Kenya is the logistical hub for the East African region. Through its strategic geographical location, Kenya has emerged as a significant player in regional trade, investment, infrastructure development and general economic growth. Despite many of its social and economical problems, Kenya can be described as one of Africa's post-colonial success stories: relatively prosperous, comparatively stable and host to many international organisations. Few could have imagined that Kenya would have achieved so much given the violence and terror which marked the country's struggle for independence more than 40 years ago. Today, Kenya continues to maintain a stable government and a free-market economy with a vibrant private sector, and, through the Greater Horn of Africa Initiative, the country is in a strong position to maintain its significant role in regional trade, investment, infrastructure development and general economic co-operation for the region.
During the last two years the country has made substantial progress in stabilising and liberalising its economy. Inflation has been brought under control and continues to decline. The budget deficit has been reduced and interest rates have come down. The liberalisation of import controls and foreign exchange rates have been major steps towards removal of trade barriers.
Mombasa, the principal seaport of Kenya, has served as a distribution hub for the lucrative East African market providing connections to landlocked neighbouring countries. The port of Mombasa is linked to the world’s major ports with over 200 sailings per week to ports in Europe, North and South America, Asia, Australia, Middle East and the rest of Africa. Kenya and neighbouring countries - Uganda, Burundi, Rwanda, Sudan and Zaire - have established the Northern Corridor Transport Agreement which facilitates transportation of goods to and from the port of Mombasa.
Kenya is also a member of the Preferential Trade Area (PTA) agreement embracing countries in Eastern and Southern Africa which has been transformed to the Common Market for Eastern and Southern Africa (COMESA) with a population of approximately 400 million. Exports and imports within member countries enjoy preferential tariff rates.
Exporters to the Preferential Trade Area (PTA) regional market (19 countries of eastern and southern Africa) receive tax advantages and have the option to trade in local currencies. The market has a total population of 190 million and a GDP of over US$50 billion. The aim of the PTA is to eventually establish a common market with no barriers across member countries’ borders.
While inviting foreign investments, Kenya also needs to hold out its own against aggressive moves by dominant financial markets like South Africa. A trade invasion by South Africa into the Kenyan market has seen a flood of South African manufactured goods into the country. This has had a bad effect on the local manufacturing sector, which is still trying hard to make a place for itself in the international market.
There is an increasing concern among local manufacturers that South Africa is gaining an unfair advantage over Kenya by monopolising the Kenyan market. The trade deficit between Kenya and South Africa has grown from US$ 33 million in 1992 to over a whopping US$ 205. It is interesting to note that South Africa has yet to dismantle the high tariff barriers that protected the country during its notorious apartheid era. Such protectionist policies have had an adverse effect on Kenya’s exports to South Africa, thereby resulting in a huge trade imbalance in favour of South Africa. On the other hand, South African government has been offering subsidies and incentives to its exporters - a move that has encouraged South Africans to invade the lucrative market in Kenya.
Viewed against this scenario, the United Arab Emirates offers Kenya a healthy, fair and mutually beneficial trade relationship. The UAE policy of free trade has attracted an increasing number of Kenyans to the country. Surprising as it may sound, the United Arab Emirates was the largest supplier of goods to Kenya in 1993, beating the traditional trading partner of Kenya, the UK, by a fair margin. Trade between Kenya and the United Arab Emirates is now poised for unprecedented growth.
DUBAI EMERGES AS A MAJOR SUPPLIER OF GOODS TO KENYA
Kenya and the United Arab Emirates enjoy a multi-faceted and robust relationship that is being continually strengthened by high level contacts between the two governments as well as a growing relationship between the business and social organisations in the two countries. According to H.E. Chirau Ali Mwakwere, former Ambassador of Kenya to the UAE, the Emirates is one of Kenya’s most important trading partners. Recent trade figures indicate that the country is now the leading exporter to Kenya having overtaken those that had previously held the record. “Kenya has become an increasingly important trading partner for the United Arab Emirates over the past few years. In addition to being the major supplier of oil to Kenya, the UAE has emerged as a favoured shopping destination to which Kenyans travel regularly to purchase household and office electronic appliances, automobile spare-parts and even motor vehicles,’’ the former Ambassador said.
Kenya has now fully liberalised its economy by removing all obstacles that previously hampered the free flow of trade and foreign private investment. Among them were exchange controls, import and export licensing, as well as restrictions on remittances of profits and dividends, all of which no longer exist. These reforms have been painstakingly undertaken by the Kenyan government in order to create the necessary environment to attract foreign investment. The President of Kenya has taken a personal interest in these reforms.
The adoption of the Treaty of East African Co-operation in March 1996, has created a common market of over 80 million people providing an attractive market for commerce and industry on a vast scale. Together with the Common Market for Eastern and Southern Africa (COMESA), to which all three East African countries belong, and the recently reinvigorated Inter-Governmental Authority on Development, a dynamic market of nearly 400 million people will provide unlimited opportunities for the potential investor in Kenya and its trading partners.
Last year, Kenya imported approximately $800 million worth of goods from the UAE - not to mention a substantial amount of goods that have found their way to Kenya through unofficial channels. Trade between Kenya and the UAE has been increasing every year, specially after trade restrictions and foreign exchange regulations have been lifted by the government of Kenya in order to boost foreign trade. An increasing number of Kenyan businessmen are now coming to the United Arab Emirates in search of new sources of supply and to market their goods in the lucrative Gulf market.
Automobiles, tyres, batteries, ball bearings, consumer electronics, chemicals, second-hand cars, consumer goods, spare parts, machinery, textiles, and computers are some of the items that are being exported from the UAE to Kenya in increasingly large quantities. On the other hand, Kenya has been exporting coffee, tea, flowers, fruits and vegetables to the UAE, albeit in comparatively smaller quantities.
Although crude oil forms a major portion of UAE exports to Kenya, other aspects of trade have also seen a substantial increase in volume in recent times. According to rough estimates, as many as 600-1,000 second-hand cars are being exported to Kenya through Sharjah every month. These right-hand drive cars are being specially imported from Japan and shipped to Kenya by traders in Sharjah’s expansive second-hand car mart.
“There is a huge demand for quality second-hand cars in Kenya. Second-hand car dealers in Sharjah and Dubai have been the major sources in meeting this increasing demand,’’ says John Makau, interim secretary-general of the Kenya Business Advisory Committee, a special task force formed under the patronage of the Kenyan Embassy to promote Kenya’s business interests in the UAE. “The trading of second-hand cars has received a further boost by the decision of the Kenya government to do away with foreign exchange regulations, thereby making it easier for Kenyan businessmen to pay for their overseas purchases,’’ he said. The increased trade activity between Kenya and the UAE is reflected in the increased air traffic between the two countries. Two years back, only Kenya Airways and Pakistan International Airline (PIA) were operating on the Dubai-Nairobi sector whereas now several other airlines, including Emirates Airline and Gulf Air, have started plying this route. It is estimated that as many as 1,000 businessmen from Kenya are visiting the UAE every month.
“One of the main advantages of doing business with the UAE is the fact that I can ship an assortment of goods in one container - something I can’t do in the Far East,’’ says Alfonso Samara, a Kenyan businessman who was in Dubai to buy a variety of goods for sale in Nairobi. “In the Far East, they will sell you nothing less than a container load if you want wholesale prices, whereas in Dubai I am able to buy a variety of goods on wholesale prices even if I purchase much less than a container load,’’ he explains.
As the relationship between UAE and Kenya develops and grows, many new doors will be opened and heightened cooperation along with booming trade and investment will serve both countries well.
KENYA BUSINESS ADVISORY COMMITTEE
Serving as a catalyst in the growing trade ties between the United Arab Emirates and Kenya, the Kenya Business Advisory Committee of the UAE is playing a key role in enhancing the commercial and trading relationship between the two countries.
The Committee, founded by leading Kenyan businessmen and professionals in the UAE, has a two-fold objective of promoting Kenyan goods and services in the UAE and of promoting the Emirates as a viable source of goods and services for Kenya. It works in close association with the Kenyan Embassy in Abu Dhabi and undertakes a variety of functions. These include the publication of business handbooks, organisation of trade fairs and seminars, provision of business advisory services to commercial and government organisations, organising visits of business delegations as well as encouraging UAE investors to visit Kenya.
Providing the background to the setting up of the Committee, Mohamed Rashaad, Interim Chairman of the Kenya Business Advisory Committee, said: “The Committee was convened in September 1993 by a group of leading Kenyan businessmen and professionals resident in the UAE, primarily to promote bilateral trade between the two countries. It had the help and invaluable guidance of the then Kenyan Ambassador to the UAE, H.E. Mude Dae Mude and his predecessor, H.E. Riyanga. It was under their patronage that this organisation has thrived.’’ From a trade standpoint, Kenya is of considerable importance to UAE businessmen. Like Dubai in the Gulf, the country is a regional distribution hub serving eastern and central African countries, whilst the UAE is also undoubtedly strategically placed with a reach that spans the Middle East, the Indian Sub-continent and the CIS states. Both countries also have in place well developed and modern infrastructure upon which their roles as regional economic powerhouses have been developed. Both countries are within reasonable proximity of each other, being only five ours flying time and six days sailing time along the ancient sea trade routes.
These and other such factors clearly make both countries natural trading partners and the Kenya Business Advisory committee seeks to exploit these to achieve its objectives. “Recent economic liberalisation measures adopted by the Kenyan government - that include removal of import restrictions on most items, lowering of import tariffs on a range of goods, withdrawal of foreign exchange restrictions and adoption of attractive investment and export promotion incentives - have put Kenya in an advantageous position to expands its niché in the international market,’’ said John M. Makau, Interim Secretary-General of the Kenya Business Advisory committee.