Beyond the deals: Are Kenya’s trade agreements delivering real value?

Economic speak, the key highlight of this week was President William Ruto’s tour in Europe. According to the official itinerary shared from his official communication, the key events for his foreign trip were a speech at the International Conference on Financing Development in Seville, Spain, and the signing of a new strategic partnership with the United Kingdom in London.

A summary of the main points of the President’s speech at Seville, posted on the State House official website, indicates his continued onslaught against multilateralism, instead advocating for fairness, partnerships and investments for Africa, not tokenism. His pet subject on the need for a responsive public debt structure was not to be left out.

Probably continuing his veiled attacks on multilateral agencies, President Ruto argued that public debt must be development-oriented, as opposed to a trap for debt distress. However, this line of attack seems to overlook the individual responsibilities of the borrowing countries to ensure prudent application of borrowed funds and the need to implement responsive fiscal and macroeconomic policies domestically.

For instance, it is public knowledge that part of the borrowed money in Kenya goes to waste or gets stolen and stashed in tax havens through inflated costs for public projects. A case in point here would be the COVID-19 billionaires scam. Within the window of this scandal, the country had borrowed billions of shillings in concessionary loans from both the International Monetary Fund and the World Bank under an emergency response package to tackle the health crisis.

Of the twin events on the President’s itinerary, it appears it was the signing of a new strategic partnership with the UK in London that stole the thunder of the trip. Multiple news channels have reported that the President secured deals worth at least Sh427 billion for the next five years. According to official reports, the renewed strategic partnership is premised on four pillars, including trade and investments, green growth and climate action, science and technology, and peace and security.

A further breakdown of the agreement suggests that the innovation sector shall receive at least Sh17.7 billion, targeting 500 start-ups and 5,000 Small and Medium Enterprises. These would be expected to generate at least 30,000 jobs within the digital sub-sector. By 2030, the agreement proposes that the UK shall facilitate Sh266.1 billion in investments across Kenya. In between the dotted lines, it is, however, the Nairobi Railway City project, estimated to cost sSh27.9 billion, which seems to be the golden crown.

This brings us to the fundamental questions of the day: do we, as a country, ever actualise the many trade agreements and partnerships that we sign? Are there any impact evaluations conducted to assess return on investment before committing to any new agreements? For example, of the predecessor Kenya-UK agreement of 2020-2025, what was implemented and what was achieved?

According to economic literature, the reason why countries enter into strategic partnerships is the need to achieve common objectives and enhance national interests through collaborations. The direct economic benefits that are expected from such partnerships include, but are not limited to, access to new markets, sharing of resources, increased competitiveness, innovation and technology transfers, and trade and investments.

At the political and diplomatic fronts, strategic partnerships strengthen diplomacy among partners, offer platforms for conflict resolutions, promote geopolitical alignments and enhance security. Other benefits include mitigation of risks, learning and skills development and fostering of long-term relationships.

Within development circles, there has been a continued disquiet among the developing world that many of the bilateral agreements signed are skewed in favour of the partner developed nations. For example, of the many foreign trips President Ruto and his immediate predecessor, Uhuru Kenyatta,  have made to Western developed and Far East emerging economies, the public mostly gets to witness only the big infrastructure projects awarded to foreign companies.

Unfortunately, the funding mechanism for these projects is equally sourced from the foreign capital of the contractors. Eventually, all materials and equipment also get shipped into the country tax-free, with no commitments for skills and technology transfer to domestic economic actors. Some of the commitments made have bordered on the bizarre. A good case in point was the importation of Cuban doctors, when the country couldn’t absorb its own locally trained healthcare workers. Does anybody remember this? What was the return on investment on the billions paid and spent under the programme?

As a consequence, the country has perennially been reliant on foreign contractors even for small infrastructure projects that can easily be done by local contractors. The economic costs of this lopsided model of development are not only limited to the financial costs and the attendant debt burden, but also include long-term opportunity costs to develop local capacity to drive our growth.

Scanning through multiple data sources, the country’s trade statistics do not seem to be consistent with the multiple trade agreements that the country has signed. For instance, the Privacy Shield Framework trade advocacy group lists that Kenya had active bilateral trade agreements with at least 27 countries and 9 under negotiations in 2023. This is in addition to active membership in at least five regional markets and/or trading blocs. The same information is reflected in multiple Kenya Embassies and foreign missions’ official websites. Despite these multiple trade agreements, there have been minimal or insignificant shifts in the country’s trading partners and volumes. According to the latest World Bank data, the top five trading partners for Kenya are Uganda, the United States, the Netherlands, Pakistan and Tanzania. Based on the same data, the top five sources of Kenya’s imports are China, the United Arab Emirates, India, Saudi Arabia and Malaysia.  Trade economics data indicates Kenya’s main export destinations in 2023 as Uganda, Pakistan, Netherlands, Tanzania, the US, UAE and the UK.

From a strategic and analytical point of view, one cannot fail to wonder what ever becomes of these trade agreements the moment the ink dries up on the paper.

Does the country have a structured mechanism to follow up, track and measure achievements for each agreement?

Is there any office of government that can demonstrate specific evidence of trade flow improvements post-signing an agreement with a particular country?

One of the time-honoured means of tracking project or program achievements is to have an underlying implementation matrix with specific timelines and milestones to be achieved. While I am aware that advanced technical teams deal with the negotiations in advance of the signing ceremony by the heads of state, the troubling question is: do we have the right people to profile the country correctly on what to achieve under each agreement?

For example, who were the people accompanying the President in the UK this week? Were there local industrialists, investors, lobby groups and researchers to evaluate and profile Kenya’s interests in the deal?

Or did the President travel with the usual joyriders and political loyalists simply on a shopping spree and to collect government daily subsistence allowances?