IMF expresses concern over Kenya’s export performance

Tuesday, February 15th, 2022 04:00 | By
An employee at Naivasha-based Maridadi Flower Farm works on roses for exports, yesterday. Photo/PD/Kirera Mwiti

Lack of a vibrant export philosophy continues to stymie growth in the value of the country’s gross domestic product (GDP) which has remained at about 5 per cent for almost a decade.

International Monetary Fund (IMF) Resident Representative to Kenya, Tobias Rasmussen, said the stagnant export sector explains the disconnect between strong economic performance and a stagnant export regime.

He said export products are uncompetitive and attract low participation on the global value chain, while referring to a marked dip in GDP relative to the exports, from 20 per cent in 2011 to 11 per cent in 2019. “Looking at Kenya’s export performance, it’s been relatively stagnant. This is not in the context of the pandemic. It goes back to at least a decade before that,” Rasmussen said.

The IMF representative said Kenya must embrace technology to enhance her export value addition situation and stop relying on products like tea, coffee and vegetables which do not attract rapid demand. “We have also seen that Kenya’s share of the global export market has remained unchanged for 15 years and that contrasts with the experience of many other countries in the region which have been gaining,” said Rasmussen.

Shared prosperity

Rasmussen was speaking before the Kenya Association of Manufacturers (KAM) launched its Manufacturing Priority Agenda (MPA) 2022. The MPA is themed, “Manufacturing sector recovery and sustained growth for Kenya’s shared prosperity.”

The MPA is an annual publication that guides the association’s advocacy efforts with the government and its agencies. 

This year’s MPA is guided by five pillars to support the recovery of the manufacturing sector from the devastating effect of Covid-19.  The pillars include competitiveness and level playing field for local manufacturers; enhancing market access for locally manufactured goods both in local and export markets; Promoting pro-industry policy and institutional framework, Promoting SME Development and enhancing industrial sustainability and resilience 

During the launch, experts tasked KAM with the responsibility of developing a comprehensive approach for import substitution, saying this would enable Kenya to export the same products as it has matched import expectations.

In 2020, the manufacturing sector contracted by negative 0.1 per cent due to the impact of the Covid-19 pandemic.

Phyllis Wakiaga, KAM chief executive urged the government to consider the pandemic crisis as an opportunity to reshape the economy and revitalise the sector to achieve higher economic growth and greater equity for Kenyans.

She said the Covid-19 pandemic had proved the risk of relying on imported goods.

“Global supply chain disruptions due to the pandemic have revealed that the ability to buy goods in international markets is not enough, logistics difficulties might be such that no trade happens,” said Wakiaga.

With the mineral-rich Democratic Republic of Congo (DRC) about to be admitted to the East African Community, Captains of Industry expect the move to provide strong resources, for inorganic value-added products for import substitution and exports.

Reduction in electricity

Some of the MPA 2021 wins by KAM include a 30 per cent reduction in electricity, with the first 15 per cent implemented last month. The Credit Guarantee Scheme was also allocated Sh2 billion to enhance access to affordable credit by micro, small and medium enterprises, while the high court’s declared the minimum tax provisions unconstitutional.

A Credit Guarantee is effectively insurance that gives lenders the confidence to extend loans to high-risk borrowers.

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