JICA study lists profitable business opportunities

July 28, 2008
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, NAIROBI, July 28 – A survey released Monday indicates that trade in dairy produce, fruit juices and refined petroleum products would be the most profitable within the COMESA and East African Community markets.

The assessment, commissioned by Japan International Cooperation Agency (JICA) on behalf of the trade ministry has among other things, identified the potential of products that small and medium term enterprises in  Kenya can export within the East African Community region.

The main purpose of the study was to identify potential commodities that could be manufactured in Nairobi, Kisumu and Mombasa and marketed within the EAC market.

The traditional destination of the country’s agro processed products has been the European Union. However exports to the European Union have been on a declining trend over the last 2 decades.

Speaking during the report’s launch, Chief Executive of the Export Promotion Council, Matanda Wabuyele explained that the study was a follow up of a master plan that had previously been prepared by JICA on the industrialization plan for the country.

“The survey addresses some gaps that were not identified in the initial plan, reflects on cost structure, and has identified some insights that can be shared with manufacturers and exporters on the constraints of carrying out business within the region,” he said 

Currently 75 percent of Kenyan exports are to the East African Community. The shrinking of exports to the European Union, threats to the Preferential Trade Area in addition to the country’s inability to satisfy the AGOA market, have created an urgent need to pursue regional trade.

According to the report, export expansion is under constant threat from globalisation and climate change and thus the need to focus on regional trade as it offered great potential for the country.

The report notes that though there was a huge market potential in the EAC for Kenyan exports, there was a lack of information on the potential products that could be produced in the country and exported to the regional market.

 Research consultant Jonathan Nzuma explained that the list of potential products in the study was derived from the profit margins derived from agro-processing and that any product with a profit margin of more than 10 percent was considered to be a potential commodity to be marketed within the region.
 
“Out of the list of fourteen, six  of the slots were taken up by fruit processors closely followed by dairy and finally cereal processors with profit margins on these ventures ranging from 119 percent to 23 percent for the investors,” said Nzuma

Any product that utilised local resources intensively, qualified to join the list because labour in the country is cheap thus reducing the cost production.

The report recommended an effective trade surveillance system as a necessary step towards strengthening the capability of the affected sectors in responding to trade opportunities in the region.

“India, for example, has a system that closely monitors the import trend of 220 sensitive products which include 112 agricultural products,” the report noted.

The report further proposes that the surveillance system offers free information to traders in the country with a view to informing them on the investment opportunities in the region.

The report concludes on the need for more analytical studies that could be availed to the private sector for better decision-making.

Kenya exports products worth about Sh228 billion but imports Sh521 billion worth of produce tilting the balance towards imports by more than double.

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