Kenya diversifies exports to enhance competitiveness

 Moringa powder processed from the leaves. A Chinese patrnership has helped Kenyan farmer become an exporter of the medicinal plant's products. [File, Standard]

Kenya National Chamber of Commerce and Industry (KNCCI) President Erick Rutto has said that Africa is the main destination of Kenya’s exports accounting for more than 43 per cent of total exports.

Dr Rutto who appeared before the committee Nairobi said that Kenya is ranked 103 in the world export among 250 trading partners with majority of its export destination being; Uganda, United States of America, Netherlands, Pakistan, Tanzania, United Kingdom and United Arab Emirates.

The KNCCI President told the Senate Committee on Trade that 15 per cent of the East African Aggregation of exports comes from Kenya, as it is ranked second among the seven East African Community (EAC) member states after Democratic Republic of Congo.

“Major products exported by Kenya to the East Africa region include; coffee, tea, mineral fuels, live trees, edible fruits and nuts, iron and steel, pharmaceutical products, salts, soaps among others,” said Dr Rutto.

He said that on the global scale Kenya has been increasing its exports to markets such as the European Union, United States, and China, which comprise of high quality agricultural products, particularly tea and coffee which have global demand.

Rutto said that the African Growth and Opportunity Act (AGOA) with the United States of America and the Economic Partnership Agreement (EPA) with the EU offer Kenyan products duty-free access to these markets enhancing competitiveness.

He revealed that Kenya has been diversifying its exports by promoting sectors like textile, leather goods and ICT services, thus reducing dependency on traditional commodities. However Rutto said that there was stiff competition from other developing countries that offer similar products often at lower prices.

“Kenyan products sometimes face significant trade barriers, including tariffs, quotas, and stringent sanitary and phytosanitary standards, particularly in developed markets, also reliance on a few key commodities for its export revenue makes it vulnerable to price fluctuations in the international market,” he said.

The KNCCI President noted that the Export Processing Zones (EPZ) program experienced an upward trend in performance with total sales increasing by 16.7 per cent to Sh115.3 billion in 2022 while overall volume of output by the sector expanded by a meagre 3.8 per cent in 2022 compared to a growth of 6.5 per cent in 2021.

He told the committee that EPZs and Special Economic Zones remain among target areas by the government to drive industrial growth with others being leather, textiles, constructionn automotive, dairy, edible oil and pharmaceutical sectors.

“The creation of counties industrial parks is a game changer since it has attracted manufacturers to set up local plants aimed at opening up counties as epicenter of industrial growth and helping develop various parts of the country,” said Rutto.

The KNCCI President noted that Kenyan goods are now assured duty-free and quota-free access to the vast market of the 27-member European Union, with exports such as tea, coffee, exquisite cut flowers, peas, and beans. 

Rutto said that the Kenyan textile sector banks on reforms to unlock growth and currently exports goods worth Sh34 billion annually.

He told the committee that Kenya’s logistics are expected hit Sh500 billion driven by new projects with roads and rail being key drivers including harmonized levies for foreign investors, increasing retail and e-commerce space and the country’s strategic location.

“The tourism sector has grown due to the ease of issuance of Visa to Kenya for international tourists with visitor exports expected to grow by 6.5b per cent to Sh340 billion in 2027,” said Dr Rutto.

The KNCCI President noted that overall international arrivals reached 80 per cent of pre-pandemic levels in the first quarter of 2023 and by 2027 tourism sector is expected to create around 569,000 jobs directly an increase of 3.3 percent annually over a decade.

Rutto said that the construction industry is expected to register an annual average growth of 5.7 per cent between 2023 and 2026 with government's expected to promote infrastructure development and provide electric access to all citizens, as well as better health and education facilities.