Bilateral trade between Kenya and India not fair

Despite years of trade with India, its relation with Africa has been nothing more than a tossed coin that lands on the head repeatedly — in favour of India

The recent Indo-Africa Summit that was meant to address the trade imbalance ended up being a diplomacy spectacle and less on substance.

Perhaps nobody could have captured the bigger picture than President Uhuru Kenyatta who emphatically stated that Kenyan traders need to undertake more value addition before exporting anything to India. But even Kenyatta’s speech failed to spell out any clear policy guideline or even a trade agreement to that effect.

India charmed African leaders with a promise of $10 billion in credit to back a “partnership of prosperity” and pitching a broad alliance for global reform. In addition, India promised an addition to $7.4 billion in soft loans and $1.2 billion in aid provided since the first India-Africa summit in 2008.

In addition, India will offer grant aid of $600 million. Of that, $100 million would go towards an India-Africa Health Fund.

India has had a good chance to make a meaningful impact in Kenya through investment in solar energy technology that Kenya so urgently needs, among other areas. The country has failed to capture this opportunity due to lack of a clear policy guideline to promote the trade between the two countries, choosing instead to stick to the current arrangement where it benefits from raw materials and exports finished products. This arrangement with Kenya is repeated over and over in several countries in Sub-Saharan Africa.

And statistics prove this trend. India exports consumer goods to Africa. In return, Africa, Kenya included, almost exclusively exports raw materials to India.

World Bank data for 2014 shows that of the total imports from Sub-Saharan Africa, 84 per cent were raw materials, while just two per cent were consumer goods. India’s exports to the continent mirror this trend – 67 per cent consumer goods and barely two  per cent raw materials.

The top five exports to Kenya include pharmaceuticals, steel products, machinery, yarn, vehicles and power transmission equipment. Main Kenyan exports to India include soda ash, vegetables, tea, leather and metal scrap.

“This pattern runs contrary to Africa’s long-stated objective to transition regional economies away from natural resource dependence and toward higher-productivity manufacturing,” according to a Brookings India report.

It will, however, not go without mention that there is a rising Indian investment in Africa’s infrastructure and communications sectors.

At the Africa business conclave organised in 2014 by the Confederation of Indian Industry, it was pointed out that raw cashews imported from African LDCs get duty free access, but processed cashew nuts do not get this benefit.

Although the relations between India and African countries have generally been good over the years, it was only in the first decade of the 21st century that they gained significant momentum.

The push came from India’s burgeoning post-liberalisation private sector but the pull was the ‘African Renaissance’ project – championed by the then South African President Thabo Mbeki.