Trade is an excellent kindle for igniting growth, jobs and socio-economic gains. For this to occur, trade has to be effectively harnessed and sustainably exploited. This requires market information, trade intelligence, skills upgrade, productive capacity and an enabling business environment.
In many respects, these elements are ‘Business 101’ of what any economy needs to grow more, attract increased and more diverse investment, and better distribute the gains of increased trade. But for some economies, including in Africa, getting this right policy mix can be challenging.
The potential on the continent to develop deeper and wider is well recognised. With a rising middle class, more focused innovation especially among the youth, greater participatory governance and a more varied basket of partners, Africa is on the cusp of moving to another level of economic development.
A key to achieving this is to ensure a good business environment for small and medium-sized enterprises.
SMEs are at the heart of Africa’s dynamism and by enhancing their trade competitiveness and boosting the skills of their workers, more of them can become part of the regional and international value chains. These value chains offer market opportunities, transfer of technologies, and in a growing number of cases, a path to greater diversification.
Kenya has an advantage and an opportunity. It has much to teach and to share with and to learn from its neighbours in Africa.
With its strategic geographical location, natural and human resources, Kenya has the opportunity to further exploit its position as the growth pole of East Africa. The country’s location provides Kenyan exporters ‘easy’ access to markets across East Africa and the rest of the continent, but also across the Indian Ocean.
Yes, Kenya’s exports continue to rise, but to enjoy further benefits of trade, the country has to address the quality and competitiveness of its products and services, and supply side constraints. As in most African countries, there is in Kenya a strong reliance on a handful of primary commodities, which may lead to high vulnerability to external macroeconomic shocks.
For
Kenya, agricultural products such as tea, coffee, beans and cut flowers continue to be the main goods exported ($4.8 billion in 2012), whereas services exports such as transport and travel buttress
its economy ($5.3 billion in 2012). Adding more value to the goods and services exported will further enhance Kenya’s economic prospects.
Kenya’s productivity and the quality of its goods and services continues to improve. But quality standards, private standards and consumer tastes are ‘moving targets’. Continued capacity building, upgrading of facilities and innovative approaches to branding, packaging and marketing need to be at the forefront of the business strategy for the country. All these elements will be critical for SMEs in Kenya and across Africa to increase value addition of their products and services. It will be crucial for SMEs to get into and move up value chains.
How can businesses do this?
First, through technology and innovation, which although requiring capital investment, is important in attracting further investment and to ensuring a competitive product.
Second, to boost private
sector development, governments need to create policies conducive to business growth, and an
enabling environment for businesses to thrive. A reduction in the cost of doing business is vital, as well as efforts to boost cross-border trade through the simplification of customs procedures. Effectively implementing the World
Trade Organisation's Trade Facilitation Agreement is an important contributor here, and the International Trade Centre will continue to work with countries and the private sector in Africa to ensure that the promise of the agreement is translated into reduced trade costs for SMEs. This is fully in line with steps already undertaken by Kenya and a number of other neighbours to implement the vision of an the Eastern African Common Market.
Third, promoting stronger regional economic integration and the expansion of pan-African trade can help Kenya to further prosper.
The African market
alone is huge and the business opportunities are plentiful for
enterprises which can carve a niche in
supply to meet demand.
In support of the African Union's Action Plan to
increase pan-African trade from the current level of around 10 per cent to more than 25 per cent within the next decade, ITC is working closely with the African Union Commission and the various regional economic commissions in Africa to help develop policies that will lead to growth in intra-regional trade.
By strengthening partnerships with the
regional economic commissions,
ITC, aims to collaborate in developing regional projects and interventions that will complement national objectives and initiatives.
Key areas of focus
will be the transition from agriculture into agro industry, enhancing domestic value addition; and
spurring growth of the services sector, especially in the area of tourism.
ITC is also working closely with the African Union Commission in the establishment of the African Business Council which will enhance public-private sector dialogue by facilitating the private sector's views on the continental trade policy formulation process.
We are also supporting the development of the AU Trade Observatory which will serve as a tool to bring trade and market intelligence to the doorstep of businesses through web-based technologies.
In addition, in collaboration with a series of partners in India and East Africa, ITC is also spearheading a six-year effort to unleash the potential of untapped trade between the two regions. The project, ‘Supporting India’s Trade Preferences for Africa’ will run from 2014-2020 and will promote exports from five Eastern African countries – Ethiopia, Kenya, Rwanda, the United Republic of Tanzania and Uganda – to India, through investments and the transfer of skills.
It aims to capitalise on the huge potential of growing South-South trade and investment relations. Through SITA, ITC and its partners aim to diversify the range of products being traded, which will allow for an increase in business transactions between India and the five African countries, and help create jobs and income opportunities.
This week’s meeting of the African, Caribbean and Pacific group of states in Nairobi will mark the signing of a co-operation agreement between the ITC and the ACP group.
It reflects the importance that both sides accord to unlocking the potential of the private sector to use trade as a vector of growth and jobs. It is a clear commitment of the ITC, the UN-WTO development agency focused on SME internationalisation, to work with Kenya, East Africa and the entire ACP family to ensure that trade does provide impact for good.
Gonzalez is the
executive director, International Trade Centre, Geneva