- Africa Trade Barometer has ranked Kenya sixth after South Africa, Namibia, Mozambique, Tanzania, and Nigeria.
- Kenya’s macroeconomic environment has demonstrated a moderate contribution to the nation’s trade attractiveness.
- A total of 235 businesses were surveyed in Kenya, located in Nairobi, Mombasa, Nakuru, Kisumu and Eldoret.
Kenya has fallen one place in Africa’s trade index by Stanbic Bank, as the country navigated a challenging macroeconomic environment marked by high interest in the first half of the year.
Latest Stanbic Bank Africa Trade Barometer has placed Kenya sixth after South Africa, Namibia, Mozambique, Tanzania and Nigeria.
Kenya has nevertheless beaten Ghana, Zambia, Uganda and Angola in the index which surveys 10 key economies in Sub-Sahara Africa, looking into trade openness, access to finance, macroeconomic stability, infrastructure, foreign trade, governance and economy, and traders’ financial behaviour.
According to the report, the country recorded drops in macroeconomic stability, governance, quality of infrastructure and access to credit, a period that 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.
Kenya’s trade attractiveness
This downturn, part of a broader trend over the past three years, has seen Kenya’s trade attractiveness ranking drop from the promising fourth place in the 2022 to a more modest sixth position, now in the lower half.
Perceptions of governance have notably been negatively impacted in this iteration of the survey. 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.
Africa trade barometer
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.
This mix of growth and stability amid challenges underscores the complex but optimistic scenario for Kenya’s trade prospects, according to experts at Stanbic.
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 fueled 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 support more favourably than smaller enterprises, possibly due to their capacity to leverage available resources and navigate complex regulatory landscapes.
Climate-resilient investments
Surveyed Kenyan businesses conveyed a decline in the perceived quality of trade-related infrastructure, with the index dropping from 53 to 48, exacerbated by the severe floods of 2024 which underscored the urgency for climate-resilient investments.
The most severe critiques were levelled at road, port, and rail infrastructures, which bore the brunt of the flooding’s destruction. 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.
Meanwhile despite notable progress in regional trade agreements, and ease of trade index remaining constant at 41, perceptions of trading within Africa have become less favourable among Kenyan businesses, with only 17 per cent finding it easy, a decline from 31 per cent in the previous survey.
The ease of trade index score remains unchanged at 41, indicating consistent trading conditions with other countries.
This contrasts with expectations set by the African Continental Free Trade Agreement (AfCFTA), suggesting that businesses may not yet be experiencing the intended benefits, such as simplified policies and reduced costs. A total of 235 businesses were surveyed in Kenya, located in Nairobi, Mombasa, Nakuru, Kisumu and Eldoret.
Read also: Allianz Risk Barometer 2023: Top threats for Kenyan Businesses
