Can William Ruto tip the EAC trade balance?



Can William Ruto tip the EAC trade balance?

Trucks carrying goods to Uganda stuck in a traffic jam on the Eldoret-Webuye highway. FILE PHOTO | NMG

As Kenya hosts the presidency of William Ruto on Tuesday, the East African Community (EAC) will be watching closely the new administration’s approach to foreign trade policy.

With a combined gross domestic product (GDP) of over $100 billion – double that of Tanzania and nearly three times that of Uganda – Kenya remains the region’s largest economy.

An analysis of trade data over the past decade under President Uhuru Kenyatta shows that Kenya’s trade balance with EAC members has shrunk by 19.1 billion shillings.

Gains from Rwanda and Burundi partly helped offset much of the shortfall incurred with Tanzania.

Data from the Kenya National Bureau of Statistics (KNBS) shows that the trade surplus with neighboring countries in 2012 was 119 billion shillings – which Mr Kenyatta inherited when he took office in 2013 – and he has decreased last year to 99 billion shillings.

The trade surplus between Kenya and Rwanda increased by 12 billion shillings between 2012 and 2021, with Burundi registering a surplus of 7 billion shillings.

When the incumbent president took office in 2013, trade between Kenya and Tanzania was in favor of the former, which had a surplus of 31.6 billion shillings, but fell to 11 billion shillings by the end of his first term and a deficit of 8 shillings. 0.9 billion in 2021.

Tanzania, which previously had a lukewarm relationship with Kenya, benefited greatly from the change in administration following the death of former President John Magufuli.

Samia Suluhu’s rise to power saw Kenya and Tanzania improve their trade relations, abolishing several non-tariff barriers such as taxes that had been imposed on a number of goods.

The change of administration in Kenya has always brought uncertainty to the region as the country is a major trade route to Uganda, Rwanda, Burundi and the Democratic Republic of Congo.

Macharia Munene, professor of history and international relations at the United States International University in Nairobi, said that so far there was an indication that trade between Kenya and its neighbors would remain stable.

“Kenya’s neighbors have so far responded well [to Ruto’s election] and it is a good sign that trade between the countries will continue to flourish even with the changing of the guard,” Professor Munene told the business daily.

KNBS data shows that there has always been a shift in terms of trade figures between Kenya and its neighbors whenever there is a leadership transition.

Kenya had a 52 billion shillings surplus with Uganda in 2012, which fell to 12.6 billion shillings in 2017 before rebounding to 57 billion shillings at the end of last year.

President Yoweri Museveni and Dr Ruto have enjoyed good relations in the past and analysts believe his election also bodes well for relations between the two countries.

In July 2021, Mr Museveni hosted Ruto as a chief guest during the laying of the foundations for a new vaccine facility in Uganda in what experts believed was an endorsement of Kenya’s new president.

On the other hand, the Ugandan leader maintains lukewarm relations with opposition leader Raila Odinga.

Uganda remains Kenya’s largest trading partner in the region, accounting for 44.2% of total trade volume last year.

Kenya mainly imports grain, milk, poultry products and sugar from Uganda, while it exports animals, vegetable oil, machinery, steel and iron.

Tanzania was Kenya’s second largest trading partner last year, with trade volume between the two countries rising 35% to 100 billion shillings. Nairobi has in recent years increased maize volumes from the neighboring country to cover its local deficit.

Other countries in the region, especially Great Lakes countries like Rwanda, Burundi and DRC, will also be keen to hear about the new administration’s trade agenda in Kenya.

In addition to cementing bilateral relations between the countries and providing space for intra-community trade, they hope that the Ruto administration will agree to finance the construction of the remaining sections of the standard gauge railway (SGR) linking the route from Malaba to Kampala.

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