Access to EU market opportunity for Kenyan MSMEs

Kenyan micro, small, and medium enterprises (MSMEs) are gearing up to leverage the new Economic Partnership Agreement (EPA) between the European Union (EU) and Kenya. The EPA, which recently entered into force, aims to boost bilateral trade, increase investment flows, and enhance economic relations sustainably. The EU is Kenya's second-largest trading partner, with a trade value of around €3 billion as of 2023, marking a 16% increase from 2018 to 2020. The agreement encompasses several key provisions, including workers' rights, climate change and environmental protection, sustainability, and gender equality and women empowerment. To shed light on the potential opportunities and challenges facing Kenyan businesses under the EPA, CNBC Africa's Tabitha Muthoni recently interviewed Victor Otieno, Managing Director of Viffa Consult. According to Otieno, one of the major challenges for Kenyan MSMEs is accessing the European market. To address this, he emphasized the need for clear guidance and support from the Ministry of Industry and Trade, along with other relevant government bodies. This includes providing market intelligence, offering capacity building programs, facilitating market access, and aligning financing mechanisms to enable MSMEs to compete effectively with their EU counterparts. In terms of job creation, Otieno highlighted that traditional sectors such as coffee, tea, minerals, vegetables, and cut flowers are likely to benefit in the short term. However, he also emphasized the potential for Kenya to diversify its export product portfolio into high-value sectors like agribusiness, manufacturing, and technology-related services to drive economic growth and create more employment opportunities. When discussing the friendly policies under the EPA, Otieno stressed the importance of aligning regulations and incentives to make Kenyan SMEs competitive in the EU market. This includes implementing tax support measures, providing capacity-building initiatives, and introducing programmatic support to enhance the readiness of Kenyan businesses for international trade. Furthermore, the bilateral deal between Kenya and the EU within the broader East African Community (EAC) trade dynamics could lead to market fragmentation, with Kenya gaining a stronger position due to its direct EPA with the EU. This imbalance in market power may impact the economic cooperation within the EAC, leading to potential challenges for other member states. In terms of sustainability commitments, Otieno emphasized the need for effective monitoring and enforcement mechanisms to ensure the successful implementation of the EPA. He highlighted the role of various ministries, including Labour, Environment, and National Treasury, in overseeing the agreement's execution and taking corrective actions based on trade developments. Overall, the EPA presents a significant opportunity for Kenyan MSMEs to expand their market reach and enhance their competitiveness on the international stage. By addressing the challenges and leveraging the support provided by the government, Kenyan businesses can capitalize on the benefits of the EU-Kenya Economic Partnership Agreement for long-term sustainable growth and economic prosperity.