Few local producers can fund the multi-layered paper trail necessary to selling their goods beyond Kenya, in sharp contrast to Rwanda, which has unleashed an exports bulge by simplifying processes, reports James Momanyi.
Albert Gekonde formed his candle making company in 2007, just three years after completing his engineering course from a local university. Within a short time, the company, specialising in the manufacture of multifloral beeswax candles ,had established a niche in the local market and the young entrepreneur began to think of venturing into the deep end: the export market.
Albert started researching possible regional and international markets and export procedures. But after some time, he quit, to concentrate his efforts in the local market. The reality is that exporting simply involved too much red tape to be viable.
Yet the country’s only long-term path to a strong shilling lies in growing exports.
But for Albert, it’s a mission he will not be contributing to for the timebeing.
“I am based in Nakuru and when I did my research, most of the export processes are done in Nairobi. I developed a feeling that the processes are straining and that government has not done enough to centralise some of the services so that we can have a one stop shop where exporters and even importer can do all the paper work without visiting different offices located in different places, which are far apart,” observed Gekonde.
For while other countries have minimised export procedures and decentralised the process to encourage and increase the volume of exports, Kenya is still stuck with a cumbersome export process characterised by elaborate export licencing procedures and decentralised licencing agencies, which are discouraging small scale producers from exporting and starving the country of precious foreign exchange earnings.
Rwanda, by contrast, has managed to streamline its export documentation and processes, with impressive results.
The country set up the Rwanda Development Board bringing together all the government agencies responsible for the investor experience under one roof. This includes key agencies responsible for business registration, investment promotion, environmental clearances, privatisation and specialist agencies that support the priority sectors of ICT and tourism as well as SMEs and human capacity development in the private sector.
The body is modelled on international best practice examples from Singapore and Costa Rica. In 2010, RDB developed a 5-year National Export Strategy (NES). In the short and medium term, the country is focussing on traditional sectors of tea, coffee, tourism and mining, as well as nascent, non-traditional export sectors, such as horticulture and business process outsourcing.
The strategy focuses on removing the key barriers and constraints to trade in Rwanda and on driving export capacity, sophistication and revenues, while taking into account the many inter-related cross-cutting components that build trade competitiveness.
These efforts have seen the country’s exports increase significantly in recent years, from $367m in 2009 to $454m in 2010.
The country has also made significant improvements in its business environment, with its entry as the most competitive East African country in the WEF ratings, and its 2011 World Bank Doing Business rankings of 58th.
By contrast, Kenya, which is a regional economic giant, is yet to walk the path of decentralising its export operations so as to encourage more people to export, despite its galloping trade deficit.
In 2006, Kenya exported some $3.4bn worth of goods, led by tea, horticultural products, coffee, petroleum products, fish and cement. But it imported almost twice as much, as some $6.8bn-worth of goods ranging from machinery, transportation equipment, petroleum products and motor vehicles to iron, steel and plastics.
Moreover, it’s a gap that keeps widening. In the 10 months to October 2011, exports were worth Sh45.3bn, compared to imports that were three times larger at Sh115.7bn.This has seen the price of the shilling under constant pressure.