Kenyan exporters are cautiously hopeful on Brexit

Kenyan business leaders were cautiously optimistic about deeper economic ties with the United Kingdom even as it formally detaches itself from the European Union today.

After nearly four years of politicking, haggling and delays that cost the political careers of two prime ministers, the United Kingdom – Kenya’s fourth largest trading partner – formally leaves the EU today, heralding momentous changes in the way it relates not just with the rest of Europe but Kenya.

However, the UK will enjoy 11 months of transition during which it will continue to obey EU rules.

Though there will be no immediate changes according to experts, Brexit holds many opportunities and risks for Kenya as the UK will have to renegotiate various deals during the transition period that lasts until the end of the year.

During the transition period, Britain will remain in the EU single market and customs union to allow for fresh negotiations for the bloc. Britain was the fifth biggest destination of Kenyan goods in the period to November last year behind Uganda (Sh49.36 billion), the United States (Sh46.4 billion), the Netherlands (Sh42 billion) and Pakistan, which stood at fourth place after importing Kenyan goods worth Sh41.1 billion.

With the UK poised to be free to enter bilateral deals with other countries after the transition period, Kenyan exporters hope it will help expand their access to the market.“Our biggest anticipation is that our business and relationship with the UK will just continue to be as strong and that goes for the remaining countries in the EU,” said Carole Kariuki, the chief executive officer of the Kenya Private Sector Alliance (Kepsa). “We also hope to see new opportunities arising from the UK as it looks for new partners outside the EU.”

Ms Kariuki said businesses in Kenya were ready to engage their UK counterparts under a new trade regime. Britain’s Withdrawal Agreement was approved by the European Parliament on Wednesday evening with 621 votes in favour, 49 against and 13 abstentions. However, many members warned that negotiations on the future relationship between the EU and the UK were going to be difficult, especially taking into account the timeframe provided in the Withdrawal Agreement.

Once it transitions from the EU, the UK has said that it will be at liberty to sign bilateral deals with other countries. Kenya constitutes about 0.1 percent of UK’s trade, exporting products like flowers, vegetables, fruit, tea and coffee.

The UK is the second-largest export destination for Kenya’s cut flowers after the Netherlands, buying almost 18 percent of the flowers produced in the country. With Brexit, some analysts have said, Kenya will be in a position to negotiate for more access to the UK market to include more products without having to pass through various barriers and regulations that favour EU member States.

The fact that the UK has been a strong opponent of the EU Common Agriculture Policy (CAP), which offers subsidies that disadvantage Kenyan farmers, is seen to offer hope for better access to the UK market post-Brexit for Kenyan farmers, especially those who grow French beans and snow beans.

Trade data released by the Kenya National Bureau of Statistics (KNBS) shows that Kenya’s exports receipts from the United Kingdom remained flat at Sh36.6 billion in the 11 months to November last year compared to Sh36.7 billion earned over a similar period in 2018.

During the same period, expenditure on imports from the UK rose by Sh2.1 billion to stand at Sh30.87 billion compared to Sh28.76 spent over the same period a year earlier. That means Kenya has enjoyed a surplus trade position with Britain in the last four years, recording the highest surplus of Sh8.63 billion in 2018.

It is expected that Brexit will not have an immediate effect on Kenyan exports after the country was granted a two-year agreement in September last year to continue trading under preferential terms that provide for duty-free, quota-free access pending new trade agreements to replace the current EU pacts, thus shielding the country from tough World Trade Organisation (WTO) regulations.

UK Prime Minister Boris Johnson, who gets the credit for pushing Brexit, has already started preparing for the future in talks with world leaders and countries like Kenya. Recently, he hosted the UK-Africa Summit in London, which was attended by 21 heads of State from Africa.

, with a view to forging new partnerships in readiness for the post-Brexit era. During the summit, where President Uhuru Kenyatta was in attendance, Mr Johnson declared the UK’s intention to build a new future as a global free trading nation.

“We want to build a new future as a global free trading nation, that’s what we are doing now and that’s what we will be embarking on, on 31st of January. But I want to intensify and expand that trade in ways that go far beyond what we sell you or you sell us,” he said.

The UK-Africa summit was strategic since many key countries on the continent, Kenya included, are members of the Commonwealth by virtue of being former British colonies and have a longstanding relationship with the UK that can be leveraged to lessen any negative impacts resulting from Brexit.

While attending the summit, President Kenyatta urged UK investors to use Kenya as a gateway to investing in Africa and a bridge to the emerging market of more than 1.2 billion people created by the African Continental Free Trade Area.

“There is probably no better time for African nations and the UK to explore new and innovative ways of deepening the long-standing partnerships that have existed between our nations,” said Mr Kenyatta.

Analysts will be watching to see if there will be any ripples in the Kenyan economy in the short term though the fact that the UK under Mr Johnson was able to secure a “soft deal” rather than the feared “hard deal” is seen as a welcome development.

There are more than 300 British companies in Kenya and trade between London and Nairobi is currently valued at £1.3 billion (Sh130 billion), according to data from the British Chamber of Commerce Kenya. They include multinationals Barclays, Land Rover, Standard Chartered Bank, British American Tobacco and Unilever.