Photo: FashionatingWorld

How Kenya can achieve sustained export expansion

We need to be deliberate on creating an export push for our local goods, in order to achieve our economic goals as envisioned in the 2030 development blueprint.

A growth in our export value will not only increase revenue to Kenya, through foreign exchange earnings, but will also have the impact of catalyzing creation of productive jobs. Thereby, absorbing the large number of unemployed youth.

In other words, exports ensure a healthy circular flow of income. This stimulates an increase in the production of local goods and expansion of industries, consequently opening up opportunities for employment.

Raising the national income also translates to increased public funds that would enable Government to, adequately, provide and maintain the equal distribution of public goods and basic amenities for all citizens. Ultimately increasing their quality of life. Export growth is not just beneficial for economic growth, it supports social and political development of a country.

The unveiling of the National Trade Policy, this year, re-sparked enthusiasm in industry. It sought to enhance Kenya’s export competitiveness through investment in value-add industries thereby expanding our regional and global markets. In fact, the new policy places emphasis on turning Kenya into an export-led economy in an effort to support inclusive development.

Whilst this vision is indeed laudable, the tangibility of it is still out of reach owing to various challenges faced, currently, both locally and regionally. At the moment, despite the immense opportunities that lie in Eastern Africa, Kenya’s total export earnings from the region registered a decline.

The incentives to export, for local industrialists, are dwindling as new hurdles crop up and long-standing ones persist. A prime example is the complexities experienced in taxation policies and development of new regulations.

Taxation impeding export trade

The Import Declaration Fee and Railway Development Levy are some of the taxes imposed on raw material and inputs, leading to increased commodity pricing. Thereby, reducing competitiveness of our products regionally. This compromises our current share of export markets especially in the face of increasing exports from China and India.

Additionally, continued delays in VAT (Value Added Tax) reimbursement slows down operations and destabilizes planning for many exporters in Kenya. Late VAT refunds shift the Tax burden from consumption into production. The issue of outstanding VAT refunds still remains a big pain for manufacturers who look forward to the expeditious payment of the refunds.  As a last resort, manufacturers are forced to get into debt to keep operations afloat and thereby incurring huge losses.

Taxation, in any country, should be formulated with the aim of enabling local industry to operate at full capacity, incentivizing investors and bringing on more businesses into the tax bracket. However, tax policies such as the above deter any progress towards sustained export competitiveness and in doing so making Kenya’s economic goals, as in vision 2030, that much harder to realize.

message to KRA: multiple charges bar trading

We have been talking about ways in which we can leverage Counties for our nation’s economic prosperity. Inter-county trade plays a huge role in this. If we abolish the current multiple levies and charges, that bar us from trading with each other, we shall be able to diversify and expand our goods for exports. Thereby, grow our export market share within the region and globally.

Taxation that is designed to optimize the growth of local industry will open up inter-county trade spurring the proliferation of Small and Medium industries across the country. Development in Counties will ensure equitable distribution of resources and inclusivity.

In conclusion, Kenya needs to develop a National Export Development Strategy which aligns to existing frameworks, such as the Kenya Industrial Transformation Programme (KITP), and also links to the newly launched Trade policy. This strategy will seek to promote value addition especially in agro-processing. It will power more exports and eventually reduce our trade balance.

Our export strategy should be based on the ‘promotion of self-sustaining industrial development‘. This means that we ought to find sustainable ways to grow our export value through leveraging our various competitive advantages, especially with devolution. Our policies should be, foremost, inward looking to promote our local products and create jobs for our citizens. Essentially, we need to reset our policy ideas to deliver positive achievable results to increase our export value both regionally and globally.


The writer is the CEO of Kenya Association of Manufacturers and the UN Global Compact Network Representative for Kenya. She can be reached at ceo@kam.co.ke