Trump win unlikely to alter Kenya-US trade relations: Analysts

November 21, 2016
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/AFP
Trump plans to prioritise job security for all Americans by establishing new immigration controls that could negatively affect diaspora remittances/AFP

, NAIROBI, Kenya, Nov 21 –  Barely a month after Donald Trump was declared the winner of the United States Presidential elections, analysts are predicting a bumpy ride ahead in the global markets.

The US has a major influence on the global economically, financially and politically; and it is due to Trumps “radical plans” that many believe that global markets should prepare for a bumpy ride.

Trump’s inward looking campaign message of ‘Make America great again’, with radical statements on immigration and trade, has brought uncertainty in the international markets.

But how is Trump’s win expected to impact the Kenyan Economy?

According to a new report by Cytonn Investments, Trump’s presidency is largely neutral towards Kenya’s economic growth.

 

Trade and Investment

Under the outgoing US President Barrack Obama administration trade and investments between Kenya and the US recorded remarkable growth, with net imports increasing by 206.4 per cent from the previous administration, highlighting the improved activity in trade between the two nations.

“Imports from the US increased by 90.4 per cent, faster than exports to the US, which grew by 81.9 per cent, an indication that Kenya depends more on the US; and with over 96 investment projects in Africa worth USD6.9 bn (Sh702 billion) as at 2015, the US remains to be the single largest investor in Africa.”

“Kenya receives a large proportion of these investments and as at 2015, Kenya recorded a 12.3 per cent share of Africa’s Foreign Direct Investment,” the report states.

Trump’s plan, on the other hand, involves withdrawal from the Trans African partnership and the renegotiation of trade agreements to better suit the American worker. However, there is no direct mention of any changes to trade between the US and Kenya.

Aid

Kenya has received about USD 1.0 bn (Sh102 billion) annually in aid from the US and ranks in the top ten US aid recipients in Africa.

Under the Obama administration the USAID formulated the “Country Development Cooperation Strategy” running from 2014-18; with 3 main goals namely; implement devolution effectively, strengthen health and human capacity, and execute an inclusive, market-driven and environmentally sustainable economic growth.

However, this could change. Trump, during the primaries, claimed his number one priority is to strengthen America and this will involve cutting Aid to countries where they receive no form of “return”.

Immigration 

Trump plans to prioritise job security for all Americans by establishing new immigration controls that could negatively affect diaspora remittances that are currently the highest foreign exchange earner for the country.

Cumulative 12 months’ diaspora inflows to June 2016 increased by 11 per cent to USD 1.7bn (Sh173 billion) from USD 1.5 billion in the year to June 2015.

Trump also plans to select immigrants based on their likelihood for success in the US, end Obama’s illegal immigrants’ amnesties, force other countries to take back their illegal immigrants, and reform legal immigration to serve America’s best interest.

The Kenyan-born population in the US is fast growing and is now the 2nd highest contributor to diaspora remittances into the country after the United Kingdom.

According to the report, most Kenyans in the United States are in the country by virtue of their family members being US citizens at 35 per cent, while 28 per cent are on Visa programme, 26 per cent are refugees, 7 per cent are admitted on employment sponsorship and 3 per cent are in the US are based on family sponsorship.

International corporations

Kenya has attracted major US firms that include Coca-Cola, General Electric, Google, and IBM among others, with the country benefitting in terms of job creation and skill transfer.

“Attraction of international companies into Kenya is due to Kenya’s status as a regional hub and is not politically motivated. Given this, we do not see a Trump presidency as being negative towards this,” the report indicates.

Commenting on this, American Chamber of Commerce Chief Executive Ferial Nathoo, says business goes on as usual with more American firms seeking investments in Kenya.

“Despite any concern, business environment remains stable, as long as the Kenyan government business environment remains stable there will be further investment interest from the American companies into Kenya,” Nathoo told Capital FM Business, citing exciting times for investors due to the amendment of the Finance Act 2016 which revokes the compulsory Kenya equity shareholding in foreign business.

The Amendment, she says, opens the door for more international investors., OPIC announced they are opening an office in Kenya, We are also expecting the United States Trade and Development Association (

“OPIC announced they are opening an office in Kenya. We are also expecting the United States Trade and Development Association (USTDA) Manager East and Central Africa Brandon Mergoden in Nairobi in  December to meet with potential developers who are interested USTDA grand funding,” she explained.

According to the Cytton report, key hindrances to Kenya’s growth include insecurity, political stability, corruption, and weak export growth with the Trump effect likely to have a positive impact on security and governance, and neutral on trade and investments.

The Kenyan economy is one of the most diversified in the region and has displayed resilience to global shocks, as witnessed by the IMF projecting a 6 per cent growth for 2016, despite other African countries being downgraded on account of global turbulence, especially due to commodity prices.

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