Domestic exports in Kenya have performed extraordinarily well under the prevailing circumstances of Covid 19, recording a higher figure than 2019, according to a recent study contained in a policy brief released this month.
At the end of June this year, the Kenya National Bureau of Statistics (2020) published monthly trade data up to end of May 2020 reveals that Kenya actually experienced a significant improvement in exports in the first quarter of the year, together with a moderation of imports, leading to a marked decline in the trade deficit.
These details are contained in Africa Growth Initiative at Brookings policy brief; The Impact of the Covid 19 crisis on trade, Recent evidence from East Africa authored by two researchers, Andrew Mold and Anthony Mveyange that was published this month.
The study mainly used trade data from KNBS to provide evidence on the impacts of the COVID-19 crisis on trade in Kenya and the wider East African region, complementing it with other recently released data on regional trade. Kenya is a major exporter and importer in the whole region with volumes of the goods handled standing and 46 and 41 percent of exports and imports respectively.
In the first three months of 2020, total Kenyan exports reached historic monthly highs, peaking in March at 64.5 billion Kenyan shillings (KES) (about $606 million at current exchange rates). The report notes that the pandemic-induced fall in Kenyan exports did not notably materialize until April, with a 33 percent decline in exports compared to March but recovered again by 9 percent in May.
“There is a strong seasonality in trade data, which must also be considered when analyzing the impact. Thus, total exports were still higher in May 2020 than in May 2019, driven mainly by tea and horticulture,” noted the report, adding that contrary to all the bad news about the global economy, for instance, Kenyan tea exports reached an historic high in April, and fruit exports have also done very well, recording almost 58,000 tons.
However, imports have experienced noticeable decline. Domestic imports declined by 25 percent in the months of March-May this year compared to last year. As a result, Kenya’s balance of trade has improved very significantly during the crisis period.
This can partly be explained by events in China early this year, the first country to record coronavirus cases. Chinese global exports declined by 13.3 percent in the first quarter this year and industrial production by 13.5 percent in the first two months of the year. Chinese accounted for a quarter of Kenya imports in 2019 before Covid 19 crisis.
During the crisis period, re-exports initially suffered the most, recording an 83 percent decline in April, reflecting a dramatic fall in goods passing through Kenya to its regional partners. Nonetheless, that fall in re-exports should also be qualified by the rise in re-exports in the preceding two months. The spike in re-exports in the first quarter probably reflected regional traders in other EAC countries rapidly procuring goods in anticipation of shortages. Re-exports had started to recover by the end of May.
“As the pandemic has geographically shifted from Asia to Europe and Northern America, further disruption in commerce with other trading partners may be on the horizon,” the survey noted.
The report offers a number of policy recommendations the region should adopt to cushion itself from economic vagaries of Covid 19. To ensure seamless flow of the cargo, the report suggests harmonizing issuance and recognition of COVID-19 certificates for truck drivers to speed up port and border clearance procedures in East Africa as an important starting point. Average cargo transit time from Mombasa to Busia raised from 4 days before Covid 19 crisis to 12 days by the end of March
Regional protocols and initiatives like TradeMark East Africa’s $23 Million Safe Trade Emergency Facility, which focuses on making ports, borders, and supply chains safe for trade, are also critical in protecting regional economies.
The two researchers recommends flexibility of the utilization of different modes of transport. Kenya’s rapid decision to retool its passenger aircrafts for cargo is a good example. Rwanda has followed a similar strategy and found success: Its air cargo (imports and exports) increased from $57 million in April to $134 million by May, the study reveals.
“Indeed, whereas in May 2019, just 18 percent of Rwandan exports were shipped by air, by May 2020 that figure had reached 73 percent (National Institute of Statistics of Rwanda, 2020),” said the policy brief.
It further recommends additional policies to support border communities where livelihoods are heavily dependent on informal cross-border trade. Rapid implementation of the African Continental Free Trade Agreement (AfCFTA) together with new trade facilitation measures, could significantly mitigate COVID-19’s negative impact on the continent’s economy.
