The future of Kenya’s trade with the European Union looks bleak, with the country staring at Brexit uncertainties and unwillingness by East Africa Community members’ to ratify the Economic Partnership Agreement.

While the country’s trade has been gravitating towards the East in recent times, President Uhuru Kenyatta recently pitched tent in the United Kingdom in what was seen as a fence mending visit to the region that has been Kenya’s biggest export market for a long time.

Kenya’s imports from the EU bloc continued to decline for the second consecutive year, dropping to Sh206.5 billion last year. The value of imports from the two leading source countries— Germany and UK— jointly declined by five per cent to Sh73 billion in 2017.

According to the Kenya National Bureau of Statistics’ latest Economic Survey Kenya’s exports to Europe rose by 3.6 per cent to Sh125.6 billion in 2017. This constituted only 21.1 per cent of total exports.

The value of total exports to Netherlands, United Kingdom, France and Belgium went up, jointly amounting to Sh96.2 billion in 2017, up from Sh92.9 billion in 2016 while that of Pakistan alone went up from Sh40.3 billion in 2016 to Sh64.1 billion in 2017

A notable decline was also recorded in value of imports from Italy at 5.7 per cent. Spain, Denmark and Ireland recorded 5.7, 11.5 and 53.1 per cent drop respectively. Only import volumes from France, Netherlands and Belgium went up during the year

The value of imports from the Far East and Middle East Asia rose by 6.8 per cent and 50.7 per cent, respectively, in 2017. This resulted in a 15.8 per cent increase in the value of imports from Asia which amounted to Sh1.1 trillion during the review period. Consequently, the value of imports from Asia accounted for 64.2 per cent of total imports in 2017.

Europe and especially UK was Kenya’s biggest export market outside East Africa by the beginning of this decade and was largest trading partner with over £1.2 billion (Sh168 billion) of trade annually by 2013, according to British Chambers of Commerce.

Despite decline in trade volumes between Kenya and UK, the two countries continue to enjoy cordial relation spanning colonial era, with a huge chunk of UK investors controlling major counters at the Nairobi Securities Exchange.

Although Britain economy is currently boxed in a corner by Brexit politics, President Uhuru Kenyatta’s visit to UK is seen by many analysts as Kenya’s plan to take a front seat chair in the independent Britain

According to Capital Market Authority in its latest Soundness Report, Kenya’s re-negotiation of post-Brexit trade deals should focus on devising new ways to maintain the current market share while identifying new avenues to expand trade.

Indeed, during President Uhuru Kenyatta’s visit, he secured a trading platform for Kenyan firms on the London Stock Exchange and acquired an energy investment deal from Quantum Power, the owner of 35 megawatt Menengai Geothermal Development which promised to increase its investments in Kenya by five fold.

Kenya is also wooing UK to maintain the current trade arrangements under EU which are free from non-tariff barriers. This, even as other members of East Africa Community continue to frustrate efforts to ratify the Economic Partnership Agreement (EPA) with EU.

The 19th Ordinary Summit of the East African Community (EAC) Heads of States in Uganda in March failed to reach a compromise on the crucial trade treaty whose absence threatens the future of Kenya’s exports to EU.

Although Kenya ratified the treaty in 2016, other EAC members led by Tanzania have been dragging the process considering that lack of signing will not affect their trading with EU whatsoever.

Tanzania, Uganda, Rwanda and Burundi are on UN’s list of Least Developed Countries (LDC) hence their traders are guaranteed duty and quota-free access to the EU market.

In the treaty, EU is demanding for gradual opening up of up to 80 per cent of the EAC’s market for European products

Uhuru’s visit to UK is therefore seen as Kenyan strategy to consolidate more markets outside EU ahead of Brexit to cushion it from negative effects of the region’s not signing the pact with EU.

Source: The Star

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.