Low production, exports hurting Kenya’s economy – Kuria

Manufacturing sector growth shrank to 2.7% last year compared to 7.3% in 2021.

In Summary

•The government is keen to grow FDIs, which have fallen for the last three years and support local industries. 

•Trade deficit worsened to Sh1.6 trillion despite growth in exports. 

Investment Trade and Industry CS Moses Kuria during the African private sector dialogue on AfCFTA, in Nairobi, on May 22/TWITTER
Investment Trade and Industry CS Moses Kuria during the African private sector dialogue on AfCFTA, in Nairobi, on May 22/TWITTER

Kenya is eyeing a bigger Africa export market under the continental trade deal with major investments in Special Economic Zones expected to drive local output, according to Trade SC Moses Kuria.

This is amid renewed efforts to drive up Foreign Direct Investments (FDIS), which have been falling in recent years, while supporting growth of local industries and exports under the African Continental Free Trade Area (AfCFTA).

Kuria said the country’s rising debt; fiscal deficit, weak currency and high inflation, which are heavily impacting on the economy, are all as a result of imbalanced productivity.

“Our problem is not all these macroeconomic factors we keep talking about, all these are symptoms. Low production and exports is the main virus,” Kuria said in Nairobi yesterday, when he officiated over the African private sector dialogue on the AfCFTA.

This is ahead of the Kenya International Investment Conference set for next week in Nairobi, expected to bring together over 55 trade ministers and CEOs of the top 100 companies in Africa.

Kenya and Ghana were the first countries to ratify the AfCFTA and to deposit instruments of ratification with the AU Commission, after the agreement was adopted by the AU Extra-Ordinary Summit on March 21, 2018 in Kigali, Rwanda.

So far, 46 countries have deposited their instruments of ratification with 36 tariff offers, including customs unions –EAC, ECOWAS, and CEMAC (Central African Economic and Monetary Community) have been technically verified, and Rules of Origin covering 88.3 per cent of tariff lines agreed upon.

“It is about time we restart that engine of production,” CS Kuria said, emphasising on the need tap the 1.2 billion African market to grow exports and cut the country’s trade deficit.

Kenya’s expenditure on merchandise imports rose by 17.5 per cent to Sh2.5 trillion as the country’s trade deficit hit a new high last year, despite growing exports volume.

Earnings from exports of goods grew by 17.4 per cent to Sh873.1 billion in 2022, the Economic Survey 2023, but were not sufficient to offset the growth in imports, resulting to the widening of the balance of trade deficit to Sh1.62 trillion.

Africa remained the biggest export market for Kenya with goods worth Sh357.7 billion sold within the continent last year, as East African Community accounted for majority of the volumes.

It was followed by Asia, Europe, Middle East then the US.

Kenya has opened two Special Economic Zones (SEZs) for investment by the private sector as it seeks to grow the country’s industry and export.

Allocations at the 3,000 acres Dongo Kundu SEZ and Naivasha 1,000-acre zone are open for long-term leases to local and foreign investors.

Dongo Kundu provides investment opportunities in agro-processing, cotton, textile and apparels, pharmaceuticals, automotive manufacturing and assembly, and blue economy related businesses.

Naivasha is being fronted for cotton, textile and apparels, paper and paper products, iron and steel industrial activities.

The government has earmarked about 9,000 acres for SEZs in Mombasa, Naivasha and Machakos, as part of its plans to boost Foreign Direct Investment (FDIs) in post-Covid-19 economic recovery.

SEZ come with incentives manly taxes where the supply of goods or taxable services is perpetually VAT exempt, and favourable corporate tax terms.

The government is keen to grow FDIs, which have fallen for the last three years.

Net foreign assets declined by 51.9 per cent from Sh589.3 billion as at end of December 2021, to Sh283.4 billion in 2022, the Economic Survey indicates.

Inward FDIs declined from Sh50.8 billion to Sh46.4 billion in 2022.

“There were increased disinvestments in portfolio equity liabilities

for the third consecutive year with net portfolio equity outflows of Sh24.5 billion recorded in 2022,” Kenya National Bureau of Statistics notes in the survey.

This is attributable to increased disinvestments by foreign investors from developing and emerging markets in preference to more developed markets, such as the US and United Kingdom.

Kenya’s manufacturing sector equally performed dismally with growth slowing down to 2.7 per cent compared to 7.3 per cent in 2021, contributing to a drop in the country’s GDP growth, which was recorded at 4.8 per cent, down from 7.6 per cent the previous year.

The decelerated growth was partly attributed to low agricultural production especially food crops that are the main inputs to agro-processing.


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