Wednesday, October 21, 2009

Kenya, SA seek stronger trade ties

Mbogo, Steve (Business Daily, Nairobi)

South Africa and Kenya plan to launch a joint trade commission by the end of the year in an effort to guide investors on opportunities and increase the volume of trade between the two countries.

Once the Commission is launched at a date yet to be announced, the team will be expected to facilitate the launch of a joint chamber of commerce to be run by the private sector.

The two bodies are part of the implementation of the Bilateral Trade Agreement that was signed by Kenya and SA in September 2008.

“What is intended is to streamline our trade agreement so that the tariff barriers that exist because we belong to different African trade blocs do not impede trade”, said SA’s High Commissioner to Kenya, Tony Gab Msimanga.

Kenya and South Africa belong to the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC), respectively. Kenya is also a member of the East African community (EAC).

Exporters from the two countries face restrictive tariffs, which slows the pace of trade.

“The trading blocs were good intentioned but with time, they have become a problem. They impose tariffs that are slowing intra-Africa trade.”

However, Msimanga said that the recent signing of a memorandum of understanding between COMESA, SADC and the EAC was a step in the right direction.

Issues the trade commission is expected to address will include identifying investment opportunities and areas for economic cooperation.

South Africa, for instance, is already helping some of the local Kenyan authorities to improve their financial management through an exchange programme between the Durban Local Council and the Nairobi City Council.

Two Durban officials visited the Kenyan capital recently to meet officials from the Ministry for Local Government and the Mayor of Nairobi. The mayor is expected to visit Durban to gain insight into the financial management at the councils.

Kenya will also be sending engineers, medical experts, and academics to South Africa to bridge existing gaps.

“We made a deliberate effort to encourage Kenya engineers to participate in the construction of 2010 World Cup stadiums”, said the High Commissioner.

Under the Commission, South Africa will help Kenya establish a nuclear energy electricity plant to assist the country diversify from hydro-generation, which is dependent on weather.

It is also expected that the new steps to open trade corridors will erase suspicion that has engulfed the private sectors of the two countries.

South African businesses have generally had a poor experience in Kenya with massive closures in the late 1990s and early 2000.

According to a report by the South African Institute of International Affairs, hostility between the business players in the two countries and Kenya’s lack of adequate infrastructure and slow pace of business reforms are some of the causes of the failures.

Nevertheless, the situation has been improving as Kenya has made several business reforms such as reduction of business licenses, reconstruction of roads, and improving information technology networks.

“The private sector has to try to break this suspicion for their own good. The ball is in their court”, said Mr Msimanga. The balance of trade remains strongly in favour of South Africa at a ratio of 20 to 1.