Kenya primed for cross-border trade

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BY CAROLE KARIUKI

Kenya’s economy has shown remarkable gains over the last five years, maintaining a robust growth rate. GDP growth stood at 5.4 percent in 2014, an improvement on the 5.1 percent recorded in 2013 and 4.6pc in 2012. The country’s annual GDP growth is projected to reach 7.0 percent by 2017 (6.7pc average CAGR 2014-2017).

Following the rebasing of calculations in 2014, Kenya’s GDP now stands at US$55 billion. The country is now ranked the 9th largest African economy and the 5th largest in Sub-Saharan Africa. There is global recognition of the major and positive economic and other reforms that are now taking place in Kenya. The changes point towards a positive economic outlook for the country.

In its latest report, Bloomberg ranks Kenya as the 3rd fastest growing economy in a global survey of 57 economies projected to register rapid growth this year. This places Kenya alongside China, India, the Philippines, and Indonesia as the only economies hitting a five per cent growth rate this year.

According to the United Nations Conference on Trade and Development (UNCTAD), in its World Investment Report 2014, Kenya is developing as the favoured business hub in the Eastern and Central African region. Oil and gas exploration, manufacturing and transport are projected to be the leading investment attractions in the country over the next few years.

Fortune magazine rates Kenya as one of the seven top investment destinations to watch in the emerging markets, ahead of continental giants Nigeria and South Africa. Kenya currently accounts for 40 percent of the EAC regional GDP. Kenya’s competitiveness index as measured by the World Economic Forum is rated at 3.9 (2014-2015), making it the 6th most competitive economy in Sub-Saharan Africa (after Mauritius, South Africa, Rwanda, Botswana, and Namibia).

In recent years, Kenya has experienced an influx of Foreign Direct Investments (FDI) inflows, reaching KSh116.4 billion (US$1.2b) in 2014. This capital primarily went into the oil and gas and manufacturing industries. A new report released by the African Development Bank (AfDB) ranks Kenya among the top 10 destinations for FDI in Africa.

Over the last two years the country has been aggressively implementing a series of reforms in order to ease investments and doing business. This transformative policy approach and the general improvement of both infrastructure and security, gives Kenya a major boost as an investment and business destination.

Policy reforms and infrastructure development have reduced the cost of doing business in Kenya, thus attracting more FDI inflows. Among the companies set to invest in Kenya in 2015 are Carrefour (a French multinational retailer), Radisson Blu, Park Inn Hotel, Business Connexion (an ICT service provider based in South Africa), and Imperial Health Science.

All indications are that Kenya is fast becoming a favoured business hub, not only for oil and gas exploration, but also for manufacturing, transport and ICT. Kenya is already the world leader in usage of mobile phone money transfer platforms, bringing millions of hitherto unbanked people into the formal economy.

The Kenya Private Sector Alliance (KEPSA) and the Government of Kenya have been involved in proposals to expedite regional integration so as to facilitate cross- border trade with neighbouring countries and improve Kenya’s overall investment climate. One key reform is the National Electronic Single Window System (NESWS), which is drastically reduced for tax compliance and facilitates cross-border trade within the East African Community (EAC) region.

The NESWS, which replaces cumbersome and fraud-prone manual systems, is being implemented through integration with all stakeholder systems involved in clearing cargo (such as the Kenya Ports Authority, Kenya Revenue Authority, Kenya Plant Health Inspectorate Services, Kenya Bureau of Standards and 23 other agencies involved in the inspection of cargo. The NESWS system is expected to double East African trade to $33.3 billion by 2016.

Another major reform is in the Mombasa Port Community Charter involving both the public and private sectors, which was launched by President Uhuru Kenyatta on 30th June 2014 to create efficiency at the Port of Mombasa in light of competition from neighbouring ports. Mombasa is the largest port in the region, with significant growth in traffic volumes. In the last 10 years, traffic increased by more by than 6% per annum to 22.3 million tons in 2013. The Kenya Ports Authority projects that the Port of Mombasa will handle 1,650,000 TEU by 2016.

Development partners have also not been left behind in the support of these types of initiatives. For instance, TradeMark East Africa (TMEA) has, to date, mobilized over US$98 million to support the Port of Mombasa infrastructure. This indeed boosts confidence among investors that Kenya is the main gateway into East Africa.

Another noteworthy reform is the improvement in inland infrastructure through the various targeted interventions. There has been a reduction of weighbridges to four along the Northern Corridor, namely Mariakani, Mlolongo, Gilgil and Malaba, as well as the introduction of weigh-in-motion weighbridges which has resulted in a drastic reduction of time for clearance and transportation of transit goods.

With Kenya’s economy showing remarkable gains over the last five years supported by investments guarantees; a liberalized and stable economic atmosphere; abundant natural resources; readily available highly trained and affordable manpower; access to regional and international markets; fairly well developed infrastructure in the region; the ‘One-Stop-Shop’ service centers and other new facilities, all these reforms greatly impact on the country’s Vision 2030 objectives and drive the nation closer to achieving greater economic prosperity.

(Ms. Carole Kariuki, HSC, MBS is the Chief Executive Officer, Kenya Private Sector Alliance)

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