TRALAC - Trade Law Centre

US widens its lead over UK as top importer of Kenyan goods

Thursday, 12 January 2017 Published: | NEVILLE OTUKI

Source: Business Daily (Kenya)

The United States has strengthened its position as Kenya’s third-largest export destination — making it Nairobi’s most valuable economic partner outside East Africa.

Kenya’s exports to the US grew seven per cent to Sh35.3 billion in the first 10 months of 2016 as exports to Britain tumbled by a similar margin to Sh30.9 billion, according to Kenya National Bureau of Statistics (KNBS) data.

The growth saw American consumers open a Sh4.4 billion gap over their counterparts in the UK, wider than the Sh2 billion in 2014 when the US first outpaced Britain to become the third largest importer of Kenyan goods after Uganda and the Netherlands.

The KNBS data also shows that the US overtook Britain for the first time as the top source of foreign tourists who visited Kenya in the year to October 2016, cementing its position as a crucial source of dollar inflows in addition to diaspora remittances.

International trade experts said local traders are increasingly opening more supply channels to the US, helped by increased interactions with American investors.

“Besides the renewal of Agoa [the African Growth and Opportunity Act], Kenya’s increased visibility on the global map is as a result of conferences like the Global Entrepreneurship summit that attracted US President Barack Obama,” said Joseph Kosure, a consultant in international trade.

Kenya is a beneficiary of the preferential trade pact, Agoa, which allows sub-Saharan African countries to export goods to America tax-free.

Textiles and apparel account for about 80 per cent of Kenya’s total exports to the US under the pact.

Last September, Kenyan authorities said they were looking to expand the list of products that the country exports to the US under Agoa as competition intensifies in the garment and apparel market.

Relations between Nairobi and London came into focus four years ago following threats by the UK to cut ties with Kenya should Uhuru Kenyatta, then an ICC indictee, be elected president in the 2013 polls.

The charges against Mr Kenyatta have since been dropped, and the UK has been working to reset the frosty relations with Kenya.

Meanwhile the US-Kenya trade basket has continued to expand.

Ongoing growth now puts America on the path to overtaking the Netherlands for the first time as the second-largest buyer of Kenyan goods.

At Sh35.3 billion, the US consumption accounts for seven per cent of Kenya’s total export receipts of Sh482 billion for the period between January and October last year.

Besides trade, Kenya has benefited from a growing traffic of American holidaymakers seeking to sample the country’s safari trails, resorts and sunny palm-fringed sandy beaches.

US tourist arrivals to Kenya stood at 82,363 in the year to October 2016, outpacing Britain, traditonally Kenya largest source of tourists, which had  80,821 visitors, according to the Kenya Tourism Board (KTB).

The Netherlands, the largest buyer of cut flowers, has held the second position on Kenya’s export table for years but now looks set to cede ground to the US after taking in Sh32.6 billion worth of Kenyan goods.

The Kenyan shilling last year held steady against the US dollar, standing at an average of Sh101, unlike in 2015 when at some point it touched a low of Sh106 to the dollar.

This means that last year’s exports growth was driven by increased commodity sales and not foreign currency gains experienced by exporters when the dollar strengthens against the local currency.

The KNBS is yet to make available the data for the last two months of 2016.  

Imports from the US, however, dropped to Sh40.5 billion in the review period from Sh67 billion.

Uganda tops market

Uganda remains Kenya’s largest export market even after it sharply cut its orders by Sh10 billion to Sh41.8 billion in the review period.

Analysts warned of a looming cloud of uncertainty as the US gears up for a change of guard at the White House with the swearing-in of Donald Trump as the 45th American President on January 20.

Mr Trump has promised to renegotiate nearly all trade deals the US has with various countries and trading blocs around the world.

“Africa is in the wait-and-see mode regarding what would become of Agoa under Trump’s presidency,” said Aly-Khan Satchu, the CEO of Nairobi-based investment advisory firm Rich Management.

There are concerns that Mr Trump’s tough stance on immigration rules would affect the stream of diaspora remittances that account for a huge share of forex inflows for Kenya and other African countries.

The ongoing shift in Kenya’s trade interests comes at a time when Nairobi is slowly reversing its low engagement with the West.

Mr Kenyatta’s policy of economic diplomacy in the initial years of his presidency has mirrored that of his predecessor, Mwai Kibaki, of looking East.

Kenya’s largest import bill comes from China at Sh275 billion in the review period, but Beijing took in less than Sh5 billion worth of Kenyan goods, underlining the deep trade imbalance.

Kenya’s total import bill in the year to last October narrowed to Sh1.1 trillion from Sh1.2 trillion while export receipts grew marginally to Sh482 million from Sh481 million.

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