The Star | 12 March 2021
Kenya must up industrial game to survive trade deal with UK
By Martin Mwita
Kenya must take advantage of the seven-year moratorium in the Economic Partnership Agreement (EPA) with the UK to improve her manufacturing competitiveness, the Kenya Association of Manufacturers (KAM) has said.
It should also address the cost of doing business to ensure local entities can compete when UK exports to Kenya start enjoying lower duty charges, with the trade deal expected to abolish duty in the long-run.
The Kenya-UK EPA which has since been ratified by both Parliaments, after its signing on December 8, seeks to reduce basic duty on UK imports to 80 per cent after seven years of entry into force of the agreement.
Fourteen years after the entry into force of the agreement, duty will be reduced to 10 per cent with a final abolishment after 15 years.
About 82.6 per cent of goods and services originating from the UK will benefit from preferential access to the Kenyan market for a period of 25 years.
“In light of this, and to fully take advantage of the opportunities provided by EPA, the competitiveness of local industry must be prioritized,"KAM chief executive Phyllis Wakiaga said in an interview with the Star.
"This is because in the Kenya-UK EPA, and other trade agreements, we shall be operating in a globalized market, and shall have to contend with global competition,” she added.
The seven-year moratorium provided by the EPA gives the country an opportunity to revitalize industries, in order to make them competitive before tariff liberalization for UK industries commences, she said, even as she noted the industry is supportive of the trade deal.
Her sentients comes amid concerns of unfair competition when UK imports start enjoying duty-free access to the Kenya market, with local players among them farmers feeling jittery they could lose out.
The Kenya Small-Scale Farmer Forum and Econews Africa moved court to stop the ratification citing a lack of public participation.
Local industries and producers are already fighting for market with cheap imports from China which have in recent years flooded the country, costing cheaper than local products.
The high cost of production, including electricity and taxation, has been blamed for making Kenyan goods much expensive than imports.
Signing of the EPA was necessitated by UK’s exit from the European Union (EU), commonly referred to as Brexit, which would expose Kenya to high taxation when exporting to the UK.
With the deal, Kenya is assured of duty and quota-free market access to the UK mainly on trade in goods, fisheries, agriculture, economic and development cooperation and institutional provisions among others.
From the agreement, both parties shall conclude negotiations within five years, upon entry into force of the agreement on trade in services, competition policy, investment and private sector development, intellectual property rights and sustainability, among others.
Trade shall be liberalized progressively, as Kenya enhances her production, supply and trading capacities, in order to enable Kenya to fully benefit from the EPA.
Kenya’s top exports to UK are edible vegetables, tea, cut flowers, edible fruit and nuts, games and sports requisites, coffee, preparations of vegetables, fruit, nuts, live animals, oil seeds and oleaginous fruits, beverages, spirits and vinegar.
“The country has the potential to increase her export products to the UK for products such as textiles and apparels, processed tea and coffee, leather products, fish, livestock products and edible vegetable oils,” Wakiaga said.
There are approximately 2,500 UK businesses exporting goods to Kenya each year, with last year’s total exports valued at Sh29.9 billion, according to the latest Kenya National Bureau of Statistics–Leading Economic Indicators.
The value of exports from Kenya to the UK totaled Sh49.5 billion, meaning the trade is currently in favour of Kenya.
UK High Commissioner to Kenya, Jane Marriott, on Wednesday said the EPA brings significant benefits for Kenyan and British businesses, workers and economies.
“We are excited about the opportunity to build on that(ratification). With our Kenyan counterparts and businesses, we will be explaining more the benefits of this EPA for our countries,” Marriott said.
Kenya’s Industrialisation, Trade and Enterprise Development Cabinet Secretary Betty Maina said the trade deal mutually beneficial trade and development.
Most agricultural and horticultural products are protected, since they are in Kenya’s sensitive list.
“Such products are set to benefit from the Kenya- UK EPA, if they are nurtured, through an enabling business environment, to increase their competitiveness,” Wakiaga said.
Other sectors that are linked to horticulture, such as transport, transport equipment, packaging polyethylene and roofing materials, chemicals, irrigation pumps and equipment shall also benefit from the trade agreement, she added.
With trade being in favour of Kenya, a sound EPA would see Kenya improve its exporting sectors supply chains, and bringing down the cost of transport and logistics.
Local industries have remained resilient despite effects of the Covid-19 pandemic on the economy, manufacturers have said, withstanding economic shocks.