Kenya has fallen one place in Africa’s trade index by Stanbic Bank, as the country navigated a challenging economy marked by high interest in the first half of the year.
Latest Stanbic Bank Africa Trade Barometer places Kenya sixth after South Africa, Namibia, Mozambique, Tanzania and Nigeria.
Kenya has however beaten Ghana, Zambia, Uganda and Angola in the index, which surveys 10 key economies in Sub-Sahara Africa.
The survey looks into trade openness, access to finance, macroeconomic stability, infrastructure, foreign trade, governance and economy, and traders’ financial behaviour.
Kenya recorded drops in macroeconomic stability, governance, quality of infrastructure and access to credit, a period in interest rates at commercial banks hit a high of 25 per cent as Central Bank of Kenya base lending rate rose to a 12-year high of 13 per cent this year.
CBK has however brought the base-lending rate down to 12 per cent on easing inflation, as it seeks to stimulate borrowing.
“Kenya’s decline to 6th place in trade rankings reflects a drop in business perceptions of export growth, access to credit, infrastructure quality, and government support for trade,” the report reads in part.
This downturn, part of a broader trend over the past three years, has seen Kenya’s trade attractiveness ranking drop from fourth place in the 2022 to position six, which is the lower half.
Perceptions of governance negatively impacted Kenya’s ranking. However, there were areas where Kenya improved, particularly on the efficiency of borders and customs operations and financial behaviours in regards to credit terms extended to clients.
Kenya’s macroeconomic environment has demonstrated a moderate contribution to the nation’s trade attractiveness.
In 2023, the economy experienced a rise in GDP growth to 5.6 per cent, primarily driven by the agriculture and services sectors, with agriculture emboldened by good weather and supportive government programmes such as the Bottom Up Economic Transformation Agenda.
However, civil unrest in June negatively affected the tourism sector, while the Kenyan shilling, though volatile, has shown relative strength against the US dollar, bolstered by strategic moves such as the Eurobond buy-back.
According to Stanbic experts, this mix of growth and stability amid challenges underscores the complex but optimistic scenario for Kenya’s trade prospects.
Kenya’s business confidence index scored a steady 55, mirroring the score from May 2023 and reflecting the mixed economic sentiments amongst businesses.
The stability of this score reflects a delicate balance between optimism fuelled by the successful Eurobond buyback, GDP growth, and subdued inflation, against a backdrop of pessimism due to the contentious tax unpredictability.
Kenya’s government support index for trade dropped to 45 from 57, signaling a decrease in business sentiment towards government backing of cross-border trade.
"This decline is partly attributed to the impact of nationwide protests about the Finance Bill 2024, which have overshadowed positive changes implemented by the Kenya Revenue Authority to enhance efficiency and reduce corruption,” Stanbic notes in its report.
Larger businesses generally perceive government supports more favourably than smaller enterprises, possibly due to their capacity to leverage available resources and navigate complex regulatory landscapes.
Surveyed Kenyan businesses conveyed a decline in the perceived quality of trade-related infrastructure. The access to credit index for Kenyan businesses has dropped to 45, indicating a tightened credit market compared to the score of 49 from May 2023.
