New protectionist policies shield Kenyan economy from concurrence from abroad

Periods of crisis are generally conducive to the return of protectionist policies, a temptation that in Africa has always traditionally been high. The government of Kenya is reported to have banned on Saturday 29 July international firms from engaging in clearing and forwarding business related to provision of land transport services in the country. The reason seems to be the fact that logistics firms in Kenya cannot compete with international shipping lines that operate land-based logistics services. According to the government, already 50 nations have enacted laws restricting foreign access to domestic transportation. But the question now is, will this measure increase logistics costs in an economy that has already experienced a sharp surge in the last years, especially after the increase of fuel prices? Logistics costs are typically incorporated by importers in the prices of goods to consumers, so the risk is that this restriction will further inflate prices in the country is high.

The Kenya’s move seems also to go in a different direction from its neighbors. On September 2020, the Ethiopian Council of Ministers enacted the new investment regulation (n. 474/2020) that now allows foreign companies to invest in the freight forwarding and shipping agency sector, which was previously reserved to Ethiopian nationals. Foreign entities are consequently allowed to create forwarding and shipping companies in Ethiopia, even though in joint venture with an Ethiopian investor that must hold at least 51% of the share capital of the enterprise.

The Kenyan measure follows a recent decision to stop imports of fish from China to protect the fish farming industry in the country, mentioned in the same source. It is not the first time Kenya tried to do so. In 2018 a similar attempt was made by the previous government, but at that time China threatened Kenya to start a “trade war” and to withdraw its funding for completion of the SGR project from Naivasha to Kisumu, so the government took a step back. It remains to see what will be the reaction of China now.