Exports to Dar plunge to a nine-year low as Kenya’s share of EAC market shrinks

Flags of both Kenya and Tanzania flying high at the Namanga border. there is a major plan to construct modern border posts station to cater of travellers from the East African community. PHOTO BY: MBUGUa Kibera

Kenya’s exports to Tanzania plunged to a nine-year low as the country’s share of the regional market in 2017 shrunk significantly.

Latest data from the Central Bank of Kenya (CBK) shows that exports to the rest of the East African Community (EAC) member states were not any better, pointing to Kenya’s dwindling fortune in the region despite a protocol allowing free movement of goods in the five EAC member states.

It is a worrying trend that certainly casts doubt on the future of EAC whose member countries ratified the Common Market Protocol in 2010 to ease the free-flow of goods among the five states.

Exports to Tanzania in 2017 declined from a high of Sh46 billion in 2012 to Sh28.5 billion, even as exports to Uganda and Rwanda flattened.

Imports from Tanzania to Kenya have also gone down, declining from Sh19 billion to Sh13 billion in 2017. Exports to Uganda- for long Kenya’s main export destination- have also under-performed, declining from an all-time high of Sh76 billion in 2011 to Sh61.8 billion in 2017.

Kenya’s exports to Uganda rose steadily from a low of Sh27.8 billion in 2006 touching an all-time high of Sh76 billion in 2011 before they flattened to an average of Sh63.3 billion.

POLICY OF INDUSTRIALISATION

There was a pronounced bump in Nairobi’s exports to Kampala a year after the signing of the common market protocol. The value of goods exported to Uganda increased by 46 per cent from Sh52.1 billion to Sh76 billion, as optimism of the new-found free-trade reigned high.

That of Tanzania equally rose significantly by a quarter from Sh33.3 billion in 2010 to Sh42 billion. It is the same story in Rwanda where Kenyans have been exporting palm oil, salt, rubber footwear, paper containers, coated flat-rolled iron, packaged medicaments among other manufactured products.  

Unfortunately, since then Kenya has fast been losing the East African Community market as these countries aggressively pursue a policy of industrialisation that has seen them substitute most of the products coming from Kenya.

These countries have also substituted imports of Kenyan manufactured products with cheap alternatives from China and India.

The Principal Secretary in the Ministry of East Africa Community Betty Maina observed that after an extended period in which Kenya was the main supplier of various manufactured goods to these countries, they too have seen the growth of their own industries.

But it is with Tanzania- and particularly after President John Pombe Magufuli came to power in 2015- that trade relations have gone south. Since then, movement of goods and people across the two borders has been intermittently inhibited.

In November last year, Dar-es-Salaam imperviously burnt Kenyan chicks illegally imported in the country and auctioned about 1,125 cattle from Kenya after Maasai herders crossed the border in search of pasture.

Maseno University Economics lecturer Dr Scolastica Odhiambo described some of Tanzania’s barriers as “silent embargo,” since they were not so pronounced to be seen as contravening the East African Common Market Protocol. The protocol allows for the free movement of people and goods within the region.

Dr Odhiambo says that Kenyans who trade in processed milk, processed cooking fat, and processed juices are frustrated at the border of Tanzania as Magufuli works on a policy to protect Tanzania’s infant manufacturing industry. “They try to silently stop that export in their country,” explains Odhiambo.

She adds that Tanzania charges between $500 (Sh51,750) and $1,000 (Sh103,501) as work permit fees in what is aimed at controlling the number of professionals entering their country. Such a fee, for example, is an effective deterrent to the influx of casual workers in Tanzania.

Kenya exports mostly pharmaceutical products, plastic lids, petroleum, confectionary sugar, electric batteries, cleaning products to Tanzania.

“Non-tariff barriers (NTBs) in Tanzania have been very severe in the last two years,” said Ms Maina. An NTB is a trade restriction that does not involve a tax.

She said since 2015, Tanzania has frustrated entry of a number of Kenyan products into its borders with exports of confectionary products such as sweets and biscuits already stopped. Export of textile has also been stopped as well as edible oil, explained Ms Maina.

However, President Magufuli’s Government insists they are only protecting infant industries in Tanzania which they believe will be critical in job creation in the resource-rich East African economy. But generally in the EAC countries, aggressive China and India are to blame for Kenya’s reduced role in the region.

A 2016 working paper by the World Bank noted that China’s foray into the region might have hurt Kenya’s exports into the four East African countries. The paper, Deal or No Deal: Strictly Business for China in Kenya? noted that Kenya’s exports to Uganda and Tanzania were falling.

“Chinese goods may have also hurt Kenya’s exports to its neighbours. Exports to Tanzania and Uganda are quite similar to China’s, compared to both countries’ exports to the United States or the UK,” read the report written by the World Bank’s Lead Economist for the Russian Federation Apurva Sanghi and Dylan Johnson - consultant in the Macroeconomics and Fiscal Management Global Practice in Nairobi.

The greater overlap in East Africa suggests that Chinese goods will likely displace Kenyan exports. Between 2008 and 2014, manufacturing exports to Tanzania fell 36.1 percent; exports to Uganda increased slightly by 4.5 percent, but compared to previous years, the growth was slow.”

In 2000, Kenya’s exports to Uganda accounted for 29 per cent of Uganda’s total import bill which added up to $284 million (Sh29.2 billion). India’s and China’s products accounted for a paltry 5.4 per cent and 2.8 per cent respectively, trailing even that of the United Kingdom (8.1 per cent) and Japan’s (6.2 per cent).

But this changed fifteen years later as India and China by-passed Kenya to become Uganda’s first and second source of imports. India’s imports into Uganda accounted for 20 per cent of Kampala’s total import bill while China’s accounted for 16 per cent.

RE-ORGANISATION

The two Far-East countries had eaten into Kenya’s pie leaving Nairobi with a small share of 9.7 per cent, although the country’s import value went up to $535 million (Sh55 billion). In Rwanda, Kenya’s share of exports reduced by more than half from 16 per cent to 7.5 per cent, even as China’s imports into Kigali increased almost ten-fold from 2.4 per cent to 18 per cent.

Imports from India also rose five times from 2.1 per cent to 10 per cent. Interestingly, Rwanda’s trade with Uganda and Tanzania deepened as that with Kenya went down. Imports from Tanzania into Rwanda rose from a paltry 1.3 per cent 15 years ago to 5.1 per cent in 2015. Uganda’s share of imports to Kigali went up from 6.5 per cent to 12 per cent, in what many might see as re-organisation of relations amongst the East African countries.

However, last month Kenya and Tanzania agreed to resolve a number of trade related concerns ranging from multiple charges on levies, lack of preferential treatment, delays, inspection fees, non-payment of suppliers by Uchumi and Nakumatt supermarkets, slow customs procedures and slow implementation of the relevant East African Community directives.