With exports from Kenya facing near stagnation, stakeholders are now asking the government for more funding to support initiatives that will boost exports. The Export Promotion Council, which brings together exporters and producers of export goods and services in Kenya, is calling on the Ministry of East African Affairs, Commerce and Tourism to take action to address exporters’ concerns.
The Council, through its Chief Executive Ruth Mwaniki, says the myriad challenges the sector faces have created an urgent need to solve these problems in order to boost performance. During the National Exporters Forum, a platform that seeks to bring together all the stakeholders in the export industry, some of these challenges were recently highlighted.
“Most agricultural produce, such as flowers and vegetables, are perishable. Quick delivery to airports is therefore essential. Some products such as eggs are highly fragile and a potholed road is not the best means of transport,” Grace Wanyoike, a local exporter said.
Export Performance and Increasing Costs
The country’s export performance depends largely on the efficiency of trade facilitation, transport and logistics. One of the major causes of increased costs is the poor infrastructure network in the country, especially the road network. This, according to the exporters, is increasing costs of delivery of products from farms to airports. Most export enterprises are also faced with logistical and facilitation challenges, especially in African markets. This has greatly affected their performance.
High production costs are a major challenge, negatively affecting the competitiveness of Kenyan products in the international arena.
Lack of storage for delicate perishable agricultural products has also led to a decline in exports. A shortage of warehouses and cold rooms for storage of goods greatly hampers the growth and proliferation of exports.
Most agricultural products require cold storage rooms, which are expensive to install. Consequently, the cold rooms also require electricity which is not available in most parts of the country especially the rural areas. The Council has called on the government to expand the electrification program especially in the villages where most of the industries are located as well as build sufficient warehouses for the products.
Inadequate financial support for export promotion is also an issue. Many exporters do not have access to credit facilities where they can get low interest loans to boost their businesses. This has greatly affected the industry’s growth and development. The Council pointed out that the current commercial bank interest rates were not favorable for the emerging industry.
Droughts and Over-reliance
The severe droughts that the country frequently experiences are yet another major cause of the decline in agricultural exports. This, the exporters say, is attributed to the changing climatic conditions around the world.
The exporters have asked the government to develop the irrigation systems in the country and promote water harvesting in addition to efficient utilization of water resources. By so doing, the industry would be assured of sufficient products all year through, say the traders.
Moreover, agricultural exports have been affected by stringent tests for maximum residual limits that are now being undertaken by the European Union.
“The West has discovered that the same chemicals that are banned there are used to grow crops in Kenya which are then exported to Europe and America. A lot of farmers are now losing out by finding that their produce is not accepted in foreign markets and has to be destroyed,” said Kenya Institute of Organic Farming Director John Njoroge.
Over-reliance on traditional markets – which have become overcrowded due to the entry of new players as well as lack of new markets – has hampered efforts to grow the quantity and variety of exports. This calls for intensified market development and promotional efforts in regional markets such as South Sudan, the Democratic Republic of Congo, Angola, and the United Arab Emirates. The Council recommended that aggressive marketing campaigns be undertaken in order to boost trade.
The absence of an international exhibition center in Kenya was noted to be a problem. At present, exhibitions are held at various venues, many of which were not constructed with such activities in mind. The Council has therefore recommended diversifying Kenya’s export products range and integrating the youth and women in production of goods and services. The Council also recommends establishment of effective and functional distribution channels.
Barriers and Promised Funds
Within the East African Community, non-tariff barriers were cited as the greatest hindrance to exports within the region. The Council noted that although the Common Market Protocol had been signed more than three years ago, partner states have yet to fully implement its recommendations. Bidco Oil Refineries chief executive officer Vimal Shah said that although the Common Market Protocol allows free movement of people, goods and services, most EAC member states were hindering free trade through non-tariff barriers.
President Uhuru Kenyatta has promised that the government will set up an export development fund to boost export trade. According to the Daily Nation, Kenyatta insisted that credit guarantee schemes would counter high loan costs. Sustainable financing of exports are to be supported by an Export Promotion Council endowment fund.
The president has also encouraged exporters to pursue more markets for exports, especially within the region and around Africa. He noted that global export trade patterns were moving towards intra-regional trade, where countries are increasingly doing business with their neighbors. Kenyatta noted in this regard that European Union countries trade more among themselves — a trend that is lacking in Africa.