Country Report Kenya January 2011

Economic performance: Kenya-South Africa trade and investment relations deepen

The growing importance of trade and investment relations between Kenya and South Africa came into focus in November during the visit of South Africa's deputy president, Kgalema Motlanthe, accompanied by a large ministerial and business delegation. The two sides signed a double tax avoidance treaty (which will encourage investment) and an agreement on co-operation in agriculture-and held talks in other areas, including tourism and wildlife-as well as making preparations for the formal launch of a joint trade commission in February 2011 (which builds on an initial co-operation agreement concluded in 2008). A separate Kenya-South Africa business summit took place on the sidelines. Mr Motlanthe's three-day tour was the highest-level South African visit since the end of apartheid in 1994 and paves the way for the planned arrival of South Africa's president, Jacob Zuma, in 2011. The talks also covered the push for a single African trade bloc comprising the Common Market for Eastern and Southern Africa (Comesa), the East African Community (EAC; to which Kenya belongs) and the Southern African Development Community (SADC; which includes South Africa), although progress is likely to be slow.

South Africa was Kenya's third most important import supplier in 2009, with sales hitting KSh70bn (US$875m)-up by 51% from a year earlier-to account for 9% of total imports. Kenyan purchases include consumer goods, coal, steel, textiles and maize (which accounted for one-third of total shipments by value in 2009). Kenya is pressing for a reduction in South African tariffs on tea and soda ash, both key exports, and for an easing of health rules governing livestock and avocados, in order to trim the trade gap. However, imports from South Africa declined sharply in the first half of 2010, by 19% to KSh28.7bn, a 6.5% share, owing to reduced maize needs (following better weather) and the sharp appreciation of the South African rand against the shilling during 2010: the exchange rate of KSh11.5:R1 in November was 16% weaker than a year earlier, which has reduced the appeal of South African goods.

Kenya's trade with South Africa
(KSh m except where otherwise indicated)
 20062007200820092010
 YearYearYearYear1st half
Imports from South Africa33.835.446.770.628.7
 % of total imports6.45.86.19.06.5
 % change year on year-20.04.532.051.1-19.1
Exports to South Africa2.42.33.63.61.1
 % of total exports1.00.91.11.00.6
 % change year on year12.4-2.455.2-1.8-48.8
Balance of trade-31.4-33.0-43.1-67.0-27.7
Source: Kenya National Bureau of Statistics.

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