The-Accountant-Jan-Feb-2018

Governance
exportation market to other European
countries who have been securing the
commodity from the UK. “We can
comfortably attribute this decline to
Brexit, Britain has been a major buyer of
our tea in Europe and it was buying for
both local consumption and re-export
to other EU countries” to quote Samuel
Ogola, the head of the directorate. But
on the brighter side albeit slow-start,
we have seen Kenya exporting directly
to individual European countries with
statistics from the same directorate
indicating that volumes of tea exported
to Poland and Germany grew up by 39
and 12 percent respectively within the
period of review. Further, the country is
on the right track as it trying to open
up new markets such as China, which
has the potential of buying more of the
local beverage as a way of protecting
farmers from low earnings. In addition
local producers are gearing a ready
market in the US after Kenya and an
international tea-buying firm struck a
deal to purchase all tea for distribution
in America. International Tea Importers
(ITI), an American tea buyer, and the
Tea Directorate will see the export of
purple tea to the US, a big boost at a time
Kenya is trying to expand its market for
the produce in the wake of post-Brexit
effects. Similarly, apart from tea exports,
flower imports also suffered a major blow
considering that over a third of the EU’s
cut flower imports come from Kenya
with the UK and Netherlands being the
top destinations. Recent reports indicate
that by August 2017, total Dutch plant
and flower exports have grown around
6%, reaching a record value of 4 billion
euros but sales to UK are down by 7%.
Basically, the EU treaty policies
provide that once a member state
invokes article 50 so as to exit, the
formal withdrawal can only take place
after two years if not more. However,
financial markets is all about reaction to
information, thus we are likely to see a
lot of re-alignments before the Brexit
“divorce” is finalized by the EU policy
makers. One of the major setbacks
in negotiating new trade blocs, be it
bilateral or multilateral, is the time and
legal factor. Policy analysts indicate
that it would take on average 3 or more
years to finalize a bilateral agreement.
This is mainly because of the competing
interests of the parties to the agreement
and different laws that may require
harmonization. It is even more difficult
to negotiate and get accepted in a free
trade area, such as the EU that UK chose
to exit due to the privileges and obvious
benefits that accrue to member states
within the free trade area.
Our beloved motherland is a
net importer, with the few exports
being agricultural produce that have
not undergone value-addition. Put
differently, this position of shrinking
cash inflows, more often than not leads
to the balance of payments always
in favor of our trading partners from
developed countries. It has also been
argued that as Kenya strives to form
double-taxation treaties with countries
such as China, Kenya will benefit less
from the agreements. Countries all over
the world are re-aligning themselves so
as to maximize on absolute advantages
or the comparative advantages they
possess. Some big states within countries
are seeking independence as they realize
that by doing so, they’ll have economic
freedom to prosper. Examples include,
Tibet seeking to delineate from China
and more recently Catalonia seeking
independence from Spain.
In conclusion, it is incumbent upon
industry players, government and
farmers to come up with strategies of
value-addition on agricultural output
and invest in high-end manufacturing,
among other innovations so as to
minimize market shocks arising from
external factors such as Brexit. It is also
imperative for African nations to forge
formidable regional economic blocs,
since most of the problems that afflict
them are similar in nature and to a
certain extent, their political ideologies
are convergent. Echoing the words
of Martin-Luther King, “We either
stick together as brothers or we perish
together as fools”.
williamirari@gmail.com
38 JANUARY - FEBRUARY 2018