TRADE – In an uncertain time, Kenya looks closer to home for partners
How can Kenya take advantage of a changing global trade order?
PART A: UNDERLYING TRENDS
Kenya has the potential to benefit from a growing commitment to intra-African trade.
- While Kenya remains a key trading partner in the East African Community (EAC) and wider continent, neighbours (e.g. Rwanda & Ethiopia) are catching up fast. In part, this increased competition explains Kenya’s recent decline in export earnings from African trade.
- Within the EAC, integration is being driven by the private sector and inhibited to some extent by a lack of government support.
- While the African Continental Free Trade Area (AfCFTA) could drive transformative growth in Kenya, significant logistical and political challenges will need to be overcome.
Fueled in part by Brexit and an administration change in the US, Kenya’s trade relations with traditional partners are undergoing transition.
- Until recently, Kenya was struggling to agree trading relations with EU & UK owing to intra-EAC tension. This has been revitalised somewhat following new free trade agreements.
- While the value of Kenya’s exports to new partners like China is growing, the potential for scaling such trading relationship may be limited by fierce global competition.
PART B: IMPACT OF COVID-19 ON TRADE IN KENYA
Following an initial shock, Kenya’s global exports have performed surprisingly well amidst disruptions from COVID-19. However, imports and regional trade have been significantly affected.
PART C: CONCLUSION
What might a post-COVID-19 trading order mean for economic transformation?
- Kenya needs to harness its agricultural sector in order to drive export performance.
- Harnessing opportunities in global value chains such as textiles & apparel may require further regional integration moving forward.