Kenya’s annual earnings from goods sold to key African countries fell for the first time in six years, data from the Central Bank of Kenya shows, shining a spotlight on the competitiveness of the manufacturing sector, which faces the impact of a stronger shilling among other headwinds.
Traders earned an estimated Sh421.34 billion from goods exported to other African countries in 2024, up from Sh429.69 billion a year earlier, breaking a trend of sustained growth since 2019.
The marginal decline of 1.94 percent, or Sh8.35 billion, came in a year when the shilling gained about 17 percent against the US dollar, the most widely used currency in international currency, meaning earnings shrank when converted into the local currency.
Kenya’s exports to African markets are largely processed or semi-processed goods. The exports growth in recent years, including double-digit climb in three straight years through 2023, has, for example, been majorly driven by demand for cement clinkers, lubricants, wheat flour and animal feed ingredients.
The earnings have also been lifted by re-exports of kerosene-type jet fuel from other African countries due to Nairobi’s status as a regional aviation hub.
“Some of the major challenges affecting exports between Kenya and the rest of Africa include a challenging policy environment that erodes Kenya’s competitiveness,” Tobias Alando, chief executive officer of Kenya Association of Manufacturers, said.
“For instance, policy and fiscal disruptions on the cost of raw materials for the steel and paper industries have significantly eroded the country’s exports competitiveness compared to our regional peers.”
President William Ruto’s administration enforced an export and investment promotion levy on imported clinker, steel and paper at the rate of between 10 percent and 17.5 percent, claiming the measure would support local industries.
But the industry lobby says the levy is counterproductive because it has raised the cost of some of the products which are used as raw materials, lowering the competitiveness of Kenyan-made goods in regional markets.
The CBK data, which is sourced from the Kenya Revenue Authority, shows that the value of exports to key markets of Egypt and Tanzania contracted by double-digit rates.
Earnings from goods sold to Egypt, which includes tea, fell 13.51 percent to Sh27.63 billion, breaking a cycle of double-digit expansion since 2021 and posting the first drop since 2019.
Exports to Tanzania, on the other hand, fell by 5.56 percent to Sh65.51 billion in 2024, the first decline since 2020.
The CBK data shows that Uganda remained the largest destination market for Kenya, buying goods worth Sh125.30 billion last year. The orders from the landlocked country, however, were largely flat, growing at a measly 0.11 percent compared to Sh125.15 billion in 2023.
Growth in the value of goods trucked into Uganda was the softest since 2018, when they rose 0.10 percent to Sh61.88 billion.
“We witnessed some discriminatory taxes and levies in Tanzania and Uganda, but generally exports were impacted by the slowdown in the economies of some of the external markets for Kenya,” Mr Alando said.
Kenya, Tanzania and Uganda have continued to battle on-and-off trade tiffs despite signing the East African Community (EAC) Customs Union Protocol in 2005, allowing free movement of goods, services, capital and labour within the bloc.
President Ruto, who took power in September 2022, has adopted the trade policy of his predecessor, Uhuru Kenyatta, which made access to African countries key to growing and diversifying markets for farmers and manufacturers.
Dr Ruto has championed the removal of trade barriers between African countries to ease movement of goods, services and labour through the integration of regional trading blocs.
The integration is aimed at creating the world’s largest single market of about 1.4 billion people with an estimated economic output of more than $3 trillion (about Sh388 trillion at current exchange rates) under the ambitious African Continental Free Trade Agreement (AfCFTA).
Dr Ruto has in the past pushed for talks with Uganda, DR Congo and Republic of the Congo aimed at building a modern railway, which connects the Indian Ocean at Mombasa to the Atlantic Ocean, with proposed financing from China.
Securing funds for extending the standard gauge railway line from Naivasha to Malaba was one of his pitches to Beijing during Forum on China–Africa Cooperation (Focac) last year.
“As countries, we are prepared to work only together. That way, we can do our section in Kenya [while] Uganda are already working on their section,” Dr Ruto told a past forum on AfCFTA in Nairobi.
“We are [also] discussing with the government of DRC to see how, together, we can get the resources to get their 1,000km in DRC, connect it to the Congo River and transport our goods and products across the hinterland of Africa.”
