Africa-Press – Kenya. Kenya risks losing out on the vast opportunities under the African Continental Free Trade Area (AfCFTA) and other regional blocks, save for the East African region, an industry report shows.
This, as new evidence shows that deep-rooted logistics bottlenecks, high trade costs and limited export readiness among firms are undermining the country’s competitiveness.
Despite the country being among AfCFTA earliest adopters, high logistics costs and operational inefficiencies continue to erode the competitiveness of its exports.
The country signed and ratified the AfCFTA agreement in 2018 and has since participated in pilot trade under the Guided Trade Initiative, signalling strong policy commitment to continental integration.
The agreement, which seeks to eliminate tariffs on at least 90 per cent of goods traded across Africa, was expected to open up new markets for Kenyan manufacturers and farmers.
However, emerging evidence shows that tariff reductions alone are not enough to translate market access into actual trade flows, particularly for small and medium-sized enterprises (SMEs).
High costs dilute tariff gains
The logistics study by the Kenya Association of Manufacturers (KAM), with support from TradeMark Africa (TMA) and funding from the Foreign, Commonwealth and Development Office, sought to establish the full extent of fees, levies, charges, and regulatory obligations that manufacturers encounter within Kenya’s trade environment.
The report examined how logistics structures influence the competitiveness of Kenyan SMEs seeking to trade under the AfCFTA and identifies practical pathways to reduce these constraints in strategic markets, namely Ethiopia, Zambia, and Nigeria.
For instance, shipping a 20-foot container from Mombasa to Lagos costs between $3,200 (Sh 413,952) and $4,200 (Sh543,312), while a 40-foot container ranges from $4,500 (Sh569,184 ) to $6,000 (Sh776,160).
Air freight is significantly more expensive, with equivalent cargo costs ranging between $70,000 (Sh9.1 million and $110,000 (Sh14.2 million).
Similarly, transport along the Lusaka corridor, a key route into Southern Africa, costs between $3,500 (Sh452,760) and $7,000 (Sh905,520) per container, with transit times stretching from eight to 30 days due to border delays and operational disruptions.
Even on shorter routes such as the Nairobi–Addis Ababa corridor via Moyale, where transport costs average $4,500 (Sh582,120) to $5,200 (Sh672 672) per truck, exporters face uncertainty caused by security checks, low cargo volumes and incomplete border integration.
“These cost layers are cumulative,” the report notes, pointing to inland transport, port charges, border procedures and documentation requirements as major contributors to the final price of Kenyan goods in export markets.
SMEs hardest hit
While large firms are better equipped to navigate these challenges, SMEs are disproportionately affected.
Exporters must comply with AfCFTA Rules of Origin to qualify for tariff preferences, a process that requires detailed documentation and certification.
For smaller firms with limited administrative capacity, this adds another layer of complexity and cost.
In addition, SMEs often ship smaller volumes, limiting their ability to negotiate better freight rates or spread fixed logistics costs across large consignments.
As a result, many are effectively locked out of continental markets despite the availability of preferential access.
“Logistics systems along major corridors are designed around high-volume exporters,” the report states, “SMEs face similar compliance costs but without the scale to absorb them.”
This comes even as Kenya’s export potential within Africa remains significant. Trade with West Africa, particularly Nigeria, illustrates both the opportunity and the constraints.
Kenya exported goods worth $51.1 million (Sh6.6 billion) to Nigeria in 2024, largely comprising manufactured products such as textile fibres, processed foods, iron and steel products, and agricultural commodities like tea and coffee.
Yet, these exports remain modest relative to Nigeria’s market size, partly due to high shipping costs, long transit times and limited direct logistics links between East and West Africa.
Cargo to West Africa is often transshipped through third-party ports, adding both cost and complexity. Industry players say unlocking AfCFTA gains will require a shift in focus from tariffs to trade facilitation.
KAM chief executive Tobias Alando says targeted interventions are needed to address structural inefficiencies in logistics systems.
Key recommendations include investing in cargo aggregation centres to allow SMEs to consolidate shipments and reduce per-unit transport costs.
A proposed shared distribution hub in Lusaka, for example, could also enable exporters to pool cargo, improve container utilisation and enhance delivery predictability.
Improving coordination among border agencies is also critical.
Despite the rollout of the National Electronic Single Window System, exporters still face delays and additional costs due to fragmented processes across agencies such as customs, standards and phytosanitary authorities.
Further, there is need to enhance maritime and air connectivity within Africa as limited direct shipping routes and high aviation costs continue to constrain intra-African trade, pointing to the urgency of implementing initiatives such as the Single African Air Transport Market.
Security and infrastructure gaps along key corridors must also be addressed to improve reliability, particularly along emerging routes like Moyale.
“The African Continental Free Trade Area brings together 54 countries into a single market, creating significant opportunity for Kenyan manufacturers. But there is a clear gap between that opportunity and reality,” Alando said.
Beyond infrastructure, experts say Kenya must invest in building SME export capacity.
This includes supporting firms to comply with Rules of Origin, improving access to market information, and facilitating linkages with buyers across the continent.
“Improving SME participation in AfCFTA markets will depend not only on tariff preferences but also on logistics efficiency and export readiness,” the report concludes.
TradeMark Africa Country Director, Lilian Mwai, said: “From high clearance costs to infrastructure delays and inefficiencies in logistics systems, these are issues that must be addressed to unlock intra-African trade and enable businesses to compete effectively.”
As Kenya pushes to grow manufacturing’s contribution to GDP from 7.3 per cent to 20 per cent by 2030, the stakes are high.
Without addressing the “cost-and-friction wedge” embedded in its trade systems, the country risks ceding ground to more competitive exporters within the continent, experts have warned.
