The good and bad in UK-Kenya trade deal

At the height of coronavirus scourge, Kenya sent 300 bouquets of flowers to the United Kingdom in an act that was judged harshly by the vibrant local social media buffs.

This move was decided by the very top echelons, which brought together the Kenya Private Sector Alliance, Kenya Association of Manufacturers, Kenya Airways and the Kenya Flower Council. Kepsa members including Elgon Kenya Limited and Flamingo Flowers Limited were also aboard.

Kenya Airways, the struggling national carrier had all of a sudden found its planes grounded, travel cancelled and tourist arrivals down 72 percent to 470,971 in the first 10 months to October 2020, compared to 1.72 million arrivals in the same period in 2019.

The national carrier was already deep in debt, running huge losses and was headed for bankruptcy if it continued to ground its aircraft.

It managed to convert passenger Dreamliners into cargo craft to carry the only cargo Kenya is good at exporting, fresh produce to the United Kingdom one of Kenya’s largest market for vegetables and flowers.

But just months down the line, this outlet would also close its duty free access to Kenya once the UK exited the European Union in December leading to another scramble by top government officials to secure a trade deal; any pact and even call in a favour for the lovely Coronavirus flowers that were sent their way.

Export market

By December, Britain and Kenya settled on the controversial European Union and East Africa Community Economic Partnership Agreement, duplicated and signed it in a move that ensured Kenya still had access to the Sh49 billion export market while UK could access Kenya’s Sh29.3 billion market.

Just like the EU, the EPA agreement seems to be running into headwinds with Kenyan MP refusing to ratify the flowery document citing mischief in some parts they say were sneaked into it.

The British Parliament is seeking more time to ratify the new trade deal. “The issue of the rejection is misunderstood, our MPs said that annexures to the main text had not been uploaded, which has now been done. So they will proceed next week,” Cabinet Secretary Ministry of Industrialisation Betty Maina said.

Read: Kenya-UK trade deal heralds new era of sustainable growing market

CS Maina said Kenya will lose out if the deal is not ratified since it is the only lower middle income economy in East Africa which is competing against developing countries, which are still enjoying duty free access as lower income countries.

Kenya is also more reliant on the UK as British lovers can pick flowers from the menu of different developing countries but Kenya has only a few developed nations where it can buy machinery and capital goods cheaply.

“The reality is that we are not competing with the plane manufacturer in the UK, we are competing with other developing countries, if our flowers and vegetables attract a duty then nobody will buy from us they would get from Columbia,” CS Maina said last week .

Read: Kenya to sign trade deal with UK after London lifts lockdown

“In fact those who are buying the capital goods for further investments will benefit since some machines will be cheaper to import from the UK rather than China or Germany,” she said.

Approximately 2,500 UK businesses export vehicles, machinery, nuclear reactors, boilers, pharmaceutical products, printed books, paper and paperboard, articles of pulp, paper and board newspapers, pictures and beverages, spirits and vinegar to Kenya.

They also sell to Kenya electrical, electronic equipment, textile articles, sets, worn clothing, miscellaneous chemical products, ships, boats, and other floating structures.

Hundreds of thousands of Kenyan farmers on the other hand, export tea, coffee and spices to the UK worth £121 million (Sh18.5 billion); vegetables £79 million (Sh12 billion); and flowers £54 million(Sh8.2 billion). 

The Kenya Association of Manufactures Chairman Mucai Kunyiha says the EPA’s and US trade agreement are getting very specific goods into the market with their base mainly focusing on equipment and high tech goods which Kenya does not produce here so they are not an immediate threat

He said most of the goods they are bringing are already coming in duty free.

Read: Kenya-UK trade deal won’t harm EAC

“No one in the UK is making cooking oil to come to Kenya. Our threat is coming from regional competitors, China and the South East Asia countries,” Mr Kunyiha said.

Mr Kunyiha, the general manager of Coopers K-Brands Ltd, an animal health products company in East and Central Africa, says eyes should be focused more on African Continental Free Trade Area (ACFTA), which offers opportunities and also threats if local players do not wake up to reality.

“Other countries in the region who compete with us like Ethiopia, Egypt and Swaziland will become more competitive with ACFTA which will affect our ability to compete so the next government should be worried,” he said.

He said during his tenure as the manufacturers’ lobby he wants to shift government policy and narrative around productivity and efficiency so that Kenya does not have to worry about who accesses our markets but rather if local players can compete on the global stage.

Mr Kunyiha said for instance if you look at tea, horticulture and floriculture, Kenya is very competitive globally even without subsidies.

In fact Kenya is so good global markets are trying to use non-tariff barriers to stop Kenyans by lowering the minimum residue limits lower than what is globally recommended

“We should build industries that are globally competitive and there is great opportunity especially in agro processing around tomatoes, chili and pyrethrum. We need to ask ourselves why are we not making tear gas and we are so good at producing chili,” he said.

He said that subsidies and forcing consumers to buy locally made goods might sound patriotic but distorts the market and hurts the economy since they pay more for inefficiencies.

“It’s what we see in maize and sugar sectors, which are subsidised by government regulations. Kenya may be the only country where chicken is more expensive than beef, you know why? It’s because of the cost of maize which goes into feeds,” he said.

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