China-Kenya relations are at a critical stage as the two countries face enormous challenges related to debt sustainability, a severe trade imbalance, and the public health crisis brought on by the COVID-19 pandemic. Nonetheless, Kenya remains a strategically vital country for China as a key hub on Beijing’s Belt and Road Initiative, an important gateway into East Africa, and as an anchor for China’s broader engagement on the continent.
Ambassador Sarah Serem is Kenya’s point person in managing ties with China. She recently sat down with the team from Development Reimagined, an African-led international development consultancy with headquarters in China, to discuss her views on the current state of China-Kenya ties and the critical role that agricultural trade and development now play in the relationship.
DEVELOPMENT REIMAGINED: Thank you very much for speaking with us. To start, could you give us a brief overview of Kenya and China’s relationship before COVID-19 and how this might have changed during COVID-19?
AMBASSADOR SARAH SEREM: Our relations with China have been, and continue to be, excellent. Our trading relationship is at an all-time high, although the balance of trade is hugely in favor of China. In 2020, Kenya’s exports to China totaled $139 million, but in comparison, China’s exports to Kenya were valued at $5.41 billion – that’s almost 39 times higher. Part of the reason for this is temporary – China’s top exports to Kenya are in electrical equipment ($751 million) and machinery ($443 million), much of which is used for infrastructure building. But the fact is our top exports to China are often raw materials such as ore slag and ash, with some limited agricultural products, so this does need to shift, and I will come back to this.
Talking of infrastructure, China has contributed a great deal to this. Since 2000, Kenya has sought and received a $9.2 billion loan from China, with the majority – $6.1 billion – going into transport. The Mombasa-Nairobi Standard Gauge Railway was a major development milestone! It reduced supply-chain costs by making transport of goods easier and cheaper, which in turn, makes our products more competitive internationally.
However, with COVID-19, important aspects of our cooperation have been impacted. Many governments and business engagements that required a physical presence were disrupted. But despite these challenges, we have worked with China to find short and long-term solutions. We have received support from China in form of protective equipment donations, knowledge exchange, and debt rescheduling. Most recently, we have been working on procuring vaccines from China, with China willing to donate at least some vaccines to Kenya to support our vaccination rollout.
DR: You mentioned trade being an important aspect of Kenya’s relationship with China. Could you tell us some more on Kenya’s key priorities regarding trade with China?
AMBASSADOR SEREM: We have several key policy-level priorities to increase our exports to China, especially in agriculture, as it plays a central role in Kenya’s development with around 70% of marketed agricultural production comes from smallholder farmers.
In 2018, we signed a Memorandum of Understanding (MOU) on sanitary and phytosanitary protocol (SPS), which aims to speed up risk analysis of certain Kenyan agricultural products to enable access to China’s market. This includes meeting specific standards before we export. Take avocados as an example which is not allowed to China although in a frozen form. But we are now looking with Chinese authorities to export fresh avocado as well, as this will bring greater direct gains for smallholder farmers, who account for 70% of avocado growing in Kenya, so this is really important. Further, our government has requested China to fast-track the SPS protocol by undertaking pest risk analysis for an additional 12 agricultural products, as getting these products into China would be hugely beneficial for our economy and address the skewed balance of trade mentioned earlier.
Beyond this, we are also pushing for a reduction or removal of duty tax on our cut-flowers and vegetable exports. While China has a duty-free quota scheme for least developed countries (LDCs), Kenya, which is not an LDC, having graduated to lower-middle-income country status in 2014, does not qualify. That means currently, there is a 10% duty slapped on flowers and other agricultural produce from Kenya, making them expensive and uncompetitive. Kenya is keeping taps on the matter and bilaterally talking with China. Despite the challenges, several entrepreneurs have managed to penetrate the Chinese market with agricultural products – like coffee and tea.
DR: Just to go back to one of your points, Ambassador. You mentioned the potential demand in China for Purple Tea, as one of Kenya’s special products. What would you say are the opportunities of China’s tea market?
AMBASSADOR SEREM: The Chinese tea market is abundant in opportunities. In 2019, China was the world’s 9th largest importer of tea in dollar worth, equating to $187.3 million. Capturing just a small percentage of this would bring huge benefits for Kenya! And it’s not just tea – China’s coffee consumption has also expanded by an average annual rate of 16% over the past decade.
And Kenya has a significant advantage in tea and coffee production. In 2016, Kenya accounted for 27% of global tea sales, and tea was our second-biggest source of foreign exchange, whilst coffee is was our third most important source of foreign exchange.
For tea, we are actively looking to tap into this in two ways. First, the special tea; Purple Tea, is only found in Kenya and packed full of antioxidants, so we think it would receive high demand in China. Second, Chinese young people in particular are developing an affinity for black tea with milk. And what does that mean for us? Literally, tea with milk is a Kenyan product. I can even see spicy tea coming in! So, I can confidently say we have a competitive advantage on these and I am excited about the prospects.
DR: And has Kenya developed a strategy for entering the market?
AMBASSADOR SEREM: Since I have been in post, I’ve been working on this and I would say there are two key elements of the strategy.
First, I keep saying to Kenyan entrepreneurs and business people – to enter the market you don’t need to market to the whole of China. You just need a province. And you probably don’t need the entire province. You just need a city because if you target one city you’re talking about over 10 million people. That alone is enough market for Kenyan products.
Second, we are targeting places that have a high consumer footprint. We’re currently looking at how to introduce our coffee in major malls, airports, and railway stations, as millions of people pass through these outlets daily. This will guarantee a consistent and sustainable outflow of our product.
DR: One final question, from your vantage point in Beijing, do you have any suggestions on how Chinese partners can offer further support to Kenya, including in agriculture?
AMBASSADOR SEREM: You know, China is extremely busy these days. I am constantly traveling and calling on [Wu Peng], the Director-General, Department of African Affairs in Chinese Ministry of Foreign Affairs – it’s my job to be proactive. And it’s important. In China, over 800 million people have been lifted out of poverty, contributing to over 70% of worldwide poverty reduction. I’ve seen this first-hand from my visits to different provinces that were poverty-stricken not too long ago. I keep seeing technologies that I think – would be so useful back home in our fields and factories, can we just send it over there now! But the reality is we also need the frameworks, to learn about how this process took place, and the good news is Chinese partners are very willing to share. That’s why, for instance, I think we do need to transform the concept of the scholarships that China offers to African students to see how students can get what we call hands-on experience, for instance through internship programs so that when they go home, the students can do more than translation, and really benefit. This kind of transfer is crucial for fast-tracking development, including in agriculture.
Building on this, I think one of the crucial points I’ve noticed in China so far is the strong sense of ownership and nationalism here. And while we have many constraints in Kenya – including an annual estimated gap of $170 million in smallholder agriculture finance – part of the answer I believe is investing in building our national brand, our national identity and using that sense of pride to insist on developing the value-chain in our products and to develop our people, to create employment opportunities for our youth. Unless you know where you have come from, it’s very difficult to undo what you have today. China gives us hope that we can do this. We have an opportunity to work collectively as Kenyans to use our partnerships with countries like China for our benefit.