Kenya’s SME and Start-up trade options under the AfCFTA Guided Trade Initiative

Background

Agenda 2063 is Africa’s blueprint and master plan for transforming Africa into the global powerhouse of the future. It is the continent’s strategic framework that aims to deliver on its goal for inclusive and sustainable development and is a concrete manifestation of the pan-African drive for unity, self-determination, freedom, progress and collective prosperity pursued under Pan-Africanism and African Renaissance

The AfCFTA being a key agenda 2063 programme  is an agreement among the African Union Member States aims to significantly accelerate growth of Intra-Africa trade and use trade more effectively as an engine of growth and sustainable development by doubling intra-Africa trade, strengthening Africa’s common voice and policy space in global trade negotiations.

Following the official launch of trade under AFCFTA in 2021 no significant trade has taken place prompting the AfCFTA Secretariat to catalyse trade through AfCFTA Initiative on Guided Trade announced in July 2022.

The approach taken is matchmaking businesses and products for export and import between interested State Parties in coordination with their national AfCFTA implementation committees.

The objective of the catalytic initiative is to; enable significant trade under the AfCFTA, test the operational, institutional, legal and trade policy environment under the AfCFTA; and positive signalling trade stakeholders.

The AFCTFA initiative on guided trade has attracted eight countries including; Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia with the following priority products;: Ceramic Tiles; batteries, tea, coffee, processed meat products, corn starch, sugar, pasta, glucose syrup, dried fruits, and sisal fibre, amongst others.

Kenya’s National AFCFTA implementation strategy

AfCFTA presents a huge market opportunity for Kenya of a population of 1.2 billion persons and a combined GDP valued at USD 2.5 trillion with a combined consumer and business spending of more than USD 4.0 trillion.

Kenya developed its national AfCFTA implementation strategy anchored in the country’s policy frameworks ; The National Trade Policy 2017, The Integrated National Export Development and Promotion Strategy (INEDPS) (2018) and Kenya’s Vision 2030 development blueprint.

The strategy espouses to contribute towards national development through securing of markets for goods and services within the African region, promoting value addition and the diversification of products in those markets and creating conditions for increased participation of micro small and medium-size enterprises (MSMEs), women, youth and persons living with disabilities in trade and investment in the region.

The strategy further provides a holistic approach to trade and investment opportunities in Africa as opposed to past practice was non-systematic and fragmented.

Kenya has prioritised goods and services as per the below schedules and has further prioritised export of tea, Exide batteries, confectionery, leather bags, incinerators, beaded products, vehicular filters, textiles, sisal fibre, avocados, and fresh produce under the guided trade initiative

Source : Kenya’s National AFCFTA implementation  strategy

Its imperative that both ad hoc committee as well as the national AFCTA committee to include SMEs and Starts cognisant that this will have the biggest impact in economic development as well as job creation (see table 1) and move away from the traditional thinking that has stagnated the economy by focusing on exporting tea, coffee, cut flowers, and vegetable products, accounting for over 50 percent of total exports.

Table 1:  SME GPD and Employment Contribution by sector

Source : KNBS 2016 MSME report

Kenya can utilise the guided trade as a test bed to improve or solve bottlenecks to SME and Start-up competitiveness such as; un-conducive business regulatory environment, access to finance (hustler fund) , low productivity, fit for purpose infrastructure  for SMEs and start-ups among others (retrofit SEZ for local SMEs), talent (preferential VISA for tech talent in order to compete with tech MNC) among others.

If AFCTFA and Kenya is not careful SMEs, women and youth will continue to be a byword used that sounds good but has no relations whatsoever with the reality on the ground.