Trade volumes between Kenya and South Africa have always been minimal compared to each country’s commitment to its other major trading partners. But in recent years, the leaders of the two countries have been taking steps to stimulate trade. South African President Cyril Ramaphosa was on the same mission late last year when he addressed the Kenya-SA Business Forum in Nairobi. We asked foreign policy and trade analyst Paul Odhiambo and economist XN Iraki about trade barriers between the two countries and how they can be overcome.
What are the main imports and exports between South Africa and Kenya?
Pablo Odhiambo: Kenya’s exports to South Africa (in 2020) included gold, soda ash and cut flowers. In 25 years, Kenya’s exports to South Africa increased at an annualized rate of 0.49%, from $30.7 million in 1995 to $34.6 million in 2020.
Kenya also revealed its plans to start exporting meat to South Africa from December 2022.
South Africa exported $513 million to Kenya in 2020. The main products exported from South Africa to Kenya were coal briquettes, delivery trucks, and semi-finished iron. Over the past 25 years, South African exports to Kenya have increased at an annualized rate of 2.94%, from $249 million in 1995 to $513 million in 2020. The two countries have rarely traded in services with each other.
What are the barriers to trade between Kenya and South Africa?
XN Iraqi: Johannesburg and Nairobi are geographically close, about a four hour flight away. But traders face administrative barriers to selling in different trading blocks. This is because South Africa is a member of the Southern African Customs Union, while Kenya is a member of the East African Community. These blocks apply external tariffs and other administrative measures that restrict the entry of non-members to their markets.
History has also played a role in weakening trade between the two states. Kenya did not support South Africa’s liberation from apartheid in the same way that, say, Tanzania did (by training and hosting freedom fighters). The tepid relationship that has characterized past diplomatic engagements means that South Africa may not have forgiven Kenya for that story.
Another challenge revolves around trade items. South Africa mainly exports minerals, which Kenya may not need. Similarly, Kenya exports agricultural products such as tea and coffee that South Africa has been able to easily order from its neighbors.
Additionally, Kenya has traditionally looked west for trade and more recently to China. South African traders will have to compete with the now established trading channels of rivals from these traditional partner states.
And finally, simple things like visa requirements also hurt the flow of trade. For a long time, Kenyans have had to pay visa fees and provide proof of sufficient funds and return air tickets in order to travel to South Africa.
What are the untapped opportunities?
Pablo Odhiambo: Kenya and South Africa have enormous untapped potential for trade. Kenya had a trade deficit of KSh40.1 billion in 2021; that’s the difference in value between what Kenya bought from South Africa (KSh44.07 billion) and the KSh3.96 billion in goods it sold there.
Kenya could export much more to South Africa if it explored the existing market opportunities. It has many agricultural products such as avocados, tea, coffee and pineapples that could be exported to South Africa once market entry barriers are revised to encourage fair competition with products from neighboring states. Those barriers include strict quality standards. As an example, Kenya exported $1.07 million worth of tea to South Africa in 2021. It could export coffee, avocados, and other tropical fruits and spices that it produces in abundance, as they have a market in South Africa.
South Africa’s service sector is also opening up to trade. For example, South Africa will need Kiswahili teachers because it recently announced plans to introduce the language as a teaching subject in its classrooms.
How should the two states improve their trade relations?
XN Iraqi: The recent visit of President Ramaphosa indicates that South Africa wishes to build on the trade and investment memorandum of understanding that the two states signed in 2016.
They must also strive to operate within the same economic bloc. The move by the East African Community, the Southern African Customs Union and the Common Market for Eastern and Southern Africa to harmonize their tariffs under the African Continental Free Trade Area is an important step towards removing some of the barriers trade between the two states. The continental market agreement is also expected to harmonize quality standards for traders in Africa.
At the bilateral level, visa requirements should be eliminated or document processing made more efficient. President Ramaphosa’s recent decision to reciprocate an approach that allows South Africans to visit Kenya without a visa for up to 90 days in a calendar year was a step in the right direction.
The two countries should also have their citizens learn from each other in schools. The decision to introduce Kiswahili to 90 South African schools as an optional subject was a positive step. Having recently been approved as one of the official languages of the African Union, Kiswahili may have greater appeal among the population of member states such as South Africa.
Also, greater cultural and educational exchange would help deepen commercial ties between the two states.
Altogether, Kenya should focus on exploiting the existing untapped potential to boost exports.
XN IraqiAssociate Professor, School of Business and Management Sciences, University of Nairobi and Paul Odhiambo, Foreign Policy Analyst, Kenya Institute for Public Policy Research and Analysis (KIPPRA)
This article is republished from The Conversation under a Creative Commons license. Read the original article.
