25 April 2017

East Africa: Cheap Chinese Goods Eat Into Kenya's EA Export Market

Kenya's status as an exporter of products to the East African market continues to be undermined by cheap direct imports from China, according to the latest data.

This is threatening the country's industrial growth, which relies on the same market to sell its products.

The World Bank, which had earlier warned of the threat due to imports from the Asian economic giant, now says Kenya's trade performance is fast declining due to an influx of goods from China into Uganda and Tanzania who are major export destination for the country.

The data shows that exports contracted by an estimated 23.3 per cent in 2016 despite the region's relative resilience underlined by a growth in the East Africa Community (EAC) intraregional business.

The imports now threaten Kenya's regional economic dominance where the country's competitiveness has remained highest over time.

"Kenya has become less competitive in EAC due mostly to cheaper products to EAC markets from elsewhere, in particular East Asia (including China).

For instance, in both Tanzania and Uganda, the share of China exports has increased from some 45 per cent to 60 per cent over the past decade. This has not only driven down market shares of Kenya's exports, but also that of other countries," the global lender said it its latest economic update.

The narrowing space is said to be affecting both agricultural and manufactured products.

The World Bank says that while Ugandan and Tanzanian Chinese imports grew at 12.4 and 16 per cent respectively over the 2000-2015 period, their imports from Kenya only increased by 4.3 per cent and 6.3 per cent.

Agricultural products whose exports to the EAC has weakened the most over the past 10 years include: cereals, milling products; malt and starches gums, resins and other vegetables, animal or vegetable oils, sugar and sugar confectionery.

Uganda, which is Kenya's largest EAC market recorded significant decline in malt and starches imports from Kenya by 25.3 per cent with a further 11.6 per cent fall in vegetable import during the period.

Affected manufactured goods exports include: chemical products, plastics, raw hides and skins, paper and paper boards, glass and glassware, iron and steel products, electrical machinery and equipment, motor vehicles and musical instruments according to the Word Bank data.

Further, in Tanzania, Kenya's second largest EAC market, grew its manufacturing from other parts of the world over the last 15 years by 16.8 per cent, but reduced those from Kenya.

The loss of market share by the East African economic giant far outweighs gains in the market share made in a few export markets including European Union, Asia and America.

Trade and Industrialisation Cabinet Secretary Aden Mohamed could not be reached for comment on this latest development that waters down the country's industrialisation plan.

Efforts to reach his Trade Principal Secretary Chris Kiptoo over the same were equally unfruitful as both neither answered phone calls nor responded to texts.

Kenya's economic resilience is partly pegged on the importance of manufactured exports, which directly support the diversification of the country's economy with the loss of market share in these products dealing a blow to economic diversification.

Manufacturing, which has declined over time from a growth rate of 19 per cent in 2012 when it contributed up to 11 per cent of the gross domestic product (GDP), now grows at a paltry 9.5 per cent and contributes to 9.2 per cent of the GDP as per the latest data form the Kenya National Bureau of Statistics (KNBS).

The economic weight of the sector falls less than half from what the government hopes to achieve in its Vision 2030 blueprint.

The KNBS data also shows that credit to the manufacturing sector dropped by 4.6 per cent in 2016 to Sh277.4 billion, further presenting a negative scenario in the sector.

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