Kenya’s Africa Continental Free Trade Area (AfCFTA) Strategic Plan 2022-20271 provides a comprehensive approach to industrialization by leveraging on the opportunities presented by the AfCFTA to expand trade. The strategic plan aims to increase the manufacturing sector’s value added by 5 per cent annually from 7.8 per cent in 2022 through tariff liberalization and targeted government interventions. The strategy prioritizes key sectors such as textile, leather, pharmaceuticals, and light engineering while promoting inclusiveness by facilitating the participation of MSMEs, women, youth, and persons with disabilities.
The AfCFTA is African Union’s (AU) flagship project that opens the continent for trade and industrialization by bringing together 55 member States and 8 Regional Economic Communities (RECs)2. The Agreement is a detailed legal document containing the protocols on trade in goods, trade in services, dispute settlement, investment, intellectual property rights, and competition policy. Additionally, protocols regarding digital trade and women and youth in trade are also part of the agreement. With a projected US$ 3 trillion borderless market3, it attracts foreign investors by providing access to a large consumer base. The AfCFTA’s priority industrial sectors include automotive, pharmaceuticals, transport and logistics, and agri-business.
To attain long-term industrialization goals, AfCFTA’s member States have an obligation to gradually eliminate tariffs and non-tariff barriers, liberalize trade in services, cooperate on investment, harmonize intellectual property rights, regulate competition policy, and implement trade facilitation measures4. To actualize industrialization under the AfCFTA, the Guided Trade Initiative on Trade in Goods (GTI) has been adopted and is being piloted in 24 countries. The industrial products traded under the GTI include tea, batteries, palm oil, rubber, components for air conditioners, and ceramic tiles. These products are key exports for Kenya, and this presents an opportunity for Kenya to pilot its competitiveness of the products in the region. To pilot the GTI, Kenya exported batteries worth Ksh 9.3 million to Ghana under the AfCFTA. Further, the Kenya Revenue Authority (KRA) has procured 1,500 AfCFTA certificates of origin to facilitate exporters exporting goods under the GTI –AfCFTA framework 5. That said, the AfCFTA holds a great promise for Kenya’s industrialization.
Currently, Kenya is involved in trading various industrial products that have been designated for trade through GTI and have notably benefitted from strong relationships within the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA). However, there is significant untapped potential beyond these borders, through expansion of its reach and exploring trade opportunities with other RECs in West Africa and North Africa as shown in Figure 1. Therefore, the agreement provides an opportunity for Kenya to trade with markets currently engaged under the rules of the World Trade Organization (WTO) Most Favoured Nation (MFN) rates, which are very high.
[1] AfCFTA_Policy_Brief_Final.pdf (trade.go.ke)
[2] https://au.int/sites/default/files/treaties/36437-treaty-consolidated_text_on_cfta_-_en.pdf
[3] Economic Development in Africa Report 2021 | UNCTAD
[4] Agreement Establishing the African Continental Free Trade Area | African Union (au.int)
