Kenya lost Sh6 billion in re-exports between January, July 2017

Congestion of containers at the port of Mombasa in 2008. Traders are now questioning the drop in cargo import at the port of Mombasa   [PHOTO BY GIDEON MAUNDU/STANDARD].

Political jitters scared away traders from neighbouring countries, denying Kenya a massive Sh7.8 billion in exports and re-export earnings.

This is according to the latest data from the Kenya National Bureau of Statistics (KNBS).

The Latest Economic Indicators, August 2017, shows that Kenya lost Sh6 billion in re-exports and another Sh1.8 billion in exports between January and July 2017, leaving a huge hole in the country’s exchequer.

Re-exports- or export of imported products, particularly to landlocked countries in the region- took the biggest hit as traders opted for a different route. And the likeliest route chosen by these traders, analysts noted, was Tanzania’s Central Corridor served by the Port of Dar es Salaam.

Between January and July, 2017 re-exports declined to Sh38 billion from Sh44 billion it managed in the same period last year, as political temperatures rose.

And with the October 26 elections cast into doubt after former Prime Minister Raila Odinga opted out of the race, things could get worse. Kenya’s re-exports into neighboring countries includes petroleum products and manufactured articles.

Although re-exports have generally been slowing down, a dip of 11 per cent during this period was significant compared to a marginal decline of 1.8 per cent in the same period in 2016?

In 2016, a 12.1 per cent decline in the value of re-exports contributed to a decline in the value of total exports from Sh581 billion in 2015 to Sh578.1 billion. “The decline in re-exports was attributed to a contraction in the re-exports of petroleum products and manufactured articles,” read The Economic Survey 2017.

Re-exports declined from Sh81.3 billion in 2015 to Sh71.5 billion in 2016. This is even as re-exports to Tanzania went up. “Total exports to Tanzania grew from Sh33.7 billion in 2015 to Sh34.8 billion in 2016, mainly attributable to a 28 per cent growth in re-exports,” noted the 2017 survey by the statistics office.

Kenya’s re-exports to Tanzania includes mostly packaged medicament, which constituted about 18 per cent of the total value of exports to Dar-es-Salaam. Tanzania, however, has been weaning itself off Kenya’s products, with President John Maghufuli’s policy of promoting local manufacturing.

This has seen Kenya’s exports to Tanzania decline by 18 per cent during this period from Sh14.5 billion in the first seven months of 2016 to Sh11.8 billion in the same period in 2017.

Soon, export of packaged medicament will also go down with the aggressive foray of India and China into Tanzania. India supplies Tanzania with 60 per cent of packaged medicament, followed by Kenya which supplies 19 per cent.

The poor performance of the country’s re-exports has been blamed on the decline in re-exports of petroleum products. “The values of domestic exports and re-exports of petroleum products decreased by 29.7 per cent and 28.2 per cent to Sh4.4 billion and Sh38.5 billion, respectively, in 2016,” read the Economic Survey 2017.

The election period has seen trucks from the neighboring countries of Rwanda, Burundi and Uganda choose a different route, contributing to a plunge in the consumption of diesel, according to the latest figures from Petroleum Institute of East Africa.

Consumption of light diesel slipped from 1.3 billion litres in the first seven months of 2016 to 1.1 billion litres in the same period this year.

“The main users of diesel in Kenya are the heavy commercial vehicles. Agricultural sectors are also large diesel consumers. Very soon the SGR will be the next largest consumer when fully operationalised,” said George Wachira, a director at Petroleum Focus Consultants.  Mr Wachira noted that “growth in diesel consumption is normally the best indicator of GDP growth.”

Traders from the neighboring countries probably fear for another post poll violence in which movement of goods from the port of Mombasa to neighboring countries was curtailed as violence rocked parts of the country. A section of the railway line from Kenya to Uganda was uprooted, as traders counted losses.

In the run up to the August elections, Ugandan traders were reportedly saying they would pass their goods, mostly coffee, through Tanzania’s Central Corridor as opposed to Kenya’s Northern Corridor.

“It might be a good idea to begin opening up and using the route through Dar es Salaam,” the executive director for Private Sector Foundation of Uganda Gideon Badagawa was quoted by a local daily in Uganda.

However, export of locally produced goods went up slightly aided in large part by improved prices of horticultural produce- cut flowers, fruits and vegetables- in the international market.

“Definitely this becomes more than an individual company to handle but rather a country strategy. All of us as exporters and government of Uganda we must join hands for plan B Tanzania,” the local daily quoted yet another player, Joseph Nkandu, the executive director of National Union of Coffee Agribusiness and Farm Enterprises.

Mr Nkandu said that that although Dar es Salaam, over 1,700 kilometres, comes with added costs of more than 20 per cent, it is less than diversion costs in case violence erupts.

Using the Mombasa Port costs about $1,500 (Sh150,000) to $1,800 (Sh180,000) for a 20 feet container, compared to Tanzania’s $2,500 (Sh250,000) and more including more time in delays. The Leading Indicators showed that Kenya exports of locally produced goods were at Sh314.8 billion as of July 2017 compared to Sh302.7 billion in the same period last year.

The country exported horticultural produce valued at Sh64.7 billion in the period under review compared to Sh58.1 billion in the same period last year, earning the country critical foreign currency. The value of export of tea and coffee, however, declined.

“The quantity of tea exported dropped from 42,369.54 tonnes in June 2017 to 41,437.02 MT in July 2017, while its value decreased from Sh13.48 billion to Sh13.44 billion over the same period,” read part of the report.

“The quantity of produced tea decreased from 40,537.92 tonnes in June 2017 to 31,565.43 MT in July 2017. The price of processed tea dropped from Sh324.63 to Sh309.97 per kilogram over the same period.”

Quantity of coffee exported decreased from 4,442.89 tonnes in June 2017 to 3,597.63 tonnes in July 2017, while its value went down from Sh2.5 billion to Sh1.97 billion over the same period.