Sunday, October 19, 2008

Kenyan traders urged to diversify exports

Mugambi, Kaburu; The Nation (Nairobi) 2008-07-24

Kenya has increased its share of trade within east Africa and COMESA, but its trade levels with the rest of the world have reduced by 50 percent in the last two decades. According to Vice-President Kalonzo Musyoka, this will threaten Kenya’s fight against poverty if the country fails to increase trade with non-traditional partners.

It is estimated that Kenya’s share of global trade is about half what it was in the mid-1980s while the ratio of trade to gross domestic product (GDP) has dropped sharply from 71 percent to the current level of around 56 percent.

“This declining share of trade can be attributed to the inability to diversify exports from primary products to manufactured and value added goods, coupled with the inability to access new markets”, said Musyoka at the opening of the African Trade Insurance (ATI) Agency Annual General Meeting in Nairobi on Tuesday.

He said that the agency will have a critical role to play in helping member states to diversify and increase exports, move up the value chain, and find new markets. “I therefore urge the business community to take advantage of the political and credit insurance products offered by ATI as a cushion against possible risks”, the Vice-President said.

Peter Jones, ATI Chief Executive, said that over the past 36 months, the agency has increased its focus on providing support for companies that export both regionally and internationally. It has also grown its export credit business by 40 percent in terms of gross exposure and 25 percent in terms of exporters benefiting from this cover.

By the end of 2010, ATI is expected to be supporting exports worth US$1 billion (Sh44.3 billion) for exporters located in African member countries, Jones said.

“Export credit insurance is a high value-added product, allowing the exporter to move up the value chain by selling directly to end users, rather than via wholesalers and auction houses while reducing their cost of financing by using ATI policy as security for their borrowings”, he said.

COMESA member countries formed ATI in 2000 in order to cover the perception of high risk associated with poor public governance and negative political events. Since being established in 2001, the agency has supported almost $500 million (Sh33.1 billion) inward investment and in the past 36 months, has supported exports by private corporations worth over $180 million (Sh11.9 billion).

The agency has further supported over $120 million (Sh7.9 billion) in stand-alone terrorism and sabotage coverage, in partnership with various underwriters at Lloyd’s of London.