Kenya and South Africa will next week set up a joint secretariat to ease trade between them, giving local investors easier access to the Johannesburg market.

Sisanda Mtwazi, the Economic Counsellor at the South African High Commission in Nairobi, said agreements--which will lead to the establishment of the Joint Trade Commission and the Private Sector Business Council--will be signed on Wednesday.

The two institutions are expected to rev up investments between the countries that is currently skewed in favour of South Africa.

"The formation of this commission is likely to address these imbalances through increased investments from South Africa targeting export markets and increased market access into South Africa for local investors," said Export Promotion Council's CEO Matanda Wabuyele.

Clear signal

Official data indicate imports from South Africa are currently 20 times the value of Kenya's exports to that country, a clear signal that South Africa investors are reaping more from the trade between the two countries.

Kenya exported goods worth Sh3.6 billion to South Africa last year while it received goods worth Sh46.6 billion from the country.

This has been attributed to tariff barriers and the advancement of the South Africa economy compared to Kenya, which has seen it sell high value goods such as vehicles, machinery and computers to Kenya.

Kenya mainly sells flowers, handicraft and woven products.

The commission and the council are expected to provide a platform to address some of the outstanding trade disputes such as tariff and non tariff barriers that exist between the two countries.

"What is intended is to streamline our trade agreement so that the tariff barriers that exist because we belong to different African trade blocs do not impede trade," said South Africa's High Commissioner to Kenya, Tony Gab Msimanga.

Kenya belongs to the Common Market for Eastern and Southern Africa, COMESA trading bloc while South Africa belongs to Southern Africa Development Community, SADC.

Exporters from the two countries face restrictive tariffs because of this reality, which slows the pace of trade.

The setting up of the two organs, which will have permanent secretariat, was part of the Bilateral Trade Agreement signed by the two countries late last year.

The agreement was envisioned in Kenya's Vision 2030 as a means of helping Kenya increase its exports and learn from countries with higher economic competitiveness.

EPC said the council will make it easier for the academia to be involved more in identifying areas where the two countries have greater trade potential.

On focus will be the need to harmonize policies of the three trading blocs, SADC, COMESA, and EAC.

The commission is expected to provide a platform for addressing pending bilateral trade issues as well as issues hampering trade within the three trade blocs.

Mr Timothy Muriuki, the chairman of the Nairobi Central Business District Association(NCBDA) said one of the major benefits for Nairobi could be increased investments in the housing sector.

Nairobi has an annual demand of 150,000 houses but investors here are not able provide this number.

"We can borrow a lot from cheaper technology in South Africa to meet this demand," he said.

He said the deal will further cement the status of Nairobi as the major business hub of the region.

Create jobs

Mr Douglas Machuki, the CEO of Discovery Health, medical insurance company said the insurance industry will learn how South Africa has been able to improve its penetration, especially in medial and life insurance.

"Kenya can gain a lot from South Africa in terms of research, use of insurance technology and new products," he said. "This is the first world type of market and our links will can be important when utilised fully."

He said he sees opportunities for partnerships with Kenyans because South Africa-type of business model does not usually work in Kenya.

Among other possible gains, South Africa hospitals could set up satellite units in Kenya so that they don't have to go to South Africa for specialised medical services not available here.

This will help to reduce the cost of such services and create jobs in Kenya.

But Kenyan businesses were alerted to be aware of the high regard for workers' rights in South Africa labour market.

South Africa is a highly unionised country where even househelps have a union and the government has set minimum wages for them.

"Kenyans need to understand that doing business in South Africa will require them work with the unions. Some Kenyans tell me it is difficult to fire an incompetent employee in South Africa because of the unions, it is not hard as long as one follows the due process of the law," said the SA High Commissioner in Nairobi.

But the chairman general of COTU Rajabu Mwondi said there is no major difference between the respective of labour rights in Kenya and South Africa but declined to elaborate.

Under the Trade Commission, South Africa will also assist Kenya set up a nuclear energy electricity plant to help the country diversify from over reliance of hydro generated electricity, which is susceptible to weather changes.

South African owned businesses have not had a rosy experience in Kenya with massive closures in the late 1990s and early 2000s.

A report by South Africa Institute of International Affairs then cited hostility between the business players in the two countries and Kenya's lack of adequate infrastructure and slow pace of business reforms as some of the cause of those closures.

However, the situation has been improving with Kenya making several business reforms like reduction of business licenses, reconstruction of roads and information technology networks, which is now ongoing.

"The private sector has to try to break this suspicion for their own good. The ball is in their court," said Mr Msimanga.