Trade volumes between Kenya and South Africa have always been minimal in contrast to every nation’s engagement with its different main buying and selling companions. But in recent times, leaders of the two countries have been taking steps to stimulate trade. South Africa’s President Cyril Ramaphosa was on the identical mission late final 12 months when he addressed the Kenya-SA Business Forum in Nairobi. We requested trade and international coverage analyst Paul Odhiambo and economist XN Iraki in regards to the trade obstacles between the 2 nations and how these might be overcome.
What are the key imports and exports between South Africa and Kenya?
Paul Odhiambo: Kenya’s exports to South Africa (in 2020) included gold, soda ash and reduce flowers. In 25 years, the exports of Kenya to South Africa elevated at an annualised price of 0.49%, from $30.7 million in 1995 to $34.6 million in 2020.
Kenya additionally unveiled its plans to start exporting meat to South Africa from December 2022.
South Africa exported $513 million to Kenya in 2020. The principal merchandise exported from South Africa to Kenya have been coal briquettes, supply vans and semi-finished iron. Over the final 25 years, South Africa’s exports to Kenya increased at an annualised price of two.94%, from $249 million in 1995 to $513 million in 2020. The two nations have hardly ever traded in providers with one another.
What are the obstacles to trade between Kenya and South Africa?
XN Iraki: Johannesburg and Nairobi are geographically shut to one another, a few four-hour flight. But merchants face administrative barriers promoting throughout totally different buying and selling blocs. That is as a result of South Africa is a member of the Southern African Customs Union whereas Kenya is within the East African Community. These blocs apply exterior tariffs and different administrative measures that limit entry of non-members into their markets.
History has additionally performed a job in weakening trade between the 2 states. Kenya didn’t assist South Africa’s liberation from apartheid in the identical means that, say, Tanzania did (by coaching and harbouring freedom fighters). The lukewarm relationship that has characterised previous diplomatic engagements implies South Africa might not have forgiven Kenya for that historical past.
Another problem revolves across the objects of trade. South Africa mainly exports minerals, which Kenya might not want. Similarly, Kenya exports agricultural commodities like tea and espresso that South Africa has been able to order easily from its neighbours.
In addition, Kenya has historically looked to the west for trade, and more recently to China. South African merchants could have to compete with the now established trade channels of rivals from these conventional associate states.
And lastly, easy issues like visa necessities additionally damage trade move. For a very long time, Kenyans have had to pay visa fees and present proof of ample funds and return flight tickets to be allowed to journey to South Africa.
What are the unexploited alternatives?
Paul Odhiambo: Kenya and South Africa have enormous untapped potential for trade. Kenya ran a trade deficit of KSh40.1 billion in 2021 – that’s the distinction in worth between what Kenya purchased from South Africa (KSh44.07 billion) and the KSh3.96 billion price of products that it bought there.
Kenya may export much more to South Africa, if it explored the prevailing market alternatives. It has a lot of agricultural merchandise like avocados, tea, espresso and pineapples which could possibly be exported to South Africa as soon as market entry barriers are reviewed to enhance truthful competitors with merchandise from neighbouring states. Those barriers embrace stringent quality standards. As an instance, Kenya exported to South Africa tea price $1.07 million in 2021. It may export espresso, avocados and different tropical fruits and spices which it produces in lots as these have a market in South Africa.
South Africa’s providers sector can also be opening up for trade. For instance, South Africa will want academics of Kiswahili as a result of it recently unveiled plans to introduce the language as a taught topic in its school rooms.
How ought to the 2 states enhance their trade relations?
XN Iraki: The current go to by President Ramaphosa alerts that South Africa is eager to construct on the memorandum of understanding on trade and investment that the 2 states signed in 2016.
They must also attempt to function throughout the similar financial bloc. The transfer by the East African Community, Southern African Customs Union and the Common Market for Southern and Eastern Africa to harmonise their tariffs below the African Continental Free Trade Area is a significant step in direction of eliminating a number of the barriers to trade between the 2 states. The continental market deal can also be anticipated to harmonise high quality requirements for merchants throughout Africa.
At a bilateral degree, visa necessities ought to be eliminated or processing of the paperwork made extra environment friendly. The recent decision by President Ramaphosa to reciprocate an method that permits South Africans to go to Kenya visa-free for up to 90 days in a calendar 12 months was a step in the suitable route.
The two nations must also have their residents study each other in colleges. The choice to introduce Kiswahili in 90 South African schools as an non-compulsory topic was a welcome transfer. Having recently been accepted as one of many official languages of the African Union, Kiswahili might have a wider attraction among the many inhabitants of member states comparable to South Africa.
Likewise, extra cultural and academic trade would assist deepen the trade ties between the 2 states.
In all, Kenya ought to concentrate on exploiting the prevailing untapped potential in order to drive the exports.
XN Iraki, Associate Professor, Faculty of Business and Management Sciences, University of Nairobi and Paul Odhiambo, Foreign Policy Analyst, The Kenya Institute for Public Policy Research and Analysis (KIPPRA)
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