Kenya’s golden days of exporting more into its neighbouring countries may come to an end soon. This is after a new World Bank report showed that cheap Chinese products have been slowly displacing Kenyan manufactured products from the Tanzanian and Ugandan markets.
For long, Kenya’s main trading partners have been the East African countries of Tanzania and Uganda but with the advent of cheap Chinese products into these markets, this is set to change.
The World Bank report titled 'Deal or No Deal: Strictly Business for China in Kenya?' found out that Chinese goods may have hurt Kenya’s exports to its neighbours. The US-based international lender said between 2008 and 2014, manufacturing exports to Tanzania fell 36.1 per cent.
Although exports to Uganda increased slightly by 4.5 per cent the growth was slow compared to previous years, the report added. Uganda being a landlocked nation, it imports through Kenya’s port what could explain its long-standing position as Kenya’s key export market.
The Economic Survey, 2015, which is prepared by the Ministry of Devolution and Planning showed that the value of exports to the East African Community (EAC)-Uganda, Tanzania, Rwanda and Burundi- jumped from Sh101.3 billion in 2010 to Sh137 billion in 2011. The following year total exports fell to Sh134.9 billion. It fell further to Sh125 billion in 2013 before it marginally grew to 125.8 in 2014.
The value of exports to Uganda, the leading destination for Kenya’s exports in 2014, declined by 7 per cent, according to the Economic Survey. Some of the exports to Uganda in 2014 included cement, flat-rolled products of iron, steel, salt and re-exported products such as petroleum and cooking oil.
Exports to Tanzania, however, edged up by 5.5 per cent to Sh42,725 million in 2014. But the growth was not as phenomenal as in the previous years. “Exports to Tanzania and Uganda are quite similar to China’s, compared to both countries’ exports to the United States or the UK. The greater overlap in East Africa suggests that Chinese goods will likely displace Kenyan exports,” read the World Bank report in part.
Other Kenyan exports to EAC include soda ash, and increasingly, electricity. According to the Economic Survey 2015, the volume of cement exported registered a 12.9 per cent decline from 826,941 tonnes in 2013 to 720,465 tonnes in 2014.
Similarly, the quantity of soda ash exported decreased by 17.3 per cent while iron and steel export volume dropped by 11.5 percent.
Recently, Kenya’s steel manufacturers have been up in arms against what they term as cheap steel products flooding the Kenyan market. The global price of steel has tumbled to its lowest levels in 10 years. This cheap steel has taken away their competitive advantage forcing some of them to close shop even as others have laid off in droves.
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But to add salt to injury, the cheap steel products have also snatched from the Kenyan steel manufacturers their key East African market. With the tumbling prices of steel in the global market, Uganda, Rwanda and Burundi have opted to import directly from China.
Taking advantage of the low-prices, these countries have by-passed the Kenyan manufacturers for the cheap imports from China.
According to the International Monetary Fund (IMF), Kenya exported most of its produce to the European Union with exported goods to the Eurozone totaling €1,006 million euros (Sh114.23 billion) in 2014.
The second export destination was Uganda where the country exported goods worth €576 million euros (Sh65.399 billion), the US followed with export goods worth €392 million euros (Sh44.512 billion). Tanzania was fourth with goods worth €360 million euros (Sh40.877 billion).
Indeed, so prevalent have the Chinese products been in Uganda, especially textile and apparel, that some Kenyan traders have actually been importing from Uganda and selling them in the country.