Change tack to close Kenya, US trade deficit

The US Trade Secretary Wilbur Ross, is coming to Kenya for a summit with 70 delegates from the American private sector. One of the key objectives of his visit is to explore  opportunities that exist for US businesspeople in the Kenya government’s Big Four agenda.

This mission is coming after the Global Entrepreneurship Summit (GES) held in Nairobi three years ago that saw former American President Barrack Obama, arrive in the country accompanied by dozens of American businesspeople. Investment deals worth billions of dollars were signed. No prizes for guessing who were the key beneficiaries of those deals. The forthcoming trade summit will be no different.

Trade balance

In the meantime, Kenyan businesspeople continue to lament about the lopsided balance of trade between Kenya and the US. According to official data, Kenya exported goods worth Sh47 billion to US in 2017, while its imports from that country stood at Sh57 billion.

This situation has remained so, and is not likely to change anytime so. What is the problem? There is a fundamental change of attitude that must take place in the local mindset. No country will work for the benefit of another country’s investors.  In all these forays by the US, their interest is purely to advance Americans interests. And any benefits Kenya accrues are either incidental, or meant to facilitate the exploitation by American businesses. This is what inter-state trade relations are all about. So Kenyan businesspeople must change tack.

First, if Kenya wants to boost manufacturing, a drastic growth in exports is a must. The local market is too small to create the manufacturing base that will create the jobs, wealth, be an economic driver and make the contribution to economic output that the country envisages under the Big Four agenda.

However, this drastic growth will only come if Kenya fundamentally changes the way it does business.  The American market is a consumers’ haven, and countries such as China and Japan have built massive export-ortiented industrial bases by supplying that market.  Also, all the countries that have vibrant manufacturing sectors,  have vibrant export sectors. There is no other way.

Secondly, trade missions to the US are a must.  Aggression is the name of the game. The US markets beckons, especially now that direct flights are set to start between the two countries. How is Kenya positioning itself to exploit the potential in this game changing initiative? Third, Kenyan businesspeople must seize the available opportunities. From the coming mission, its obvious American businesspeople do not let opportunities go begging. Kenya has been exporting under the African Growth and Opportunities Act (AGOA) for almost two decades, yet, according to the Kenya National Chamber of Commerce and Industry (KNCCI), the country has only been exploiting a miserable 10 out of 6,200 items on the eligible list.

Exploit opportunity

No opportunity should go unexploited. Kenya is a small market as far as the US is concerned, yet that country’s leading companies- General Electric, Google, Microsoft, Coca Cola etc are all in Kenya. The moral of the story is that no market is too small to pursue. Yet Kenya’s manufacturing sector plods on selling poor quality products at exorbitant prices to the local market, and operating at serious undercapacity. How will Kenyan manufacturing ever grow?

The first step is for Kenyan businessmen to organise a reciprocal trade mission to US to explore export opportunities. Further, Kenyan businessmen must ensure the requisite quality and standards that will make their goods competitive have been met. Out there, only the best survive.

Thirdly, with a Kenyan at the helm of the United Nations Conference on Trade and Development (Unctad) in the person of Dr Mukhisa Kituyi, it would be sad if he served out his tenure without Kenya utilising this opportunity to assist develop its export competitiveness. This is one of Unctad’s core mandates. Kenyans need to wake up!

Fourthly, Kenya’s missions abroad must undergo a paradigm shift in terms of how they measure their effectiveness. Kenya is spending millions of dollars annually to keep these foreign missions running. One of their key mandates must be to aggressively seek opportunities for Kenya’s export sector in the countries they are posted to.

This must be made one of their key success factors. The Ministry of Foreign Affairs must be part of the country’s export market infrastructure. One of their performance indicators should be how many successful trade missions an embassy has organised for Kenyan exporters. The export thrust must become a multifaceted initiative between the government and the private sector.

The coming of US trade mission should be a wake up call for Kenya. Over to you cabinet secretaries in the Ministries of Foreign Affairs and Industrialisation, Kenya Association of Manufacturers and KNCCI.

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