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EDITORIAL: Address trade gap with Africa urgently

by biasharadigest
Ideas & Debate

EDITORIAL: Address trade gap with Africa urgently

Kenya has long prided itself as one of the economic hubs of Africa. With its apt geographical location on the gateway to the eastern Africa market, and an established industrial base, Kenya is without doubt, one of the economic powerhouses of the continent.

That’s why we find it worrying that for the first time since the country started compiling trade data, imports from Africa have this year overtaken exports.

Data compiled by the Central Bank of Kenya (CBK) shows that Kenya’s trade deficit with partners in Africa over nine months through September hit nearly Sh4.22 billion.

The country ordered goods worth Sh168.741 billion from African countries against export earning of Sh164.525 billion in the nine-month period.

While we applaud a policy that has encouraged intra-African trade in the last 17 years, urgent steps need to be taken to diagnose the cause of trade mismatch and have it resolved immediately.

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In general terms, a gap of the nature may imply that either Kenya’s goods are fast loosing competitiveness in the continent or that Nairobi’s open-trade policy has failed to elicit reciprocal gestures from other African states. If the issue is about competitiveness, then it must have more to do with the laxity on the part of the private sector and less to do with regulatory and administrative failures.

This is because the World Bank’s Doing Business 2020 ranking, which is basically the private sector’s review of States’ facilitative role, put’s Kenya at position 56 globally, a marked improvement from number 61 the previous year.

The report identifies Kenya as the third most competitive economy in Africa after Mauritius (13) and Rwanda (38).

That implies that private sector must equally bear responsibility for the remaining competiveness questions, such as failure to invest in product research and development, poor pricing policy and factory inefficiencies.

If on the other hand the trade mismatch is due to abuse of our open-door policy then Nairobi needs to reevaluate its options to ensure preferential access to its market is granted on reciprocal basis. This is particularly important as Kenya moves to integrate itself deeper into the continental trade system such as through initiatives such as the African Continental Free Trade Area.

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