Kenya begins to benefit from free trade with Africa
Monday 26 September 2022
Kenya has shipped its first shipment of locally made batteries to Ghana, two months after being chosen from among seven countries to pilot the continental free trade zone designed to unlock free movement of goods and services in Africa.
The Kenya-made Exide batteries, worth Shsh9.24 million ($77,000), landed in Ghana last week, marking the formal start of preferential trade under the Africa Continental Free Trade Area (AfCFTA).
Associated Battery Manufacturing EA Ltd’s shipment is the clearest indication that Kenya can now access markets in West and Central Africa at preferential prices.
Kenya, along with six other nations, has been chosen to lobby for the testing phase of the framework, which aims to lower tariffs on goods and services and remove barriers to movement between African countries.
“Associated Battery Manufacturing EA Ltd is the first Kenyan company to start trading under AfCFTA and the first local company to ever export Exide batteries to the Ghanaian market,” the Ministry of Industrialization and Trade said in a statement.
No trade had taken place since January last year, when the AfCFTA was launched, as eligible countries first had to identify products that could gain access to the markets.
The delays were linked to unresolved issues related to rules of origin, which made it difficult to identify products that could benefit from preferential tariffs under the agreement.
Other countries selected to participate in the pilot phase of the AfCFTA guided trade initiative are Tanzania, Tunisia, Cameroon, Egypt, Mauritius and Ghana.
The pilot phase gives Kenya the opportunity to access markets in Tunisia, Cameroon and Ghana, located in different economic blocs, at preferential prices.
Kenya is a member of the East African Community (EAC), Ghana is part of the West African Economic Community, while Tunisia is a member of the Maghreb.
Products Kenya has identified for trade under AfCFTA include tea, Exide batteries, confectionery, leather bags, incinerators, beaded products, vehicle filters, textiles, sisal fiber, avocados and fresh produce.
Kenya’s entry into other continental trading blocs comes amid a shrinking East African market for Kenyan products, with Uganda – which was the largest buyer of Kenyan supplies – warming up to Tanzania.
Tanzania and Uganda have expanded their industrial bases in recent years and reduced their appetite for goods made in Kenya.
Each trading bloc has its own Common External Tariff, which levies fees on goods coming from a specific region. For example, EAC charges up to 50 percent duty on goods shipped from other regions.
Kenya has sought to strengthen trade ties across the bloc, with the latest official data showing the United States has overtaken Uganda as the largest buyer of its goods.
Exports to the US rose 47 percent to Shillings 38.8 billion in the first half of the year, on the back of rising apparel sales.
On the other hand, sales of Kenyan-made goods to Uganda fell slightly to Sh36.2 billion from Sh36.3 billion in the period.
Over the past 10 years, Uganda has been the largest buyer of Kenyan supplies, but recent events point to strained trade relations between the two nations.
In June, the two EAC nations fell out when Nairobi reinstated a levy on eggs imported from the neighboring landlocked country.
This comes at a time when Kenya and Uganda had yet to resolve a long-standing dispute over milk, after Kenya locked Uganda’s dairy products in 2019.
Kampala’s list of imports from Kenya has narrowed over the years as investors set up factories in the country to manufacture goods previously imported from Nairobi, including cooking oils and cement.
Kenya has long sought a full free trade agreement with the US, and negotiations for such a deal to lower bilateral tariffs were launched by the Donald Trump administration with the East African country in 2020.
But the Joe Biden administration, which has shunned traditional trade deals, has not resumed those talks.
Kenya enjoys substantial duty-free access to the US market through the Africa Growth and Opportunity Act (AGOA), a preferential trade program for sub-Saharan Africa, but expires in September 2025.