Kenya’s small businesses are finding it difficult to trade with the rest of Africa under the free trade area agreement due to trade restrictions, high trading costs and complexities in logistics and policies.
A survey by South Africa’s Standard Bank, trading in Kenya as Stanbic Bank, shows that perceptions by Kenyan businesses of trading with others under the African Continental Free Trade Area (AfCFTA) framework are diminishing, with attention shifting to the European, Asian and East African markets.
“Despite notable progress in regional trade agreements, and ease of trade index remaining constant at 41, perceptions of trading within Africa have become less favourable among Kenyan businesses, with only 17 percent finding it easy, a decline from 31 percent in the previous survey,” the latest Stanbic survey says.
“The ease of trade index score remains unchanged at 41, indicating consistent trading conditions with other countries. This contrasts with expectations set by the AfCFTA, suggesting that businesses may not yet be experiencing the intended benefits, such as simplified policies and reduced costs. Instead, complexities in logistics and policies, alongside the high costs of transport and operations, persist, overshadowing the AfCFTA’s potential to streamline intra-African trade.”
The ‘Stanbic Bank Africa Trade Barometer: An overview of the current cross-border trade landscape of Africa’ sampled 235 businesses between July and September 2024 majority of which were small businesses.
The report was launched in 2022 with the intent of creating Africa’s leading trade index to address the information vacuum of reliable African trade data and to support and enable the growth of intra-Africa trade.
It focuses on 10 countries Angola, Ghana, Kenya, Mozambique, Namibia, Nigeria, South Africa, Tanzania, Uganda and Zambia.
The AfCFTA agreement seeks to remove barriers to trade and put in place common policies to ease movement of goods and services within the continent, creating the eighth trading bloc in the world with a combined GDP of $3.3 trillion.
According to the United Nations Economic Commission for Africa, African countries continue to trade with the rest of the world more than among themselves, and the envisaged benefits of Africa’s trade agreement are yet to be felt by member countries as evidenced by the declining intra-Africa trade as a share of global trade.
Intra-African trade declined to 13.7 percent in 2022, from 14.5 per cent in 2021, while intra-African exports as a percentage of total exports declined to 17.89 percent from 18.22 percent.
Intra-African imports as a percentage of total imports declined to 12.09 percent from 12.81 per cent in the same period.
According to the Stanbic survey, Kenya’s cross-border trade is expanding among surveyed businesses, bolstered by trade agreements with the EU, China, and within the East African Community (EAC), despite a slight dip in the Trade Openness Index from 50 to 49.
Kenya’s imports, particularly from Asia, have grown, reflecting diversification in trade partnerships while the country’s trade ties with East African countries are expected to strengthen especially with Tanzania, following the resolution of longstanding trade barriers.
According to the survey Kenya and Tanzania have resolved14 trade barriers between them that included Tanzania’s refusal to allow Kenyan poultry products, imposition of a 1.75 percent free-on-board fee on Kenyan dairy, non-recognition of Kenyan certified products under the EAC’s Standardisation, Quality Assurance, Metrology and Testing Act, and discriminatory Tanzanian excise duties on Kenyan-made lead acid batteries, juice products, and confectionery.
