Trade in services key to Kenya’s economic recovery

e-commerce

E-commerce has played a key role in the liberalisation and transformation of the Chinese economy - offering a number of lessons to countries like Kenya.

Photo credit: File | Nation Media Group

The Covid-19 pandemic remains the most lethal cause of global economic suppression with millions of jobs already lost. Countries are struggling to stay afloat and cushion populations from the economic and health implications of the virus. Developing countries are particularly hard hit with many households fast regressing towards poverty.

As part of efforts to promote economic recovery from the Covid-19 global pandemic, Kenyan companies participated in the recently staged China International Fair for Trade in Services (CIFTS); an initiative that aims to leverage digital technologies to integrate economies and boost the services sector.

Involving sale and delivery of intangible products such as tourism, transportation, computing and telecommunications, trade in services has become an important anchor of domestic and international trade during the pandemic. It is particularly critical in Kenya where the services sector contributed 42 per cent of the country’s gross domestic product in 2020.

E-commerce

E-commerce has played a key role in the liberalisation and transformation of the Chinese economy - offering a number of lessons to countries like Kenya. With increasing internet connectivity, a large youth band passionate about technology and an expanding base of mobile money payment options, Kenya can leverage e-commerce to foster economic viability in the backdrop of travel restrictions due to the global health crisis.      

Kenya is currently the 64th largest e-commerce market in the world, with 24% of the population having bought at least one product online in 2020. The sector generated US$ 1 billion of revenue in 2020, according to Statista. With more stores coming online, Kenya’s e-commerce market is expected to register compounded annual growth of 20 per cent in 2020-2024 period. 

To fully benefit from e-commerce, Kenya will have to overcome a number of barriers including efficient logistics chains, consumer trust on the online market, as well as regulatory framework to protect rights of consumers.

Beyond enhancing domestic exchanges, ecommerce can also assist more Kenyan products access the Chinese market. While China is Kenya’s largest trade partner with volumes of trade having been on an upward trend for over a decade now, the balance of trade is heavily in favour of China.

By using online platforms, Kenyan products can gain greater visibility in the Chinese market, aided by a reduction or removal of duty tax currently levied by China.

Another key target of CIFTS was tourism. As a top tourism destination in Africa, the Fair offered Kenya the opportunity to market its tourism services. The pandemic has greatly affected Kenya’s tourism services, with the sector having recorded a decline of by 17.5 per cent to 579,600 in tourist arrivals in 2020. The sector earnings equally dipped by 43.9 per cent to Sh91.7 billion in 2020, according to the country’s economic survey, 2021.

Economic fortunes

China is now the largest source of tourists in the world, and targeting Chinese leisure travellers can significantly boost Kenya’s economic fortunes towards recovery from the global health crisis. Vaccination against the pandemic, however, remains the key determinant of international leisure travel.

Kenya, like many developing countries around the world, still faces the challenge of accessing Covid-19 vaccines. The situation appears gloomy with the UN-led Covax facility lowering their vaccine forecast for developing countries.

Low access to the commodities means many people in Kenya’s tourism value chain including hotel personnel, drivers, guides and even traders in tourism hotspots will not be vaccinated in time.

China is today the largest supplier of Covid-19 vaccines to Africa. Kenya has so far not received Chinese vaccines. The recent approval of the Sinopharm vaccine and the pledge by China to donate over 200,000 doses of the vaccine, this September, should enhance access to the commodities for the benefit of Kenyans across different sectors.

To move from a net aid recipient economy into an industrializing one, Kenya is also keen to attract international capital flows that can help power domestic investments towards job and wealth creation.

With a mission to be the region’s financial hub, Nairobi could leverage some of the opportunities presented by the CIFTS to attract more investments from China and the rest of the world.

Twitter: @Cavinceworld.

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