Arun Panchariya: Kenya Dont Forget The Export

Last year Kenya"s current account deficit increased to USD 4.5bn from USD 1.6bn two years ago

. This represents no less than 13 % of the domestic national product, worse than even Greece.

Is this a warning of a huge pending crisis for this hugely important African country? I certainly will not rule that out, but I think there are a number of very positive factors that will underpin Kenya"s economy and makes it possible for it to grow out the challenges.

Import of oil and other petroleum related products makes up large part of the Kenyan import. Due to the fact that it has recently been found huge reserves of oil and gas this is going to change. Kenya has the potential to be a net exporter of oil and gas. Obviously, this will have a huge positive impact on its trade balance. However, it will take a few years to for these effects to come through as it takes some time to develop the newly discovered resources. The fact that these reserves have been found will in the mean time underpin Kenya"s credit worthiness.

Another element is, that in my view, we now are experiencing the worst effects on the import of cheap Chinese goods on Kenyan own industry. But we can already see the first signs that this is going to change. Firstly, the Chinese goods are not going to get cheaper and most likely going to get somewhat more expensive due to the Chinese inflation and currency adjustments.

Secondly, the national industry has started to adjust to the new competition. This happens in different ways. For example the industry is focusing more on inter-African export markets.

Lastly, I will mention the new generation of well educated and entrepreneurial young generation that are emerging in many African countries, not at least in Kenya. Given that these are encouraged and not hindered this will also create a huge economic opportunity for export oriented growth in the future. It can also be put this way: The demographics will support the potential for Kenyan growth in the coming 20 years.

Mr. Arun Panchariya is specialising in cross border transactions globally and is currently involved in a number of project related to Africa

by: James Peterson

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