Export Trade and the Green Economy: Challenges and Opportunities for SMEs in the AfCFTA
During the 9th meeting of the African Continental Free Trade Area (AfCFTA) Council of Ministers held in Accra, Ghana on Monday, 25th July 2022, seven African countries (Egypt, Cameroon, Ghana, Kenya, Mauritius, Rwanda and Tanzania) were nominated to participate in what’s known as the AfCFTA Initiative on Guided Trade. According to the AfCFTA Secretariat, the initiative seeks to demonstrate that AfCFTA is functioning and send a political message to countries that are yet to submit their provisional schedules of tariff concessions in accordance with agreed modalities. Following this Council of Ministers meeting, Kenya launched its National AfCFTA Implementation Strategy (2022–2027) on the 03rd of August 2022.
Following the outbreak of the COVID-19 pandemic, UNDP Kenya has been implementing the Global Programme and Policy Offer aimed at supporting governments and citizens to overcome the socio-economic impact of COVID-19 and sustain progress towards attainment of the UN 2030 Agenda for sustainable development. One of the outcomes of UNDP support was the development of the country’s Economic Recovery Strategy (ERS, 2020–2022), which set the foundation for the Fourth Medium Term Plan (MTP IV, 2023–2027) of Vision 2030. The ERS recognizes the role that the private sector ought to play to drive innovation and local production to exploit opportunities created by the AfCFTA and other bilateral trading arrangements.
In August 2021, UNDP Kenya signed a partnership agreement with the Kenya Export Promotion and Brand Agency (KEPROBA), to develop the capacity of women and youth to access export markets through the Green Economy Youth Activation Programme (GrEYAP). As part of this initiative, KEPROBA and UNDP identified 98 women- and youth-led Small and Medium Enterprises (SMEs) from the counties of Kisii, Kisumu, Kwale, Machakos and Embu to participate in the programme. The capacity-building initiative entailed diagnosis of the barriers to export trade, development of the export manual, and partnership with other government agencies such as the Kenya Bureau of Standards (KEBS), Kenya Industrial Research Institute (KIRDI), Kenya Plant Health Inspectorate (KEPHIS), Micro and Small Enterprises Authority (MSEA), Kenya Trade Network (KenTRADE), Kenya Association of Manufacturers (KAM), State Department of Trade, County Governments, among others, to conduct Training of Trainers and capacity building of the enterprises. The final part of this collaboration entailed onboarding successful SMEs onto the KEPROBA export portal.
Export trainings for SMEs in the five counties were conducted between 26th June- 30th July 2022. The SMEs were drawn from the cashew nuts value chain (18%), Avocado (14%), Bananas (12%) and macadamia nuts (11%), as well as manufacturing (22%), oranges and mangoes (7%), among others.
Some of the challenges that exporters in Kenya experience include low productivity, fluctuating prices, lack of product development and quality control processes, inappropriate export finance facilities, lack of awareness of export trade requirements, including market standards, and having the Made in Kenya mark, among others.
The five-days trainings targeted SMEs with high potential to utilize trade opportunities such as the AfCFTA, and spur export-led inclusive, sustainable, green growth for the country.
The AfCFTA presents several opportunities to SMEs including allowing them to enter the potential 1.3 billion population market in the continent, reduce cost of inputs due to the removal of tariffs and other trade barriers thus making it easier for SMEs to supply larger regional companies.
In as much as the AfCFTA presents some good benefits for SMEs, the reality on the ground is that most SMEs are not yet prepared enough, nor are they aware of the processes required for them to exploit this opportunity. The feedback from the participants confirmed that the unpreparedness is largely due to lack of knowledge about customs procedures, standards, and other regulatory processes, and lack of skills in product development, as well as issues around product certification.
The SMEs were taken through modules that included essentials of exporting, product development & branding for an international market, compliance to standards, customs procedures, market research/identifying target markets, export financing, and traceability, among others.
The workshops were eye-opening to the participants and inspired them to take advantage of cross-border trade opportunities.
One enterprise, Lipegeni Group from Kwale which grows and sells cashew nuts revealed that they had no experience in export trade but would like to expand their markets and sell to Tanzania using the knowledge and skill acquired from the workshop.
Limbua group, an enterprise based in Embu, that processes macadamia nuts, avocados, and mangoes was pleased to acquire knowledge on how they can expand their market to other African countries.
“There is a need to unpack the opportunities within the AfCFTA to SMEs and the procedures required for them to benefit from this agreement,” said the Deputy Director of Trade for Machakos county, Dr. Muema Wambua.
In Kwale, the County Executive Committee Member (CECM) for Tourism, Trade and Enterprise Development, Hon. Nassib Omar Nyahi shared similar sentiments emphasizing the need to organize more capacity-building workshops.
“With thousands of SMEs present in Kenya, we have a big assignment as the Government, NGOs and private sector to bring awareness of the AfCFTA to the SMEs and handhold them to effectively take advantage of the opportunities the AfCFTA presents.”
The nomination of Kenya as a pilot country in the “AfCFTA Initiative on Guided Trade” is a testament to the country’s readiness to start trading under the AfCFTA rules and regulations. However, without strong and competitive SMEs, along with supply chains including adequate capacities in services for goods storage, transportation, regulatory certification, and clearance processes among other aspects, the potential benefits of the AfCFTA agreement may not accrue to the country and its citizens.
Notwithstanding the challenges, the adoption of the AfCFTA National Strategy is an inclusive, holistic approach by the country to embrace the AfCFTA and create opportunities, especially for women-led SMEs.
By Julius Coredo & Tamiwe Kayuni,
Inclusive Growth, UNDP Kenya.