Africa and the world trading system: a case study of Kenya (стр. 1 )

AFRICA AND THE WORLD TRADING SYSTEM: A CASE STUDY OF KENYA

BY

FRANCIS M. MWEGA

ECONOMICS DEPARTMENT

UNIVERSITY OF NAIROBI

and

KEFA L. MUGA

MINISTRY OF FINANCE, KENYA

MARCH 1999

Final Report Prepared for an AERC Collaborative Project on Africa and the World Trading System.

1. Introduction

There is a consensus in the economic literature that the performance of Kenya's export sector has been quite poor and exports have grown more slowly than the economy as a whole. While the trend real GDP grew at an average rate of 4.7% in the first three decades of independence (), the trend growth in the volume of exports was only 1.6% (Mwega, 1995). More recently, as Table 1 shows, the export performance declined significantly in (average 14.5% of GDP), before rebounding in (average 23.3% of GDP).

Kenya's exports can be divided into traditional and non-traditional (NT) exports. The World Bank (World Development Indicators, 1997) defines traditional exports to include the top 10 three-digit export items in a base year, unless they total less than 75% of exports, in which case more items are added until 75% is reached. Based on this definition, Kenya's traditional exports (taking 1980 as the base year) comprise the following ten products accounting for 83.3% of total exports: petroleum products (33.3% of total exports); coffee (22.2%); tea and mate (11.9%); crude vegetable materials n. e.s (3.2%); sugar and honey (2.7%); other crude minerals (2.3%); preserved fruit and fruit preparations (2.2%); lime cement and fabricated construction materials (2.1%); raw hides and skins (except fur skins, 2.0%); and fruit and nuts (not oil nuts), fresh or dried (1.4%).

We utilize a narrower definition (Blackhurst and Lyakurwa, 1997) that includes as traditional exports items that account for more than 3% of total exports in the base year. Traditional merchandise exports therefore include petroleum products (SITC 334), coffee (SITC 071), tea and mate (SITC 074) and crude vegetable materials n. e.s (SITC 292). This leaves many of the horticultural products apart from crude vegetables among NT exports. The first three products are therefore by far the dominant traditional commodity exports, although the contribution of petroleum products to forex earnings is small as the country mainly re-exports imports after processing.

Table 1 shows the evolution of traditional exports based on the second definition. The share of traditional exports in the national income declined from 15.4% ($931 million) in 1980 to 5.3% ($366 million) in 1989 before increasing to 12.2% ($972 million) in 1996. The proportion of traditional exports in total exports therefore declined from 70.0% in 1980 to 47.6% in 1996, reflecting a diversification of Kenya's export basket.

In the case of coffee and tea, access to developed markets has not been a major constraint. A large proportion of these products is exported to the European Union where the applied tariff and non-tariff barriers have been low[1]. The export volumes of coffee and tea generally expanded in the 1980s and 1990s, coffee marginally from an average 86,994 metric tons in to an average 94,976 metric tons in and tea about two-and-a-half times, from 84,905 metric tons in to 218,336 metric tons in . Their export prices have generally declined. The price of coffee, for example, declined from $2.95 per kg in to $2.90 per kg in while that of tea declined from $1.81 to $1.64 in the two periods..

Table 1: Exports performance in Kenya, a

	Total exports as % of GDP	Total exports in $ million	Traditional exports as % of GDP	Traditional exports in $ million	NT exports as % of GDP	NT exports in $ million
1980	21.7	1328.95	15.4	930.75	6.3	398.20
1981	19.7	1386.13	13.3	936.33	6.4	449.80
1982	18.4	986.81	13.1	703.81	5.3	283.00
1983	19.1	949.10	13.1	650.90	6.0	298.20
1984	19.6	1041.11	14.4	766.17	5.2	274.40
1985	17.9	960.69	13.0	694.69	4.9	266.00
1986	29.7	1860.48	13.7	858.48	16.0	1002.00
1987	19.3	1327.08	8.6	591.68	10.7	735.40
1988	20.8	1445.76	9.0	626.16	11.8	819.60
1989	12.1	841.4	5.3	365.56	6.8	465.90
1990	14.6	1013.89	9.1	634.09	5.5	379.80
1991	16.7	1131.34	9.9	671.14	6.8	460.20
1992	19.2	1298.59	9.0	564.19	10.2	644.40
1993	24.7	1029.20	12.0	499.40	12.7	529.80
1994	24.5	1853.05	11.7	886.05	12.8	967.00
1995	24.6	1691.06	11.6	794.46	13.0	896.60
1996	25.5	2039.60	12.2	971.84	13.4	1067.80

a Data for 1989 were reported for the first nine months of the year and were therefore adjusted by a factor of 1.33. In general, data on total exports may not conform with those from the national accounts.