Pavel Vziatkin,
Ambassador Extraordinary and Plenipotentiary of the Republic of Belarus to the Republic of Kenya, the United Republic of Tanzania, the Republic of Uganda, the Federal Democratic Republic of Ethiopia, Permanent Representative of the Republic of Belarus to the African Union, UNEP & UN-Habitat
Dear Pavel Vladimirovich, a trend has been observed over recent years that many countries, and Belarus not being an exempt, have intensified their communication with African countries. What are the reasons? Can Eastern Africa become an extra source for the diversification of Belarusian export when the global economy and transport-and-logistic chains are being transformed? What are the prerequisites?
To begin with, I would note that even though Africa is not a global center of power, it is still one of the most prospective regions possessing an enormous geoeconomic potential, and many countries are committing long-term development of their own to the development and exploitation of Africa's resources. It is not by chance that key global players like the USA, European Union, China, India, Russia currently keep and even intensify their interest to the region. Europe, for instance, sees the resource cooperation with Africa through the prism of strengthening the economic potential of the European Union. A large-scale long-term cooperation with the region was the focus of the 2019 "Russia – Africa" forum. The presence of China, which is implementing major infrastructure projects, has increased remarkably. The global competition for Africa will increase in the near future.
Eastern Africa is of interest to Belarus' export-oriented economy due to its sustainable economic growth. Over the past ten years – before the pandemic – the region was among the fastest growing economies in the world, with Ethiopia's economy growing at an average annual rate of over 10 percent, Kenya and Tanzania at 6 percent, and Uganda at 5 percent. Today, forecasts expect these countries to recover shortly from the negative impact of the pandemic with GDP growth of about 5 percent a year. The IMF estimates that the forecast for 2022/2023 remains positive: Kenya, 5.7/5.3 percent; Ethiopia, 3.8/5.7 percent; Tanzania, 4.8/5.2 percent; Uganda, 4.9/6.5 percent.
Eastern Africa is a large and growing market. Membership in regional integration alliances with the free movement of goods in a common customs area, as well as the need to accelerate the development of own industry, infrastructure and food security, provide additional opportunities.
In this context, our economies are complementary. Belarus can offer African partners a broad range of solutions to achieve these objectives.
A big factor in favor of cooperation with the African region is the constructive and respectful attitude of the East African countries towards the Republic of Belarus and its leadership.
Given that the Embassy of the Republic of Belarus is based in Kenya, the greatest opportunities are seen in developing relations with this country. What sectors do you find promising?
Indeed, the main practical steps of the Embassy are aimed at building relations with the Republic of Kenya. However, the clear priority is economic cooperation, which is still at an early stage.
Given objective factors, including the negative impact of the pandemic in 2020-2021, long-term foreign trade relations between Belarusian and Kenyan businesses are yet to be established. This market is still new for Belarusian exporters, and supplies still look sporadic. Therefore, the Embassy's efforts are focused on creating the legal and institutional basis in the area of economic cooperation and sustainable commodity flows for Belarusian exports. The prerequisites for this are in place.
Kenya is an economic leader in the region with a promising and sizeable market of 53.7 million people. The country is characterized by political stability, strong political and public institutions and a sound financial and banking system, making it the trading and financial center of Eastern Africa. Kenya is also a major transport and transit hub, transferring goods to and from neighboring countries in Eastern and Central Africa.
When assessing the potential for cooperation with Kenya, it is important to emphasize its membership and active role in regional economic integration alliances, such as the Eastern African Community (EAC, seven countries with population exceeding 180 million) and the Common Market for Eastern and Southern Africa (COMESA, 21 countries with population exceeding 580 million). Not only should, therefore, Kenya be seen as a large market for finished goods, but also as a bridgehead to the regional market.
Kenya's economy is dominated by the agricultural sector, which has contributed between 30 and 40 percent of GDP in different years. The agricultural sector is represented by plant cultivation, animal husbandry and other sub-sectors. Kenya is the third largest producer and first exporter (by volume) of tea in the world, the third largest exporter of flowers, the ninth largest producer of legumes, the fourteenth largest producer of oil-yielding crops, and one of the world's top 20 coffee exporters.
The telecommunications, transport and construction industries are rapidly developing. Financial and banking services take an important place. The service sector accounts for 43.2 percent of GDP and employs 38.7 percent of the population. Industry accounts for 16.1 percent of GDP and 6 percent of the country's employment.
A fact to notice. In Kenya, alongside traditional money circulation, there is a mobile payment system called MPesa ("M" for "mobile", "Pesa" for "money" in Swahili). Mobile communication is accessible for more than 80 percent of the population. The mobile money platform is used to transfer funds and make all kinds of payments, including household running costs, health insurance, school fees, government services, taxes, and others.
The commodity structure of Kenya's imports is dominated by industrial goods and equipment, as well as foodstuffs (wheat, corn, rice, vegetable fats and oils). The list of main suppliers, accounting for more than 60 percent of imports, include China, India, the UAE, Japan, Saudi Arabia, the USA, Indonesia and South Africa.
Given the structure of Kenya's imports and Belarus' industrial capabilities, there is potential for exports of automotive trucks, road construction equipment, tractors and agricultural equipment, motorbikes, tires, cable and electrotechnical products, refrigeration equipment, metal products, pharmaceutical products, paper, foodstuffs, including processed foodstuffs. Bearing in mind the Kenyan Government's efforts to protect the environment, there is potential for the supply of electric passenger transport.
The long-term trend in Kenya is to focus on own industry developing. Therefore, the country is in need of investment, competence and technology. Belarus can contribute to achieving the goals by launching joint projects to establish assembly facilities for Belarusian machinery and build industrial and agricultural facilities (agro-industrial complexes, cattle farms, poultry farms, greenhouses, grain storage facilities). Industrial and technological parks and special economic zones, which are actively developing in the country, can provide a convenient platform for the implementation of such projects.
A promising form of cooperation at the current stage is public-private partnership. Foreign investors are offered favorable taxation treatment, preferences for participation in state programs and tenders in exchange for jobs and production within the country.
What is important for Belarusian exporters to be aware of? What are the peculiarities and challenges to look out for when working on the Kenyan market?
First, despite the potential for Belarusian exports and the overlap of Kenyan imports with Belarusian products, one should have no illusions about the easy accessibility of the Kenyan market. Today's Kenya is not a backward African country on the periphery of the world economy, it is a dynamically developing country with the development based on the market economy principles.
Kenya is a WTO member, which implies its adherence to generally accepted rules of international trade. No special restrictive measures are applied to Belarusian goods. At the same time, the level of tariff protection is rather high. Kenya applies tariffs based on the internationally harmonized product classification system, as well as Eastern African Community (EAC) Common External Tariff (CET) duties and tariffs. Customs duties range from 0 to 100 percent, with an average rate of 25 percent. Generally, the rate is 0 percent for raw materials and industrial equipment; 10 percent for intermediate goods; and 25 percent for finished goods.
Then, the prevalence of the private sector in the economy has to be taken into account. While the African continent's average private sector contribution to GDP creation is estimated at 80 percent, the figure for Kenya is 92 percent.
In this situation, it would be a mistake to assume that the Kenyan market is waiting for Belarusian producers. Competition is high in this market. Producers from the UK and the USA, India and Western European countries are present in the country. Over the last decade, manufacturers from China and Türkiye have become much more active; they are characterized by their aggressive marketing policy and the use of financial instruments. With their arrival, the market has become more dynamic. With the increased competition, Kenyan consumers tend to place higher demands on the price, quality and functionality of goods. Also, a 100 percent prepayment is rarely practiced, with instalments and deferred payment as well as credit export support used instead.
One of the most important conditions for entering and gaining a foolhold in the Kenyan market is to provide financial support; otherwise, the implementation of export contracts, especially large ones, is hardly possible. It is, therefore, important to have the financial infrastructure to organize the export of Belarusian goods to the country. In this respect, the key instrument for promoting Belarusian goods is export crediting through the Development Bank of the Republic of Belarus, which has an agreement with the Eastern and Southern African Trade and Development Bank to open a credit line to finance exports.
When entering the Kenyan market, especially when investing, one should take into account Kenya's belonging to the Anglo-Saxon legal family, the high level of bureaucracy in government structures, the specifics of interaction with Kenyan business, Kenyan traditions and business etiquette. Selecting a local partner with links in the business circles and at the government level is incredibly important.
What marketing tools have proved effective in Kenya? What works in practice?
Kenya is a market economy. Therefore, most of the known marketing tools work here. Moreover, they don't just work, they are essential to market products.
Participation in international exhibitions is an important step to establish contacts with potential Kenyan partners. Such experience already exists, and it has shown its effectiveness. Thus, in June 2022, the Belarusian Chamber of Commerce and Industry and the exhibition enterprise "Belinterexpo", in cooperation with the Embassy of the Republic of Belarus in Kenya, held the national exposition of Belarus at the 23rd International Kenyan Trade exhibition (KITE). The country's food and pharmaceutical industries were well represented in the Belarusian pavilion. The event sparkled a considerable interest among Kenyan businesses and received wide media coverage. The exposition was preceded by extensive preparatory work of the Embassy, BelCCI, "Belgospischeprom" Concern and enterprises to select potential partners and invite them to the exhibition.
Cooperation through chambers of commerce and industry has significant potential for the establishment of primary contacts. The Memorandum of Cooperation between the BelCCI and the Kenya National Chamber of Commerce, which was signed in July 2021 with the support of the Embassy, contributes to this. Since the partnership was launched, business meetings have already been held in the form of a video conference in July 2021 and in June 2022 on the platform of the Kenyan Chamber of Commerce and Industry with the participation of the Embassy, the Belarusian enterprises participating in the exhibition, the Kenyan Chamber of Commerce and Industry management and Kenyan companies.
An important milestone in cooperation with the Kenyan Chamber of Commerce was the participation of the Belarusian Ambassador in the annual meeting of the Management Board of the Kenyan Chamber of Commerce, which brings together branches of the Chamber from all 47 regions of the country, with a presentation on the export potential of Belarus. In the first half of 2022 alone, the Ambassador of Belarus had three meetings with the senior executives of the Kenyan Chamber of Commerce and Industry, where issues of economic cooperation, partner search and joint activities were discussed. There are plans to hold presentation events in the regions of Kenya. Also, a business mission to Belarus under the auspices of the chambers of commerce and industry of the two countries is being discussed with the Kenyan partners.
In the economic dimension, what interest could there be in participation in international organizations, in particular the African Union?
Opportunities exist in cooperation with the African Union Commission. The interaction objective is to explore participation of Belarusian organizations in the implementation of projects on the African continent as contractors (subcontractors). Participation in tenders of the African Bank for Reconstruction and Development that implements infrastructure projects under the auspices of the African Union is potentially promising.
In multilateral diplomacy, the interaction with the UN programs in Nairobi, UNEP and HABITAT, is important. Environmental and natural resource management issues will remain the focus of international attention and stay relevant.
Conclusion
The Eastern African region offers great opportunities for Belarus to cooperate, primarily in agriculture, engineering and manufacturing.
However, along with finances, logistics, and technical characteristics, the key conditions for successful operations in the Kenyan market remain interest, proactive and consistent practical actions on the part of Belarusian exporters. The Embassy of Belarus in Kenya is ready to assist and is on hand to serve Belarusian exports to the country 24/7.
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