PUBLISHED ON September 1st, 2014

Tanzania becomes Kenya’s largest East Africa market

Tanzania has edged past Uganda as Kenya’s largest export market in East Africa as a result of the ongoing elimination of non-tariff barriers and increasing local production in Uganda of goods that were previously imported.

Uganda has traditionally been Kenya’s top trading partner in the region, but latest data from the Kenya National Bureau of Statistics (KNBS) ranked the country third, with Tanzania coming second.

Uganda was overtaken by the US in June as the leading export destination for Kenyan goods.

The report showed that the US imported goods from Kenya worth Ksh3.7 billion ($41.8 million) in June, followed by Tanzania at Ksh2.8 billion ($31.6 million) and Uganda at Ksh2.5 billion ($28.3 million).

“The EAC integration means that Tanzania has to apply tariffs to products from the Southern Africa Development Community, while Kenyan goods are basically entering a domestic market,” said Sam Watasa, lead advisor on non-tariff barriers at Uganda’s Ministry of Trade.

Although it is difficult to project future trends based on a month’s data, Kenyan exports to Uganda have declined by almost half since November last year, at Ksh4.5 billion ($51 million), a trend analysts attributed to the growth of the manufacturing sector in Uganda.

Over the same period, Kenya’s exports to Tanzania were between Ksh3.2 billion ($36.2 million) and Ksh2.7 billion ($30.5 million).

Uganda has drastically reduced its imports from Kenya. Tanzanian imports have remained fairly stable. However, June is not a good month for imports because it is usually the end of the budget year,” East African Business Council trade economist Adrian Njau said.

Uganda imported more from Kenya than Tanzania in June last year.

Kenyan officials attributed the change in trade volumes to increased monitoring of non-tariff barriers after the EAC became a Single Customs Territory. Officials from the bloc now meet quarterly to address obstacles to trade.

“There are some non-tariff barriers that we’ve been looking at in the EAC, and resolving them has led to an increased flow of goods between the two countries,” said the director of international trade at Kenya’s Ministry of Foreign Affairs and International Trade Nelson Ndirangu.

According to Kenya Investment Authority managing director Moses Ikiara, Uganda has over the past two decades attracted substantial foreign direct investment in key sectors like manufacturing and services, reducing its reliance on imports.

“Some of the products that Kenya was selling can now be manufactured in Uganda. The elimination of some forms of non-tariff barriers has also seen the flow of goods from Kenya to Tanzania increase,” Mr Ikiara said, adding that the quality of some Kenyan products is now rivalling that of items Tanzania previously imported from South Africa.

Savanna Cement, which exports a third of its products to the region, said the trend, if maintained, presented Kenyan manufacturers with a bigger and more diversified market.

“Kenyan’s exports to Uganda may be slowing down but Tanzania is picking up. Tanzania is a much bigger market for commodities and their population is bigger. The Tanzanian market is opening up and for us it is a win-win situation,” Savannah managing director Ronald Ndegwa said.

Mr Watasa said products like soap, cosmetics, detergents and spices were now being manufactured in Uganda.

Ugandan manufacturers also appear to be responsible for the decline in exports from Kenya to Rwanda, which fell from Ksh1.1 billion ($12.4 million) in November last year to Ksh712 million ($8 million) in June.

Gideon Badagawa, the executive director of the Private Sector Foundation Uganda, however, said the data needed to be examined over a longer term to avoid jumping to conclusions.

“I don’t think it’s possible that after the aggregation of all Kenyan businesses in the insurance, retail and banking sectors and workers in the hotel industry, Tanzania would be ranked as a bigger trade partner,” Mr Badagawa said.

He said Kenya should nurture relations with Uganda for strategic reasons, including access to the landlocked countries of Burundi, Rwanda, DRC and South Sudan. “This makes Uganda Kenya’s shortest route to the hinterland,” Mr Badagawa said.

Mr Ndirangu said Kenya has been diversifying its products to the international market to widen its export revenues and minimise over-reliance on agricultural produce.

“Our exports to the US are mainly textiles under the Agoa framework. We have been branching out to products like cut flowers and horticultural produce,” he said.

Tea tops the list of Kenya’s exports, followed by horticulture and coffee. A return to political stability in Egypt has seen exports, mainly of tea, rise for the third month running.

The 2014 Economic Survey released in February by KNBS showed that Kenya’s exports to Uganda declined for the second year in a row to Ksh65.36 billion ($739.6 million) last year, from Kshs67.45 billion ($763.2 million) in 2012.

Kenya traditionally exports lime, cement, fabricated construction materials and consumer goods to Uganda. Tanzania was last year Kenya’s second largest export destination with products like soap, foodstuffs, cleansing and polishing preparations as the major exports, according to KNBS.

“With the harmonisation of border procedures and single documentation procedures coming into effect, the ease of doing business in the region has improved,” Mr Ndegwa said.

In the year to June 2014, the value of exports of goods and services to Tanzania was $13.99 billion, equivalent to an increase of 8.5 per cent over the previous period.

Importation of building and constructions materials went up by 25.7 per cent to $1 billion, partly associated with the ongoing increase in construction activities in the economy.

The July edition of Bank of Tanzania’s Monthly Economic Review states, “A significant increase was recorded in the category of all other consumer goods, particularly pharmaceutical products, paper products and plastic items.”

Source URL: The East African

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