OFFICE OF THE CABINET SECRETARY
TALKING NOTES FOR USE BY THE CABINET SECRETARY DURING THE OFFICIAL LAUNCH OF THE NATIONAL AfCFTA IMPLEMENTATION STRATEGY, 2022-2027
DATE: 04 AUGUST 2022
TIME: 10:00 – 11:00AM
VENUE: MOVENPICK HOTEL, NAIROBI
- Director, Regional Integration and Trade Division UNECA, Dr. Stephen Karingi,
- UN Resident Coordinator Kenya, Dr. Stephen Jackson,
- EU Trade Counsellor at Delegation of the European Union to the Republic of Kenya, Mr. Martijn Boelen,
- AfCFTA Representatives,
- Government Ministries, Departments and Agencies Representatives,
- Private Sector Representatives,
- Distinguished Guests,
- Ladies and Gentlemen,
Good morning on this cold morning!
- I welcome all of you to the official launch of the Kenya National AfCFTA Implementation Strategy and the unveiling of the National Implementation Committee. Thank you all for gracing this important event that is in line with the Government’s commitment to expand Kenya’s export trade.
- I would like to thank most sincerely the United Nations Economic Commission for Africa
- Kenya is confident that the implementation of the AfCFTA trade pact has the potential to unlock market access for our goods and services within the African continent, while creating numerous job opportunities across multiple sectors and industries. As it stands, statistics show that the AfCFTA creates a large single market with a population of over 1.2 billion people and a combined GDP of about US$ 2.5 trillion.
Global Crisis affecting Trade
- Since we are here to launch a trade implementation strategy, let me reitetarate a well known truth. Trade is critical for the economic growth and development of countries. Trade links various sectors of the economy by creating markets through which goods and services are traded. Despite the significance of trade, Africa’s share of the total global trade remains very low at 2.8%. In addition, the share of intra-African trade is severely limited at 18%.
- In the last few years, trade has been adversely affected by several global existential crises including COVID-19 Pandemic, The Russia-Ukraine war and the ongoing Climate Change.
In 2019/2020, the COVID-19 pandemic plunged the world economy into unprecedented global shocks, disrupting and adversely affecting all
sectors of the economy and economic fundamentals, particularly production, distribution, supply and demand.
- Pandemics continue to pose a critical threat to the world from economic recovery, and concerted global efforts are required to achieve lasting responses. However, most countries, including Kenya learned quickly and adopted agile policy actions to build back resieliently.
To mitigate the effects of the pandemics, there are recovery plans and initiatives at the continental level, regional and national levels to cushion the vital economic and social sectors of the region including Micro, Small and Medium Enterprises.
- Climate change is indeed a major concern globally. The trade sector is exposed to the impacts of climate change primarily because of the effects on goods that are traded, but also directly through the transportation of goods. One of the main effects is an increase in greenhouse gas emissions generated through the transport of goods from the place of production to the area of consumption.
- Part of the efforts in Kenya in promoting a sustainable environment includes: implementing sustainable waste management systems, start-up culture for green manufacturing, creating green jobs, recycling, use of biofuels & green energy, e- mobility and agricultural biologics.
- impact of the Russia-Ukraine war has been felt more by developing countries and LDCs in Africa whose bulk imports of food and energy products originate from Russia and Ukraine. In 2020, it was estimated that African countries imported agricultural products worth USD4 billion from Russia. About 90% of this was wheat, and 6% was sunflower oil. Similarly, it was estimated that Ukraine exported US$2.9 billion worth of agricultural products to the African continent about 48% of this was wheat, 31% maize, and the rest included sunflower oil, barley, and soybeans.
- The African continent imports nearly two-thirds of the wheat it consumes and because 8.3% of the wheat comes from Ukraine and 22% from Russia, trade in agricultural commodities could become more complicated in the context of heavy sanctions, particularly for major importing countries.
- The supply shocks have resulted in more costly oil products in Kenya, leading to an increased cost of living. The increased cost of oil products has a wide-ranging welfare impact through increased transport and costs of production, which are in turn transferred to consumers. In response and in an effort to forestall the costs, the Government has taken measures to address the challenge, including through the provision of subsidies to cushion consumers against the negative effects of skyrocketing fuel prices.
- To address the above supply chain constraints, the AfCFTA provides path to inclusive African growth and resilient self–reliance. Looking beyond the Covid 19 pandemic, climate change and the ongoing Ukraine-Russia crisis, effective implemention of the AfCFTA is the clarion call to build Africa’s robust supply chains.
Overview of the African Continental Free Trade Area
- Despite the launch of the commencement of trade in January 2021, commercially meaningful trade is yet to commence. The cause of the delay was mainly attributed to not only the COVID-19 Pandemic which delayed the conclusion of negotiations, but also the delay in the conclusion and submission of tariff offers.
- Since commercially meaningful trading is yet to start, the AfCFTA Council of Ministers responsible for Trade at their 7th Meeting held in Accra on 10th October 2021 adopted the Ministerial Directive for the Application of Provisional Schedules of Tariff Concessions. This Ministerial Directive was adopted by the Assembly of Heads of State and Government in February 2022. The Ministerial Directive provides a legal basis for the 29 countries to start commercially meaningful trade. Kenya’s tariff offer as part of the larger EAC tariff offer has been technically verified and is ready for implementation.
- commence trading under the AfCFTA, the AfCFTA Initiative on Guided Trade was formulated and endorsed by the 9th Meeting of the Council of Ministers responsible for Trade held from 25th to 26th July 2022 in Accra-Ghana, which I attended. The initiative is made up of State Parties that are willing and ready to trade amongst themselves and have met the minimum threshold for the start of commercially meaningful trade, in line with the Ministerial Directive on the Application of the Schedules of Tariff Concession. That is, they have submitted their schedule of tariff concessions; they have printed the trading documents (rules of origin certificate etc.) and have set up implementation committees.
- Kenya is among the pilot countries in the AfCFTA Initiative on Guided Trade and has already established an Ad hoc Committee that will be in charge of coordinating the initiative, identifying the export products and facilitating product market access. Under this priority initiative, I encourage the private sector including MSMEs to work with my Ministry to ensure that Kenya makes meaningful gains from trading in products where we have a competitive edge.
- unlock the benefits of the AfCFTA, the Government is determined to develop decisive policy actions to enhance economic diversification, unleash the private sector’s potential, and address the existing challenges. For Kenya and most African countries, the infrastructure gap remains one of the key areas to consider to facilitate the efficient and affordable movement of goods and services across borders.
- In this regard, it is expected that the Program for the Infrastructural Development of Africa (PIDA) under the African Union will aid the attainment of AfCFTA goals by facilitating the movement of goods, services, people and capital across the continent, and supporting the development of regional value chains. Moreover, the successful implementation of the Northern Corridor integrated projects will go a long way in realizing the benefits of the AfCFTA.
Kenya National AfCFTA Implementation Strategy
- To fast-track implementation of the AfCFTA trade deal, the development of an implementation strategy is critical. Therefore, upon entry into force of the Agreement in May 2019, Kenya embarked on a national process of formulating the National AfCFTA Implementation Strategy with the support of the United Nations Economic Commission for Africa.
- Development of the Strategy followed a three-pronged approach:
- First, a comprehensive desktop review of the history and aims of regional economic integration in Africa, national policies and trade-related strategies, structure and performance of the domestic economy. This together with the progress made in the AfCFTA integration provided the foundation upon which Kenya’s policies concerning external markets should be built.
- Second, a comprehensive analysis of the production structure, employment and international trade performance was conducted. The results of this analysis shed light on the identification of priority interventions in the production and marketing of exports to support the structural transformation envisioned in the AU’s Agenda 2063 - The Africa We Want.
- Third, we undertook intense consultations with public and private sector stakeholders. This provided an opportunity to discuss with relevant representatives from the Kenyan government, private sector and non-governmental organizations on key opportunities, issues and risks related to the implementation of the AfCFTA as well as the next steps strategy formulation process.
- The development of this Strategy was complemented by several stakeholder engagements held to technically review the document and incorporate comments from a wide range of stakeholders. This ensured that the process was participatory and inclusive, bringing on board players from the public and private sectors including Women, Youth and Persons with disabilities.
- The purpose of this Strategy is to leverage deeper integration within the framework of AfCFTA to facilitate an expansion of Kenya's trade and investment in Africa; support structural transformation; and foster economic growth and sustainable development.
- This National AfCFTA Implementation Strategy seeks to:
- Increase GDP, overall exports and Kenya’s exports to all African sub-regions;
- Increase production and consumption of locally produced goods and services;
- Increase the size and scope of the manufacturing sector and other value-added exports;
- Develop and strengthen regional value chains;
- Boost Kenyan exports to Africa outside of the EAC and COMESA-Free Trade Agreement (FTA); and
- Boost trade in services exports.
- The Strategy identifies priority export products and sectors for both goods and services. The prioritized sectors in Merchandise trade are:
- Livestock and Fisheries;
- Mining; and
- oil and gas.
- The priority export sectors under services trade are:
- Business including professional services;
- Financial services;
- Cultural and Sports Services; and
- Transport And Logistics.
- These priority sectors are aligned with Kenya’s national development goals and aspirations including the Integrated National Export Development and Promotion Strategy (INEDPS) and the Big Four Agenda.
- The Strategy further identifies the challenges faced and sets out strategic interventions geared toward resolving those challenges. In addition, the Strategy has identified risks that are likely to occur and has put in place measures to mitigate those risks.
- In addition, the Strategy outlines clear coordination, monitoring and evaluation mechanism as well as a communication plan to create and maintain awareness about the AfCFTA among all the stakeholders.
- The Strategy has established a National Implementation Committee which is necessary to ensure effective and coordinated implementation of this strategy. The NIC will be responsible for:
- Implementing the AfCFTA Agreement and Kenya’s National AfCFTA Strategy;
- Mainstreaming gender and youth in strategy implementation;
- Managing communications and implementing the communication plan;
- Mobilizing sufficient financing for the strategy implementation;
- Managing risks associated with strategy implementation;
- Monitoring and evaluating the national AfCFTA strategy implementation.
- The National Implementation Committee comprises:
- Ministries, Departments and Agencies;
- The Council of Governors;
- Private Sector Associations;
- Relevant academic and research institutions; and
- Non-governmental Organizations and Civil Society.
- Official Launch of the National AfCFTA Implementation Strategy is instrumental towards the commencement of commercially meaningful trading in goods and services and the unveiling of the AfCFTA National Implementation Committee will be critical towards steering Kenya’s trading in the AfCFTA market.
- As I indicated when I started, Kenya is committed to the implementation of the AfCFTA so that the business people can benefit from the readily available single market for goods and services under the AfCFTA. In addition, my Ministry is keen to work with negotiators from across Africa towards development of flexible and progressive trade rules that facilitate deeper market access for African produced goods and services, while ensuring that the AfCFTA does not get stuck in endless negotiations.
- The next step after the launch of this National AfCFTA Implementation Strategy is for the Ministry to continue championing an enabling regulatory and business environment for the private sector to thrive as well as organize more stakeholder sensitization campaigns for the Strategy and the AfCFTA in general.
- As I conclude, I urge the private sector and the business community at large to seize the opportunities created by the AfCFTA, and dialogue with my Ministry on a regular basis when faced with challenges that diminish gains made.
- Asante sana! Thank you!