sources, with the value of goods exported to Kenya dropping last year to Sh230.9 billion, from Sh250 billion the previous year.

“The value of imports from UAE more than doubled due to the increased importation of gas oil, motor spirit premium, kerosene type jet fuel, and residual fuel oils,” Kenya National Bureau of Statistics (KNBS) says in the Survey, which outlines how the economy performed last year.

Chinese goods however continued to dominate the Kenyan market, with the value of imports by the Kenyan government and private sector further growing to Sh452.6 billion, up from Sh441.3 billion.

Saudi Arabia whose exports were valued at Sh122billion, mainly fuel products, was the fourth top import source.

Increased edible palm oil, articles of apparel and vegetable fats pushed up imports from Malaysia as the value grew by almost 30 per cent to Sh120.6 billion.

Other top sources were Japan (Sh97.5 billion) and the US whose value of goods sent to Kenya grew to Sh93.4 billion, up from Sh84.2 billion.

The Asian continent continued to dominate accounting for 69.1 per cent of the value of volumes shipped to Kenya during the year.

Of the Sh2.5 trillion Kenya spent on imports, a total of Sh1.7 trillion went to Asia, Sh612 billion Middle East, Sh323 billion went to Europe, Sh273.6 billion was spent on imports from Africa while Sh144.9 billion was spent on imports from America (US, Canada, Brazil, Mexico, Argentina and others).

During the year, Kenya spent Sh597.7 billion on petroleum products, which accounted for nearly a quarter of the total import bill even as the weak shilling to the US dollar increased expenditure.

On exports, Africa remained Kenya’s biggest market accounting for Sh357.7 billion of the total value of exports by Kenya to the international markets.

By country, Uganda was top with exports valued at Sh97.2 billion largely driven by increase in re-exports of crude palm oil, with the East African Community (EAC) remaining a key market for the country.

Exports to Tanzania grew by 25.9 per cent to Sh57.4 billion on account of increased exports of iron and non-alloy steel while exports to Rwanda increased by 31.6 per cent to Sh40.2 billion, attributable to growth in palm oil exports in the same period.

The US was the top export destination outside Africa with Kenya earning Sh79.9 billion up from Sh59.6 billion the previous year, pushing up total earnings from the entire American market to Sh85.5 billion from Sh63.6 billion.

“The growth was mainly due to increased domestic exports of titanium ores and concentrates; articles of apparel and clothing accessories and; coffee to the United States of America,” KNBS notes.

Other top markets were Netherlands, a major destination for Kenya’s cut flower, Pakistan (tea) and UAE, a major destination for coffee, tea, mate and spices and meat.

While total earnings from export of goods grew by 17.4 per cent to Sh873.1 billion in 2022, the mount spent on imports equally rose to a new high, worsening the country’s trade deficit.

The growth in total exports was not sufficient to offset the growth in imports, resulting to the widening of the balance of trade deficit to Sh1.62 trillion.

The trade deficit worsened from Sh1.4 trillion in 2021 to Sh1.6 trillion in 2022.

“The slower growth of exports compared to imports, resulted in the continued widening of the trade imbalance,” KNBS notes.

Meanwhile, economic performance in 2023 is likely to be reinforced by the government’s development agenda aimed at achieving economic turnaround and inclusive growth.

On the downside, the 2023 growth will be hampered by a decline in domestic demand, the government statistician notes, as a result of elevated inflation and sustained high interest rates.

“The reduction in domestic demand is likely to suppress private investment,” KNBS says in the survey.

The weakening of the Kenya Shilling against the US Dollar is likely to make imports expensive and slow trade with the rest of the world.

Additionally, the projected decline in global demand due to deceleration in the global economy is expected to reduce demand for Kenyan goods.